Extent to which Pakistani MNCs Instill a Strategic Culture

ABSTRACT

This study demonstrates the extent to which Pakistani multinational corporatations instill a strategic culture. Why this culture is vital and how HR management practices and decisions making can play an integral role towards achieving organization’s strategic goals. Most of Pakistan’s corporate culture is not in line with international accepted and practiced SHRM. However, SHRM exists because of its increasing adaptation of western management style and American influence. There are many obstacles in the holistic implementation of SHRM in multinational corporatations in Pakistan. Political expediency, religious, cultural and ethnic barriers, unethical practice and limited practical knowledge are few of the impediments standing in its way. A good number of people attribute religion of Islam as one of the factor to adversely affect SHRM to exist and practice in Pakistan. This is not at all true. Main factor is the culture developed in a particular organization. If that is not sound and strong enough, it cannot implement the Human Resource policies successfully. There may be conflicting policies while working on the lines of SHRM in the presence of old policies. The performance of company depends upon the human resource available with the company. If the policies are reviewed based on the management staff and skill, SHRM is capable of playing more positive role to achieve company’s objectives and goals. Some of researchers have worked on these lines and are optimistic that things can improve a lot but in their study they have observed that lack of literature and literary culture on the following topics and themes requires further study and assessment.

Objectives

There should be insight study on specific topics to ascertain the effect of religion, culture, society, ethics and politics to introduce SHRM in working system of Pakistani and multi-national companies. Since local companies have not adopted this system in Pakistan, therefore, extensive research has to be done in connection with introduction of SHRM. Pakistan is a country which is coming up in the comity of nations progressively and, therefore, it is time that researcher should concentrate on the possible introduction of SHRM in Pakistan. This research can cover following objectives:

Whether SHRM is prevailing in Pakistan

The role of SHRM to play in the ultimate success of companies in Pakistan.

The justification to introduce SHRM in Pakistan

The factor to affect SHRM in a Pakistan environment.

The question of this research is TO WHAT EXTENT HAS HR PRACTICES BECOME STRATEGIC IN MULTINATIONAL CORPORATIONS IN PAKISTAN?

With a view to ascertain the question and its answer through current practice, it is essential to examine as to what is HRM. Similarly, the significance of SHRM is also an important factor. SHRM originally started in North America that’s why it is suited to companies working in American environments. The topic of research is as to what extent has HR practices are strategic in Pakistan. For this purpose, one has to explore the research question / topic on the basis of religion, politics, culture and society and whether it is adaptable and adjustable in the local environment in Pakistan. Whether it is acceptable to society and community where ethics has great influence and impact. The point of discussion and focus of research on multinational companies in Pakistan in the background of culture of Pakistan will assist the researcher to identify and examine the research objectives of the above research question.

Context

Recently, lot of discussions about SHRM has taken place all over the world about SHRM based on its importance and successful results. Most of the researchers have conceived that in view of SHRM being an American system of management, it cannot work as such round the world. Since the business activities by multi-national companies are being expanded especially in developing nations, the researcher are interested to introduce SHRM as composite policies in various countries including Pakistan. The research will indicate whether SHRM is working or workable in Pakistan. This study will also give stress on the point whether it will be successful in performance and results. This relationship will also identify the strategies for the success of organization.

Review of Literature

Some researcher argue that SHRM is not a new arena; rather is just modification and polishing of HR policies in a strategic fashion. In comparison to the Japanese style of management, SHRM does not look like a remarkable innovation. Since the start, HRM looks to exist in organization (Nankervis et al, 2002). The relationship of HRM to strategic one has actually given birth to SHRM. To have competitive advantage, deriving a well-planned and masterly tailored way of getting organizational goal is a real challenge that is to be solved in a strategic way. Conversion of HRM from micro focused function to macro strategic role has taken place, where HR functions like recruitment; training and rewarding are not only in line with organization objective but also with one another. (See Budhwar, 2002, Lundy, 1994, Martell and Carroll, 1995, Ritson, 1999 cited in Khatei and Budhwar, 2000) SHRM concerns with contributions to make HR strategies effective and how these contributions are accomplished (Ericksen and Dyer, 2005 cited in Becton et. al., 2009). This involves designing and implementing a set of internally regular policies in order to ensure that human capital of an organization including employees, their knowledge, skills and capabilities contributes to achieve objectives of the company. (Baird and Heshoulam 1988: Richard and Johnson, Becton et.al., 2009).

