Introduction
Beginning the early 1990s, the number of multinational corporations has risen steadily as a result of globalization. This reason has caused organizations to realize the need for international human resource management as a determinant of success. International training and development is a tool that multinational enterprises (MNEs) are using to improve the quality of services that their employees provide. The main aim of training is to improve work skills and behaviors that an organization employee has in the current circumstances. On the other hand development is aimed at increasing working abilities with respect to a future task or job, and especially a managerial job. Training and development are two important and related activities that are required in the context of a global leader.
This paper will describe a current news event that regards training and development. The article is titled “Spending on Corporate Training Soars: Employee Capabilities Now a Priority.” The article appears on http://www.forbes.com/sites/joshbersin/2014/02/04/the-recovery-arrives-corporate-training-spend-skyrockets/#1a8ef71c4ab7. The paper will analyze this article using peer-reviewed journals and textbooks. The aim of the analysis is to show how its content is related to the process of training and development at the international human resource management level. Later in the paper, I will provide my personal perspective regarding the news event.
Description of the news event
The article was written by Josh Bersin, and it appears in the Forbes website. The article was published on February 04, 2014. According to the news event, there is a drastic rise in the amount of money that organizations are spending on corporate training as a result of economic recovery from the financial crisis of 2008-2009. The author of this article got his facts from the research on the Forbes’ Corporate Learning Factbook for the year 2014. The article indicates that the amount of resources that US spent on corporate training had increased by 15% in the previous year. The article states that in the 2013, the U.S. spent over $70 billion while over $130 billion was spent worldwide for corporate training. It is worth noting that 2013 was a year in the period when the global economy was recovering from the effects of the financial crisis that had hit the global economy in 2008/2009. The author of this article argues that the increase in corporate training spending was an indication that companies in America and elsewhere had identified skills gaps that they wished to fill as the global economy recovered.
One area where the article reported a skills gap in is in the Oil and Gas industry. The article cited that by the year 2016, this industry needed 60,000 petrochemical engineers. However, there were only 13,000 students in this field who graduated every year in the US. This is a clear indication that oil companies in the US needs to embrace the act of training and retraining energy engineers. The author of the article deduced few facts in regards to the soring spending in corporate training.
The first fact is that the spending on corporate training could have risen because there was high priority in spending on leadership development. According to the article, there is a need among organization to develop global talents so that the global leadership gaps can be closed. Millennials are taking on more responsibilities, and that is why companies are in urge to build leadership skills everywhere including in geographical areas all over the world. The second fact that the author deduced as a result of soaring spending on corporate training is that high performing companies tend to spend more. The final fact from the author is that technology is positively impacting the need to spend on training.
Analysis of News Event Using Textbooks and Peer-Reviewed Journals
As the news event has indicated, the main cause of the increase in spending on corporate training was to close the skills gaps that exist in the workplaces. This spending on corporate training also increased due to developing global talents filling the gaps of shortage of global leadership. A close analysis of the news event can clearly indicate that the two issues that led to companies increasing their spending on training in 2013 were to close the skills gaps, and develop global talents so that global leadership gaps could be filled. In developing global leader Shen (2005) seems to agree with the assertions of the article that training and management development are two closely related subjects in the human resource management literature. According to Shen, there are four strategies through which global managers can be developed. The four are training, international travel, forming diversified teams, and international assignments (Shen 2005). Viewing the four strategies, it is clear that are related to expatriation management. The news event just mentioned one of the four strategies in developing global talent. That was training.
