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A multinational corporation is a business firm operating in different countries, under centralized control, producing commodities and services for profit. The demise of communism, the fall of trade barriers, and the rise of networked communication have unleashed a revolution in business. Market capitalism guides every major country on earth. Goods and services flow across borders more freely than ever; vast information networks instantly link nations, companies and people. The results---twenty first century capitalism! Increasingly, the world is becoming a global village. (Business Week, 1996)
International businesses have been around for a long time. Siemens, Remington, and Singer, for instance, were selling their products in the nineteenth century. According to Coulter & Robbins, (1999), the Ford Motor Company set up its first overseas sales branch in France in 1908. By the late 1920 s other companies including Fiat, Unilever, and Royal Dutch/Shell had gone multinational. But it was not until the mid 1960 s that Multinational Corporations (MNC s) became commonplace. Today however, these Multinational corporations - large companies which operate in more than one country - make up twenty-nine of the world s 100-largest economic entities. The biggest corporation, Exxon Mobil, is the 45th largest entity sandwiched between the economies of Chile and Pakistan.
1.2 MANAGERIAL RECRUITMENT
Plant, equipment, materials, and people do not make a business more than airplanes, tanks, ships and people make an effective military force. One other element is indispensable: effective managers. Weihrich & Koontz (1993).
The success of the organization is a significant contribution of managers who thus need to be selected with a lot of caution and care. According to Weihrich & Koontz (1993), Selection is a process of choosing from among the candidates, from within the organization or from outside, the most suitable person for the current position of for future positions.
The need for managers initiates the recruitment process which involves attracting qualified candidates to fill organizational roles, from among whom, managers, or potential managers are selected. The selection process involves choosing from among the available candidates, the most suitable ones. The entire process aims to place managers in positions which allow them to fully utilize their potential and contribute to the success of the organisation.
An employer needs to sell its job to potential employees so as to ensure that it can generate an adequate pool of applicants. According to Barber (1998) it is important that employers do not consider the recruitment process to be finished at this point. It continues during the short listing and interviewing stages and is only complete when the offer is made and accepted (Torringotn, Hall & Taylor, 2002).
MNCs have grown faster than national economies in recent years: in 1990 they accounted for only 3.5 per cent of the world s GDP, but by 2000 this figure had risen to 4.3 per cent. The scope of MNC activity has increased over the past two decades as states have deregulated their economies by removing barriers to foreign investment, and functions traditionally performed by states have been devolved to corporations through privatization, for example in the telecommunications and energy sectors. (http://www.cafod.org.uk)
MNC s are thus an interesting area for those interested in the developing countries, which are now emerging as huge markets for world trade. MNC management has been studied in detail by quite a few researchers well-known in the field of management such as Harold Koontz etc, but the researcher could not find any examples of detailed case studies from a developing country such as Pakistan. The country s culture, economy and business trends set it apart from the others and should thus be studied individually.
Managers run organizations and are instrumental for the profitability and survival of these entities. They thus need to be selected with extreme caution. While there are many selection and recruitment techniques highlighted in text and practice, the researcher is more interested in the origin of these managers, whether they are chosen from the home country, etc. The researcher is also interested in a deeper understanding of the international business environment of his home country i.e., Pakistan. Furthermore it is also felt that familiarity with business environment and an insight to the economic conditions of the country will help gather more pertinent facts and authentic data for a high caliber of research.
1.4 AIMS OF THIS RESEARCH
To determine and analyse managerial recruitment choices taken by multinational organizations in Pakistan in light of Managerial theories.
1.5 OBJECTIVES OF THIS RESEARCH
Identify and understand the managerial recruitment of multinational organizations operating in Pakistan focusing on Siemens.
The main focus of the objective is to look at the target market and the origin of the managers sought by these organizations. However for the purpose of this research one organization is being focused upon.
Evaluate the managerial recruitment choices in light of management theory.
2 LITERATURE REVIEW
The literature review is meant to develop a strong theoretical framework which can be used to gain better insight into the area of study and also enables to analyze the research findings in light of a critical evaluation of the theory and reach conclusions through effective triangulation.
2.1 RECRUITMENT OPTIONS
Companies have three sources for staffing the positions in international operations: (1) managers for the home country of the firm, (2) managers from the host country, and (3) managers form a third country (Negandhi, 1987).
It is not unusual for large international firms to have top management teams to be composed of managers of many different nationalities. The geocentric attitude is the basis for viewing the organization as a worldwide entity engaged in global decision making, including staffing decisions. One must look beyond the immediate external environment and recognize the world wide changes brought about primarily by advanced communication technology and by the existence of multinational corporations (Ronen, 1986).