SHRM is so developed and designed to assist the companies to meet the requirements of their workers while promoting goals of the company. HRM deals with any aspect that relates to employment / recruitment, their pay structure, pay package and allowances and their administration including work incentive, safety, leave and holidays.

SHRM is management of people by a system. It involves vision and advance planning for better supervision, administration and discipline while planning for the training, appraisal of performance and assessment technique of work done.

It is an established fact that companies which look after the needs and requirements of their employees properly cultivate an atmosphere favourable to increased production and profits. HRM is one of best system to achieve this. If the planning is made in advance and in time, the employees, their skill and performance is improved for the benefit of company instead of employing untrained and new employees – yet to be trained at certain cost and expense.

At the time of making out plan for the employee, it is essential to assess their needs and requirements which company can reasonably afford. It may be training and financial benefit programs in larger companies that cannot be offered by smaller companies due to their limited resources. In smaller companies, proper training can be offered by senior management within the company instead out of country training to employees. There should be personal assessment and training session on site, so as to help employees achieve highest performance rates. It should be noted that employee’s development is most important aspect of SHRM that starts from day one when a company plans to recruit and interview the prospective employees. Improved technique of interview is better method because non-deserving candidates are out of run in the initial stage.

After recruitment, training of employees is very important to improve their skill in profession and to be conversant with the policies of the organization because investment on training gives return to the company in the shape of more consistent and quality oriented products.

SHRM is beneficial for both large and small companies. Its function is simple in small companies because the sole owner has to supervise and observe employees while in larger companies, overall incharge of department dealing with human resources by his experience has to assess the working system and suggest /make improvements based on his observation. It is a kind of investment having positive impact on performance of their employees.

SHRM has received criticism from various corners due to lack of solid foundation. SHRM system focuses on three theories: universalistic, contingency and configural perspectives. Contingency approach explains that HR strategy will be comparatively more effective when it is properly linked with its organizational and environmental background. The Universalist approach explains that entire companies will improve their performance if they chose to adopt the same best practices (Pfeffer and Veiga, 1999). On the basis of this observation, numerous authors have developed different sets of HR practices which bring competitive advantage to organizations with ultimate positive results (Datta et al., 20005Guerrero and Barraud – Didier, 2004). These authors include Pfeffer and Veiga’s (1999) seven best practices popularly known (job security, selective hiring, extensive training, high compensation, information sharing, self managed teams and reduction of status), Lawler’s (1986) four types of HR practices relating to information, training, wage, empowerment). Arthur’s (1994) six types of practices which include training, empowerment, high wages, compensation based on performance, collective participation and skill development) and Wood de Menezes’ (1998) include practices of recruitment, appraisal systems and job security to Arthur’s (1994) list. These practices will lead to high performance of employees and greater commitment for employees helping organizations in getting a competitive advantage. The ultimate results show that each perspective can be used to develop theoretical argument that signifies variable financial performance. (Delery and Doty, 1996).

Travel from HR to SHR

Besides the sincere and significant efforts of HR for becoming more strategic, it has not yet unanimously graded as a strategic business partner. SHR has full role to play instead of traditional role of HR from old bureaucratic to strategic (Leonard, 2002). In view of different approaches between traditional HR practices and SHR, it is gratifying to know that some of the organizations are successfully transitioning to SHR (Fisher, Schoenfeldt, and Shaw, 2003). To become strategic partner, it is requirement of HR to revolutionize their activities in this regard.

The report of Lepak and Snell (1998) indicates that with a survey of 1050 companies, HR professionals devoted less than 1/3 time to SHR activities. They mainly worked on traditional activities (Fisher, Schoenfeldt, and Shaw, 2003; Green, 2002). Strict attention needs to be devoted on basic activities.

Mostly, the obstruction to limit HR department, to contribute to their companies is strict administration on the bottom line that depicts that HR plays only an optional role and not an important strategic partner (Fegley, 2006).

Research has established that HR professionals must be more strategic to become equal partners in formulation and implementation of organizational policies (David, 2005). In numerous organizations HR is managed so weak that due to lack of capacity to change, SHR is not properly and completely applied. In many cases, professionals resist such change. It is necessary to study this important aspect to examine possibility of application of SHR in complete order.

