international expansion (HR perspective)

MANAGING PEOPLE ACROSS CULTURE HBM- 411

SUPER MARKETS EXPANSION IN TO INDIA

SUBMITTED BY: MOHAMMAD PARVEZ NAIM SUBMITTED TO: PETER CARTON STUDENT ID

: 6565700

DATE

: 5TH MAY 09

Executive summary: The purpose of this report is to identify and evaluate key IHRM issues face by Coles during the set up phase of their expansion in to Indian market by opening 5 supermarkets   by the end of 2011. The key issues identified requiring action to be taken includes Recruitment Recruitment and selection, selection, training training and development development,, performance performance management and compensation.

The key Recommendations of this report are as follows:

Recruitment and Selection

1. It is recomme recommende nded d by Awasth Awasthappa appa K (2006) (2006) that ethnoc ethnocent entric ric approa approach ch may be appropriate during the early phase of international business because firms at this stage are concerned with transplanting a part of business that has worked in home country. 2. It is recommen recommended ded by Dowling Dowling P (2008) (2008) that Coles Coles selecti selection on criteri criteriaa should should be  b bas ased ed on expat expatri riat ate’ e’ss Tech Techni nical cal abil abilit ity, y, cros crosss cult cultur uree suit suitab abil ilit ity, y, fami family ly requ requir irem emen ent, t,

coun countr try/ y/cu cult ltur uree

requ requir irem emen ent, t,

lang langua uage ge

crit criter eria ia

and and

MNC MNC

requirements. 3. It is recomme recommended nded by Dowling Dowling P (2008) (2008) Recruiti Recruiting ng internal internal candidate candidate for Indian Indian headqua headquarte rters rs is likely likely to result resultss in better better contro controll and coordin coordinati ation on of their  their  subsidiaries as PCN is more familiar with home office goals, objectives, policies and practice.

Training and development

1.

It is reco recomme mmended nded by Mond Mond A Noe (2002) (2002) that that pre-de pre-depar partur turee traini training ng for Coles Coles Expatriates should be designed to fill the cultural gap between the home country and host host countr country y and it should should includ includee content content like like cross cross cultur culturee traini training, ng, language training, practical training and miniculture training

2.

It is reco recomm mmen ende ded d by Munir unir H.Ta H.Tay yeb (200 (2005) 5) that hat Col Coles shoul hould d give give pre pre departure training to its Key personnel in host nation headquarters. Munir H. Tayeb (2005) further argues that pre departure training conducted in host country with with the intera interacti ction on of host host countr country y employ employees ees will will help help the expatri expatriate atess to unders und erstan tand d the local local custom customs, s, cultur cultural al insigh insights ts and social social aspect aspectss leads leads to intercultural communication skills and business performance.

3.

It is reco recomme mmended nded by E. E. Dunbar Dunbar & A. Katch Katcher er (1989) (1989) that that it it is criti critical cal that that the family should be included in the orientation programs.

Performance management

1. It is recom recomme mend nded ed by Cadwel Cadwelll M (2000 (2000)) that that Coles Coles shou should ld use perf perfor orma manc ncee mana manage geme ment nt mode modell for for thei theirr Indi Indian an subs subsid idia iari ries es whic which h is (1) (1) plan planni ning ng   perfo performa rmance, nce, (2) monito monitorin ring g perfor performan mance, ce, (3) Analys Analysing ing perfor performan mance, ce, (4) Improving performance and (5) maintaining performance. 2. It is recomm recommend ended ed by Bascal Bascal Robert Robert (1999) (1999) that Coles Coles should should choose choose one of the following three approaches for evaluating employee performance. They are (1) Rating system (2) Ranking system and (3) appraisal by objective and standards. 3. Lutahns Lutahns & Doh (2009) (2009) argues that, that, according according to the the hofstede`s hofstede`s cultural cultural dimensi dimension, on, India is a high collectivism country where promotion is given on the basis of  seniority. So, it is recommended for Coles to give promotion on experience basis.

Compensation

1. It is recomme recommende nded d by Brisco Briscoee & Schule Schulerr (2004) (2004) that Coles Coles should should meet certain certain objective while developing their international compensation package in order to be effective. These are (1) providing the incentive to leave the home country for  foreign assignment; (2) maintaining a given standard of living; (3) should take career and family needs into consideration and (4) Facilitating re-entry into home country at the end of foreign assignment.

2. It is recom recomme mend nded ed by Dowli Dowling ng et al. al. as cited cited in Shen Shen J (2003) (2003) that that Cole Coless key component for International rewards and compensation should include; •

80% Base salary as a primary component of package of allowances.

