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Legal and Ethical Considerations Management Essay

Legal and Ethical Considerations in  Management 

 

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 The purpose of this report is to identify and evaluate the human resource management issues that affect the decisions on recruitment and selection, training and development, performance management and compensation criteria for the expatriates of the Nutrient Water Company, Australia during the pre-departure to the host nation India and the set-up phase of the subsidiary in Mumbai, India. The key recommendations that the organization needs to consider adopting, for the expatriates before the pre-departure to the host country.

Recruitment and Selection -

It is recommended that Nutrient Water evaluates the technical competence of the expatriate with the help of supervisor's work and reports, interviews, work history and performance in previous and current positions, reference checking and qualification during the selection process.

It is recommended that Nutrient Water evaluates the interpersonal skills of the prospective expatriate with the help of psychological assessment and a residential training programme during the selection process.

It is recommended that Nutrient Water analyses the domestic circumstances of the expatriates including personal interviews with the spouse regarding the suitability of posting, partner's career, children's circumstances and overall family circumstances.

 

Training and Development -

It is recommended that the Nutrient Water expatriates should be given six important types of cross cultural activities comprising of environmental briefings, cultural orientation, cultural assimilators, language training, sensitivity training, job-related training, management training, field experience training, and communication skills training and on-the-job training.

It is recommended that the Nutrient Water expatriates comply with the five-point questionnaire items which are based on the instructor's experiential and conceptual learning method. The fit between the instructors teaching methods and expatriates learning style shall serve as a moderating effect for the influence of expatriate training on training performance.

It is recommended that the Nutrient Water expatriates will be given the training of cross-cultural difference based on five cultural factors that are universal for a nation with the help of five-point questionnaire items. These values include Power Distance (PDI), Uncertainty Avoidance (UAI), Individualism (IDV), Masculinity (MI) and Confucian dynamic (LOTI).

Performance Management -

It is recommended that Nutrient Water provides expatriates with enough financial support to maintain the expatriates standard of living in the host country during the set-up phase of the subsidiary, followed by other key benefits such as assistance in housing relocation, membership in social clubs, rest and relaxation vacation leave, assisting with schooling for children, and spousal employment and also to maintain communication with the expatriates.

It is recommended that Nutrient Water complies with high-quality LMX relationship and that the expatriate should receive information and assistance that will serve as a supportive aid in the host nation and that it should be highly characterized by mutual loyalty, liking, professional respect and contributory behaviour towards meeting goals.

It is recommended that the spousal support will positively affect the expatriates work adjustment and performance and so with respect to work adjustment the spouse shall provide support to the expatriate by assisting him/her with relocation, and freeing up time for the expatriate to focus on work and on the other hand, the spouse can serve as a "cheerleader" to the expatriate and reiterate his/her beliefs concerning work related abilities.

Compensation Criteria -

It is recommended that the Nutrient Water uses the home-country policy approach to compensate the expatriates for their work in the overseas nation and by using this pay system the organization intends to enable the expatriates to maintain a lifestyle equivalent to that which they enjoy in the home country.

It is recommended that the Nutrient Water designs an effective expatriate compensation package, which means, that the job-satisfaction of the expatriate should be directly related to the compensation package rewarded to him/her during the initial set-up of the subsidiary in India.

It is recommended that the Nutrient Water signs a contract with full details regarding the compensation package design with the expatriates and do not comply on verbal agreements to avoid repatriation or expatriate failure in the host nation.

Leadership and Motivational Systems -

It is recommended that the CEO expatriate adapt transformational leadership style because of the transfer to host nation with different business ethics and cultural diversity, which will help him achieve the goals of the initial success of the set-up phase.

It is recommended that the CEO expatriate adapt a three-way expectancy model approach to contribute towards ethical behaviour of the employees, motivation and to shape up the employee's problem solving approach

Legal and Ethical Considerations -

It is recommended that CEO expatriate, for the successful operation of the management in the host nation, adopt a professional code of conduct under the umbrella of ethics which will clarify both the trainees and old HR professionals, their values by which objectives and activities of the HRM function are to be carried out and also it will serve as a guide to HR professionals in matters of conflict of interests.

It is recommended that the HRM professionals are given training in moral reasoning to internalize ethical standards and to develop necessary skills to translate written standards into practices.

Table of Contents

INTRODUCTION 4

COMPANY BACKGROUND 6

COMPARISON BETWEEN THE PCN AND HCN 7

IHRM PRACTICES 9

LEADERSHIP AND MOTIVATIONAL SYSTEMS 12

LEGAL AND ETHICAL CONISDERATION 13

CONCLUSION 13

RECOMMENDATIONS 14

Bibliography 18

INTRODUCTION

It is the intention of this report to evaluate Nutrient waters' current Human resource management system as to how effective it is in recognising employees' skills and competencies and identifying skill gaps and developing Human resource strategies to expand to the host nation India and Mumbai as the target market.

