As companies’ operations go global, there has been an increased need and relevancy for developing the human resource management from a domestic one to an international one. This has led to international human resource management (IHRM), which has introduced the need to change the traditional transactional models of outsourcing the personnel of companies to a transformational one that is more beneficial to both the employees (personnel) and the company. Transformational model involves the personnel manager concentrating mainly on behavioral transformation of the employees and the organization as a whole.
Integration of the IHRM and transformational models of human capital management has enabled multinational companies perform better than they used to when they relied on transactional models of personnel management. The Ford Motor Corporation has employed transformational models of IHRM and has resulted to brilliant performance in terms of sales, making it one of the best motor companies in America and in the world. This report seeks to analyze the personnel management and development from transactional to transformational models of human capital management in relation to Ford Motor Company. This is because of the increased use of the latter model.
The concept of international human resource management (IHRM) is not new for the companies, which form the multinationals. According to Dowling, Marion and Allen (2008, p.2-3), It entails the management of the basic human resource of an enterprise on a global scale. IHRM is represented in three dimensions:
- Procurement, allocation and utilization of resources which are the broader activities of human resource.
- The country categories involved; they are the host country, home country for the firm, and other countries where the resources are employed.
- The three employee categories sourced from the host country, original or parent country and third party nationals from a third country, who are the expatriates which is more so the same. For our case, we will concentrate on the last element that entails employee categories as the human capital of the Ford Motor Company.
IHRM covers all the issues that are related to management of personnel in a global context. There is a difference between the domestic and international human resource but the most differentiating concept is the fact that the IHRM deals with a diverse socio-culture. The traditional approach to human resource was mostly based on transactional models of outsourcing. This model centered on outsourcing of employees of a company which is the direct opposite of transformational models that concentrates on behavior transformation of the employees.
This entails moving of staff across national boundaries. This is because IHRM deals with the management of people from many countries. The report looks into the IHRM of the Ford Motor Company. IHRM has helped a lot in achieving diversity in personnel management. It has enabled personnel to be used in a wide array of roles that relate to entering new markets and growth.
Background of the company
Ford is an American multinational company based in Michigan, Detroit. It was founded in 1903 by Henry Ford, and it deals with Ford, Lincoln, and Mercury brands in America, Volvo in Sweden and Ashton Martin in the UK. It started to engage in international production and venture and came to be internationally recognized in 1914, a method of production that was then referred to as Fodism. It operates in all the continents
Currently, Ford is the second largest automaker in America, after General Motors, and fourth largest in the globe. In 2008, the Fortune 500 ranked Ford in seventh place in America with a global revenue of about $146 billion. In the same year, it produced over 5.5 million automobiles and employed about 213,000 people worldwide in its plants and facilities (Ford.com, 2010; Mullaly, 2010, par.2). It deals with both fuel and electric vehicles.
The study aims at analysing the concept of IHRM in relation to Ford Motors Company. This will be through ensuring that the personnel are used in a wide array of roles which will help to achieve diversity. Ford can improve through diversity in expatriation, repatriation, selection and pre-departure training on assignment which will go a long way in strengthening its IHRM improvement plan.
The scope o the study is assessing the current state of the IHRM, the evolution of the human resource, risk management, and strategy, process and practice optimization of the Ford Motor Corporation.
Ford has employed 213,000 employees worldwide who work in its plants and facilities. These employees are recruited from the host countries where Ford operates, the country of origin, and from other countries. The employees, therefore, are of three categories. The employees from other countries and the parent country to the host country are referred to as expatriates.
This is the process where Ford is involved in the movement of people (staff) across national boundaries into various centers in the international operation. The employees who are moved are referred to as expatriates, as they are working and residing in a foreign country(s) on a temporary basis (Dowling et al, 2008, p.4) Ford has capitalized on the development of human capital as it is vital to help it achieve its goals.
Ford has the advantage of being a globally recognized company, which helps it to attract many employees from all over the world. Through attracting the best pool of human resources it has been able to get the right managers who have in turn managed its business efficiently.
First, given their annual revenue collection of around $146billion, it can be able to develop its personnel capacity to its advantage, a strength that it has relative to its competitors in the industry. Again, the fact that it can be able to move its staff across the globe, it will have the ability to direct its appropriate personnel to the most productive stations, therefore gaining comparative advantage. This has been done by the company recruiting the best people for key jobs throughout the organization without considering their countries of origin.
