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LVMH is operating their operations almost all-around the world. For the organisation's perspective international mobility is very much important for organisation's growth.
Workforce diversity occurs when an organization becomes more distinct in terms of gender, race, ethnicity and minority (Robbins & Coulter 2002, p. 41). Managers in LVMH will have to mingle with the diverse workforce. Cultural awareness training for the current workforce can help employees and managers to learn about each other's background.
Organizational Behaviour is a knowledge which helps managers who deals closely with human resources to understand their subordinates as an individual, a group or as a whole organization (Robbins, S. P. et al., 1998, p. 10).LVMH's Organizational Behaviour offers several concepts in helping managers to understand individuals better. The concepts are globalization, workforce diversity, recuperating quality and productivity, empowerment, improving people skill, 'temporariness', simulating innovation and changes, balancing family with work and principles.
Procter & Gamble's introduction of liquid detergent failed in Europe because European washing machines weren't equipped for it so modifications had to be made to their product (Gibson, Ivancevich & Donnelly 1997, p. 56). This is an example in which Procter & Gamble had to suffer the loss of profits because they were ignorant in finding out about the pros and cons of launching their product. Managers will have to give pleasure to local as well as international needs so that global success can be attained. A diverse workforce will help managers to appreciate the intricacy of globalization.
Globalization is interdependency of transportation, distribution, communication and economic networks across global boundaries (Gibson, Ivancevich & Donnelly 1997, p. 54). This influences a manager's people skills by two ways; he'll likely be transferred to a foreign country or having to deal with individuals from difference countries (Robbins, S. P. et al., 1998, p. 17). To adapt, managers should think globally and being aware of the process of globalization. Managers should sensitise themselves while dealing with a global organization (Gibson, Ivancevich & Donnelly 1997, pp. 57-58). A clear code of conduct for the workplace can be developed so that employees have respect for difference cultures. To benefit from globalization, managers should equip employees with information about cultures in a country that they wish to penetrate its market (Gibson, Ivancevich & Donnelly 1997, p. 58).
At LVMH, a Diversity and Workforce Champions are appointed in each department to find solutions concerning diversity problems; in hope of enhancing work performance.
"When you make a valid dedication to diversity, you bring a greater diversity of ideas, approaches, experiences and abilities that can be applied to consumer problems. After all, six people with different perspective have a better shot at solving complex problems than sixty people who all think alike."
From the statement above, it shows that a diverse workforce is well appreciated because it can improve an organization's quality and productivity
In this task researcher is going to highlight benefits of career development and expatriate compensation practise in LVMH.
Objective: to focus on expatriate compensation practise in LVMH.
Recruiting and holding quality international executives have become a major task for companies operating on a global scale.
LVMH follows typical components of a expatriate compensation package are base salaries, incentive programs, allowances of various types and perks. They are also considering , need to alter their compensation packages according to different situations. For instance, American executive compensation programs are composed of salary plus bonus and other pay-for-performance incentives like stock, due to the high risk, entrepreneurial U.S. society. In other parts of the world, like Japan, employees are offered mostly cash salaries and the promise of lifetime employment. In Europe the pay philosophy falls between these two extremes. Although bonuses and incentives are more attractive to Europeans than their Asian counterparts, most are conservative and frown upon awards of stock since they don't feel employee performance should be tied in any way to the vagaries of the capital markets.
Organizations like LVMH cannot really rely on old compensation formula based on internal compensation policies and procedures, which are unfavorable from the firms view point. Such outdated pay structures, different from the prevailing markets rates, may cause dissatisfaction and therefore loss of valuable talent.
Objectives of an effective international compensation policy of LVMH are following
¨ Attract and retain employees who are qualified for overseas service.
¨ Facilitate transfers between foreign affiliates and between home-country and foreign locations
¨ Establish and maintain a consistent relationship with regard to the compensation of employees of all affiliates, both at home and abroad.
¨ Maintain compensation that is reasonable in relation to the practices of leading competitors.
In an analysis of the international compensation package, two major components are: benefits and pay adjustments and incentives.
Global corporations commonly handle benefits coverage in terms of the "best-of-both-worlds" benefits model. Here is how it works: Wherever possible, the expatriate is given home country benefits coverage. However, in areas such as disability insurance, where there may be no home-country plan, the employee may join the host-country plan. Most internationals also offer various types of premiums and incentives. Their purpose is to provide for the difference in living costs ( that is, the costs of goods, services, and currency realignments) between the home country and the host country. Premiums may include any one or more of the following components:
¨ Housing allowance
¨ School allowance
¨ Home leave
¨ Hazardous-duty pay
¨ Hardship pay
¨ Income tax equalization allowance
¨ Education allowance
Also, LVMH have realized the importance of developing effective internal and external international management development programs, in order to attract and retain key superior talent. Firms, through such developments programs, foster to provide high-quality international education to its global managers in order to widen their international business knowledge. As firms expand over different countries and cultures, it is essential for them to provide cross-cultural training to its global managers in order to foster an appreciation of the host country's culture.