•

10% Foreign service inducement or hardship premium

•

5% Allowances (ie.cost of living allowance, housing allowances)

•

5% Benefits (ie. Pension plans, medical services, social security, vacation, special leave)

3. It is recomm recommended ended by Brisco Briscoee & Schuler Schuler (2004) that during during the the set up phase phase Coles Coles should choose Negotiation/ad hoc approach app roach for compensating its expatriates.

Table of Content

Executive Summary…………………… Summary……………………………………………… …………………………………………. ………………. 1.0 Introduction………………… Introduction……………………………………………… ………………………………………………… …………………… 1.1 Aims and scope…………………………………… scope……………………………………………………….. ………………….. 1.2 Research methodology…………………… methodology……………………………………………… …………………………… … 1.3 Limitations…………… Limitations………………………………………… ………………………………………………… …………………… 1.4 Assumptions……………… Assumptions…………………………………………… …………………………………………….. ……………….. 1.5 Company background……………………………… background…………………………………………………… …………………… 1.6 Why India?.......................................................... ....................................... 1.7 Culture comparison…………………… comparison………………………………………………… …………………………………. ……. 2.0 Body of the Report…………………………………… Report……………………………………………………………….. ………………………….. 2.1 Recruitment and selection………………… selection……………………………………………… ……………………………… … 2.2 Pre-departure, on-going, induction training training and development……………. 2.3 Performance management…………………………… management…………………………………………………. ……………………. 2.4 Compensation……………………… Compensation…………………………………………………… ………………………………………. ………….

3.0 Conclusion 4.0 Key recommendations…………………… recommendations……………………………………………… …………………………………………. ………………. 5.0 References……………………… References…………………………………………………… …………………………………………………… ………………………

1.0 Introduction

It is the intention of this report to identify and explore the key IHRM issues for the Coles, intending to expand their business in India by opening their retails stores in major cities. The purpose of this report is to analyze the Implementation of key IHRM practice during the set up phase in India.

1.1 Aim and Scope

The purpose of this report is to identify the key IHRM issues for the Coles group indents to expa expand nd in Indi India. a. Th Thee scop scopee of this this repo report rt will will ident identif ify y key key Issu Issues es face faced d by a multi multinati national onal compan company y while while expandi expanding ng overse overseas as during during the set up phase phase and will will recommend proper actions to be taken. This report will also seek to; •

Propose Recruitment and selection criteria, whether to recruit Indian CEO internally or externally

•

Propose Training and development, whether pre-departure training should be held in Australia or India

•

Propose Performance and management, whether promotions should be on merit basis, experience basis…..(need to write more)

•

Propose compensation, what compensation packages Coles should give to their expats in order to achieve set up targets

1.2 Research Methodology

For the purpose of this report secondary data will be used. Secondary data is defined as information already collected or published for purposes unrelated to the research at hand (MaCarthy, etal, 1997, pg 149). The Information will be collected from class textbook,  journals, websites, swinburne`s online data bases, academic textbooks, company website,  business reports.

1.3 Limitations

1.4 Assumptions

•

The Cost benefit analysis estimated that this project would cost $35 million

•

In 2009, it is assumed that Coles will establish it’s headquarter and one super  market store in Delhi.

•

In 2010, it is assumed that Coles will establish 2 other supermarket stores in Mumbai

•

In 2011, it is assumed that Coles will establish 5 new supermarket stores, two in Chennai and three stores in Bangalore.

•

It is assumed, during the set up phase Coles projected revenue growth would be $7 million and in second year it would be $15 million.

•

Within first 3 year of operation it is assumed that Coles will achieve break even.

1.5 Company Background

Coles group limited is an Australian company which is engaged in super markets, liquor  and convenience stores from the last 89 years. In 1960, the company opened its first supermarket in North Balwyn, Victoria. By 1973, Coles achieved its aim of establishing a supermarket in every Australian capital city. Coles is owned by Wesfarmers ltd. Coles is full service supermarket operating over 760 stores throughout Australia and employing more than 92,000 people. Today Coles is a leader in Australian food retailing with over 

11 million customer doing transaction in a week. Coles offers customers convenient shopping that aims to fulfill all of their expectations and requirements under one roof and it is renowned for their daily cheaper prices p rices quality goods. Business proposals: During the set up phase following pe rsonnel will be recruited: •

It is proposed that the Chief Executive officer (CEO) will be selected internally (from Australia), successful candidate must possess 8 to 10 year experience in sales and retails management with a strong understanding of host nation business culture.