Second, it has many opportunities as the wave of globalization has enabled it to explore and exploit opportunities in countries like Europe, Asia, and Japan, thereby tapping the market in these continents and increasing its establishment on a global scale (Ford.com, 2010). Third, the weaknesses that it has are based on its involvement with the Nazis regime in Germany to use forced labour in Cologne, between 1941 and 1945. Another weakness is the alleged involvement in the Argentine dirty war in 1976-1983, which can affect the level of employee trust as they may perceive it as exploitive.
Finally, the threats that it can face is more to do with trade unions in the other countries where it is sourcing its personnel as it has to discuss and negotiate with the respective union leaders or governments before it can recruit. This reduces its profitability as it has to comply and this way it cannot be able to have employ staff at its own price structure. This is a threat because it has been forced to employ the right personnel from the influence of external government regulations which has been costly. However, transnationalism can affect the business adversely, by presenting threats that makes it difficult for a company on a global scale to operate efficiently.
A good example is in Germany, where it has to discuss the issues of payment to the employees before it can recruit. This is a SWOT analysis based on employee/personnel management, and the influences it has on the way it can conduct business. These weaknesses and threats can be used by Ford to come up with the best solutions through proper review.
The concept of transnationalism has played a vital role in promoting IHRM. Transnationalism is the movement that is grown out of the heightened interconnectivity between people and the loosening of boundaries between countries (Paul, 2008, p.432). Transnationalism has opened avenues for expansion of businesses and this has made it easy for businesses to venture into the international arena and to operate globally. This is evident with Ford Company, as it started to operate on a global scale a long time ago.
The opportunities that are presented by transnationalism are the ease with which companies are able to outsource its personnel and move them to different locations all over the world without a problem, as there has been opening of barriers.
Ford has been supporting transformation by using expatriates based on the global nature of their business and the need to transfer knowledge to other locations. Ford Company has had worst experiences before; an example is its involvement with the Nazis. Based on this it may be seen as a way to continue labour exploitation by the country and so people may be discouraged to work for the company especially if they are being moved across their national borders.
This has brought in different trends of doing business based on employees and personnel management. This is because of the diversity in experiences and points of view that are a benefit to the firm because it combines strengths and capabilities from across the globe, leaving it in an advantaged position in management and operations of its business (Dowling et al, 2008, p.11).
Human Resource Management Evolution
Human resource management has been changing for the better. In IHRM, many companies that operate on an international level have been transforming slowly from the traditional transaction models to those that are human capital management-oriented models. The traditional transactional models were concentrating on out-sourcing workers based on cost minimization strategies, that is, the personnel manager of a certain firm was recruiting with the constraint of cost reduction in the firm.
For example, Ford Company would recruit its employees to a certain level, given the budgetary allocation which aimed at reducing costs. They even used to contract different people so that they could not be burdened with the compensation of benefits that would accrue to their employees (Storey, 2007, p.25). The overall aim was to check the payrolls and related benefits to employees so that they could effectively manage them to reduce costs.
On the contrary, however, human capital management models are friendlier to the employees. According to Marrewijk and Joanna (2002, p.6), the personnel manager of the firm seeks to address three basic aspects related to the human capital management. These aspects are:
- human operations that concentrates on dedication of employees. This ensures that the tasks and their execution, of all planned activities by the company are carried out effectively.
- corporate identity which is concerned with commitment of both parties in the development of an identity for the company and incorporation of a culture unique to a particular company.
- human development that is achieved through motivation of the employees. This is done through increase development of employee knowledge base, through the increase of skills and necessary training that is vital in an organization.
As earlier discussed transactional management basically concerns cost management. This is done by managing the employees to achieve the targeted goals, as the major priority of the organization. Transformational approaches that are mainly adopted by multinational companies, involve the personnel manager concentrating mainly on behavioral transformation of the employees and the organization as a whole.
The model for this applied here is the participative management, that is concerned with the people and their skills changes in all levels of the organization, especially the lower level. The model is thus compatible with empowerment of employees, their commitment and managing of teams in the organization (Price, 2007, p.279).
Ford Motor Company, being the multinational enterprise it is has not been left behind in transforming from transactional to transformational models of human capital management. There has been development of the employees from all over the world to make sure that they grow in skills and knowledge for the benefit of the corporation globally. This has been achieved through exchange programs by shifting employees to its other companies based in different parts of the world.
