Effectiveness of Expatriate Remuneration in Fedex China

Part 1: Introduction

1.1 Overview

One of the outcomes of economic globalization is the development of multi-national corporations. Under the situation of economic crisis, the tendency of multi-national corporations to invest in China still keeps raising. As an irreplaceable, important, creative resource in modern corporations, human resource has been paid attention by business industry which includes multinational corporations. Human resource is one of the most valuable treasures for organizations, especially for multi-national corporations, and it has been attaching great importance for a long time. Expatriates are irreplaceable special resources for MNCs such as FedEx Corporation, even the number of expatriates only be a small part of local MNCs. As the compensation and benefit management is well recognized important part of human resource management, many organizations include FedEx Corporation have adopted strategic attention to its obvious effect on the attraction, inspiring, and retention of employee. Thus, this report will study the effectiveness of compensation and benefit management in FedEx Corporation based on expatriates.

1.2 Aim and Objectives

The study aim of this report it try to explore the effectiveness of expatriate remuneration in FedEx, and the study objective is FedEx. Literature review will be showed in the second part of this report which will study the direct investment theories of multi-national corporations, HRM theories of multi-national corporations, and payment management theories of multi-national corporations. After the theories study, the methodology will be introduced in the third part of this report. More details of the research and research methodology will be introduced in the third part of this report. Lastly, it will be further discussed the prevalent management practice and potentially future development, and make expectation on the tendency of expatriate management.

Part 2: Literature Review

2.1 Foreign Direct Investment(FDI) Theories of Multinational Corporations

Multinational corporation(MNC) is also name transnational corporation(TNC), or international company(INC). Based on different standards, the definition of Multinational Corporation is different. The United Nations (U.N.) defines the multinational corporations as “an enterprise with activities in two or more countries with an ability to influence others…TNCs produce a vast range of goods and services for international trade, and often for the domestic markets where they operate. MNCs operate across national boundaries in a context of nation states”.

In 1995, United Nations Trade and Development Board have made descriptive determination of multinational corporation in World Investment Report that multinational corporations are the joint-equity companies or non-joint-stock companies that constituted by their parent company and foreign affiliates. The parent company or home company can be defined as one that controls assets of another entity or entities in a country or countries other than its home country, usually by owning a capital stake.

Generally, the definition of MNTs defined by the U.N. is comprehensive and scientific. To be briefly, the MNCs contain four aspects:

(1) To set up the headquarters in one country, and through foreign direct investment in two or more countries to build up legislative branches or subsidiaries;

(2) Have a global business strategy;

(3) The production and competition scale is based on the global market, and the form of the organization is adapted to the modern production conditions of high-tech and networking;

(4) Forms of ownership is more broad, which can be state-owned, private or mixed ownership.

Depends on the development history of foreign direct investment of multinational corporations, it can be divided into three stages, which are:

1960s’ Monopolistic Advantage Theory (S. Hymer, 1960s) and Product Life Cycle Theory (R. Vernon, 1966);

1970s’ The Theory of Comparative Advantage to Investment (K. Kojima, 1978) and Internalization Theory (Peter J. Buckley & Mark C. Casson, 1976);

1970s-1980s’ The Eclectic Theory of International Production (John H. Duning, 1977).

Based on the above theories, many deeper studies for FDI have been developed. Such as the theory of core assets, product differentiation, oligopolistic reaction, cost variations and Hirsch Model, currency differences, economic of scale, and Adachi Peter Model, ect, all of these theories are developed based on the Monopolistic Advantage Theory and Location Advantage Theory. In addition, some new theories and principles from different point of view have been also proposed, such as the theory of maximization of utility and Michael E. Porter’s Competition Advantage Theory for managerial class.

2.2 HRM Theories of Multinational Corporations

According to Shuming Zhao, Peter J. Dowling, and Dennis E. Welch (2001), there are three ways to study international human resource management in the academic field. First one is the cross cultural management method, and focus on the international view to inspect the members’ behaviour from inside of organizations. Second one is the comparison study based on the industrial relationship and human resource management theories, it trys to describe, compare, and analyse the human resource management systems of different countries. The last one is to focus on the human resource management of multinational corporations. In this report, it is paid more attention to the last study method, and will target on the issues and efficiency of multinational corporations’ human resource management.