 

AIMS AND SCOPE

The purpose of this report is to analyse and evaluate the current international human resource practices and to make an effective human resource strategy for the Nutrient Water expatriates keeping in context the cultural diversity, the reason for the choice of the host-nation and the form of organization structure in the host nation, during the set-up phase of the subsidiary in India. The scope of this report is to examine the key issues in recruitment and selection, training and development, performance management and compensation criteria the expatriates and to provide suitable recommendations after careful consideration in each criteria to contribute towards the overall success of the expatriates prior to the pre-departure to the host nation.

METHODOLGY

In undertaking this research there have been used various methods of data collection, including academic journals of international human resource management of cultural theorists, cultural surveys and trends of beverage consumption as well as supporting literature of India's economic profile, accustomed Indian business practices, Organization's background, the comparison between the parent country nationals and the host country nationals with the help of world fact book and Hofstedes model, and e-mail communication with Kaitlin Rimington, Marketing Assistant of Nutrient Water.

LIMITATIONS

In undertaking this research there have been limitations that have been highlighted and the important ones are the lack of information on Nutrient Water, The research is based on second hand data methodology and the lack of published literature on the international human resource management in terms of limited concepts and models that have been developed by the author.

ASSUMPTIONS

It is assumed that in the first year of the set-up phase of the business in the host nation India, the three members from the parent company will be sent to the host nation by the date 1st of January 2011. It is assumed that CEO expatriate of Nutrient Water, along with one marketing manager expatriate, one executive expatriate from the finance department and two employees' from the production department will take the initiative during the set-up phase of the subsidiary of Nutrient Water in India. It is assumed that during the growth phase, the subsidiary shall staff the host-country nationals to further expand in its cost-effective operations and that the company recruits 20-25 staff members and accordingly follow the recommendations highlighted in the IHRM practices below.

COMPANY BACKGROUND

In 2004, Luke Marget, Brad Wilson and Matt Denis at the age of 20 were pursuing individual careers in finance and law but their common interest in health sparked a serious review of products that could support their active lifestyles (Rimington, Kaitlin, 2010). They recognized that Australians are relying on convenient foods and beverages to aid their increasingly active and demanding lifestyles. They also recognized that there was a significant gap in the Australian beverage market that was dominated by the popular growth of bottled water at one end of the market and sports drinks and energy drinks at the other. Nutrient Water also recognized that Australian market lacked a beverage which should suit the modern health conscious consumer who seeks a nutritional enhancement which is suitable for their everyday needs rather than just for when playing sport. It pioneered the enhanced water category in Australia, now estimated to generate $100m in retail sales (and growing) which is rivalled between the independent Nutrient Water and significantly larger multi-nationals in Coca-Cola and Schweppes (Rimington, Kaitlin, 2010). The initial trial in Melbourne was a huge success for nutrient water and it realized that there are many distributors who focus on smaller regions of the country and hence in order to grow and develop a national footprint, the distributors needed to be approached one-by-one. A major breakthrough came when a major distributor in Sydney was secured known as Socrates Distributors. For many distributors, Nutrient Water soon became the largest selling product. The distribution since then has grown to over 15,000 retail accounts spread across Australia from Darwin to Port Macquarie, Warrnambool to Bundaburg. In addition, major retail chains like 7 Eleven, Coles and Caltex came on board and are now significant trading partners. It is also available through Virgin Blue and Jetstar airlines (Rimington, Kaitlin, 2010). They currently have thirty full-time staff and twenty-four contractors and the number of staff is expected to grow as they expand more and capture the market. The fact that the entire Nutrient Water team fits right in the middle of the Nutrient Water target market (being healthy, active 18-35 year olds) means they know what they are talking about when selling the brand. They believe strongly that the product has worked well because their consumers can relate to the product and brand from every perspective (Rimington, Kaitlin, 2010). There are currently seven functional variants in the Nutrient Water range including Antioxidant, Energy, Immunity, Multi Vitamin, Endurance, Rehab and the latest addition D-Stress. Nutrient Water-X has been an instant hit and is set to revolutionise the market for the second time by forcing other manufacturers to consider using natural sugar alternatives such as stevia instead of artificial sweeteners (known to cause serious health side effects) in order to shed calories. The enhanced water category is still in its infancy and there is considerable growth to come. In the petrol and convenience retail channel (made up of national retailers such as 7 Eleven, Caltex and BP) the enhanced water category has existed for less than two years and is already twice the size of the iced tea category and half the size of sports drinks which are both established beverage categories (Rimington, Kaitlin, 2010).

