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DETERMINANTS OF STANDARDIZATION AND LOCALIZATION OF HUMAN RESOURCE MANAGEMENT PRACTICES IN MULTI-NATIONALS' (MNCs) SUBSIDIARIES

Standardization and localization of HRM practices are essential concepts in human resource management of Multinational Companies' (MNCs') subsidiaries. As MNCs' establish subsidiaries beyond borders of the parent country to produce services and goods, they experience complex situation related to management of human resources far away from their parent countries. Some scholars like Rugman et al. have argued that the experience they face in the host countries is a dilemma on whether they should standardize or localize HRM practices overseas. Eventually, MNCs' subsidiaries decide to implement either high degree of standardization or localization across HRM practices.

Standardization of HRM practices refers to centralized decision making at MNCs' headquarters regarding HRM practices at subsidiaries; and conduct them in the same way as done in their parent countries. Standardization of HRM is considered by Smale (2008) and Taylor (2006) as a global HRM integration in which MNCs try to achieve common standards of HRM management between the headquarters (HQ) and the business affiliates around the world. It can be implemented by exporting similar mechanisms of HRM practices from headquarters (HQs) to subsidiaries operating in the host countries. Al-Khaldi (2016) used the concept of standardization interchangeably with transfer of HRM practices from headquarters to the subsidiaries while Uyasal (2014) and Sparrow (2016) viewed it as a convergence of HRM practices between the parent company and subsidiaries.

In contrast, localization of HRM practices refers to local adaptation where MNCs adapt HRM practices to host country's local firms' practices. Localization is diverged HRM practices from the parent country of the MNCs to local conditions of host nations. Sometimes localization is used synonymously with the concept of decentralization of Human Resource Management practices in which the subsidiaries become autonomous in executing Human Resource (HR) functions differently from the headquarters but addressing business goals of the MNCs. In other words, localization is a practical effort of indigenizing international HRM practices to host country conditions.

According to literature, there were various determinants associated with standardization and localization of HRM practices in MNCs' subsidiaries. MNCs' subsidiaries operating overseas would localize many of their HRM practices including staffing, training and development, compensation, industrial relations, employee communication, employee participation, health, and safety due to cultural differences in the host countries. Several researchers including Myloni et al. (2004), Edwards and Kuruvilla (2005) and Mellahi et al. (n.d) also found that host country culture such as traditions, norms, and values limited standardization and transfer of HRM practices to subsidiaries. HRM practices at subsidiaries were conducted based on intan ible and tan ible cultural contexts of the host nations for them to

succeed in their global business strategy, gain allegiance, legitimacy and avoid resentment from the local society.

But as cultural factors facilitated local adaptation of HRM practices in the subsidiaries, it has been found that similarities in culture again may influence standardization or transfer of HRM practices from parent to host countries of subsidiaries. As already indicated above, Maharjan and Sekiguchi (2017) in their findings on Japanese HRM standardization in terms of seniority-based promotion and performance-base pay in India was based on cultural similarities characterized by common social norms, long-term orientation, valuing more seniority and high power distance which eased transfer of HRM practices by Japanese subsidiaries in India.

MNCs' subsidiaries which operated in countries which had similar culture with the parent HQs easily standardized HRM practices as cultural similarities between country-of origin and the host countries do not pose barriers to standardization. The findings suggested that MNCs which established their investments in environments with relatively similar culture would have high degree of standardization in most of their HRM practices. For this case, the British MNCs' subsidiaries in Ghana as already found above standardized because Ghana's national culture was similar to some extent with the British culture due to colonial ties, Anglophone and commonwealth culture across these two countries.

Likewise, the institutional factors in terms of labour laws, regulations, cognitive and normative dimensions imposed by institutions determined a degree of MNCs' subsidiaries' standardization or localization of HRM practices. Differences in the labour laws, regulations, rules, ideas, norms, and values which evolved as institutional pressures in the host country limited standardization in favors of local adaptation of HRM practices. Some scholars including Bjrkman et al. (2006) and Sparrow (2009) also found that all matters relating to MNCs behaviour choices about subsidiary location and organisation, technology, capital, labour, strategies, investments, and HR practices were often influenced by the institutional differences. However, Edwards et al. (2009) argued that sometimes the home country institutional perspectives could influence standardization by imposing appropriate practices and demanding institutional change in the host countries.