Generally, human resource management is aim to benefit every performance by utilize human resource, it normally include human resource plan, employee recruitment, performance management, training and development, and salary welfare management, and other some aspects. The complexity and difficulty of human resource management will be rapidly increased if it be placed under the international background. It has been proved by Morgan (1986) in the international human resource management model (see Figure 2-1).

Figure 2-1 Model of International HRM

(Source: Adapted from P.V. Morgan 1986. International Human Resource Management: Fact of fiction, Personnel Administration, vol.31, no.9, P44.)

There are three dimensions that presented in Morgan’s IHRM model:

1. Procurement, allocation, and utilization are the three broad human resource activities which can be easily expanded into six HR activities which are human resource planning, staffing, performance management, training and development, compensation and benefits, and labour relations.

2. There are three categories of national or country involved in IHRM activities, which are the host-country where a subsidiary is located, the home-country where the company is headquartered, and other countries may be the source of labour or finance.

There are three types of employees contained in multinational corporations: parent country nationals (PCNs), the host country nationals (HCNs), and the third country nationals (TCNs). For example, FedEx employs Chinese citizens (HCNs) in its Chinese operations, sometimes send U.S. Citizens (PCNs) to Europe countries on assignment, and may send some HongKong employees on an assignment to its Japanese operations (as TCNs).

On the whole, multinational corporation human resource management covers international human resource management planning and recruitment, international human resource management training and development, international human resource management performance of evaluation, and international human resource management pay and benefits administration. Martin Hilb believes that IHRM is the top-in-class of the development of HRM.

2.3 Payment Management Theories of Multinational Corporations

According to global compensation specialist George T. Milkovich (2002), remuneration is defined as the total income of a variety of monetary income received by employee who are a party of employment relationship, as well as a variety of specific services and welfare.

As been defined by Xinjian Li, Fanqiang Meng, and Lifu Zhang (2006), the remuneration can be divided into two senses: the broad sense and the narrow sense. The broad sense of remuneration is about all the income or rewards received by employees from employer, and it is included material form and immaterial form. The narrow sense of remuneration is about the material rewards received by employees after make contributions for company. Milkovich concerns more narrow sense side of remuneration’s definition. It has been presented by Milkovich that remuneration contains monetary compensation and non-monetary compensation. The typical monetary payment involves all the types of salary, wages or rewards, but employee welfare is normally belongs to non-monetary compensation. In the modern concept of total remuneration, remuneration is separated into four dimensions: direct remuneration, indirect remuneration, internal remuneration, and external remuneration. (see Figure 2-2)

Figure 2-2 Key Elements of Total Remuneration

(Source: Jianxin Li, Fanqiang Meng, and Lifu Zhang, 2006. Introduction to Compensation Management for Enterprise, China Renmin University Press)

As the remuneration is involved the benefits of variety of parties, so the remuneration has its goal of diversification for different subjects. From the point of view of government, remuneration is mainly embodied in the aspect of social function; based on employers’ angle, remuneration is considered more in the aspect of corporation’s effectiveness and achievements; as a employee, remuneration is counted as personal income. However, no matter from which aspect or based on which subject, the goal of remuneration will be the same: efficiency, fairness, and legality. Theses three goals are not only interdependent, but also mutual restraint, from which it can be seen the difficulty of compensation management.

As been introduced by Jianxin Li, Fanqiang Meng, and Lifu Zhang (2006), the overall framework of compensation management is including four links, which are the formulation of compensation strategy, compensation system design, implementation of compensation management, and diagnosis and adjustment of compensation management. Compensation management is a process, but also a management system. It starts from the initial management concepts and strategies with objective evaluation (market price, work or job evaluation, personal evaluation) which is as a basis to determine positions, team, staff distribution rate and salary standard, and each employee will be paid through eventual adoption of the management and implementation with a certain amount and form of payment.

