The purpose of this report is to study the expansion of IDP Australia in the Indian market and to explore the existing cultural dimensions. This would also cover analysis based on relative best known academic theories to identify the differences within the PCN (Parent Country National) and HCN (Host Country National), identifying the resulting impact of the cultural diversity on the IHRM practices; review whether the leadership and motivational systems are in place in accordance with the legal and ethical considerations in HRM policies and practices followed by the parent company and then finally concluding the report by recommending the necessary changes in strategies to be made on the host country's culture.
The report covers four key aspects of the IDP's expansion process. In the first part it evaluates the external environment and cultural dimensions and analysis the differences in the practices and pattern between PCN and HCN. In the second part it analysis the existing IHRM Practices and based on the best culture fit for the host country, PCN implements the most viable practice. The third part focuses on the implementation of leadership and motivational systems that will help IDP Australia achieve its objective in the host country. The final section of the report would explore the legal and ethical considerations for HRM polices based on the Indian legal systems and ethical viability of strategies. And the report would be concluded by constructive and necessary recommendations at the end.
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The research methodology adapted in compiling this report indulges a detailed reading and critical analysis on various academic books and journal articles based on cultural diversity and the knowledge gained during lectures and information from IDP website.
The report is based on assumptions that IDP Education Australia is intending to expand its operations to India and the data gathered for the purpose of the report is through secondary resources. As major portion of the data was deemed classified and was not accessible a few calculative and achievable assumptions have been made. Hence there are limitations.
Overview on the Organisation - IDP Education
IDP Education Pty Ltd is a global company that offers student placements in international educational institution around the world and also provides English language testing services (IELTS). IDP Education was first incepted in September 1969 under the Australian-Asian Universities Cooperation Scheme which allowed them to play a major role in the international education and development. Since then over the last 41 years IDP has grown its network over 75 offices in 29 countries, and has placed more international students into Australian institutions than any other organisation around the world.
Initially established with a mission to strengthen teaching and research in a number of intuitions in south-east Asia, IDP gradually transformed into an organisation with three major business arms - recruitment o international students, English language testing and management of international aid projects.
IDP's core corporate culture is based on the values of intelligent risk-taking, integrity, leadership, customer service, commitment to quality, empowerment, accountability and honesty valuing the people by openness to thoughts and imbibed teamwork.
Currently half of IDP's equity is owned by 38 universities through their holding company IDP Education Australia Ltd and on the other hand the remaining half is owned by SEEK Ltd, Australia's leading online employment and training company (idp.com 2009).
IDP's Rationale for Expansion in India
In 2008-09, studies revealed that revenue generated by international students has totalled to $3.47 billion, and is further forecasted to grow to $3.7 billion in 2009-10 (Refer Appendix 1). An estimated 339,580 international students are already enrolled at Australian higher education institutions in early 2010. And by 2010-2011 almost 70% of these students are estimated to study onshore in Australia, and the remaining may opt for offshore studies in Australian universities (IBIS world 2010). As the education industry is the second largest source of revenue for Australian economy and studies reveal that a large portion is generated from strong and fast growing economies like India, China etc (IBIS world 2010). IDP's top management planned for a massive expansion in India to boost its revenue and make the company a dominant force in its sector of education.
The rationale behind choosing India as the potential market by the management team was the education system in India that is making fast progress and with the massive system of higher education consisting of 342 universities, 17000 colleges and 887 polytechnics (refer Appendix 1: source: mapsofIndia.com) made it the first in IDP's list of potential market. Recent studies indicate that India has been a leader in sending students overseas for international educational exchange, with over 123,000 students in 2006 where staying outside the home country.
