A Study on the differences between Maersk and Citigroup in IHRM practices
Globalization of business operations and the emerging issues have necessitated that business organizations reformulate their management policies to resolve the problems arising out of a diverse cultural atmosphere. Business destinations in developing countries offer a multitude of opportunities but organizations have to prepare themselves well to address the differences in business factors influencing success. These factors may be related to political, economic, cultural or legal environment and affect the functions of organizations. One of the organizational functions affected seriously by the diverse factors is that of International Human Resource Management (IHRM) and multinationals formulate different policies to confront the issues surrounding the employees and their deployment. Researchers have proposed many theories and approaches related to IHRM which will be discussed briefly here before attempting a comparison between the IHRM practices of A.P. Moller Maersk group and Citigroup Inc.
International HRM Practices – Theories and Approaches
Fleming et al, (1998, p.144) have proposed three approaches for transition of HRM from traditional practices into modern ones for managing global operations. (1) From labor cost to HRM orientation – instead of focusing on reducing labor costs, productivity is increased by improving employee competence. (2) Decentralization of hierarchical control – the decision making is based on the local conditions or work culture without compromising organizational values. (3) Home based global HRM orientation – Although decision making and competence are decentralized, the core staff is imparted the same training in all subsidiaries and regional headquarters as that of Parent Organization.
International Human Resource Planning and Management generally follow the three approaches of staffing in new locations described by (Sebastian Reiche, B., 2007. 4)
Expatriate Staffing (Ethnocentric Approach)
In this case the employees are brought in from either the parent company or outsourced primarily with the objective of training the local employees in technology and organizational processes. Expatriates have to be trained to manage the cultural and language differences before embarking on an assignment abroad. The expatriate staff is expected to play the functions of controlling on behalf of HQ, transferring organizational values and cultures, transferring knowledge and competence, building networks, spanning boundaries and overcoming the language barrier (Dowling, P., 2008, 93).
Inpatriate Staffing (Polycentric Approach)
Employing personnel from the host country and training them to handle the job responsibilities comes under inpatriate staffing. Inpatriate are also known as Host Country Nationals (HCNs). Many multinationals prefer it as local employees understand the sentiments and mindsets of the local people and can interact better with them and are more conversant with domestic legal and political process. Employing local labor is cheaper; particularly in South Asian countries, a fact that is leveraged by multinationals. However they may need training in learning technical and administrative processes of the parent company. PCNs (Parent Country Nationals) are restricted to the HQs, resulting in a reduced volume of transnational assignments (Sebastian Reiche, B., 2007. 5).
Diverse Staffing (Geocentric Approach)
Since it is not possible to have an entirely expatriate or inpatriate staffing, multinationals generally use a judicious mix of the two where the engineering, management and technical core staff is brought in from the parent company and supporting staff is hired domestically. Once the unit is functional and resumes operations smoothly, expatriates may gradually return to their parent country after handing over the responsibilities to their domestic counterparts. A diverse setting is helpful in overcoming resistance from employees of different culture, useful in talent management and in assisting a global mix of customers.
Expatriate and Inpatriate management in A.P. Moller Maersk group
Company profile
The A.P. Moller - Maersk Group is a giant conglomerate of A.P. Møller - Mærsk A/S and affiliated companies. The Group is spread over 130 countries, employing about 117,000 people. It is one of the world’s largest shipping companies and is also involved in a wide range of activities within energy, transportation, offshore and retail (Group Annual Report 2011). The Group was established in Svendborg, Denmark in 1904 by Mr. Arnold Peter Møller and his father, Captain Peter Mærsk Møller. The present corporate governance structure is presented in Appendix -1. In 2011 the company announced an increase in the revenue by 7% to USD 60.2bn (USD 56.1bn) while a Profit of USD 3.4bn (USD 5.0bn) (Appendix -2) and thus performed in accordance with the latest announced growth predictions (Appendix-1)
International Human Resource Policy at Moller Maersk
According to Fleming, D; et al, (p. 145), the human resource policy of the company is an integration of global, regional and local practices and so it is called a global regional structure by the authors. The headquarters of the company in Copenhagen lay down the guidelines for recruitment and training of employees in consultation with regional offices which are followed universally in all its subsidiaries. The unions have little or no influence in the formulation of HR policies of the company. The basic qualifications and entrance procedure is followed throughout its subsidiaries in Singapore, Malaysia and New York HR personnel in these subsidiaries claim there has been no problems in following these procedures so far.