Part 3: Methodology

3.1 Research methodology and design

As Chaoxian Li (2002) concerned, the statistical survey is defined as the working process in accordance with the intended purpose and requirements, to gathering statistical data scientifically and organizing statistical information designedly. The statistical survey occupies a very important position in the whole statistical research process, it is the basis of entire statistical work, and also the premise of statistical compilation and analysis. Depends on different criteria for classification, statistic survey has different method to be classified (see Figure 3-1).

Figure 3-1 The Classify of Statistic Survey

About above figure, it is necessary to explain the comprehensive survey and non-comprehensive survey. First one is aim to investigate all the research subjects, the other one only investigates part of the research subjects. Although the non-comprehensive survey can not achieve comprehensive information, it is not only easy to organize but also reduce cost, and under some specific situation it can predict the entire information. For the study of the effectiveness of expatriate remuneration for FedEx Co. in China, the research methods of this report is going to adopt special investigation, non-comprehensive survey, one-time survey, and interview method. Most of the data collected for this research report should be primary data, but not secondary data.

Figure 3-2 The Design of Statistic Research Project

Based on above procedure of research, the research of the expatriate remuneration of FedEx can be designed as following:

Study aim

To study on the expatriate remuneration of FedEx in China is aim to understand the general effectiveness of expatriate remuneration management situation, and to explore the management tendency in the future.

Study objective

The study objective of this research is FedEx Corporation in China. The location of FedEx Corporation branches are selected mainly located in Beijing, Shanghai and Guangzhou, as these cities are the most important economic centres in China.

Study items and questionnaire

The study items include company background of FedEx, basic situation of FedEx’s expatriate employees, expatriate remuneration management and policy, and future trend of expatriate employee management.

Investigation method and survey time

In this report, it is adopted interview method as the main investigation method, and other methods are used as assistant method, such as questionnaire. The reason is the rate of return of questionnaire may difficult to ensure, and the investigate subjects’ education level exist difference, so that the understand of questionnaire may cause result deviation. In order to make sure the quality of investigation data, it is adopted interview method. About the survey time, it is selected the period between 1st December 2009 and 30th November 2010 as the statistic year. The period between December 2009 and February 2010 will be the focus stage to collect data of FedEx.

Implementation plan

The first step of plan is to find the target branches of FedEx, and to contact relevant people within these branches. Secondly, it is necessary to obtain agreement from relevant people so that can have conversation with them directly, which is in order to achieve more accurate primary data. For the branches are can not obtain agreement for interview, should try to get agreement to fill the questionnaire, then to post the questionnaire to these companies, and reclaim after relevant people complete answer.

3.2 The design of questionnaire and data analysis

The aim of this research is trying to understand the effectiveness of expatriate remuneration management of FedEx, to the design of questionnaire should focus on expatriate remuneration. The questions forms are included in the questionnaire will adopt fill in the blanks, judgement, multiple choice, matrix form, and tabular. The questions mainly cover four parts, which are expatriate employee management situation, expatriate remuneration management policy, expatriate welfare management policy, and expatriate employee management tendency.

The analysis of basic situation of questionnaire is based on the statistic data treatment. The data treatment defined by Chaoxian Li (2002) is the working process of rearrange primary data by utilize scientific method to make the date be more systematic and organized based on the aim of the statistic study. As the prerequisite of statistical analysis, due to the survey that initial data obtained are mostly sporadic, so it only reflect the characteristics of individual units but can not reveal the general nature of the studied subjects, as a result, the statistic data treatment is a necessary stage. It is suggested to utilize descriptive statistic method to explore the data which will be helpful to understand and compare with each data.

3.3 Limitations of study

Although during the process of the survey analysis it is sought to be standardized, objective and rigorous, due to various constraints situation, there exists the possibility of errors to use the sample to analyze and deduce the overall real situation.

