Table of Contents
– Importance of culture (Ethnocentric, Polycentric orientation, Regiocentric, Geocentric international practices);
– IKEA Way (France, Benefits of Swedish management);
– Internal hiring (Being non-Swedish, Disadvantages, Advantages);
– Goals of Human Resource Department;
– HRM extension;
- In summary.
People are the key asset of any company and international organizations strive to develop and adopt Human Resource Practices that would allow identification, selection and recruitment of the talented employees from around the globe. IKEA has entered the global market without the special recruitment program being developed, however, unlike Coca Cola which uses the universal approach to filling position, IKEA takes cultural difference into account and adopts the hiring practice that is the most appropriate for the given country. The importance of knowledge about the different culture should not be undervalued because the lack of appropriate people impacts the success of the international business activity. IKEA is aware of the challenges the international stuffing encounters and is open to adopt the practices that suit the domestic markets as well as global activities in general.
Culture is one of the most important factors to be taken into account when selecting candidates for the new positions, especially at the time of entering the new market. Cultural differences shape the way the international human resources management operates. The right people being at the right positions is the prerequisite of success in such activities as cross-national negotiations, sales interaction between different countries, management of employee performance, contracting, staffing and labour relations. As early as in 1991 several global corporations, IBM among them, have recognised the importance of human resource management. According to the survey conducted by Towers Perrin among 3000 senior human resource managers globally, 70 percent thought of International HRM being critical to success of operations. By the year 2001, more than 90 percent of managers agreed with this statement.
IKEA is one of the global companies having the most developing human resource department. The analysis of the recruitment and selection practices within IKEA is based on the four essential strategic approaches: ethnocentric, polycentric orientation, regiocentric, and geocentric international practices. Using the ethnocentric approach the company does not develop the new practices but transfers the HMS system of parent company to the subsidiary. This practice can be beneficial for the company because it increases the satisfaction of key managers who gain the opportunity to be promoted but moved to another country as well as the company itself is in more comfortable position knowing that the experienced personnel is able to meet the foreign challenges.
Polycentric orientation is used when the subsidiary adopts the HRM policies and personnel to the local environment and the host company does not interfere with the local practices or controls the processes. The regiocentric approach is even more responsive to the different cultures; however, the corporate integration is rather slow. The final approach is geocentric and is based on the practice utilizing the best people for key positions in the organization regardless of their nationality or origin. This structure is the most complex because the key people are not always willing to move to another country in order to start the operations. Nevertheless, such internal selection for the key positions has proved to be the best combination of high level of responsiveness and global integration. The regiocentric and geocentric approaches are based on the selection of staff from the third country – neither from the host company nor from the nearby subsidiary.
Before identify what methods is used by IKEA it is worth to define the recruitment first. Thus, the recruitment is searching and obtaining the potential employees in order to select the most appropriate people to fill the employment needs. Selection is the process of gathering information for evaluation of candidates and deciding who should be employed. IKEA is not a unique company but it has managed to develop creative responses to any challenge and turned them from threats to opportunities. Ingvar Kamprad, the founder of the company, always followed his intuition rather than what is written in the books. It is possible to say that the market IKEA occupies has already reached its maturity stage but the key national positions within the company are still filled through inner selection.
When selecting the potential candidates, IKEA looks for good communication skills, open minds, positive work attitude. Having the diploma or Masters degree in business has never been among the prerequisites. Employees, in return, value the pleasant working environment and job enrichment. Such selection criteria became known in the world as “IKEA way” of managing people and organization and it worked at the initial stage and continues working today. At the beginning, when IKEA did not enter the global market, there was no need for global integration and cultural diversification as the mean to remain competitive.