Always on Time
Marked to Standard
A recent study by Australian High Commission recorded a growth of 7%in the number of students from India that contributed to a number of 27,000 coming to Australia. As at year-to-date (YTD) April 2009 there were 436,895 enrolments by full-fee international students in Australia on a student visa. This represents growth of 20.1% on YTD April 2008 figures. There were 170,168 commencements in the same period, representing growth of 17.0%. China and India were the largest markets in both enrolments and commencements. China accounted for 24.1% of enrolments and 24.2% of commencements; India accounted for 18.7% and 16.7% respectively (Annual International Student Statistics, 2009). A research conducted by IDP has also analysed a gap in the demand that indicates that globalization and other economic shifts have turned India into an economically dynamic region, which has repercussions that extend into the educational sector by offering new opportunities to Indian students creating the need of IDP in India. Also in terms of the economic aspects, India is the fastest growing economy in the world with the total foreign direct investment increasing by $250 million during the period 1981 to 1991 to $6.6 billion by 2005 and in 2006 alone India's GDP increased in excess of 8% (Luthans & Doh 2009). All these factors contributed towards the expansion of IDP in India.
Firms small or large that expand beyond their national boundaries they need to take in consideration the various internal and external environmental factors that directly or indirectly impact the organisation. The political factors can be related to the risks that an organisation is encountered with or might encounter in the future, and these risks "are any changes in the political environment that may adversely affect the value of a firm's business activities" (Griffin & Pustay 2005, p.72). Although every country has its own share of political risks, the nature and importance of these risks vary. There are two potential political risk that IDP could face in India, one of which would the nature of instability of the Government at the national level, which will adversely cause a repetitive change in the government and will bring in constantly changing policies that may affect foreign trade investment, the labour market, etc., and this will indirectly would trim down the flow of people moving to study in Australia which will directly affect IDP's business. Also the second most important reason could also be the recent imbalance between the relationship between Indian and Australian government due to current attacks taking place on Indian students that has raised a question of the security of Indian students in Australia. This might also be an obstacle for IDP to represent Australia and its government safety measures taken to avoid such situations in India. With regards to the economic factors, any change in the political scenario will have a fluctuating impact on the economy of the host country and this will affect the organisation's business, in this case it being IDP. However, there are no eminent threats to IDP in the social and technological aspect; the management will also have to closely analyse into the cultural dimensions and differences that prevail in India when compared to the ones in Australia, as globalization not only brings about services, capital and people across borders together, it also brings about the fusion of information and ideas as well (Chris Chase-Dunn, 2005).
Analysis of Cultural Dimensions - Australia Vs India
As the world globalises the organisation find a need to reform their workplace management, and an opportunity to diversify and innovate the operating system and work culture. The success of such a step lies in the balance between the consistency in the changes and the actual adaptation to these changes (Trompenaars, 1993).
Culture as a word in its broader sense refers to the result of human interactions and knowledge acquired during conversations which is then used by people to interpret experience and generate social behaviour which further leads to various forms of values, creates attitudes and influence the behaviour of people among the group (Michael Porter, 1986). An academic study by Luthans& Doh (2009), indicate that culture is about learning, sharing, being trans-generational, symbolic, patterned and adaptive.
Thus on the basis of critical analysis with abstract to the academic references indicate that for IDP during its expansion in India may face a challenge in moving beyond its boundaries due to the cultural differences. Below are the challenges IDP may face:
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Thus IDP would have to consider a calculative step but also have to concentrate over building relationship among the various stakeholders it has to deal during its expansion. Also, every organisation has a fixed set of strategic predispositions to manage across various cultures. These have been identified into four distinct types:
If IDP, decides to adopt Ethnocentric predisposition, then it would allow the values and interests of the parent company to guide strategic decisions in this case it would not be able to blend itself among the Indian culture and thus may lose trust and loyalty among the staff that they would recruit in India . In reverse if only a Polycentric predisposition is adopted then it would allow the parent company to make strategic decisions tailored to suit the cultures of the host countries which might disturb the corporate identity of IDP, and the Vision, values and mission of the company may not be same among the whole organisation . Regiocentric predisposition on the other end would lead the parent company to blend its own interests with those of its subsidiaries on a regional basis but not international basis, so this might not work effectively for IDP. And the last element called Geocentric predisposition would allow the parent company to integrate a global systems approach to decision making but this would force the company to recruit people and expertise all around the globe which may not work at initially stages in India as it is a new sector all together (Luthans & Doh 2009).