•

It is propo propose sed d that that the the Chie Chieff Finan Financi cial al offi office cerr (CFO (CFO)) will will also also be sele select cted ed intern internall ally y (withi (within n Austra Australia lia), ), succes successfu sfull candid candidate ate must must posses possesss 5 to 8 year  year  experience in international Accounting practices and standards. The candidate should have prior experience of practicing during the set up phase in overseas country.

•

It is proposed that the marketing manager should be recruited externally (from India) must possess 10 to 15 years marketing experience in host nation. The candidate should have strong understanding of Indian shopping culture and prior  experience of marketing with MNC during the set up phase.

•

It is proposed that the Human resource manager should possess 7 to 10 year  experience in recruiting staff and providing on going training and development  programme for the retail staff, to be recruited from the host nation. This manager  needs to be fluent in English and in Hindi. Also, HR manager must possess excellent skills in writing employment contracts and negotiating compensation and benefits in order to achieve business goals.

•

It is proposed that the Logistic and distribution manager must posses 5 to 8 years experience in transportation, stock control, warehousing, and ensuring structures in place to monitor the flow of goods and materials. This manager should be recruited internally.

•

It is proposed to recruit three business managers for food. Each one for Fresh foods, consumable (package foods) and for Meat. These managers should be selected externally (from India) must possess 10 year work experience in their  field.

•

It is proposed that, in each store there will be one store manager, one assistant manager to run stores on weekends, fresh food manager, two back office people for banking and pay roll, 20 personnel in stores for replenishment of the stock on the shelfs, for costumer service desk and general gen eral cleaners.

1.6

WHY INDIA?

Indian market has a huge potential for retail sector. Indian retail sector is one of the fastest growing retail sector in the world. Indian shopping culture is changing, now  people do more shopping in supermarkets. In India, Coles potential customer are middle class society. In the past few years’ Indian middle class society has grown reasonably and also the income level rises. India is changing and it is a best time for Coles to enter in to Indian market and take advantage of early starters. With the help of effective IHRM strategy Coles can easily penetrate in to the Indian market. 1.7 Cultural comparison (Parent company and Host Company Nation)

In the era of Globalization, understanding cultural influence is very important.

With the help of Hofstede cultural dimensions, we can sum up the differences between Australia and India below:

•

Dimensions Power Distance

Australia Low Power Distance (low

•

Individualism/ Collectivism

leve evel

of

inequa quality

India High Power Distance in (accept that power is distributed

society)

unequally)

Individualism

Collectivism

(individual rights are paramount)

(depe depend nden ence ce

on

grou group p

human relations oriented) •

Masculinity

High Masculinity

and and

(assertive (assertive,, competitive competitive business business Very High Masculinity cult cultur ure, e, stre stress ss on equi equity ty and and (big (big gap gap betw betwee een n men’ men’ss and and competition)

wome women’ n’ss

val values, ues,

stre stresss

on

equity and performance) •

Uncertainty Avoidance

Low UA (toler (tolerant ant of differ different ent opinio opinions, ns, Very High UA society try to have as few rules as (stri strict ct laws aws and and rules ules,, low low  possible)

toler oleran ance ce

of

devi devian antt

resistant to change) •

Short term orientation

Time

Long term orientation Source: Hofstede (1980) & (Chhokar, 2000; Sinha, 1997)

PCN (Australia) Individual work ethic

HCN (India) Dependence on the group

Low regard for rules

Respect for rules

Face-enhancing behavior 

Face-saving behavior 

Top down management

Bottom up management and teamwork 

Strong self-assertion

Weak self-assertion

Exceptional negotiating skills

Poor Poor negoti negotiati ating ng skills skills (respe (respect ct and save save others face)

Concern of self-interest

Concern of harmony

Source: Adapted from Shimizu, N (1995), pp. 50-51 and Hsu (1971)