Nevertheless, not everything was ok and worked out for IKEA in selection process. France, for example, was very problematic in terms of hiring – vast majority of personnel was non-French origin and customers have not been very satisfied. IKEA due to its flexibility has recruited more French specialists and now keeps the number of non-French employees to a minimum. In addition, there have been some problems with the unions whose policies were in contradiction with Scandinavian management style. Ingvar Kamprad realised that the “IKEA way” does not always work for all places and local regulations and preferences should be taken into account. “Doing the things the right way” was used to be interpreted as “doing the things the Scandinavian way” while the challenges of France have modified it to include the cultural differences.
Regarding the selection, IKEA HR managers were not ready to understand and meet the demands of candidates with different behavioural patterns, beliefs and values. Much of the research indicates that IKEA fulfils all the requirements and follows the ethnocentric approach in recruitment and selection processes. On the other hand, some of the elements of polycentric and regiocentric approaches are still present. For example, IKEA still closely controls the recruitment process in the regions. The key national positions are filled by Swedes. From one hand, the difficulty IKEA has in developing the international universal approach for recruitment and hiring can be both the indicator of weak HRM system, as well as an opportunity to meet the local demands better. The intensive global expansion of IKEA indicates that the second alternative is more appropriate in relation to IKEA operations.
Therefore, IKEA uses different staffing procedures in different countries and is able to adapt to different policies. In overall, the company changes the HRM philosophy to meet the demands of the local market with limited control from the headquarters. The level of control is still high compared to similar international companies, however, IKEA management wants to be confident that people they hire are able to add value to company.
However, IKEA has several weak points in their selection system. For example, non-Scandinavians find it hard to grow within the company and when there is a higher level position, French or American managers will not be considered for promotion. Among the prerequisites are speaking the language and knowing the culture. Therefore, young specialists know the line when their growth will stop and probably the better system should be introduced. IKEA is the best example of the company where the culture has a major impact on selection, career advancement and promotions. Moreover, it should be done urgently because IKEA has problems with finding high level Scandinavian managers willing to work in a different country for a long time. The current ethnocentric hiring results in limited promotions and leads to the point when people leave and it is hard to replace them.
The selection and recruitment systems of IKEA do not always work. From one side, this system has its disadvantages because the people with specific technical knowledge and talents are not always available in the Scandinavia and operating globally it would more logical to hire local specialists who have better knowledge about the markets. IKEA is often blamed that the people they hire are not local population (example of France) and are unable to make the decisions regarding what is better for the particular country. Thus, the subsidiaries work to satisfy the needs not of the local customers but of the managers based in Sweden. As the result, the long term planning is obsolete and the assignments are limited in time. In addition, the practice promoting the Scandinavian only managers to higher positions leads to frustration and the spread of belief that other nations lack the necessary skills to succeed. Valuable people leave and the new recruitment and selection has to begin. Nevertheless, the turndown rate for IKEA is surprisingly low compared to the other international companies. If IKEA wants to develop further and become the fully integrated global company, selection and recruitment policies should be revised.
However, this practice has it sown benefits as well. For example, hiring from the home country is less expensive and there is no language barrier in business communication. In addition, the Swedish managers get the opportunity to work abroad through transfers. In any case, IKEA will be forced to give up the strong corporate culture to become more responsive to the local demands and less integrated corporately. One of the ways to overcome the limitation of career advancement is to hire individuals regardless of their nationality. Moreover, limiting opportunities for advancement only to Swedish specialists might raise concerns regarding the discriminatory policies. Lack of qualified staff, host government requirements, and ineffective selection and recruitment might decrease the competitiveness of IKEA.
The importance of Human Resource in solving global staffing demands is already understood by international companies, IKEA as well. There are several goals HR department is aimed to solve: attracting applicants, retaining valuable specialists and motivating employees to perform better. The increased attention is being paid to the notion that the effective human management has a positive impact on the company’s overall success and flexibility in adapting to the new foreign markets. The key policies to be developed in IKEA include: effective scanning and analyses of the environment, planning for potential resource needs and staffing the existing human resource needs within the subsidiaries of the company.