Diversity helps a lot to achieve transnationalism as it allows personnel to be used in a wide array of roles that relate to entering into new markets and growing globally. Through diversity in transnationalism Ford has been able to improve on expatriation, repatriation, selection of its employees and pre- departure training on assignment support.
Risk management: health, safety and legal compliances
Risk management in any organization especially in health and safety of the workers is one of the critical roles of the personnel manager in an organization. Proper management of risks brings many benefits. These benefits can be summarized as follows: Easier demonstration of legal compliance; an impression that the objective of health and safety is given the same emphasis as any other business objective; presence of systematic management of health and safety objective; company’s preparedness in case of emergencies; and they indicate the level of commitment towards health and safety in an organization ( Hughes and Ed, 2009, p.535). All these will have a long term effect on how external customers and the shareholders end up viewing the company.
When managing health and safety objective the types and causes of failures for the same must be reviewed and then ways to reduce or eliminate them (failures) are devised. Better designing of tasks that are to be carried out, equipment and processes is critical. There has to be a good communication process with the employees to get their perception on risk and how to inculcate a positive culture towards safety in the organization. This involves the employees in the decision-making processes regarding the best viable programs that should be instituted as wellness and fitness programs.
It is, therefore, important for the management to consider the job itself, the employee doing the job, and the organization in terms of culture and work systems (the ethics and corporate culture of the organization). This leads to the employer making assessment on risks relating to health, the wellbeing of the employees as they work, and risks and health concerns for the outsiders.
This will help the management in understanding and assessing risks, as it looks into adopting the best assessment criteria according to the hazards involved in relation to the people who are most vulnerable to the hazard. Sufficient precautions should also be taken to ensure that there is safety for the employees and this helps in preventing losses associated with injuries, machine damage and the related law implications procedures. Law, being the basis of risk management, should be followed well as failure to manage the safety appropriately will result to penalties for the organization (James, 2006, p.206).
As the company employs diversity to improve on efficiency, it needs to be aware of the rules and regulations across the globe. Through this the company will be able to avoid any interruptions that might come about as a result of violation of the laws. Laws and regulations are diverse and the company needs to know this as it uses its wide pool of employees in different roles to reach new markets globally.
Ford Corporation has devised methods for risk assessment and management for effective delegation in the management of risks and safety. For example, it has joined forces with Drive and Survive Institution, to manage risks that are involved in fleet transportation. This is a culture it has developed, apart from wholly owning the subsidiary of Advanced Motorist Institute, and is mainly for the health and wellbeing of its fleet drivers.
Strategy, process, and practice optimization
As far as human capital management is concerned, Ford has adopted the transformational models and processes for the core reasons of having a well-developed personnel structure for its benefit. The transformational model mostly concentrates on transforming the behaviors of the employees and the organization. Ford has been involved in ensuring that its employees learn from each other by employing expatriates from different areas around the world. Singh and Karl (2005, p. 280), the following are some of the contrasts that exist between the transactional and transformational models, highlighting the benefits of transformational models as compared to transactional models:
- The transactional models are perceived to cut costs through the management of the personnel to achieve the targeted outcomes of the company. On the other hand, transformational models identify and create opportunities to develop leadership to its personnel. This becomes more useful as the employees are given a sense of recognition and share in the responsibility of running the firm.
- The transactional models are accountability-oriented, while transformational models increase the dependency and involvement of the personnel (employees) in the decision-making processes. This is very useful as the personnel are able to think and make decisions that affect their daily operations rather than following rigid and unreasonable rules.
- Transactional models gain dominance by their tendency to assert leadership. Contrary to this, the transformational models support the personnel thus maximizing the organizational outcomes. When the personnel are given the opportunity to lead in management and in decision-making, they tend to become more confident in what they are doing and as a result, they become more productive. The management will thus enable them to develop strengths that are vital in the long-run development of their skills and thus higher contribution to the firm’s success by ensuring that they have a good working environment.
Transformational strategies and processes that an organization can integrate in the operation of its business and operations are numerous. First of all, the human operation aims at creating a culture of dedication that ensures that all tasks of planned activities and their executions are effective. This is perfected by ensuring that the personnel are used in a wide array of roles that enhances productivity. This can be by instituting procedures that the personnel are well conversant with.