Due to the difference in cultures, a comparison of the differences and similarities across cultural dimensions would be ideal in establishing the right approach to be perused by IDP. Thus a blend of Polycentric predisposition and Ethnocentric predisposition would allow IDP, to not only manipulate certain process as per Indian culture and acceptance but also be able to retain the vision and mission same across the borders.
After analysing the strategic predispositions the understanding of cultural dimensions would help IDP understand the differences and similarities between two or more cultures along each dimension (Phatak et al. 2005). The dimensions of the two countries are further analysed by using the Dutch researcher, Geert Hofstede's five cultural dimensions of:
Individualism and collectivism
Masculinity & Femininity
Power Distance - High or Low
As the existing culture in Australia is about questioning the authority and directive of work if felt wrong, indicates it to be a low power distance culture, while there exists a great respect for authority, power and age and people to blindly obey their superiors in India (Singh 1990) indicating it to be a high power distance culture. In relation to this theory, IDP in order to have a productive workforce will have to consider placing more senior personnel in terms of age, at the managing level who can influence the lower and mid level management to attain the vision and mission of IDP.
Individualism and collectivism
Australian culture emphasises more on self-achievement, individual goals, etc., indicating it as an individualistic culture whereas the Indian culture though is high on power distance is inclined towards group work and group achievement in order to seek the best outcomes (Bond 1986), indicating it to be a Collectivistic culture. Unlike its current setup in the parent company, IDP will have to focus on having a team oriented workforce with equal and shared responsibilities, as an individualistic culture in an Indian workforce will not blend in and eventually distort its objectives.
Uncertainty Avoidance - High or Low
As per the research, Australia is low on uncertainty avoidance while India is high on uncertainty avoidance (Luthans & Doh 2009). This aspect of the theory holds the key in IDP achieving its main objective with its expansion in India. As the Indian work force being high on uncertainty avoidance, IDP will have to base its setup by strategically phasing out its vision, rather than going on an all out attack of achieving its goals, as it currently follows in Australia.
Masculinity & Femininity
The research also indicates the Australian culture inclined towards recognition and wealth, indicating it to be Masculine while the culture in India on the other-hand thrives on caring and looking after everyone in the group, indicating it to be feminine (Luthans & Doh 2009). IDP while establishing a masculitive workforce in India will have serious consequences as this will bring in non-cooperation amongst staff, as the current culture is feministic and focused on functioning as a group.Based on this framework the dimensions of Australia and India can be classified as given in the following table.
Documentation based oriented
Trust based orientation
Source: Phatak et al. 2005
As the Indian culture is foreign to the Australian manager, IDP will have to implement strategies by understanding the cultural sensitivity for the values of the Indian culture. It's necessary for them to understand that without making the necessary changes will hold back IDP's progression in India.
Human Resource Management is one of the most important resources of any organisation and the importance given to these practices have a profound impact on the performance of the organisation (Wild et al. 2007). In today's world of globalization and innovativeness, the effective management and leadership of human resources is the most innovative source for competitive advantage (Porter 1986). Unlike domestic HRM, International Human Resource Management - IHRM is considerably different as it deals with organisations across national borders and is the process that deals with the procuring, allocation and effective utilization of human resources in an international arena (Aswathappa 2009). The success of an organisation across borders depends on the effectiveness of key HR practices like internal & external Recruitment and Selection, Training and Development, Performance Management and Compensation.