2.0 Body of the Report

ideas deas,,

2.1 Recruitment and selection

It is the intention of this paragraph to analyze the recruitment and selection criteria to be used to recruit CEO for the Indian venture. Also, this paragraph intends to identify whether to recruit CEO for Coles Indian Headquarter Head quarter internally or externally. Dowling P (2008) argues it is essential to note that recruitment and selection are isolated  processes and both processes will operate efficiently only if they are able to do the staffing process effectively. Perlmutter(1969) as cited in P. Dowling (2008) identifies 4 approach approaches es MNC`s MNC`s adopts adopts for managi managing ng and staffi staffing ng their their subsid subsidiar iaries ies.. These These are Ethnocentri Ethnocentric, c, polycentri polycentric, c, geocentric geocentric and regiocentr regiocentric. ic. In Ethnocentri Ethnocentricc approach approach all key management positions are held by parent company national. In this approach subsidiaries are managed by staff from home country (PCN). The polycentric staffing approach requires host country national to be hired to manage subsidiaries (HCN) who are seldom   promo promoted ted to positi positions ons at headqua headquarte rter. r. Polyce Polycentr ntric ic approac approach h removes removes the worry worry of  language barriers, expensive training periods, and cross culture adjustment problem of  managers and their families. Geocentric approach is about staffing best people for the key  jobs throughout the organization, regardless of nationality. Seeking the best person for  the job, irrespective of nationality is most consistent with the underlying philosophy of  global corporation. The last approach is regiocentric, regiocentric approach reflects the geographic strategy and structure of the MNC. Like the geocentric approach, it utilizes the pool of managers but in a limited way. In regiocentric approach the staff can move outside their country but only with in the particular geographic region. The regional managers in this approach do not promoted to HQ positions but enjoy degree of regional autonomy in decision making. Awasthappa K (2006) argues that ethnocentric approach may be appropriate during the early phase of international business because firms at this stage are concerned with transplanting a part of business that has worked in home country. For example, during the early phase of internationalization companies are more concerned about penetrating in to host countr country y market market along along with with their their values values,, belief beliefs, s, polici policies es and proced procedure uress which which require a candidate who has strong knowledge of companies’ core value system.

Compton (2002) argues that, while establishing selection criteria it is useful to specify the essential and desirable qualities for the job. Future decisions will be easier to justify if  these are measurable in some way. For example, it is better to specify the levels of  responsibil responsibility ity and accountabil accountability ity and specific specific competencies competencies required rather rather than simply simply ask for relevant experience. Dowling P (2008) identifies selection criteria which Coles should use for expatriate selection. The selection criteria should be based on expatriate’s Technical ability: which refers to person ability to perform the required task, cross culture suitability: refers to adaptability of the person in to the new environment or 

  previous experience of working in a different culture. P. caliguiri (2000) as stated in Dowling P (2008) argues that cross culture attributes should include cultural empathy, adaptab adaptabili ility, ty, diplom diplomacy acy,, languag languagee abilit ability, y, positi positive ve attitu attitude, de, emoti emotional onal stabil stability ity and maturity, Family requirements: refers to support of family (spouse) for taking foreign assignment and willingness to go abroad, Country/cultural requirement : refers to the host country immigration rules. In some countries it is essential to give reason for using PCN rather than HCN also some immigration rules give visa only to expatriates not to their family and children which may result in rejection of offer by expatriate, language criteria: this refers to capability of expatriate to speak host country language fluently and  MNC requirements: which refers to situational factors which often have an influence on

selection decisions. For example, MNE may consider the proportion of expatriate to local staff when making selection decisions, mainly as an outcome of its staffing philosophy. However, operations in particular countries may require use o f more PCNs and TCNs. Dowling P (2008) argues an advantage for Coles to use internal candidate for Indian headquar headquarter terss because because it likely likely to result resultss in better better control control and coordin coordinati ation on of their  their  subsidiaries as PCN is more familiar with home office goals, objectives, policies and   pract practice ice.. Wherea Whereas, s, there there are certai certain n disadva disadvanta ntage ge also also of using using intern internal al candid candidate ate.. Aswathappa K (2006) argues that key disadvantage of using internal candidate is the excessi excessive ve cost cost of select selecting ing,, traini training, ng, and mainta maintaini ining ng expatr expatriat iatee manager manager and their  their  families abroad. In conclusion, it is recommended for Coles to use internal candidate for  their Indian headquarter which is likely to result in better control and coordination of  their foreign subsidiaries. Moreover selection criteria should be based on expatriate’s

technical technical ability, ability, cross cross culture culture suitabili suitability, ty, family family requirement requirements, s, country country and cultural cultural requirements, language criteria and MNC requirement.