The special attention should be paid on scanning the environment, both domestic and foreign: level of competition, workforce changes, general organizational trends, company strategy, values and corporate culture of the top management. Such scanning ensures that the needs are identified and served appropriately. Planning for human resource needs is based on the short term as well as long term requirements and analysing the existing jobs to determine the skills needed to perform more effectively. Planning might include: types of employees needed today and in the nearest future, how to obtain the employees and how to select them. IKEA should develop the wider net in recruiting the potential employees from all countries the company operates in and appropriately select the right candidates after identification regardless of their nationality and knowledge of Swedish language.
The businesses are getting more and more diverse and for this reason companies should strive to recruit and select individuals from different countries. Multicultural teams are able to generate new ideas and work more cooperatively. IKEA has made a mistake in France when the majority of personnel has been recruited from countries other than France – it ahs caused several problems: spoiled relations with unions, bad image in the eyes of potential consumers and lack of local specialist who do possess more knowledge about their inner market unlike the foreign managers. Even the companies operating in the single country should include the considerations of international human resources issues into business strategies. IKEA is already facing the skills shortage in the home country but seems not to encourage recruitment of the migrant and local labour. The competition for international labour is growing and multinational specialists are getting more and more expensive to recruit. For this reason, the sooner IKEA will start identifying the potential candidates the more competitive in will become in the long run.
Before entering the new market, IKEA should investigate the cultural differences first. When IKEA entered China, the management and recruitment strategies had to be changed completely. For example, the Chinese employees value employment for life and are expecting to be promoting within the company rather than moved to another country. They believe that loyalty and informal communication have higher value than profound skills. When Chinese come for interview and meet with the new person it is traditional to offer the small gift, while the Swedish management was not ready to such situations.
Recently, the activities of Human Resource Departments have been extended to include the middle level management into selection, training and performance activities because identifying the right people is the strategic activity. Managers from other departments becoming recruiters and participate in the selection process with the autonomy to make decisions about their subordinates. IKEA, on the contrary, uses highly centralized structure which results in hiring wrong people and complaints of middle management about inappropriate specialists. IKEA top management is not able t know about the staffing needs and job peculiarities to the same degree as middle managers who will be direct supervisors. IKEA either does not trust the middle technical managers or wants to keep the recruitment and selection more centralized.
IKEA produces and sells the furniture; however, in order to be competitive on the foreign markets it is necessary to recruit intellectual specialists who will develop effective selling strategies. Having the excellent communication skills and the desire to contribute to the company’s growth (IKEA’s selection criteria) are not always enough. The selected managers should be able to demonstrate efficient leadership and achievability of the company’s objectives. Recruitment and selection should validly identify and attract people with talents from different cultures and countries, not only Scandinavia. Therefore, the primary objective is to search for efficiency and excellence in people with emphasis being made on goals rather than on means.
In summary, any international company who wants to remain competitive on the global market should be able to adapt their recruitment and selection processes to the local markets, to add nuances and broaden the staff diversity on all levels. Even the business strategy should be developed in accordance with the Human Resource Departments taking into account the employee satisfaction, their effectiveness and achievability of staffing needs. The strategic selection of key managers at IKEA is its weakness rather then strength and the new strategy should be adopted. Staffing procedures and their implementation at international companies are different but they should take into account the overall strategy of the company as well as the needs and opportunities of the local markets. As the case with IKEA in France has showed, following the cultural principles is not always beneficial for the image and effectiveness of the company.
In conclusion, the global strategy of IKEA is influenced by the cultural differences of the countries the company expands its operations to. There is the direct link between Human Resource Management and global strategy, while both elements remain the weak side of IKEA and are at the infant stage of development despite of the significant age of the company. IKEA’s recruitment and selection procedures conducted worldwide should be targeted at attracting global talents, become more adaptive and flexible, even though the selection practices are much impacted by the foreign laws and cultural differences. Over-emphasises the talents of Scandinavian managers IKEA risks of losing its competitive advantage and should start building the international team in order to overcome this barrier. Believing that the parent company is always right is the wrong strategy to adopt and will be replaced to become more responsive to the local demands.
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