Secondly, transformational strategies that are aimed at developing a culture of corporate identity, gives the personnel pride and makes them part of the process and by so doing there is an aspect of commitment that is nurtured, and this leads to their development. Lastly, transformational models aim at motivating the personnel through human development programs through training and expansion of their knowledge that contribute to their widening of the skills. This way the employees feel appreciated and as a result, their productivity and morale is boosted in the organization (Marrewijk and Joanna, 2002, p.6). Integrating these three aspects will come up with a successful tool for the effective running, resource management, and outsourcing are concerned.
Companies can develop their human resource by using IHRM strategies. This can be done by identifying and creating opportunities to develop its personnel. Employees will be able to develop their diverse talents and help the firm to cut on costs by enabling them to share a responsibility of running the company. Whenever they are given an opportunity to be part of the company through management they will be more creative and advance their careers.
Transformation can be achieved by ensuring that there is more dependency and involvement of employees in decision making. This helps to bring about the many talents that the employees have into use. In the long run the firm will be improving on accountability. If well effect ted it improves the relation between the personnel and the management and in the process the various skills will be sharpened (Singh and Karl, 2005, p. 280).
Employees can be made to be at the forefront of the management by supporting them and allowing them to be part of the decision making. Through this they feel that their capabilities are appreciated. This turns out to be a good leadership strategy. The long term effect is that the personnel will feel very much appreciated and they will be more effective in implementation of the decisions.
Ford is in the process of integrating some of these transformational strategies as most of the global personnel trends are shifting towards that direction. The company knows very well that proper personnel management can turn it around positively. As a matter of fact the company is conforming to IHRM strategies and processes through embracing expatriates. As a result the productivity has been excellent even in recent economic slowdown in 2009; it has seen Ford emerge to be the best motor company in sales, outselling General Motors, who have been at the top for the last fifty years.
The blends of the company’s personnel who are managed in a style that is of transformational nature are then spread out through the globe to all the plants of Ford. They in turn influence the rest of the personnel and as a result, the productivity is increased (James, 2006, p.206).
This is how the company optimizes the opportunity, that is, by training a portion of the personnel and using them to impact the overall global personnel of the corporation, as between the employees communication is always more effective and fast, as they are open and free with each other. A good IHBRM strategy helps the company to cut on costs by enhancing efficiency through its personnel. This has manifested itself where Ford has been spreading its personnel around the globe to create an impact through what they have learned as the best practices.
The integrated models of transformation of the IHRM can be evaluated against their contribution to higher performance relative to those of transactional models. It is evident that throughout the world the multinational companies have been gradually transforming to the transformational models of managing their human capital. They appear to give better results and at the same time developing the personnel by equipping their flexibility in their jobs, as the operations of the company(s) may change given the changing trends that are brought about by globalization, that is ever dynamic.
Again, these models, integrated, provide a perfect recipe for the development of the much needed skills and a working culture that is characterized by commitment and responsibility, as the personnel are encouraged and developed towards attaining the global leadership skills to be competitive and more productive.
Proper management of the transformational models, thus, increase the trust and productivity of the employees which has made Ford Company the only large company in America to operate without bailouts from the government. This was especially in 2009 when the economic down turn led to the collapse of many companies. The development of the personnel and their involvement in decision-making has been the result of their increased commitment and productivity that has greatly benefited Ford Motor Company. Furthermore, the company’s productivity in terms of profits has increased.
For example, in 2010 it recorded a $2.1 billion, which came much sooner than they had expected in their forecast. This was due to higher sales thus producing such a high profit. The company, with the integrated transformational models, outsold General Motors, something it had not been able to do for the last fifty years.
The human resource management has expanded over the years to delegate its duties on a global level. This has been necessitated by the growth of companies to become multinationals who are in need of outsourcing employees from their countries, their host countries and from other third countries. This has been termed as IHRM, which has also seen the transformation of personnel management from transactional approach to transformational ways of managing human capital, which is a more productive approach.
Transformational models have enabled a lot of diversity as the companies have been presented with a large pool of human resource that has different talents. This has enabled the personnel to be used in a wide area in the process of executing their duties. In addition to these it can help a lot in increasing efficiency and productivity. Diversity is important when implementing out IHRM strategies as it enhances expatriation, repatriation and improves on employee selection. Ford has the opportunity to grow further by incorporating IHRM strategies and processes in the way it manages its personnel. This will go a long way in positioning the company ahead of others in this globally competitive environment.
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