2.2 Pre-Departure, on site and Induction Training and development

The Intention of this paragraph is to explore and identify the type of pre departure training should be given to key personnel (PCN) of Coles and where to give, in home nation or in host nation, as a part of their strategic entry plan in Indian market. Mond A  Noe (2002) identifies three phase training programme for foreign assignments which are  pre departure phase, on-site phase and repatriation phase. In pre departure training phase employees needs to receive language training and an orientation on the new country’s culture and custom. E. Dunbar & A. Katcher (1989) argues, it is critical that the family be includ included ed in the orientat orientation ion progra programs. ms. Mond A Noe (2002) (2002) furthe furtherr argues argues that prepredepartu departure re train training ing for Coles Expatr Expatriat iates es should should be design designed ed to fill fill the cultur cultural al gap  between the home country and host country and it should include content like cross range from from presen presentat tation ional al techni technique, que, such such as lectur lectures es and culture culture training training methods methods range stimulation that expatriate and their families attends on custom and culture of host nation, Practical training training seeks to help the expatriate expatriate   Language training and  practical training. Practical manager and family feel “at home” in host country. In addition, Pre departure training should also include experimental exercise such as miniculture training which allows expatriate and their family to spend some time with the family in the home country from the ethnic group of the host country. For example, the pre departure training should desig design n and given given in such such a way way that that Cole Coless key personn personnel el shou should ld have have a prop proper  er  understanding of India’s Political, social, legal and business culture, As well as health issu issues es;; emer emerge gency ncy proc proced edur ures es;; day-t day-too-day day livi living ng;; stra strate tegi gies es for for adap adapti ting ng to an internation international al environment environment;; and ongoing ongoing communicati communication on with the program program and also how to deal with the Indian costumers. For example; Fred Luthans (2005) argues bargaining for goods and services in India is common, in contrast to the western culture, where  bargaining might be considered rude or abrasive. Therefore, expatriate should know how to deal with the Indian customers.

Munir H.Tayeb (2005) argues that Coles should give pre departure training to its Key  personnel in host nation headquarters. Munir H. Tayeb (2005) further argues that pre departu departure re traini training ng conduct conducted ed in host host countr country y with with the intera interacti ction on of host host country country employees will help the expatriates to understand the local customs, cultural insights and social aspects leads to intercultural communication skills and business performance. Peter  T Burgi (1999) argues a mentor who has himself been an expatriate will be more likely to understand the challenges of international mobility, and be able to explain to top level management any problems regarding the expatriate’s performance and what may be expected from him. So, mentorship can be offered to a person with pervious expat experience like CEO of the company. Peter T Burgi (1999) further argues that mentor  should be in touch with the expatriate by visiting the expat`s work and living place. The mentor should make the maximum use of technology like emails, newsletters, phone calls, fax etc. for being in touch with expatriate. P.R Harris (1991) as cited in Mond A.  Noe (2002) argues, on site training involves continued orientation to the host country. Expatriate and their family may be paired with a mentor who helps them understand the new, unfamiliar work environment and community. Warnich et al. (2005) argues that the Induction program reduces the adjustment problem of new employee by creating a sense of security, confidence and belonging to them. Michael Meighan (2000) argues that it is the responsibility of the HR department to design and provide induction training to the new employ employee. ee. Warnic Warnich h et al (2005) (2005) argues argues the number number of people people like like superv superviso isor, r, manager, mentor, head of department etc are involved in implementation of induction training program. P. Caligiuri et al (2001) defines key advantage of pre-departure training as `intervention which is designed to increase the knowledge and skills of expatriates to help them operate effect effective ively ly in the unfami unfamilia liarr host host cultur culture. e. Wherea Whereas, s, Scullia Scullian n H (2006) (2006) argues argues key disadvantage as pre-departure training sometimes seen as a being too short duration to have a long time effect; also pre-departure stressors may be very different from the reality if the situation. In conclusion it is recommended for Coles to provide pre departure training to their expatriate on India`s Political, social, legal and business culture. In addition, addition, Coles pre departure departure training training should include include content content like cross culture culture training, training, language training and Practical training.

2.3 Performance Management

The intent intention ion of this this paragr paragraph aph is to analyze analyze the Coles` Coles`ss perfor performan mance ce managem management ent system for its international Assignees. Bris Brisco coee & Schul Schuler er (2004 (2004)) argue arguess the the perf perfor orma manc ncee manag managem ement ent syst system em used used in inte intern rnat atio iona nall arena arena rela relate tess to many many IHRM IHRM resp respon onsi sibi bili liti ties es,, such such as eval evalua uati ting ng international assignee and foreign manager for pay increase. Briscoe and Schuler (2004) further argues The IPM system also plays an important role in performance feedback, individual job assignments, development planning, and identification of training needs. Brisco Brisco & Schuler further further argues that the performance performance evaluation evaluation system needs to take account of both international and local-culture of host company standards into account   because the performance criteria in the parent country may not be the same as in the fore foreig ign n envi enviro ronm nmen ent. t. Cadw Cadwel elll M (2000 (2000)) argu argues es Cole Coless shou should ld use use perf perfor orma mance nce management management model for their Indian subsidiaries subsidiaries which is (1) planning planning performance performance,, (2) monitoring performance, (3) Analysing performance, (4) Improving performance and (5) maintaining performance. For example Coles should first establish expectations, what is expected? Then Coles need to monitor the performance, Are we on right track? Then analyse the performance of the company, if there is any problem take measures to improve it and lastly maintaining the pace of performance. Bascal Robert (1999) argues that Coles can choose one of the three approaches for evaluating employee performance. They are (1) Rating system: this system system is very common. common. Rating Rating systems systems can be best described as “workplace report cards,” much like the ones teachers in elementary schools use for their students. They consist of two parts: a list of characteristics, areas, or   behaviors to be assessed and some scale or other way to indicate the level of performance on each item. (2) Ranking System: Ranking systems involve comparing people against each other and determining whether an employee is better than, the same as, or worse than his or her colleagues on the basis of some set of criteria (e.g., sales totals or  management ability and lastly, (3) Appraisal by Objective and standards: This system involv involvee settin setting g target targetss for each employ employee. ee. Basal Basal Robert Robert (1999) (1999) sugges suggests ts that that using using individual individual targets is the better way to access performance. performance. Shipper, F., Hoffman Hoffman (2007) suggest suggestss that that the mentor mentor can play play an import important ant role role in impro improvin ving g perfor performan mance ce of 