For UK managers transferring to countries in the Far and Middle East, firms need to organize extensive cross-cultural training, due to a greater cultural gap, in comparison to international assignments across Europe. Such training programs provide exposure to diverse backgrounds, perspectives and experiences of multi-cultural team members.
The simplest training, in terms of preparation time, is to place a cultural integrator in each foreign operation. This individual is responsible for ensuring that the operation's business systems are in accord with those of the local culture. The integrator advises, guides, and recommends actions needed to ensure this synchronization. One recent review found that cross-cultural training, which can take many forms, is becoming increasingly popular.
There are two primary reasons for training (Dowling, 1994): organizational and personal. Organizational reasons include overcoming ethnocentrism, improving communication, and validating the effectiveness of training programs. Personal reasons include improving the ability of expatriates to interact locally and increasing the effectiveness of leadership styles. There are two types of training programs: standard and tailor-made. Research shows that small firms usually rely on standard programs and larger MNCs tailor their training. The six major types of training include environment briefings, cultural orientation, cultural assimilators, language training, sensitivity training, and field experience.
A cultural assimilator is a programmed learning approach that is designed to expose members of one culture to some of the basic concepts, attitudes, role perceptions, customs, and values of another. Assimilators have been developed for many different cultures. Their validity has resulted in the improved effectiveness and satisfaction of those being trained as compared with other training methods.
When implementing performance appraisal overseas, therefore, first determine the purpose of the appraisal. Second, whenever possible set standards of performance against quantifiable assignments, tasks, or objectives. Third, allow more time to achieve results abroad than is customary in the domestic market. Fourth, keep the objectives flexible and responsive to potential market and environmental conditions.
INTRODUCTION: Highlight strategy of career development for LVMH
The primary objective of the HRM function in LVMH is to ensure that the most effective use is made of its human resources. The five functional areas that will be discussed are: 1. recruitment and selection, 2. training and development, 3. performance evaluation, 4. remuneration and benefits and 5.labor relations.
However, the scope and complexity of the role of the IHRM consultant at LVMH increased as the primary focus is to undertake a global perspective of managing the human capital of its subsidiaries across international borders. These compelling issues which the IHRM manager faces are likely to be more severe than the domestic HR manager.
The need to work more effectively in multi-cultural environments is an issue for both IHRM managers and Domestic managers as organizations now have increasingly diverse workforces. From an IHRM perspective this is critical as the IHR manager have to consider the political legal environment, trans-national political orientation, government policies and regulations when interacting with employees who have different educational and cultural backgrounds and value systems. Whereas the Domestic HR manager operates under a system where there are homogenous values, attitudes and similar social organizations. Therefore the IHR manager has to be aware of the implications of cultural differences when establishing HR policy decisions.
TRAINING & DEVELOPMENT in LVMH
The general aim of the training and development function of HRM is to adequately provide trained and skilled personnel within the organization with the capacity to fulfill organizational success.
For the domestic manager this may include planned individual learning, education, organization development, career development and training.
From an international perspective this facilitates expatriate training, and the development of international staff and multinational teams.
There are several motives as to why an IHR manager could adopt a centralized approach in LVMH, as it may aim at facilitating specific firm-based training to increase corporate culture awareness. This fits the ethnocentric approach.
LVMH has adopted such approach as HCN managers are sent to headquarters for training and upon returning training programs are tailored to suit local situations.
As stated by the ACAS (2001): "appraisals regularly record an assessment of an employees's performance, potential and development needs. The appraisal is an opportunity to take an overall view of work content, loads and volume, to look back on what has been achieved during the reporting period and agrees objectives for the next year". (Foot & Hook 2002)
For the IHR manager the difficulty of this HR practice is more intricate as developing a global system is challenging. These managers have to evaluate employees from various host countries and implement systems that are consistent across subsidiaries, considering the various cultural backgrounds and implementing fair and equitable practices throughout. For example, an IHR manager who has to evaluate employees in subsidiaries in countries such as Mexico must understand that an individual's public image is important and thus public criticism is grounds and justification for resigning from a company.
REMUNERATION & BENEFITS
The remuneration process plays an integral role in acquiring and retaining employees. Pay is the primary resource of living for employees, while benefits include activities such as health and pension schemes.
For an IHR manager there are several influences on pay determination that needs to be taken into consideration. These are; beliefs about the worth of the job, individual characteristics, labour market conditions, remuneration and policy strategy, strength of bargaining groups, the cost of living and government policies. Policies are usually developed, which could apply globally, to offer salaries and benefits representing a specific market level.
The availability of qualified local personnel, the use of expatriates, and local laws also interact and influences the level of remuneration and benefits schemes that are to be established. For example if there is a labor shortage or lack of skilled personnel to fill a position, the remuneration for those positions are generally high. To reduce expenses, the IHR manager may consider the option of recruiting an expatriate.
Labor relations pose an especially complex task for both Domestic and International Human Resource managers. The concept of this HR function is to define the roles of management and workers in the workplace. For both managers labor relations often reflect the laws, culture, social structure, and economic conditions of the country.