1. The limitations of study subject

The study subject of this report is the FedEx Corporation in China. Although most branches of FedEx are centralized in big cities, such as Beijing, Shanghai, Shenzhen, Guangzhou, HongKong, etc., however, because of China is a country with a vast territory, so the locations of FedEx Co. Branches are dispersed, which would possibly increase the difficulty to collect samples during the process of study. In addition, because of this report is only a part of student study, so consider about the limit economic benefits for study subject, the rate of return probably lower than expected as human resource management department staff do not like to response the questions.

During the process of research study, it may be found that even the target subjects are focused on FedEx Co.’s international HRM department, due to the way of management and content of management exists differences between expatriate employee HRM and local employee HRM, or due to the responsibility of expatriate employee management does not belongs to local HRM department, the investigate subjects may not 100% sure about the implementation of expatriate remuneration management. Especially for the investigation of some trend issues, the results may be affected by subjects’ perception which could cause deviations.

2. Limitations of study resources

Consider about the limit funds of study and convenience of sample collection, the study of this report may only select branches of FedEx in Beijing, Shanghai and Guangzhou as the main study subjects, other places may be set as the questionnaire study subjects. Besides, the issue of research cost caused the quantity of questionnaire is limited, which means, under the restriction condition of budget and region, the concluded study result of overall study subjects may exists issues of adaptability.

3. Limitations of study time

Because of FedEx have its review and evaluation of management policies for remuneration, and based on the evaluation result FedEx will adopt adjustment periodically. Therefore, to conduct the research of FedEx corporation’s policy and operations of the remuneration, it is needed to take regular surveys as the main statistical surveys. In addition, because of the variability of the remuneration policy, it would be more appropriate to track and concern the trends of the whole market’ salary and benefits administration. Therefore, the time restriction of study could have impact on the final result, and the concluded may be provided with lopsided view.

4. Limitations of questionnaire design

As been found that the real situation of setting expatriate remuneration regulations is usually depend on the ranking of position, so even under the arrangement of same remuneration system, the different between positions will have effection on implementation of expatriate remuneration. Based on this situation, while answer the questionnaire, it is possible to select the situation which does not the real situation of the company.

3.4 Ethic issue

The Fedex Corporation engaged all the employees and contractors to pay high attention on the security issues, and motivate them to conduct highest standards of the code of business conduct and ethics seriously. In addition, through the maxim satisfy their clients and social needs, the Fedex Corporation has been chosen as a model employer which is most reliable and most respected. As the chairman, President and CEO of Fedex Corporation, Frederick W. Smith presented that “we have a long-standing commitment to complying with the law wherever we operate and striving to maintain a high standard of business and personal ethics”. (source: http://ir.fedex.com/documentdisplay.cfm?DocumentID=2823HYPERLINK “http://ir.fedex.com/documentdisplay.cfm?DocumentID=2823)” ) Therefore, the FedEx in worldwide generally can be treated as no such ethic issues relate to the work.

Part 4: Conclusion

Depends on the basic research, it should be concluded that:

The main reason caused FedEx to increase demand of employees is the business expansion and lack of high professional employees, and the decrease of expatriates is because the trend of indigenized employee management strategy.

For the internal recruitment, the global dispatch method is the most typical way for FedEx; for the external recruitment in China, FedEx typically adopt expatriates from the Asian-Pacific region.

The main standards of expatriate recruitment are specific working techniques and leadership skills.

The effectiveness of expatriate remuneration of FedEx can be generally accepted, as the expatriate employee turnover rate is low, and the organizational culture has enhanced the satisfaction of expatriates.

To be analyzed, under current economic situation, it is considered that there is a arising trend FedEx will pay more attention to the cost control for expatriate management. To employ expatriates, FedEx probably will consider more locally employed expatriates to instead of global employed expatriates which is in order to realize the cost control, and it is an effective way to reduce cost but still remain some of their competitive advantages from expatriates. In addition, the locally employed expatriates have no limitations on relevant policies from parent corporation or regional headquarter, and the remuneration arrangement is also not controlled by parent corporation or regional headquarter, which means, the company of FedEx corporation in China can do some proper adjustments depends on actual situations so that both company and employees can be benefited.