Shen (2005) can be said to have expounded the issue of training as a strategy for developing global talent. Shen raised the issue of international training. Shen says that international training is important in developing certain characteristics that are necessary for leadership in the global arena to possess. These characteristics include: cultural sensitivity, developing subordinates, handling responsibility, and exhibiting and demonstrating (Shen 2005). Shen says that international training is divided into three broad types. The first type is the preparatory training that is given to an expatriate immediately he/she is appointed to take over an international assignment. This training provides such a person with skills and knowledge that is required to work abroad effectively. The second type of international training is the post-arrival training. This is a training that is offered to an expatriate once he is onsite. The main aim of this training is to offer an expatriate with the familiarity of working abroad. The training ensures that an expatriate is conversant with the procedure and working environment of the country he/she has been posted to. The final type of international trainings according to Shen (2005) are host-country nationals (HCNs) training and third-country nationals (TCN) training. Crawley et al., (2011) wrote that HCNs training is necessary so that the trainees can be able to replace the foreign expatriates in subsidiary. Crawley et al. further says that TCNs training is vital for ensuring that a multinational enterprise (MNE) is utilizing the local market information and also utilizing the best international practices.
Another form of training that companies might have provided to its employees who are on international assignment is the cross-cultural training (CCT). Sims & Schraeder (2004) defined CCT as a procedure that is aimed at increasing a person’s ability to adjust and be able to work in a foreign environment where he/she has an assignment to complete. CCT is very important to expatriates because it enables them to understand the culture of a foreign environment where they have been assigned a task. CCT is offered before the expatriates begin working on a foreign country, and even before they land to the oversea destination. CCT might cost companies in terms of time constraint and other costs such as the training costs, but it is very important. One importance of CCT to expatriates is that it reduces cultural shock. If the increase in the amount of spending in corporate training that the news event describe was contributed by CCT, then it was worth if it served in reducing culture shock (Idrees et al., 2011). Culture shock has dire consequences in the accomplishment of tasks abroad. Further, culture shock can lead to expatriate failure. As it will be discussed next in the paper, expatriate failure is so costly to any organization that all efforts should be established so as to avoid things getting to that level.
As the news event indicated, firms have extended their training budgets and the cost of training could have been increased contributed by expatriate failure. Idrees et al. (2011) defined expatriates failure as the difficulty or total inability to adapt or adjust to an oversea country’s environment. This is characterized by low performance in the assigned duty, and an eventual premature return to the home country. According to Idrees et al., expatriate failure is increasing at a rather moderate rate. Expatriates are increasingly becoming unable to complete their foreign assignment. The statistics offered in the Idrees et al.’s work indicates that the rate of this failure is in the range of 16-17% of all the expatriates that are assigned in a foreign country. Just to indicate how expatriate failure could have raised the spending of companies on corporate training, Sims & Schraeder (2004) approximated that expatriate failure cost MNEs $2billion in the US alone. This is a rather huge amount of money. The expatriate failure cost can be attributed to among other factors the salary, training costs, and the cost of relocating these expatriates. There are also other indirect costs that come with the expatriate failure. Such costs include the damaged reputation as a result of damaging an existing good relation between a firm and host country government, damaging relations with the customers, loss of market share, loss of business opportunity, and destruction of corporate reputation (Shen, 2005).
Besides mentioned types of training, there are other forms of training that might have caused the corporate training spending to soar. Expatriates need to be trained on the tax laws of the countries that they have been assigned to. Different countries have different tax laws. For avoidance of tax problems, expatriate need to be educated on what tax laws of the country they are going to work in stipulate. Such kind of training imparts these expatriates with additional skills and knowledge of how to deal with taxation matters in the foreign environment (Tayeb, 2004).
Another thing that should be catered for during the process of training the international assignees is the relation that they should establish with the host government. It is worth noting that the host government provides documents such as the work permits and other operating certificates. This means that multinational managers should establish a good personal relationship with the relevant government officers (Tayeb, 2004). Tayeb also mentions another area where international HRM may be forced to budget on. This is the area of language translation services. Though the news event in the article talked of an increase in corporate training budget, it can be argued that the language translation services fee is part of the training budget since expatriates also learn during the translation process.
Personal Perspective of the increase of Spending on Corporate Training
During the global financial crisis that happened between 2008 and 2009, many companies experienced losses in huge amount of money. Almost all countries in the world were affected by the financial crisis that hit the global economy during that period. Some multinational companies that were operating in Canada threatened to halt operations if they were not bailed out. Two examples of such companies are Chrysler and General Motors. Both companies are from the U.S., but with operations in Canada.