expatriate in host nation. Shipper, F., Hoffman (2007) argues that, if the mentor will be ex-expatriate than he is more likely to improve the performance of the expat because of  his previous experience. Coles should consider culture diversity while giving rewards and  promotion to their employee for outstanding work. Hodgetts & luthans (2006) argue that rewards system varies from one culture to another. For example, in some countries,  personnel who do outstanding work are given individual rewards in the form of bonus and commission while in other cultural norms require group rewards and individual rewards are frowned on. Luthans & Doh (2009) argues, according to the hofstede`s cultural dimension, India is a high collectivism country where promotion is given on the  basis of seniority. So, it is recommended for Coles to give promotion on experience basis. ba sis. It will will help help Coles Coles in mainta maintaini ining ng harmon harmoniou iouss relati relation on betwee between n the employ employees ees.. For  example, if Coles gives promotion on the basis of merit than it is likely to results in inha inharm rmoni oniou ouss rela relati tion onss and and ther theree will will be more more chanc chances es of ego ego clas clash h betwe between en the the employees. Aswathappa K (2006) argues that the key advantage of giving promotion on seniority basis is the company can utilize the decade long experience for its benefit and Also Also,, Coope Coopera rati tion on betw betwee een n work worker erss is gene genera rall lly y not hind hinder ered ed by comp compet etit itio ion n for  for  subjectively determined promotions.Whereas, Harrison A (2000) argues that the key disadvantage of giving promotion on seniority basis is less motivation in employees as compared to merit basis promotion because everyone is motivated by self interest. In conclu conclusio sion, n, it is recomm recommende ended d for Coles Coles to use perfor performan mance ce model model evaluat evaluating ing company company’s ’s perfor performan mance ce and should should use one of the three three approa approaches ches for evalua evaluatin ting g employee’s performance. In addition, it is also recommended for Coles to give promotion on the basis seniority.

2.4 Compensation

The intention of this paragraph is to analyze and explore the type of compensation  packages  packages and benefits benefits should be given to Coles key personnel in order to achieve achieve set-up targets during the first two years of operation in India. Cynthia D. Fisher, et al as cited in Aswath Aswathappa appa K (2006) (2006) argues argues Financ Financial ial benefi benefits ts , along along with with the career career prospe prospects cts’, ’, motivates an individual to accept a foreign assignments. assignments. If these expectations are not met

during the assignments than it is likely to results in decline motivation and expatriate   perfor performan mance ce can suffers. suffers.

Puccin Puccino o S (2007) (2007) argues argues that that expatr expatriat iates es compen compensat sation ion

  packag packages es poses poses unique unique challen challenges ges compar compared ed to home home countr country y employ employmen ment, t, such such as  preparing expatriates packages that are reasonably cost effective while still attracting and motivating. motivating. Briscoe & Schuler Schuler (2004) argues that Coles needs to meet certain objective objective while developing their international compensation package in order to be effective. These are (1) providing the incentive to leave the home country for foreign assignment; (2) maintaining a given standard of living; (3) should take career and family needs into conside considerat ration ion and (4) Facilitat Facilitating ing re-ent re-entry ry into into home home country country at the end of foreig foreign n assignment. Dowling et al. as cited in Shen J (2003) argues that Coles key component of  international rewards and compensation should include; •

80% Base salary as a primary component of package p ackage of allowances.