As concerned by Ames Gross (1996), the cost of expatriate is the pressure of cost management. It is critical reviewed expatriate employees by Gross that expatriates are important for entire organizational operation of multinational corporations, and sometimes they are irreplaceable in senior management. However, it has to be acknowledged that the expatriate remuneration include basic salary, cost of living, hardship allowance, cost of children education, year-end bonus, and other expenses, that is generally between $250,000 and $500,000, and sometimes even much more higher, so that the cost of expatriate employees is extremely high, and it keeps raising in China. According to this situation, the trend of employee localization of multinational corporations is inevitable.

Part 5: Reference and Bibliography

John Madeley(2001), Big Business, poor peoples: The impart of transnational corporations on the world’s poor, Zed books Ltd, London

UNCTC(1986), The United Nations Code of Conduct on Transnational Corporations, Preamble and objectives, Definitions and Scope of Applications, New York

Ian Smith(1983), The management of Remuneration: Paying for effectiveness, Biddles Ltd, Great Britain

D.A.Whitmore and J.I.Ibbetson(1977), The management of Motivation and Remuneration, Alden Press, Oxford

Diana Winstanley and Jean Woodall (2000), Management, Work and Organisations: Ethical Issues in Contemporary Human Resource Management, Macmillan Press Ltd, London

Edgar P. Hibbert and Jonathan Liu (1996), International Market Research: A Financial Perspective, Blackwell Publishers Ltd, UK

Frans Poels (1997) Job Evaluation and Remuneration Strategies: How to set up and run an effective system, Kogan Page Limited, London

Peter Chisnall (2005) Marketing Research 7ed, McGraw-Hill Education, England

Martin Hilb (2006), Transnational Human-Resource Management, Central Compilation & Translation Press (CCTP), China

Shuming Zhao (2005), International Corporations: Human Resource Management, 3rd Nanjing University Press, China

Shuming Zhao, Peter J Dowling and Dennis E Welch (2001), Human Resource Management of Multinational Corporation,China Renmin University Press, China

Xinqi Lin(2004), International Human Resource Management, Fudan University Press(FUP), China

Steven Kerr (2005), Ultimate Rewards:what really Motivates People to Achieve, China Machine Press, China

Rungui Jin (2005), Master of Business Administration, China Renmin University Press, China

Riming Cui, Chunxiang Xu (2005),Multinational Corporation Administration and Management, China Machine Press, China.

John H Dunning (2006) Economic Analysis and The Multinational Enterprise, China Social Sciences Press, China

Kiyoshi Kojima (1987),The Trade Theory, Nankai University Press, China

Jeorge T. Milkovich and Jerry M. Newman(2002), Compensation 6ed, China Renmin University Press, China

Xinjian Li, fanqiang Meng and Lifu Zhang(2006), Introduction to Compensation Management for Enterprise, China Renmin University Press, China

Gary S. Becker (1987) Human Capital, Peaking University Press, China

Chaoxian Li (2002) She Hui Jing Ji Tong Ji Xue, Economic Science Press, China

A.J. Morrison, D.A. Ricks and K. Roth , Globalization Versus Regionalization: Which Way for the Multinational, Organizational Dynamics, Winter,1991

Morgan, International Human Resource Management: Fact of Fiction, Personel Administration, Vol, 31,1986

www.chinatax.gov.cn 2009/11/29

www.hroot.com 2009/11/23

http://fedex.com/ 2009/11/26

http://en.wikipedia.org/wiki/United_NationsHYPERLINK “http://en.wikipedia.org/wiki/United_Nations 2009/11/29” 2009/11/29

http://www.un.org/ 2009/11/29

Part6: Index

Questionnaire

University of Sunderland Master of Business Administration

Dear sir and madam:

Thank you for your time to completing this questionnaire.

This questionnaire is part of assignment, which will only for academic use only. All the figures and information that provided in this questionnaire will be private and confidential, also would not pass to any third parties.

The study aim of this questionnaire is trying to explore the effectiveness of expatriate remuneration for FedEx in China.