There is also an opinion that HR professionals lack vision especially on joining big organization (Leonard, 1998). He contends that HR managers mostly focus on their HR departments and look after only routine operations. They are, in many cases, are not involved to find out business solutions (Caudron, 2002). To prove this version, it is learnt that HR professionals are separately offer planning from the overall strategic planning process. It is some times taken to convince the top management in order to secure allocation of sufficient resources for HR instead of increasing organizational performance process (Lam and Schaubroeck, 1998). It is in the interest of company that HR planning processes are made effective by sharing the views, skill and expertise of HR department in line with the overall planning process of the company (David, 2005; Lam and Schaubroeck, 1998).

Employees View

In the opinion of HR, employees are considered as ‘over head and cost to the company’. This view is not strategic in principle and needs to be reviewed.

Acceptability of change

The responsibility of change in profession lies with HR because they have not been able to mobilize employee’s views and participation in these policies, as such, they resist change (Leonard, 2002). It is time that HR should positively respond to change. They should show more responsiveness for future change in this respect.

Systems and practices

It is unfortunate that HR mostly use “one-size-fits-all” approach to HR management. HR systems are rarely monolithic (Lepak and Snell, 1999). Various firm’s management extends treatment equally to all employees. This is not fair as all the employees do not possess same skill and need to be dealt with differently on the basis of their skill and performance (Steward, 1997). This standard approach is proved to be ineffective rather it is found to be counterproductive.

Organizational status

Previous shortcomings and omissions have adversely affected the reputation of HR in an organization. Therefore, there are suggestions to change mind set for HR. (Briggs and Koegh, 1999).

There are some suggestions the successful practices in West should be shifted to any Asian country. Even there is reservation of certain researchers as they assume that this may prove to be counterproductive by experience of numerous multinational firms (Ouchi, 1981). It is further assumed that if these practices are transferred, its implementation cost will be much higher than the expected benefits. Values, ethics and beliefs are directly influenced by the culture of that part of world. It is not possible to anticipate change in culture in a short period of time. However, selected good practices can be adopted with certain modifications and there is good chance of success. This requires extensive study to examine the possibility of transfer of applicable practices. Many non-cultural factors like legal constraints, demographic features and limitations may prove to be infeasible. For instance, if we consider recruitment process and compare with practices prevailing in West and in Asian countries like China and Taiwan.

There is vast difference between US and China in respect of selection practices and frequency of interviews used in selection process. In US, interview is considered to be very important for appointment of senior staff. In cases of temporary engagement of employees, interview is even not conducted and they engage someone whom they have not talked. Job interview is normally not held or omitted in China and Taiwan. Alternatively, they offer jobs to new Ph D recipients without holding interview. Even if there is an interview of any employee, it is not intended to assess the qualifications of candidate but to tell them useful information about job requirements.

In China and Taiwan, the credentials for the job are considered for initial entry-level jobs.

Further, the parity between employers and job seekers is a very prediction for the success of employee.

It is also debatable that credentials are better choice for future job performance. After research of 6 decades, it is found that interview is mere an element but not a reliable indicator of successful recruitment of staff. It is interesting to note that decisions for selection are taken in first four minutes of interview. Therefore, it is established that best indicator for hiring is the match of socio-economic background between employer and the employee (Huo and Glinow 1995).

There are relevant examples that in Middle East, many managers repatriated due to socio-cultural mishaps because there was conflict in interpretation, conception and explanation. The employees working there don’t care for the time wastage and suspension of work for prayers. These issues have mostly resulted in wastage of valuable time and energy which resulted in delay in completion of projects (Dadfar and Gustavsson, 1992)

Culture of Organization

Organizational culture also exerts upon implementation of HR policies (Chan et al.2004). For instance, a bureaucratic culture leads to follow set rules without thinking for new change and improvement. This discourages initiative of employees (O’Reilly, Chatman and Caldwell 1991). In Asia, due to autocratic leadership, they are more bureaucratic comparing with the companies located in West (Galang 1999; Chen 2004, Prabhu 2005). In this way the system of rewarding innovation cannot work although this system has strong bearing within a firm’s HRM practices.