 

COMPARISON BETWEEN THE PCN AND HCN

It is the intention of this paragraph to compare the Parent Country Nationals (PCN) - Australia with the Host Country Nationals (HCN) - India. The survey conducted by professor Hofstedes Cultural Dimensions (2009) has ranked Australia and India quite close to each other in term of masculinity index number, i.e. 61 and 56 respectively. This indicates that the gaps between the roles of men and women of both countries are similar in size. The uncertainty avoidance index number for Australia is 51, and for India it is 40, whereas the world average is 65 (Hofstede, 1983). This suggests that both cultures are more open to unstructured idea and situation. English is a subsidiary official language but used extensively in business and administrative areas (The World Fact book, 2009), therefore there are less communication barriers between employees in host country and home country. India has substantial highly educated, skilled, young, capable & dynamic human resources, government stresses on importance of education (Government of India n.d), thus quality human resource is available. India is a multi-cultural country, ethnic groups including Indo-Aryan 72%, Dravidian 25%, Mongoloid and other 3% (The World Fact book, 2009). Australia also has a multicultural background; some norms may be similar, such as respecting each other's culture while doing business. India has democratic political system and open market (India Country Profile, 2009)it provides fair ground for Australian business to enter the market. India is very rich in natural resources and accessibility to raw material is critical to productivity (India Country Profile, 2009). However, Indian very much respect to hierarchy, discussion is only led by the most senior persons. And people are likely to blindly respect anything taught by elders. The Individualism index for Australia is 90, the second highest score amount the countries in Hofstedes survey (2009), and Indian is ranked at 48, which is more towards collectivism. In India, there is a noticeable lack of privacy and a smaller concept of personal space, where several generations often live together under one roof. For Indian business practices this places an additional importance on interpersonal contacts, avoidance of conflict and a more indirect approach to communication. The wealth distribution is very unequal, the GDP per capita of $3,100, compare to Australian $38,500 (The World Fact book, 2009). The attractiveness of vitamin beverage to most of Indian people can be much lower. India has a population of approximately 1.2 billion, and GDP in purchasing power is 3.5 trillion, with a real growth rate of 6.5% (The World Fact book, 2009). The market in India is extensively larger than in Australia, and it is still in rapid growth. Nutrient Water can be benefited from the cost saving if setting business in India. Indian labour cost is among the world lowest but it is along with the quality service and sound infrastructure. As there is no other vitamin beverage products appeared in Indian market before, if the company can successfully penetrate the economic benefits brought by will be significant. Also, India has a very competitive market. Further some other global beverage tycoons, such as Coca-Cola, have been operating in Indian market for years. Therefore the recognition of vitamin beverage and future possible ongoing concerns might be very challenging.

IHRM PRACTICES

RECRUITMENT AND SELECTION

It is the intention of the report to examine the transition of the Nutrient Water Company to a global orientation and thus, the development of a global management recruitment and selection system capable of developing an adequate pool of management candidates to insure organizational efficiency and effectiveness in the host nation. According to (Tarique, Schuler, & Gong, 2006), the Person-Environment fit theory (P-E) suggests that the organization should select individuals with similar characteristics and qualities that meet the demands arising from the environment and "fit" has significant consequences at both individual and organizational levels and the integration of three dimensions: a) Strategic - used to balance dual needs of standardization and localization , b) National - parent country cultural dimension and cultural similarity between the parent country and the subsidiary country , c) Organizational - Managerial orientation at the headquarters, under the P-E fit theory. Whereas, According to (Harvey, Novicevic, & Speier, 2000) suggests that a design of an integrated competency-based approach to global management staffing will lead to creation of a sustained competitive advantage and the key component of this theory is the managerial competencies that enable the top team management to provide an institutional bridge between the cultural, social and political divide often found between the domestic and global operations of an organization. Whereas, According to (Treven, 2006), he argues that it will be viable to use the ethnocentric approach for the selection criteria of the expatriates and that the expatriates be used only for the key positions in the host country that comprise of senior manager position, high-level professional and technical specialists in the subsidiary which in turn will help lower costs. (Treven, 2006), also believes that hiring certain percentage of local citizens of the host nation will make the Nutrient Water competent by highlighting the key advantages that they will be familiar with the socio economic, political and legal environment and with business practices in the host country; lowering labour costs; Increasing acceptance of the company by the local community; recognition of the company as a legitimate participant in the local company. (Treven, 2006), also suggests four key variables such as technical competence on the job; personal traits or relational abilities; ability to cope with the environmental variables; and family situation that will assist in deciding the success or failure of the key expatriates in the host nation. This implies that Nutrient Water will have to choose the best and the key employee for the job overseas by considering facts such as emphasizing cultural sensitivity as a selection criterion; establishing a selection board of expatriates; previous international experience; the possibility of hiring foreign-born employees who can serve as "expatriates" at a future date; to screen candidates spouses' and families.

