GLOBAL HRM AT AJAX PLC
1. INTRODUCTION
1.1 Ajax PLC is a multinational homewares company which earns nearly two thirds of its revenues in billions outside its home country. What the company does is to produce products at home and send them to their subsidiaries in other countries which would then be responsible for the local manufacturing and marketing of the goods. The managers in these subsidiaries are basically citizens of the country which they are working.
1.2 In the early 1990s, Ajax realized that if it was going to succeed in a rapidly changing international business environment, it would have to develop more of a global orientation. Competition, typically the most powerful external force, is increased by the advent of globalization. The number of companies and the number of countries where these companies operate and the way governments are dealing with the impacts of globalization is accelerating, and Ajax is no exception to this.
1.3 A business needs to adapt itself to fluctuations and changes in demand, and this is what Ajax must do. The interaction of changes in government policy and business innovation has actually made globalization even faster. If a company does not become a global, it would simply be shut out of new markets.
1.4 Before breaking into an international market, a company must familiarize itself first with the new country’s culture, people, and economy and government regulations. The company must also define their objectives for entering a new market. Aside from all those, and more importantly, there is a need for the company to develop a group of executive managers at the international level who are comfortable working in one culture and country as in another.
1.5 These people should also have the ability to rise above their ethnocentric perspectives. These managers must not regard a particular culture superior over another. International managers have to understand cultural values in all aspects of implementing the marketing concept and managing the marketing mix ( 2000).
1.6 In order to be able to realize these plans and goals that Ajax has in mind, the company began recruiting graduates in 1995 and putting them through an intensive international training program. The typical scenario goes like: they recruit an individual who is an MBA holder from a home country university who speaks at least one foreign language and has already lived outside the home country. Additionally this recruit has to possess strong computer skills and business experience. Over one quarter of the participants that the company has selected are foreign nationals.
1.7 As mentioned, the company chose participants for an intensive international training program. These trainees spend 24 months overall in the training program. During the three-month stints, these trainees learn global business development skills specific to products of Ajax. This compiles a guide for introducing a new product or repackaging/altering an existing product in various national markets.
1.8 Determining why people buy and why they make the purchase choices that they do is complex. Various product features such as status, prestige, economy, price, style, color, service, and warranties may appeal to different market segments. Product features is a very important factor in customer tastes especially in housewares. According to most theories on strategic management, the customer is the ultimate judge of competitiveness; that is, by buying the products of a company, the customer indirectly decides which companies will continue to exist and which companies will go bankrupt.
1.9 Purchase decisions extend from routine to major purchases that require deliberation and planning over extended time periods. Learning what motivates consumer-purchasing behavior is not easy, but should be given important attention by companies if they would want to succeed (2003), and this is what exactly Ajax trained these selected participants for.
1.10 These trainees also receive additional language instruction and take international business trips. Learning another language is vital, especially in international companies which have locations in other countries that are not native English speakers. From the point of view of international marketing, language is an important aspect of culture which is particularly relevant to marketing communications (2000).
1.11 Taking international business trips would also expose the trainees to different environments and cultures and could help them prepare when they would start working in another country with a different environment comprising of people who also have different attitudes, beliefs, and cultures.
1.12 In addition to the management training program, Ajax has taken a number of other steps to develop its international group of managers. This is a departure from the usual and established practice of having managers spend most, if not all, of their working careers in their home country. Ajax also now tries to ensure that project teams contain managers from several countries, not only from one country alone.
2. PROBLEMS FACING THE COMPANY
2.1 So far, the company’s plan is working out well for the goals that they want to achieve in their subsidiaries and international expansion. But after the training process, some problems start to surface. These occurred when managers have already been assigned and are already working in different Ajax subsidiaries.
2.2 The company’s strategy is that they send a foreigner to a country to manage their subsidiaries there. The company does not send foreign-born trainees to their native countries for their initial jobs. To illustrate, a Japanese trainee will be sent to look over the operations in Canada, a German trainee will be sent to manage the company branch in China, or a French trainee will be sent to the Spain subsidiaries. Such an arrangement is not usually seen in the company’s competitors.
2.3 The problem now is that such an arrangement allows these foreigners to receive the same generous expatriate compensation packages that the parent country nationals do, even if they are assigned to their home country. This created resentment among managers that have been locally hired in the company’s foreign subsidiaries.
2.4 Additionally, Ajax also faces the problem of how to ensure that project teams contain managers from several countries. Ajax has a goal of developing an international group of managers and this is no easy task for any company to do.
3. ANALYSIS
3.1 The development of a good compensation scheme is one of the main challenges facing manufacturing companies that are abandoning piecework methods in favor of collective work groups. This problem of Ajax is just a normal reaction of a manager or employee who holds the same position as another individual, performs the same duties, yet receive a different and lower compensation.
3.2 Working in a different country for someone who is foreign is easier said than done. Although the managers have undergone international training in the company’s home country and are equipped with the skills needed to manage a diverse and culturally diverse workforce, the real thing would still be slightly different in reality. There are just some things that could not be learned in trainings and in books, these things are learned only through experience.
3.3 No matter how prepares a manager thinks he is, the real thing would still in some ways be something unexpected. As a manager of an international company, there is a need for him or her to collaborate with other local managers that are in the subsidiary. This is what the other plan of the company is all about – creating multicultural teams. This is inevitable in a multinational company composed of employees and managers of different races and cultural backgrounds.