Best regards

Hongwei Zhao

Student of MBA (Sunderland University)

Description of Terms

Compensation and benefit management

Global compensation and benefit management

The theory express the expatriate recruited by the headquarter of corporation

Regional compensation and benefit management

The theory aim at employees recruited by region headquarter of Corporation

China locality of expatriates compensation and benefit management

The theory normally practice on expatriate that recruited by China local recruitment.

Repatriates compensation and benefit management

The theory adapts to regionally Chinese who held other country’s passport or citizenship, which has appointed by parent company for company benefit purpose.

Salary and Benefit policy

Cash bounce

Living cost bounces

Expense for the different of living culture and service between different countries

Bounces for appointed to other countries

Rewards for employees who has take the risk at new environments

Bounces for difficulty

Compensation for employees who works under difficult work environments

Integrated bounces

To compensate the employees and achieve a standard of living at own countries

Corporation Name:______________________________________________________________

Address:_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Information of Corporation

1. Branch Name:______________________________________________

2. Ownership:

â–¡ Reprehensive office â–¡Joint venture â–¡Co-operative enterprise

â–¡ Exclusive Foreign Owned enterprise

3. Parent company information

Location of parent company

Name of Parent Company

Headquarter in China

China

Headquarter in G China

China

Headquarter in The Asian-Pacific region

Headquarter of Global

Headquarter in Hongkong

4. Company sales revenue of 2009 ______________________________________

5 The number of expatriate

Expatriate from European and US

Expatriate

From Hongkong

Expatriate

From Taiwan

Expatriate

From other Asia countries

Expatriate

From local recruitment

Repatriates

Back to

China

Part I (Please tick √ into â–¡)

Expatriates management

1.1How many different compensation and benefit system in corporation?

â–¡Global compensation and benefit management

â–¡Regional compensation and benefit management

â–¡China locality of expatriates compensation and benefit management

â–¡Repatriates compensation and benefit management

â–¡Others_____________________________________

1.2Will there any changes for the numbers of expatriates in the next 12months?

â–¡Yes, approximately __ increasing

â–¡1-5 â–¡5-10 â–¡10-20 â–¡over 20

â–¡Yes, approximately_ decreasing

â–¡1-5 â–¡5-10 â–¡10-20 â–¡over 20

â–¡No

1.3 What is the cause for the expatriates increasing?

â–¡Expansion of the business in China

â–¡The Asian-Pacific region headquarter move in China

â–¡Shortage of highly qualified competent people in local area

â–¡Shortage of expert’s specialist in local area

â–¡Others, illustrated by examples____________________________________

1.4 What is the cause for the expatriates decreasing?

â–¡Business stable

â–¡Positions of expatriate taken by local experts

â–¡Cutting down the cost

â–¡Others, illustrated by examples_____________________________________

1.5 In the recruitment of expatriate, which type has been practice more typical?

â–¡External: â–¡From home company country

â–¡From the Asian-Pacific region

â–¡From China (includes Hong Kong, Taiwan)

â–¡From Mainland of China

â–¡Internal: â–¡Global transfer

â–¡The Asian-Pacific region transfer

â–¡China (includes Hong Kong, Taiwan) transfer

â–¡Mainland China transfer

â–¡Others, illustrated by examples______________________________________

1.6 What are the standards of recruiting expatriate?

â–¡Specializing skills

â–¡Leadership

â–¡Ability of outward for business

â–¡Adaptability of the local culture

â–¡Experience of success in MNCs

â–¡Professional development

â–¡Language skills

â–¡Others, illustrated by examples______________________________

1.7 Dose the Corporation has official procedures for recruiting expatriate?

â–¡Yes â–¡No

1.8 Any measure from Corporation to help the expatriate to adapting China’s market and living?

â–¡Express local culture training to employees

â–¡Express local culture training to employees and their family

â–¡Observation and study before starting.

â–¡Specialist to give guideline

â–¡Language training

â–¡Others, illustrated by examples_____________________________________

Part II (Please tick √ into â–¡)

2.1 Salary management

2.1.1 Who will response the salary of expatriates?

Management of expatriate’s global

Global

Regional

Host

Repatriates

Back to

China

Responded by Chinese company