Internal and External Requirement and Selection:
In a global workforce organisations need to open their recruitment process and need to watch out for the unlawful discrimination of applicants (Leighton& Proctor, 2006). As IDP is in the business of placing students in Australian institutions, the candidate needs to meet the specific requirement of having a working knowledge of the industry. In Australia, IDP recruits from within and outside the sector and across national boundaries to increase its knowledge and experience pool and the role of staff is to implement new strategies for business and reform existing ones to enhance productive. This type of recruitment is geocentric in nature and helps organisations to develop staff who can easily adjust to changing business environments (Wild et al. 2007). Recruiting people from any background or culture increases the cultural diversity of an organisation. In India IDP will have to recruit for top and middle management who will be responsible for making policies and managing the business operations and front line staff who will be the face of the organisation and work towards achieving its objective and will be solely responsible for generating revenue. Although, IDP adopts a geocentric approach of recruitment in Australia, it will have to use a polycentric approach in India, as the one major downside of geocentric approach is the expense that incurs on the organisation (Wild et al. 2007). Apart from being cost effective the advantages of using a polycentric approach is that locals have a better knowledge of the region and its effects on the market (Daniels et al. 2004).
Although, as per the best practices it is advisable for organisations to follow a geocentric approach, IDP for its India operations will have to adopt a polycentric approach for both internal and external recruitment. As the operations are just being setup in India, IDP will have to initially focus on external recruitment procedures and along with the print media, will have to use the services of recruitment agencies and job centres. While using the services of agencies, organisations have to be very careful in choosing the right agency and will give the necessary instructions required, as any action taken by the agency will become the organisation's responsibility. Also the role of these agencies, for effective recruitment should be only to identify the likely applicants, based on the requirement of the organisation and the selection should be done by the employer. Similarly, organisations could also use the services of a Jobcentre, as this gives free advertising access to a pool of labour that are initially scanned through a set of set guidelines by the jobcentres and finally be selected by the employer.
Training and Development:
Training and Development is the key component of the human resources, as it draws the path of an organisations success. An effective organisation initially trains staff in various aspects of the organisational behaviour, working styles, production, etc., and then imparts the necessary training needed by the top management to support employees and continually monitor the performance to provide further development programs.
In a global organisation, training is necessary particularly for those expected to be working on foreign assignments. On such occasions, the employees need the necessary cross cultural training - CCT which helps understand the host country's culture, history, economy, social and business practices (Aswathappa 2009).
According to Aswathappa (2009) such training though has its own merits and demerits as discussed below:
Increases the ratio of success in foreign assignments
Develops a false sense of confidence amongst staff
Provides a detailed global perspective
Cannot completely remove cultural biases and prejudices still persist
Helps in the management of foreign employees
Might not make a visible difference on business volumes
Reduces culture shock
Can never fully prepare as assignee to counter real problems
As training also helps in the alteration of employee behaviour and attitude and is directly proportional to the attainment of set goals, the host country staffs also require training and development programs (Luthans & Doh 2009). As IDP, for its operations in India do not have the option of expatriates; however it needs to form training and development programs for host country staff. The top management staffs require training on the management of policies, protocols, leadership, team management, etc., while the front line staffs require training on product development, service orientation, in order to achieve the vision and mission of the organisation. The training should also focus on the awareness of the parent company, its history, the key objectives for the specified subsidiaries and the working culture of the parent company (Aswathappa 2009).
7.3. Performance Management:
While recruitment, selection and training and development focus on the achieving the company's objective, performance management focuses on the productivity of the organisation and its employees (Aswathappa 2009). The effectiveness of the performance management depends on the overall HRM strategy of the organisation. As IDP in Australia, has a standard performance appraisal system management systems across all Australian offices and consists of a 360 degree feedback reviewed once a year, it indicates of having a geocentric approach. With regards to its expansion, the same system if followed in India will reap the desired benefits, however, it needs to be carried out once every three months, as the organisation is new and monitoring the performance regularly will help in identifying any training needs. The performance evaluation may be based on the revenue generated and the market growth (Griffin & Pustay 2005). Also IDP must look at setting goals which are specific, measurable, accurate, real and timely - SMART, as this will enhance performance management within the organisation yielding better results (Aswathappa 2009).