Culture of a nation

Different cultures possess different behaviours which have been studied by different researchers in the past (Hofstede 1991; Trompenars and Hampden – Turner 1995; Gupta and House 2004). Current debate on the weaknesses and strengths of cultural dimensions (high vs low power distance; collectivism vs individualism; masculinity vs femininity, long vs short term, certainty vs uncertainty) cover the discussions on these five cultural dimensions. Gupta and Houses’ GLOBE study (Global Leadership and Organizational behaviour effectiveness (2004) recast and added to Gifstede’s framework by accepting 9 value dimensions. These dimensions have provided a vast cultural impact relating to management practices (Tung and Thomas 2003). In addition to this, the necessity of appropriate organizational and inter-personal practices to organize and bring close the issue and problem of cultural diversity in cross-boundary alliances has been pointed out (Delaney and Huselid 1996). There is reasonable ground to ascertain that national culture of a country is one of the important factors to influence performance of an employee through its effect on HRM practices (Rhodes et al., 2008).

American Environment and its effect

SHRM suits the American culture as Pakistani culture is different from America. Due to this culture, the Americans employees are more confident, company men and self driving. Their culture has cultivated a sense of proper performance, as such, the management sets goals to achieve. Their efforts are integrated and team-work is developed for better results. No bureaucracy policy is available in American company. Power is distributed equally while distribution of labour manpower is main criteria of progress. These factors contribute for the existence of SHRM in a favourable working environment.

Cultural environment of multinational Corporations

The factor of globalization has gained significant importance in the policies and practices of management As a result, employees have to deal with speedy changing environment (DeCenzo and Robbins, (2004). All big companies work in whole of the world and these companies set up their business in different parts of world. Therefore, these organizations adapt and work in different cultures so as to work in countries where multinational companies are planned to set up and operate. This is how the world is becoming a global village. Therefore, multinational companies have to work under a global frame-work. This framework will provide an opportunity to multinational companies to study the culture of their host country located in any part of world. Ultimately, the HRM practices of these countries are modified as per ethics and culture of that country.

Culture of Pakistan

HRM of a company is influenced by the national culture (Newman and Nollen, 1996 cited in Khilji 2003, p.109). Khilji (2003) recommended that HRM should be adopted in such a way that can be reflected upon the national character. Social institutions may be helpful in developing personality of an individual and same personality then form a culture for the organization. It a whole cycle delineated by Tayeb (1995) when she proposed this context and connection between macro social institutions with micro level HRM.

For instance, the macro institution will influence the multinational company located in Pakistan depicting national culture patterns in HRM of that company. In view of this, the founder company practices will be adversely affected by national culture of Pakistan where this now located and operating. Pakistani culture can be discussed being a combination of Islam, Indian origins, British inheritance and American influences (Khilji, 1999 cited in Khilji, 2002).

Islam

It is to be seen whether in Islamic state multinational companies can practice the HRM policies as per practiced in other countries by the same companies. In fact, three ingredients including national culture, political culture and legal system have significant impact on the policies of companies. Religion affects the national culture of Pakistan. It is also said that Islamization program in Pakistan is concerned only with the outer shell and not the core of Islam. (Ahmad, 1996; Malik, 1996 cited in Khilji, 2003, p.115). Islam is a religion that has strong base for the welfare of worker. It is most respectful profession and Islam greatly values it. Therefore, HRM is part of religion but its implementation process is different in system.

Influence of America

America has great influence in the policies of Pakistan which include foreign and economic policies (Hussain and Hussain, 1993 cited in Khilji 2003). This influence the touched even the syllabus of educational institutions (Khilji, 2002). Similarly, the government and management are under the influence to use American practices in management. On the other hand, the Government sector inherits bureaucracy from UK who are slow in progress and use different style (Khilji, 2003). SHRM is a style originally started from North America. Some of Pakistani managers are just following the same pattern apprehending that in Pakistan this system can be adopted and worked despite knowing that SHRM being American practices are workable in America and if it is to be introduced elsewhere it has to be modified and reviewed. The study shows that some company will adopt the same practices as of parent company and some will be able to adopt their practices considering the national culture of Pakistan.

HRM multinational companies are directly answerable to Regional Head Office. Supervision by RHO can suggest some subsidiary companies to adopt some policies of parent company and any company to adopt local culture. It is concluded that while suggesting their strategies, both national culture of host country and practices of parent company are taken into consideration. Khilji, in her study pointed out that the companies HR practices are more dynamic. She observed that in banking sector Open performance appraisal and new HRM practices can be partly introduced.

Aims of research

The aim of this research work is to establish and identify the differences between multinational companies HR practices in Pakistan and how these are considered to be important factors of influence and whether they are strategic or otherwise.

Approach

Inductive approach will be used by measuring the observation, finding patterns and making hypothesis in order to examine and to conclude the research.