Since the core competency of Maersk is shipping, the training is mostly imparted on shipping at the company’s institute in Copenhagen to the trainees from the subsidiaries all over the world. On the job training is conducted at outstation locations and aimed at preparing them for international assignments within the group. If the local candidates qualify for the training they are sent to Copenhagen.
The sales personnel of the subsidiaries of Maersk have to go through a similar training procedure where they are given outstation assignments. During the initial period, the global standard of the group is followed after which they attend both in house and internationally oriented courses.
Performance Appraisal and Rewards
An annual appraisal program is carried out to assess the capabilities and suggest improvements. The Maersk group is regarded as an international expert organization because of the individualistic and growth oriented working conditions it provides to its employees all over the world and uniform selection process. Performances are measured on the basis of international benchmark established uniformly for all regional and local units. Employees surpassing the bench mark are rewarded according to the incentive scheme (Group annual Report, 2011).
Expatriate/ Inpatriate Management
Moller- Maersk gives sufficient importance to well educated local staff and the company encourages its local pool of employees to develop the same competence as its counterparts but when it comes to managing the international shipping operations it still relies heavily on its core group of expatriate managers. However there is no conflict of interests between the head office and subsidiaries regarding the eligibility for training for shipping operations perhaps because the international pool of expatriate managers maintain a link between both (Fleming. D et al, 1998, p.150).
Diversity Management
The group promotes diversity in its workforce in all its units with over 40% female employees in almost all positions. It has appointed females in leadership positions and aspires to achieve the same status in the growth markets of South East Asia. It advocates appointing a mixture of inpatriate and expatriate employees in its subsidiaries since up gradation of educational skills of the local candidates have made it possible for them to apply for positions filled by expatriate candidates hitherto. Reports claim that Maersk strives for equality in careers, rewards and development programs in global and local practices and denounces discrimination in age, color, race, disability etc. The group is aware that the board members are all Danish and male. To remove this difference in principle and performance, Moller Maersk is working towards introducing more diversity in the top echelons (Wetfeet Incorporated, 2008. 25)
Industrial Relations
Like other transnational companies, the Maersk group does not include trade union interventions in international operations strategy and has anti union laws in its Malaysian subsidiary (Wad, P., 2012, 505). It has been accused of punishing workers who protest against Maersk’s policies in El Salvador (Bacon, D. 2004). However this policy of Maersk has been affected by the revival of the trade unions and local institutional factors which offset globalization of shipping labor markets in South East Asia’s coordinated market (Klikauer, T. and Clifford, D., 2004, 39). After two consecutive riots in Maersk Container Industry’s plant in Dongguan, China and workers’ complaints of poor working conditions, the management promised to improve its industrial relations. But Globalization Monitor reports claim that although treatment of workers has improved, many other malpractices remain to be addressed.
International Human resource Management practices in Citigroup Inc.
Company Profile
Citigroup Inc., an example of one of the world's largest International Joint Ventures between the financial giants Citicorp and Travelers Group in October 1998, is an US global investment banking and financial services corporation with head offices in Manhattan, New York. According to the Annual Report 2015, it operates over 100 countries and employs about 239000 people over the world. After its setback in the 2008 global economic crisis and a bailout by the US government, the bank had to reformulate many of its compensation policies but by the end of 2009 it regained its position as one of the largest four banks in the United States. It managed to repay the US government debt and restrictions on compensation of executives were removed by the end of 2010 (Dash, E, 2008).
International Human Resource Policy at Citigroup Inc
The IHRM policy of Citigroup Inc. primarily aims at diversity in its work force at the global level (Global Diversity Report, 2011). Being a multinational customer oriented service Corporation it uses diversity in talent as a competitive advantage and business imperative to provide innovative solutions to clients (Broder-Singer, R. 2015).
Diversity Management
Keeping this strategy in perspective the multinational banking company has decided to incorporate diversity in its leadership also. The diversity strategy addresses four core areas, including management accountability, attracting talent, workforce development and work environment. The group employs people with diverse cultural backgrounds, gender, race/ ethnicity, military veterans, people with disabilities, sexual orientation and work-life effectiveness (Appendix-3). Citi’s Office of Global Workforce Diversity executes overall governance, policy and setting priorities supporting the strategy and works in partnership with senior diversity and human resources leaders who are belong to Citi Diversity Operating Committee and are responsible for the implementation of core objectives across the group. The Board of Directors yearly reviews total progress and endorses the priorities.
Women’s Leadership Development
This program, conducted in conjunction with the UCLA Anderson School of Management, combines lectures, discussions, small-group work and personal assignments to assist female employees better manage their career development and progress as leaders. Participants learn how to exhibit executive readiness, emerge champions and role models for the firm, and build their professional networks.