•

10% Foreign service inducement or hardship premium

•

5% Allowances (i.e. cost of living allowance, housing allowances)

•

5% Benefi Benefits ts (i.e. (i.e. Pensio Pension n plans, plans, medica medicall servic services, es, social social securi security ty,, vacati vacation, on, special leave)

Bris Brisco coee & Schu Schule lerr (2004 (2004)) argue arguess that that duri during ng the the set set up phase phase Cole Coless can can choos choosee  Negotiation/ad hoc approach for compensating its expatriates. Briscoe & Schuler (2004) further argues, when the firm first start sending employee on international assignments and while while thei theirr numbe numberr of assi assigne gnees es is rela relati tivel vely y low, low, the the comm common on appr approa oach ch for  for  determining pay and benefits of expats is ad hoc or negotiation approach. This approach is quite simple in which compensation packages for each individual considered for an overseas assignment. Harzing (2004) argues Coles should choose balance sheet approach during the second or third year of their expansion in India when they will have more expatriates expatriates for managing managing their their Indian Indian subsidiari subsidiaries. es. Briscoe Briscoe & Schuler Schuler (2004) argues   balanc balancee sheet sheet approach approach is follow followed ed by most most Multin Multinati ational onal when when their their intern internati ational onal   business expands to the point where the firms have a large number of expatriates. In addition, balance sheet approach has number of bases to choose from depending on the  period of foreign assignment. For Instance, if the international assignment is long (three to five year) and assignee often go from one foreign country assignments to other than International standard will be most appropriate base. For example, during the set up

 phase of the company Coles can choose ad hoc approach for compensation which allows compan company y to nego negoti tiat atee indi indivi vidu dual ally ly to the the expat expatri riat ates es on the the basi basiss of thei theirr post, post, responsibility and tenure of the assignment. And later, Coles can choose balance sheet approach, when they have more expatriates. Briscoe & Schuler (2004) argues that key advantage of adopting Ad hoc compensation approach is that it is simple in nature and goes well during the early days of internationalization whereas, Harzing (2004) argues key disadvantage of using balance sheet approach is that it can create disparities and inequities between parent company nation (PCN) and third country nation (TCN) and also it can be expensive. In conclusion, it is recommended for Coles to compensate their  employee well so that they should always motivate towards achieving organizational goals. For achieving set up target goals Coles needs to design effective compensation  packages for their expats which should include allowance, benefits as well along with the  base salary.

3.0 Recommendations Recruitment and Selection

1. It is recomme recommende nded d by Awasth Awasthappa appa K (2006) (2006) that ethnoc ethnocent entric ric approa approach ch may be appropriate during the early phase of international business because firms at this stage are concerned with transplanting a part of business that has worked in home country. 2. It is recommen recommended ded by Dowling Dowling P (2008) (2008) that Coles Coles selecti selection on criteri criteriaa should should be  b bas ased ed on expat expatri riat ate’ e’ss Tech Techni nical cal abil abilit ity, y, cros crosss cult cultur uree suit suitab abil ilit ity, y, fami family ly requ requir irem emen ent, t,

coun countr try/ y/cu cult ltur uree

requ requir irem emen ent, t,

lang langua uage ge

crit criter eria ia

and and

MNC MNC

requirements. 3. It is recomme recommended nded by Dowling Dowling P (2008) (2008) Recruiti Recruiting ng internal internal candidate candidate for Indian Indian headqua headquarte rters rs is likely likely to result resultss in better better contro controll and coordin coordinati ation on of their  their  subsidiaries as PCN is more familiar with home office goals, objectives, policies and practice.

Training and development

4.

It is reco recomme mmended nded by Mond Mond A Noe (2002) (2002) that that pre-de pre-depar partur turee traini training ng for Coles Coles Expatriates should be designed to fill the cultural gap between the home country and host host countr country y and it should should includ includee content content like like cross cross cultur culturee traini training, ng, language training, practical training and miniculture training

5.

It is reco recomm mmen ende ded d by Munir unir H.Ta H.Tay yeb (200 (2005) 5) that hat Col Coles shoul hould d give give pre pre departure training to its Key personnel in host nation headquarters. Munir H. Tayeb (2005) further argues that pre departure training conducted in host country with with the intera interacti ction on of host host countr country y employ employees ees will will help help the expatri expatriate atess to unders und erstan tand d the local local custom customs, s, cultur cultural al insigh insights ts and social social aspect aspectss leads leads to intercultural communication skills and business performance.

6.

It is reco recomme mmended nded by E. E. Dunbar Dunbar & A. Katch Katcher er (1989) (1989) that that it it is criti critical cal that that the family should be included in the orientation programs.

Performance management

7.