Method

Qualitative research will be carried out. Semi-structured and unstructured interviews will be conducted. Due to links and contacts with multinational corporation’s staff, it is not difficult to obtain interviews. I intend to have about 10 face-to-face interviews. I will also visit their websites to secure information and profile of the company policies. This data will be analyzed with more depth and comprehension. Similarly, documents of certain companies known to me will be obtained personally.

Procedure

About 10-15 questionnaires were sent, some by post and some through email to four companies after personal contacts. Four interviews conducted, two from HR manager and two from directors of these companies in order to conceive insight of performance of these companies. They explained various policies, results, achievements and working system based on their HR procedures. By adopting this method, I was able to find out the shortcoming of system which leads from indifferent behaviour of employees and unkind treatment of employers. This data will be used for my future research on macro basis.

It should be made clear that the results of this research will not be representative. It is a sample based. The aim and object of this study was to ascertain as to how multinational companies can adapt the Pakistani culture and what are the factors which are responsible to affect the existence of SHRM in Pakistan. How could these companies or corporation prosper by using SHRM.

During the investigation, it is observed that some positive progress is forthcoming in Pakistan and SHRM has existed in various multinational companies like Foreign banks and mobile companies etc. There is chance of change over from HR to SHRM as the Pakistani based foreign companies will follow this practice. The reason for change is due to helpful attitude of SHRM because success of the company is concerned with the human resources of the company. SHRM shall lead to human resource development on the basis of welfare policies of the companies. It is yet to be seen that what is the planning of these companies which are determined to adapt SHRM system. Another aspect is implementation of these policies as formulation and implementation of policies are two different strategies. Flow of information is a regular process and decision-making involves right from formulation till implementation of HR strategies.

Main point to look into is culture of corporate. Culture should be supportive while planning strategies and especially while implementation of planning. It is suggested by research that culture that supports SHRM to exist in Pakistan is a culture all the employees work closely. The decision-making is not centralized but is it is developed by consensus of employees and employers. The employees are encouraged to proceed to attain the targets which are fixed by realistic experiments and defined mission of the company particularly definite role of each employee. The organization that has gained maturity and management having proper vision with acceptance of HR as a partner and with the support of upper management willing to use HR as strategic partner can be defined an organization which have the culture of corporate excellence and there SHRM can best be suited. These factors affect SHRM than the macro institutions of that country. Macro institutions have an important role to play for the proper corporate culture of a company. The issue of merits and demerits is available everywhere in the world. There is discrimination or favouritism in most of the countries while making selection of employees. These factors if taken care of will be able to fight against macro institutions. Islam as a religion is not in a way to adversely effect the implementation of SHRM. This can be verified by the research of Khilji (2002, 2003).

Culture which supports existence of SHRM will obviously help and assist the organizations to attain their targets. Flow of communication between the employer and employee will help in solving their problems of mutual interaction and proper communication. Culture which supports SHRM means a culture that supports human resources. It is difficult to achieve SHRM. It is essential to realize that employees are costly asset for a company. SHRM exists in multinational companies in Pakistan without having proper corporate culture which certainly asserts that SHRM can exist without being an ideal culture in Pakistan.

This research has shown a way to learn the new dimensions of SHRM. The study opened new avenues regarding corporate culture. There is no direct co-relation between success of an organization and SHRM particularly in Pakistan.

The study does not show the full picture of this exercise (multinational companies in Pakistan. The research was beneficial if done between home-based Pakistan companies and the multinational companies where SHRM could be best suited.

Lack of skills for conducting interviews, the answers to questions could have been much better if asked in proper manner. The interview of Director and the employee of the same organization had two different perspectives relating to the same topic. The questionnaire needed improvement in standard. One interview was taken on phone due to the absence of HR manager of a multinational company. He was inclined for face-to-face interview rather than on phone.

The volume of literature regarding SHRM in Pakistan was insufficient and inadequate in Pakistan making the study more comprehensive and elaborate.

In the end, it is to be emphasized that this topic needs further detailed study if SHRM is to be adapted in Pakistan. Pakistan is an emerging developing country. IF proper study is conducted on this topic the future of research would indicate the behaviour of employees and the corporate culture of companies based in Pakistan. This study is not exhaustive. The study between local and multinational organizations requires further exploration of these issues for better understanding the topic. Most importantly, further study will be beneficial as it will assist local companies to follow these trends to prosper in this era of globalisation.