As the global economy began to recover after the financial crisis, firms all over the world also started to gain in revenue. Since the world economy as at 2013 was globalized, the desire for competitive advantage had also moved to the global level at the time. Beginning 2010, firms that had been affected by the financial crisis wanted to recover at the highest speed possible so as to be in a suitable position for competitive advantage. That is why the news event in the article has indicated that there the spending on corporate training had been increasing from 2010, with 2013 attaining the highest increase in this spending.
As the case has indicated firms are prioritizing on employee capability. Firms in Canada and the rest of the world have realized that an employee is its greatest asset if at all success and competitive advantage is to be achieved. The fast pace at which globalization is being achieved is also a great contributor of the increase in the corporate training spending in these firms. Now that the economy has gone global, many companies are opening businesses all over the world. These businesses that are located in foreign environments are experiencing shortages in leadership. This reason is pushing firms to begin spending a lot in developing global talents that can manage the firms in foreign environments.
Advancement in technology is also a major contributor of the need to spend more on training. As the case in the news event indicated, there have been so many training tools that have developed in the recent past. One such training technology is the use of virtual learning where there is no physical contact between a trainer and a trainee. Such technologies are prompting companies to extend their budgets so as to establish training portals and virtual learning environments.
Consistency of the Issues that were raised in the News Event among Nations
The issue of increasing the spending on corporate training would be consistent for most nations. This is because as the news event and its analysis has indicated, the increase was to help improve the skills that the employees currently possess, and also to develop global talent. As it has been discussed earlier in the paper, immediately after the economic crisis, firms all over the world wanted a faster way to recover and return to the state in which they were before the crisis. This is the reason that made these firms to increase their budget allocation on training so that the employees could improve the skills and eventually improve the productivity of the firms. At this instance, it is worth noting that the global financial crisis had hit organizations all over the world. This means that the issue of allocating more funds was consistent to firms in all the nations
According to the news event, the second thing that made spending on corporate training to increase was because of developing global talent. Many firms around the world operate internationally and hence the need to develop global leaders who can operate their branches in foreign environments. The issue of having firms that operate internationally affects all nations. For this reasons, a firm in any nation of the world can increase its budget to cater for training its expatriates.
Conclusion
The news event, “Spending on Corporate Training Soars: Employee Capabilities Now a Priority” has indicated that training and development are two closely related subjects in HRM. An analysis of the article using peer-reviewed journals has brought a clear understanding of how training and development in international human resource management has contributed to firms increasing their budget on corporate training. When it comes to IHRM, there are so many types of training as the paper has indicated. All these types of trainings must have contributed to the increase in the amount of money that the firms set aside for training their employees. As the paper has discussed, the rapid globalization of the economy after the financial crisis of the year 2008-2009 has led to many firms establishing operations abroad. For this reason spending on corporate training has increased as these firms are trying to develop global talent and leadership, and also improve the skills that their employers already possess.
References
Bersing, J. (2014, February 04). Retrieved April 07, 2016, from http://www.forbes.com/sites/joshbersin/2014/02/04/the-recovery-arrives-corporate- training-spend-skyrockets/#1a8ef71c4ab7
Crawley, E., Swailes, S., & Walsh, D. (2011). Introduction to international human resource management. Oxford: Oxford University Press.
Idrees, F., Javed, B., & Ahmed, F. (2011). Evaluation of expatriates performance and their training on international assignments. Interdisciplinary Journal of Contemporary Research in Business, 3(5), 335-351
Shen, J. (2005). International training and management development: theory and reality. Journal of Management Development, 24(7), 656-666.
Sims, R. and Schraeder, M. (2004), ‘An examination of salient factors affecting expatriate culture shock’, Journal of Business and Management, Vol. 10 No. 1, pp. 73-88