3.4 Many are experiencing diversity but failing to really manage it. Managing diversity – developing reasonable perspectives and plans on how to attract, retain, and fully utilize a new and diverse workforce – is the critical challenge facing organizational leaders. Indeed, there is a dramatic difference between understanding the foundations and dynamics that drive such a movement (such as workforce diversity) and engaging in the difficult activities that must be promoted to respond to and deal with the effects of that movement ( 1997).
3.5 What will happen then will more like be a domino effect. One existing problem creates another problem within the company involving its people and management. The creation of an international group of managers will present another problem. Managing a diverse workforce is also another problem that would surface.
4. RECOMMENDATIONS
4.1 The company has come up with a solution for the problem of resentment of local managers in the compensation that the foreign nationals receive. Ajax is trying to resolve this problem by urging its foreign subsidiaries to send their brightest young managers to the training program.
4.2 This is an excellent move since consideration should be given to training needs to enhance quality employees not only at the home country but also in the foreign subsidiaries that a company operates. The skills of these natives/nationals that are working in their home country should be trained and since they hold the same position as that of the foreign manager working in the subsidiary, he or she should also be offered the same compensation package. And since it would be unfair to offer them the same compensation without these local managers the same skills that are found in their foreign counterparts, these selected local managers must therefore first undergo training too in the home country of the company.
4.3 Aside from this plan that the company has developed, Ajax can also come up with a different compensation scheme for their managers. The trick to developing good compensation packages is finding key measurements in every role so that compensation can then be based on performance. There might well be two or three people with the same title and role earning different compensation due to performance. Most compensation plans are performance-based, using sales, gross margin, net profit and cost as factors (2002). Often, there are various tiers or levels–each one having a different net result for the managers and employees. With a company consultant’s guidance, a company committee could outline a compensation plan and postulate the fundamental expectations of compensation relative to teamwork and other aspects that are work-related.
4.4 Executives and managers who have stayed long with the company should also be required to hold meaningful amounts of stock in a company for a long period of time as part of their compensation. This way, they’ll view their long-term interests and those of the company as aligned ( 2002). There are already many companies that utilize this compensation strategy for their managers and top executives.
4.5 On the part of the manager, since they are now treading international waters, their focus should initially be on current customers because marketing to this target is most cost-effective if saturation has not occurred. Customers in one subsidiary could be different from those at the home country or other existing subsidiaries. At some point, firms discover that targeting current customers limits brand growth.
4.6 Existing needs of the customers should be given priority in the design and manufacture of housewares. Traditional market research methods can be used by international managers, such as in-depth interviews, focus groups, and market surveys can be used to identify such needs and to test new product concepts.
4.7 What is an appropriate strategy when faced with the situation of targeting customers? Should the firm focus on its loyal but declining customer base or should it shift its attention to higher growth segments? The answer depends on both the reason for stagnant or declining growth and the relationship between current customers and higher growth segments of the population (2001).
4.8 Improving the efficiency and competitiveness of every plant Ajax operates should be a considered an important factor in achieving long-term competitiveness, survival, and success as a producer. Major new products should be introduced and market coverage expanded. The new products should be designed and engineered to score with customers, the people whose voice really counts.
4.9 Accelerating the process will benefit suppliers, employees, investors as well as customers. There should be continued re-configuration of the manufacturing network. The total production system of Ajax should be leaner, faster, and more flexible. This is necessary to anticipate and respond to an ever-changing market and fast-moving competition. Building some new and strong subsidiaries and plants to replace and consolidate older subsidiaries and plants should be planned.
4.10 A comprehensive and inclusive view of diversity management must be advanced within Ajax and its subsidiaries. In this view, diversity management deals with the process of creating an organizational culture in which workforce differences are understood and valued, and each individual has the opportunity to be fully utilized ( 1997). Although straightforward and seemingly simple, this definition signals some powerful considerations and a necessary reorientation for many contemporary organizations.
4.11 Initially, managers must realize that diversity management does not compromise the organization’s focus on meeting its fundamental competitive goals. Customers must be served, product quality must be ensured, and financial success must be achieved. However, because of the range of needs associated with an increasingly heterogeneous workforce, the firm may have to be quite creative and flexible in the policies and approaches it uses and the actions it tolerates in meeting its competitive demands. Narrow bands of acceptable behavior may be expanded. Limited, unnecessary zones of conformity may no longer be demanded or reinforced. In such a case, differences are viewed not as stumbling blocks to goal attainment, but as a mechanism that, when properly energized, can enhance the organization’s competitive presence ( 1997).
4.12 In short, diversity management is concerned with establishing a new framework and approach, in which a new set of core values governing the role of individual differences can be developed. This scenario may demand a refocused or reoriented organizational culture. To be effective, this culture must enable the full utilization of the talent that exists in the organization ( 1997).
4.13 Lastly, whatever Ajax PLC has in mind for further strategies to improve the operations, they should have some things to bear in mind. The company should therefore correct any problems before beginning changes within the company. Sensitive issues and problems should be addressed before continuing on to other plans and improvements.
5. CONCLUSION
Ajax PLC is just like any other company when talking about problems that are faced. Training a certain group of people for a specific purpose seems just the right thing to do with the kind of situation that the company is facing. Although this proved to be a good plan, it has created employee resentment when it comes to compensation. In every company, multinationals or not, there is always the possibility of employee resentment, uncertainty and criticism surfacing. This compounds most especially when the issue concerns financial matters and other compensations that the company has to offer its employees. But Ajax has already planned a strategy on how to minimize or perhaps eliminate this resentment, and that is by sending local managers for training in the home country and they would then be on equal footing with the foreign managers. Everything that the company has been doing and planning so far has been beneficial. The company just needs to further create more strategies for improvement.
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