According to Weihrich & Koontz (1994), in the early stages of the development, managers were often selected from the home country. Some of the reasons include the managers experience at the home office and their familiarity with products, personnel, enterprise goals and policies, etc. This facilitates not only planning but also control. On the other hand the home country national may be unfamiliar with the language or the environment the foreign country. Moreover it is usually more expensive to send managers and their families abroad. Families would fine it hard to adjust to the environment of a foreign country. Furthermore, host countries may pressure the parent firm to employ host managers.
Managers who are host country nationals speak the same language and are familiar with the country s environment. Employing them is generally less costly, and it may require relocating them and their families. The problem is that those managers may not be familiar with the firm s products and operations, and thus control may be more difficult. The other alternative is to have third country nationals, who often are international career managers. Still, the host country may prefer to have its own nationals in the position of power. However (Arvind Phattak, 1992) has voiced caution in selecting managers from countries that had political conflicts in the past, such as India and Pakistan or Greece and Turkey.
According to Coulter & Robbins, (1999) the decisions to send individuals on global assignments are based on employee selection criteria that are influenced by the company s experience and commitment to global operations.
2.2 EXPATRIATES & LOCAL HIRES
A firm s resources affect how the firm behaves and performs (Barney, 1991; Lippman and Rumelt, 1982). Penrose, 1959, states that managerial resources play an important role in obtaining, utilizing, and developing a firm s other productive resources. Tan and Mahoney, 2002, supplement this claim by arguing that therefore firms need to deploy their managerial resources effectively.
According to Tan & Mahoney, 2002, the effectiveness of human resource deployment influences the likelihood of generating and sustaining competitive advantages of a multinational firm and is therefore a fundamental issue for international business studies. A multinational firm can deploy two types of human resources to top managerial positions in its foreign operations expatriates and local hires. Expatriates are defined as the home country and/or third-country employees sent by the headquarters. Local hires are host country employees (Daniels and Radebaugh, 2001). Expatriates typically have developed firm-specific knowledge and firm-specific relationships. In contrast, local hires typically have local market knowledge and local business connections.
Extensive literature is to be found on the economic benefits and economic costs of expatriation (e.g., Black and Gregersen, 1999; Edstr m and Galbraith, 1977; Kobrin, 1988; Scullion, 1991), and a few empirical studies have also explored the critical factors that lead to the use of expatriates and local hires (e.g., Boyacigiller, 1990; Harzing, 2001; Richards, 2001). Here, it is generally suggested that expatriates can improve the multinational firm s capability to transfer and control information, and that the factors that necessitate information transfer and control will also increase the propensity of a multinational firm to use expatriates.
Tan and Mahoney, 2002, find a common premise underlying this research literature, that the values of comparative economic contributions of expatriates and local hires influence the multinational firm s human resource deployment decision in the foreign operation. However, Coff, 1997, finds it lacking in terms of having overlooked the impact of one distinct characteristic about human resources on this strategic decision. Specifically, human resources are under only limited control by a firm. For example, employees are in a position to leave the firm, renegotiate employment contract for personal benefits, or withhold critical information.
When the firm has serious concerns over whether particular employees are willing to do as they are required, the firm may choose not to place these employees in particular managerial positions even if they may be the most capable employees. As a result, the concern of a multinational firm about its effective control of employees may affect the firm s human resource deployment decisions.
Tan & Mahoney, 2002, also criticize contemporary research literature for not having systematically considered how the objective of managerial resource control influences the multinational firm s international staffing decision.
2.3 WHY PCNS/TCNs?
Edstrom & Galbraith (1977) carried out a study to theoretically explain why international transfers of managers occur. They identified three general company motives for these transfers:
To Fill positions
This refers to the transfer of technical knowledge to developing countries, where qualified host-country nationals are not available.
This is meant to give a manager important exposure for further assignments with subsidiaries or parent company. This occurs even if qualified host country nationals are available.
3.0 RESEARCH DESIGN
There is never a single perfect research design that is best for all marketing research projects, or even for a specific type of marketing research task (Malhotra 1993).
According to Saunders (2003), choosing a research approach is based on the theoretical knowledge before the research, which determines whether the researcher should use a deductive approach, where the researcher develops a hypothesis and tests it during the research process, or an Inductive approach, where data is collected to develop a theory on analysis.
Malhotra (1993) categorises Deductive and Inductive approaches as either Exploratory or Conclusive. However a multi-approach is also viable which involves a blend and mixing and matching of the given options. This enables the researcher to ensure triangulation; a phenomenon which helps accurate interpretation of data leading up to feasible conclusions and recommendations.
An exploratory research entails developing an insight into the area of interest after testing a hypothesis in the target market using qualitative forms of research. According to (Robson, 2002:59), Exploratory studies are a valuable means of finding out what is happening; to seek new insights; to ask questions and to assess phenomenon in a new light . Descriptive research, on the other hand, aims to provide an accurate profile of persons, events or situations ((Robson, 2002:59).