Citi has a longstanding development program — ‘Coaching for Success’ — for mid-level women. The program for evolving female talent is delivered through a series of workshops and engages senior management as coaches. Objectives comprise of improving retention, and increasing career advancement and internal mobility among participants.
Expatriate / InpatriateManagement
Unlike Maersk, Citigroup does not restrict its core group appointments to expatriate staffing only. It deploys PCN and TCN (Trans Country Nationals) at all levels of the company. The expatriate staff is also a diverse mix of minorities, women, races etc. Apart from functioning as a link between head office and regional subsidiaries, recruiting expatriates at all levels ensure that the organizational perspective and objectives are being considered at all levels of decision making. Also expatriates in banking operations are able to add to the competitive advantage by attracting customers from parent country and offers services like expatriate account management. For Citigroup expatriate staffing is more of a training and development tool for preparing global leaders using foreign assignments and experiential training. However, it aims at growing global leaders up from local businesses within the country; reducing the number of expatriates (Tessmann-Keys D &. Wellins, R. S. 2007, 34)
Employee Networks and Relations
Citi’s employee network program gives members an opportunity to share common experiences and build awareness of different cultures and communities. Open to all, the program supports the group’s goal to be a preferred employer. Employee networks are initiated and led by employee- groups, formed according to a common bond. They focus on inter-business networking opportunities and support employee growth and development. In 2011, ten new networks were launched — six for military veterans, two for women, one Pride network and the first disability network in the States.
Citigroup has initiated several programs to support and assist parents of new born infants, by providing leaves and counseling. The concern shown for the employees has contributed towards a healthy and cooperative employee relationship in the organization.
Comparison of International HRM practices of Moller- Maersk and Citigroup
Moller – Maersk and Citigroup are multinationals with activities spread over more than a hundred countries and a work force in millions and world class customers. With an obligation to fulfill customer needs from across the globe, both companies have to recruit and select a work force that has the competence to meet the requirements of the clients. Therefore both companies have introduced a uniform process for training, qualifying and performance evaluation. Both companies emphasize on the need of developing leaders through international assignments; but the similarity ends here.
The Moller- Maersk group still prefers to appoint expatriate staff in its core group in shipping business in its subsidiaries in Singapore and Malaysia but Citigroup prefers to have a diverse workforce and employs local staff in all its positions. Maersk’s group of expatriates forms the link between Copenhagen and South East Asia whereas Citigroup practices diversity to serve the customers from all over the world by offering them innovative solutions. However both groups consider international assignments as an important part of the leadership development program. Except for the preference for appointing PCN in its core group, the training and recruitment of Expats are similar in both the groups. Both groups prepare the expats to deal with cultural and language differences, link the subsidiaries with head office and to transfer the core organizational values to the subsidiaries.
Another difference that can be pointed out between the two conglomerates is the employee relations and the Governance commitment towards improving them. Whereas Citi group prioritize the need for good relations among management and employees in all its subsidiaries too, it is not the case with Maersk. Maersk has come under criticism for its repression of workers who affiliate them with trade unions and has anti union laws in its subsidiaries.
Conclusion
Also the Moller Maersk group needs to take a second look at its labor relations in the South East Asia region where it has been accused of maintaining poor working conditions unlike the Citigroup. The Citigroup claims to emphasize on employee satisfaction as one of the International Human Resource Strategies
Appendix -1
Source:http://files.shareholder.com/Group_Annual_Report_2011_UK.pdf
Appendix 2
2011 2010 Change
Profit before depreciation, 60,230, 56,090 7%
amortisation and impairment losses, etc. 14,661 15,867 -8%
Depreciation, amortisation and impairment losses 5396 6,015 10%
Gain on sale of non-current assets, etc.,net 887 674 - 32%
Profit before financial items 10,274 10,608 -3%
Profit before tax 9422 9,672 -3%
Profit for the year 3,377 5,018 -33%
Cash flow from operating activities 7,262 10,132 -28%
Cash flow used for capital expenditure - 9,759 -4,638 110%
Return on invested capital after tax (ROIC) 8.3% 12.2%
Source:http://files.shareholder.com/Group_Annual_Report_2011_UK.pdf
Appendix 3
Native
Hawaiian/
Job Other
Category White Black Hispanic Asian Pacific Native Multi Total Total
Islander American Racial By Number
Gender of
people
Consolidated Employer Information report FY- 2011 Source: http://www.citigroup.com/
References
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