TRAINING AND DEVELOPMENT

It is the intention of this paragraph to develop a comprehensive model that encompasses the interrelationship among perceived needs for expatriate training, the fit between teaching method and learning style, perceived cross-cultural differences and training effectiveness before the departure to the host nation. (Naumann, 1992; Li & Chia-Ying, 2008) suggests that satisfaction, commitment and involvement are important variables for expatriate training effectiveness. However (Harvey & Novicevic, 2001), argues that cross-cultural training, language training and job-related training will facilitate cross-cultural interaction, which results in higher confidence and higher expatriate satisfaction with the international assignment. Cross-cultural training will lead to higher adjustment, which may result in higher involvement and better performance during the assignment. It will enhance the expatriate's motivation to learn and then transfer his learning of the employees of the host company, which will enhance the overall performance of the expatriate and the host company. In addition, the fit between learning style and training mode is also essential to promote the effectiveness of expatriate training. (Treven, 2006), suggests a didactic approach to training that emphasizes knowledge acquisition and is based on the assumption that a cognitive understanding of a culture is necessary to appreciate the norms and behaviours of the culture of the host nation. Whereas (Harvey & Novicevic, 2001), suggest the experiential approach that the learners tend to follow the four learning steps that starts from concrete experience followed by observation and reflection which leads to the formation of abstract concepts and generalization which produces hypotheses to be tested in future action which in turn closes the cycle leading to exposure to new experience. (Anderson, 2005), suggested that cross-cultural training, language training, management training and job-related training of expatriates would facilitate cross-cultural interaction which may result in higher confidence and satisfaction with the overseas assignment, whereas (Black & Mendenhall, 1990), suggest that cross-cultural training was effective in developing skills, facilitating cultural adjustment and enhancing performance.

PERFORMANCE MANAGEMENT

It is the intention of this paragraph to analyse the effects of HCNs on expatriate effectiveness, with the help of social capital theory to develop and test a model of expatriate adjustment and performance. (Liu & Shaffer, 2005), suggests to develop a social capital theory model to systematically consider the benefits associated with the interactions between expatriates and their HCN colleagues by testing the relationships between the social capital variables and the expatriate adjustment and performance and predicts that the opportunities, motivation and ability have direct effects on the expatriate performance and adjustment. Whereas, (Kraimer, Sandy J, & Jaworski, 2001), suggest that the effects of Perceived Organisational Support (POS), Leader-Member Exchange (LMX) and spousal support on expatriates adjustment to work, country and interaction with host country nationals would influence the overall task performance and contextual performance of the expatriates. (Kraimer, Sandy J, & Jaworski, 2001), argues that the parent company will be the initial source of support and provide benefits and services prior to the arriving and once in the host country will affect the quality of life and work. Also, high LMX relationships should be characterized by mutual loyalty, liking, professional respect, and contributory behaviour towards meeting mutual goals. The third source argued by (Kraimer, Sandy J, & Jaworski, 2001), highlights the support of the expatriates spouse which is positively related to the performance of the expatriate work and general adjustment.

COMPENSATION CRITERIA

It is the intention of this paragraph to analyse how the Nutrient water will seek to minimize the expatriate failure by providing expatriates with enough incentives to take on and remain on the assignment until the task is completed. (Crandall and Phelps, 1991) suggest that the home-country policy, which links the expatriates' basic salary to the salary structure of their home country, is the most common compensation approach and by using this pay system- (basic home salary plus allowances) the company tends to enable expatriates to maintain a lifestyle equivalent to that which they would have in their home country. The allowances include the expatriate allowance, hardship allowance, car allowance and home-leave allowance. Whereas, (Chadwick, 1995; Logger and Vinke, 1995; Schell and Solomon, 1997) suggests that the disadvantage of the home-country policy approach is that it results in lack of equity as there are salary differentials between the expatriates and the local managers as well as between the expatriates and the different nationalities. Further, this policy is the most expensive plain to maintain with regard to purchased data and administration costs.