This research has been carried out as a preliminary investigation in a short time span as it would not have been possible to cater to a conclusive study. Therefore, the exploratory research design seemed to be suitable for the purpose of this research.
This research was carried out with an open frame of mind leaving wide options for exploring cultural and logical explanations in the recruitment of PCN or HCNs in the cultural settings of Pakistan. Exploratory research also allows for the development of a hypothesis and the use of secondary data as a basis for comparison, which was essential for the purposes of this research.
Extensive secondary research was undertaken and various theories were studied to understand the phenomenon of executive staffing practice and organize the simplest possible models for a clear and concise analysis. Secondary Data or previously published material was researched using a variety of sources including:
Articles from Business magazines and publications, especially Business week articles
Prior Research reports on MNC Managerial Recruitment
MNC Case studies with regard to developing countries
World wide web
4.0 Data Analysis
The analysis focused on analyzing the data gathered by secondary means. Data collected about Siemens Pakistan and its recruitment strategy and this was then viewed in light of 2 selected models i.e Hofstede s model and Downes Model since both are accepted models of contemporary literature and compliment each other. Furthermore both look at managerial recruitment in a cultural aspect .
2.4 GEERT HOFSTEDE S ANALYSIS
Culture is the collective programming of human mind that distinguishes the members of one human group from those of another. Culture in this sense is a system of collectively held values. -- Geert Hofstede
Geert Hofstede identified 5 cultural dimensions which he measured for various countries and used the ratings to analyse the cultural differences and similarities among societies.
2.4.1 Power Distance
As per Hofstead research Pakistan is a high power distance country unlike Germany where the organizations varies from each other. Pakistani organizations are basically divided into two sectors i.e. public and private. Till 1990 s when the economy was regulated; Public Sector Enterprises monopolized the organizational scene. Within these PSE s the culture was bureaucratic, centralized and inflexible. There is inequality between the higher and lower ups in the organization; the subordinates in the organizations tend to be afraid of their superiors and always do things what they are told to. Unlike Germany where they are more likely to challenge their bosses and they expect to be consulted but still age takes precedence over the youth. In Pakistan there is a huge concentration on authority of the managers, who are considered to be the decision makers and the holders of power in the organizations. They mostly rely on formal rules and not on their personal experiences or for that matter of their subordinate s in contrast to Germany. The whole focus is on authoritative leadership and close supervision, which ultimately leads to satisfaction of performance and productivity in the organizations.
Many a time s researchers also use various other software s and other research models to analyse the data which they have gathered. The use of SPSS is seen a lot these days. Many researchers and students make use of this Software to analyse the data what they have collected for their research. This software looks and functions same like that of Microsoft Excel.
5.0 Conclusion & Recommendations
While the research concludes that adherence to theoretical frameworks is not essential for successful business practices, it also does not regard these theories as void or invalidated. It is essential to note that Siemens Germany is aware of the importance of the factors highlighted by research theories, although it chooses to ignore these due to current success. Yet the level of success though unsurpassed by other organizations in the country is not exactly up to the optimal capacity of the organization. The company chooses to save on the expenses of PCNs/TCN s under current circumstances, but the minute its global customer steps into the country, Siemens Germany brings in the heavy guns. The project is transferred to another unit in Dubai, a new team is put together. It is interesting to note that in this case, the team is a diverse make-up of all three options.
If, Siemens Headoffice in Germany is not bothering with research in the case of Siemens Pakistan it is not because the theory is found to be invalid, it is only because non-adherence is also serving the purpose. Siemens Pakistan is not of vital importance to the parent company who can disregard its subsidiary in a developing country. The subsidiary is doing well in any case and has established itself as the country s largest telecom infrastructure provider along with gaining success in all other areas of operation. However if focused upon, Siemens Pakistan could also have had the technical capacity to deal with Telenor and the additional expenses of a different team in Dubai would not have been required.
Although the researcher aimed to put in sincere efforts to make this research as authentic as possible, one must accept that limitations remain as they always do in all human endeavours. The geographical distance between, the UK and Pakistan was ofcourse one of the major hindrences, and the shortage of time was another. Financial resources put another contraint which did not allow the researcher to go all out for the purpose of data collectiuon. Furthermore, all previous studies on the area, although none concenring developing countries such as Pakistan, focused on a multitude of MNC s for the purpose of data collection. However, time and financial constraints did not allow such an extensive study and the researcher had to contend with only one MNC as a representative. Therefore the most suitable one was selected.
The anticipated world wide merger of Nokia & Siemens has been making news for quite some time now. While many are giving their opinions about the whole issue, it has had its effects on the employees and executives of Siemens Pakistan .