Other institutional factors which enabled MNCs' subsidiaries to either standardize or localize HRM practices were embedded in varieties of capitalism which consisted of Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs) as found by scholars such as Farndale et al. (2008) above. It was clearly shown by the findings that minimal government role, labour market deregulation and companies' autonomy in LMEs' in some countries such as USA and the UK supported MNCs in extending the parent country HRM practices to host countries' subsidiaries. As opposed to LMEs, CMEs' had their labour markets highly regulated and controlled by the state, legislative institutions and stakeholder involvement which made it difficult for MNCs' subsidiaries to standardize their home country practices in Germany, Denmark, Sweden, Finland, the Netherland, and Austria in Europe. These findings were supported by Kuznetsov and Jacob (2015) who found that organizational practices in subsidiaries differed from those in the parent companies because of varieties of capitalism based on liberal and coordinated market economies.

It was also found that country-of-origin dominance in terms of the economic aspects like the financial position, industrial technological experiences and HRM experiences all limited local adaptation in favor of standardization of HRM practices. Although China was emerging as one among the most economic powers, USA as a dominant economy which sets standards for global best practices in the world economy was still prevalent. This situation made MNCs' subsidiaries diffuse HRM practices from USA due to her technological advancement and modern organizational management practices. Pudelko and Wil-Harzing (2009) found su ortive findin s which showed that the American s stem served as owerful sources of

inspiring the Japanese human resource management possibly because of economic power imbalance between the two countries.

Apart from country-of-origin dominance, the literature further showed that international human resource management approaches adopted by Multinational Companies' headquarters for subsidiaries determined the implementation of standardization and localization across HRM practices. There were four popular approaches to this case, and they included: ethnocentric, geocentric, regiocentric and polycentric approaches. In ethnocentric approach, the MNCs insisted on business and management uniformity between MNCs' headquarters and subsidiaries; which in turn forced the subsidiaries to use similar HRM practices of the parent company (Tiwari,2013; Hannon, 1994).

In geocentric approach to human resource management, MNCs usually thought of global in terms of operations and ignored nationality boundaries in favor of global standardization (Crawshaw et al., 2017). As found by Wilks and Vebeke (2016) and Pudelko and WilHarzing (2008) in support of the secondary data reviewed, MNCs subsidiaries in geocentric approach as an example would employ the host country national (HCN), home country nationals and third country nationals based on the job-person-fit model irrespective of where they originate. Many of their HRM practices were globally integrated with some levels of localization to address local responsiveness (Caligiuri and Stroch, 2006). As already found by Touron (2008) above geocentric approach to HRM was highly interconnected with the current globalization forces where movements of people and investments could be employed and established in any part of the world regardless of geographical boundaries making it easier to employ staff from where they were available around the world. As opposed to geocentrism, regiocentric approach to HRM usually standardized HRM practices at regional level as Giousmpasoglu and Marinakou (2017) wrote:

". .it indicates that each subsidiary should adapt to host location's practices, but for a geographical region rather than a single country and also attempts to achieve consistency across this region, instead of across the world" p. 7

With regiocentric approach, regions such as Africa, Europe, North America, and Middle East could deploy the same staffing, training and development, Human Resource Management Information System (HRMIS) software, career management, compensation management and performance appraisal within regional jurisdiction without beyond extension. Regiocentric approach posed advantages such as allowing career progression, transfer of staff from one country to another within a region, permit international and cross-culture experience at regional level rather than at world level by acting between ethnocentric and geocentric approaches.

As three approaches above influenced standardization of HRM practices among MNCs' subsidiaries in different ways, polycentric approach underscored the fact that it influenced higher localization of HRM practices. Based on this approach MNCs' subsidiaries totally followed the local practices as conducted in local companies of the host nations (Oppong, 2017; Isiaka et al., 2016; Lakshman, 2013). If a MNCs' subsidiary was in Country X, it would adapt HRM practices such as staffing, training and development, compensation, industrial relations to Country Y HRM practices. Polycentric approach as it concentrated on local adaptation of HRM practices, it presented numerous advantages such as increasing representation of local practices in global organization, reduced labour costs, demonstrated trust in local nationals, increased legitimate perception of subsidiaries and reduction on the amount of control exercised by headquarters (Goegele, 2020; Treven, 2001)

There were four popular approaches discussed in this case. They included: ethnocentric, geocentric, regiocentric and polycentric approaches. Discuss with ONE (1) point and example not mentioned in this article, how each of these approaches adopted by MNCs headquarters still will remain key players that will force International Human Resource Managers to standardize or localize HRM practices. (16 Marks)