There are multiple issues to be addressed when setting up a multinational company. Issues include the diverse environment, cultural implications and the parent company’s need for control. Human resource management is affected, as these issues impact the effectiveness and management. It is not common to see staffing policies for the host country are written with the parent's viewpoints, resulting in tensions between parent and subsidiary management. Companies need to desert the headquarters mentality and allow subsidiaries more freedom (Fernandez and Shengjun, 2007). This freedom is more important in framing HR policies. The main point companies must learn is that the HR policies followed at home may not be applicable in the host country (Fernandez and Shenjgun, 2007).
Multinational Companies (MNC’s) have yet to change the home country way of thinking. The members of top management are from the home country. The board of directors and senior positions are exclusive for the home country nationals, even when majority of the profits are coming from the foreign divisions. In many cases, locals have even been discriminated against. The problem is not isolated to US companies; discrimination is prevalent across all MNC's irrespective of their nationality (Fernandez and Shenjgun, 2007).
Other factors driving the need for change are the global mergers and acquisitions. Companies that merge with or acquire foreign companies need to drastically change the HR policies. It is advantageous to include the top executives of the acquired firm to join the parent's top management.
Emerson Electric, a U.S. manufacturing corporation, with more than 75 divisions, is regularly ranked in America’s Fortune 100 and had more than US$15 billion in sales in 2000 (www.gotoemerson.com).
Because of the large market served and the cost of importing products to China, Emerson wants to invest in a large foreign enterprise in...