(Suutari & Tornikoski, 2001), analyses compensation with extrinsic satisfaction of the expatriates and suggests about an appropriate compensation design which should start with the questionnaire to collect some background information related to the expatriates and their employers. The questions should be based on the pre-departure contract-making situation, the major benefits and difficulties related to the compensation and empty line for written replies. (Suutari & Tornikoski, 2001), further focuses on the compensation package design which shall include several types of allowances and insurances. Thus, the level of satisfaction with the compensation will be measured on a 5-point Likert scale and written replies shall be collected for the future expatriates.

LEADERSHIP AND MOTIVATIONAL SYSTEMS

It is the intention of this paragraph to determine the differences in the leadership styles and how an effective cross-cultural leadership style and motivational system promotes the organizational performance and the success in global business environment. (Sayeed & Shanker, 2009), argue that high performing organizations should have high levels of emotional intelligence among the constituent members and demonstrate strong links between employees' emotional capabilities and their skills. (Sayeed & Shanker, 2009), further argue that the relationship between emotional intelligence and transformational leadership dimensions in a multitude framework has established the theorized stimulus of emotional intelligence disposition at the core managerial level that comprise managing aspects and the soft skills that together maximise superior-subordinate goal directed interaction process. (Fudge & Schlacter, 1999), suggests that the effort-performance expectancy (E-P) model provides a link between the expatriates intrinsic and extrinsic factors of motivation and that the organization should carry ethics training programs consisting of training videos, board games and orientation sessions. Whereas, (Nadler and Lawler, 1977), suggest three step expectancy theory based method which include stage 1) is to determine which performance rewards have the highest valence for employees, stage 2) is to foster a motivational environment to define and communicate the kinds of behaviour the organization expects from the employee expatriates and stage 3) is to foster a motivational environment to link the behaviours desired by the organizations to outcomes desired by the employee expatriates.

LEGAL AND ETHICAL CONISDERATION

It is the intention of this paragraph to address the legal and ethical dimensions of a strategic approach to IHRM by engaging the strategy of composition of place. (Carey, 1999), suggests that according to Australian Human Resource Institutes' (AHRI), "the first responsibility of human resource professionals is to their employers, although they have obligations also to the employees to ensure that the conditions of their employment are in accordance with law and that they are treated fairly, reasonably and equitably in their employment". According to (Carey, 1999), within the strategic HR paradigm HR executives are senior managers who, along with their colleagues, need to recognize the central role in the operationalization of corporate ethics. The HR executives plan an enterprise's entrepreneurial goals and responsibilities by reference to its ethical area and that ethical area includes the organizations mission statement and code of ethics; its culture and top management support; education of line managers in how to negotiate ethical terrain and the integration of ethical conventions into the strategic decision-making processes.

CONCLUSION

In conclusion the key issues identified within the international human resource practices are identified with the help of academic literatures by expert authors and are used in day-to-day organizations. And that the models and theories used in recommendations will be useful for the organization to analyse and evaluate the recruitment and selection criteria of the expatriates, the training and development of the expatriates, the performance management and the compensation criteria. The key issue and recommendation of the selection criteria is to measure the technical competence, the interpersonal skills and the domestic circumstances. The key issue identified in training and development is the language barrier, lack of cross-cultural know-how and assumptions and the key recommendations are that the expatriates be given six type of cross-cultural training with the help of a good instructor. The key issue identified and the recommendation to the expatriates in the performance management is that they get adequate financial support, support from spouse and healthy relationship with the host country nationals. The key issue identified and the recommendation to the organization in terms of compensation criteria is that they have a proper compensation package design and they follow the home country policy approach of compensation during the set-up phase in the host nation. Further, it is concluded that the IHRM policies are adhered to the Australian Human Resources Institute in adopting professional code of conduct in HR operations and that the HR professionals have internalized the ethical standards.

RECOMMENDATIONS

Recruitment and Selection -

It is recommended that Nutrient Water evaluates the technical competence of the expatriate with the help of supervisor's work and reports, interviews, work history and performance in previous and current positions, reference checking and qualification during the selection process.

It is recommended that Nutrient Water evaluates the interpersonal skills of the prospective expatriate with the help of psychological assessment and a residential training programme during the selection process.

It is recommended that Nutrient Water analyses the domestic circumstances of the expatriates including personal interviews with the spouse regarding the suitability of posting, partner's career, children's circumstances and overall family circumstances.

Training and Development -

It is recommended that the Nutrient Water expatriates should be given six important types of cross cultural activities comprising of environmental briefings, cultural orientation, cultural assimilators, language training, sensitivity training, job-related training, management training, field experience training, and communication skills training and on-the-job training.