Compensation packages contribute to performance and can be classified under base salary, benefits, allowances and incentives and should align with the objectives of the employee with that of the organisation (Aswathappa 2009). IDP in Australia compensates its employees by means of a base salary, incentive based on the revenue generated every financial year, benefits for staff and their family, with health cover, insurance, child care, etc. Based on the Indian work culture where focus is more on monetary gains than other benefits, IDP had developed a base salary for various levels of profile there by standardising the pay structure and have a half yearly incentive option based on the net profit made. This indicated that IDP needs to adopt a polycentric approach while dealing with the compensation aspect. However, the challenge for IDP in designing the compensation is to avoid excessive cost and at the same time main the employee morale (Luthans & Doh 2009).
Leadership at IDP
Leadership is the process of influencing the activities of an organisation or a group, in a synchronized effort to achievement of the goal (Bass 1990). The sheer dynamics of change today requires a more structured approach effectively managed by determined leadership. IDP's leadership agenda is all about progressive learning. As the culture, in which the parent company operates, is individualistic and futuristic oriented, this kind of a leadership is perfectly accepted and effective. However, in India an organisation will have to look at the sub diversity within the national culture and this makes a particular style of leadership in effective (Griffin & Pustay 2005). The leadership that IDP in India would try and demonstrate should take into consideration the various levels of behaviours at different levels of the organisation and a more situational based approach is necessary.
The current system of motivation that exists in the IDP world, is that of Performance = Reward. However, in an Indian workforce, IDP will have to focus more on appreciation oriented along with group rewards methods to motivate staff, as the organisation is still in its infancy phase. Since in its early phase, the best way of motivating staff would be to involve subordinates in the decision-making process. Also this is a good way to maintain a good team environment and to empower teams to work autonomously and make their own decisions. Also IDP could motivate staff by taking care of the five basic needs as described by Maslow's Need Theory: physiological, safety, social, esteem and self actualisation. IDP by focusing on these needs will have to religiously monitor staff needs for effective motivation, as once the needs are satisfied, a much high level needs arise and the ones satisfied, no longer act as motivators (Luthans & Doh 2009). This is possible by having regular performance appraisals.
Legal and Ethical considerations in IHRM:
While expanding across national boundaries, the parent company faces a major challenge in dealing with the host country's legal system and this has a direct impact on the development of the IHRM policies. As being the largest democracy and with a vast diversity of cross cultures surrounding infinite belief systems, IDP's major legal challenge in India would be the privacy of individuals (Craig 1999).
Ethical behaviours in a cross culture is relative to how an organisation treats its employees and how the employees treat the organisation and its objectives (Griffin & Pustay 2005). IDP's focus on ethics is very straight forward and it is transparent its objective of integrity and honesty. All employees, from the top management to the front line staffs are mandatorily required to follow the organisational code of ethics, be it in Australia or India.
Based on the finding, it is best recommended that IDP with its expansion to India starts with an ethnocentric approach and gradually moves into a long standing polycentric approach. With regards to the IHRM practices IDP will have to bring in the following changes for effective functioning of the business. In terms of Recruitment, IDP after the monitoring period is over, should look at advertising for vacancies online within the intranet and slowly drive the option of staff from other offices in the network, look at working in a different environment thereby bring in broader ideas of running the business. With regards to its current Training and Development program, a more detailed training needs to be developed for staff on understanding the local market thereby helping in the progression of the business. Also an online induction program will be beneficial. With respect to the Performance Management system, as the industry is very fluctuating, a review once at the end of the financial or calendar year is much better, as it gives employees the time to do a self appraisal. Also the development of an online tool to gauge performance will help in this process. Finally in respect to the compensation aspect, IDP definitely needs to improve its base salary structure keeping in mind the market size and potential.
To conclude it is essential for any organisation to manage people and business in any country outside the national boundaries of the parent company, it has to study and understand the culture and diversity of the region and accordingly implement IHRM practices that will best fit both the parent company and the host country's needs and expectations. It is also clear that a cultural geometry and plays a very important role in establishing the right kind of leadership required navigating the organisation forward in today's competitive world.
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