It is recom recomme mend nded ed by Cadwe Cadwell ll M (200 (2000) 0) that that Cole Coless should should use perfo perform rman ance ce manag managem emen entt mode modell for for thei theirr Indi Indian an subs subsid idia iari ries es whic which h is (1) (1) plan planni ning ng   perfo performa rmance, nce, (2) monito monitorin ring g perfor performan mance, ce, (3) Analys Analysing ing perfor performan mance, ce, (4) Improving performance and (5) maintaining performance.

8.

It is reco recomme mmended nded by Basc Bascal al Robert Robert (199 (1999) 9) that that Coles Coles shoul should d choose choose one of of the following three approaches for evaluating employee performance. They are (1) Rating system (2) Ranking system and (3) appraisal by objective and standards.

9.

Luttahns Lu ahns & Doh Doh (2009 2009)) argu argues es that, hat, acco accorrding ding to the the hof hofsted stede` e`ss cul cultur tural dimension, India is a high collectivism country where promotion is given on the   bas basis is of seni senior orit ity. y. So, So, it is recom recomme mend nded ed for for Coles Coles to give give prom promot otio ion n on experience basis.

Compensation

10. It is recommen recommended ded by Briscoe Briscoe & Schuler (2004) (2004) that that Coles should should meet certain certain objective while developing their international compensation package in order to  be effective. These are (1) providing the incentive to leave the home country for  foreign assignment; (2) maintaining a given standard of living; (3) should take career and family needs into consideration and (4) Facilitating re-entry into home country at the end of foreign assignment. 11. It is recomm recommend ended ed by Dowling Dowling et al. as cited in Shen J (2003) (2003) that Coles Coles key component for International rewards and compensation should include; •

80% Base salary as a primary component of package of allowances.

•

10% Foreign service inducement or hardship premium

•

5% Allowances (ie.cost of living allowance, housing allowances)

•

5% Benefits (ie. Pension plans, medical services, social security, vacation, special leave)

12. It is recomme recommende nded d by Briscoe Briscoe & Schuler Schuler (2004) (2004) that during during the set up phase Coles should choose Negotiation/ad hoc approach for compensating it expatriates

4.0 Conclusion

The Key IHRM issues during the expansion of Coles into India are associated with Recruitment and selection, training and development, pre-departure, on going, induction training and development, and Compensation. Firstly, In Recruitment and selection it is recomm recommende ended d for Coles Coles to adopt adopt ethnoc ethnocent entric ric approa approach ch for managi managing ng their their Indian Indian subsidiary. It is also recommended for Coles to consider Technical ability, cross culture suitability, family requirement, country/culture requirement, language criteria and MNC requirement for selecting expatriates. The above recommendations are likely to result in  best person on the job who can be well adjusted into the host nation environment along with his family which finally increases the success rate of foreign assignment. The second second proble problem m of Coles Coles is relate related d with with pre-dep pre-depart arture ure train training ing and develop developmen mentt of 

expatri expatriate ates. s. For the succes successfu sfull foreig foreign n assign assignmen ments ts it is recomm recommende ended d to provid providee effe effect ctiv ivee prepre-de depar partu ture re,, on goin going g and and indu induct ctio ion n trai traini ning ng to the the expat expatri riat ates es.. It is recommended that content of the pre-departure training should include cross culture training (i.e. Lectures, orientations program, stimulation etc), language training, practical training and miniculture training. Also, after arrival into host country expatriate should get prop proper er on goin going g trai traini ning ng and induc inducti tion on trai traini ning ng.. Th Thee adapt adaptat atio ion n of all all above above recommendation is likely to results in well trained expatriate who will be aware of  India1s social, legal, political and business culture. Also, the above recommendation will help the expatriate in adjusting in to the new culture. Coles third problem is associated with with Perf Perfor orma manc ncee mana manage geme ment nt.. It is reco recomm mmen ende ded d for for Cole Coless to adop adoptt prop proper  er    perfor performan mance ce manage management ment syste system m in order order to evalua evaluate te company company’s ’s and employ employees ees  performances. In addition, it is highly recommended for Coles to give promotion to their  employees on the basis of seniority because India is highly collective society, if Coles will give promotion on the basis of merit than it will create inharmonious relation   bet betwe ween en the the empl employ oyee ees. s. Th Thee last last prob proble lem m is rela relate ted d with with comp compen ensa sati tion on.. It is recommended for Coles to design effective compensation packages for their expatriates. It is argued that expatriate is motivated to career prospects along with the financial   benefits, if its expectation is not met, it will result in lack of motivation in expats. Furthermore, compensation package should include allowance and benefits along with  base salary. These recommendations are likely to results in well motivated expatriate which finally increase the success rate of the foreign assignment. Therefore, above are the four IHRM problems and recommendations to solve those problems.

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