How Coca Cola Select & Compensate Expatriates
Abstract
International human resource management has become one of the most controversial issues in the world today, and as a result of the complexity of international management it is essential to have the right person at the right position. The aim of this paper is to identify how Coca Cola Select & Compensate its expatriates. Start from brief idea about the Coca Cola background, selection process, factors influencing the expatriates selection, role of expatriates, Training and development, and compensation. When looking at the selection process it was found that Coca Cola considers the technical ability and previous performance are selection central.This paper also discusses the previous and recent approaches Coca Cola for international compensation.
Introduction
Country boundaries no longer exist when it comes to international trade. In such an active Global competition, international experience has become a requirement rather than an option and forced many business to recognize that they must consider management from a different perspective.
IHRM is an important component of a firm’s global strategy and is often recognized as an influencing factor of success or failure of international business. Ensuring high-quality management is critical due to the complexity of managing international operations. Furthermore, in the competitive global economy, human resources are not as easy to duplicate as factors of production, and can therefore provide the source of competitive advantage.
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When looking at global assignments any HR would follow the basic five principles for people management: recruit/select; train; appraise; reward and; develop. These dimensions build upon one another and develop into a management process.
Company background
The Coca Cola Company is the world’s largest beverage company. It is the no.1 brand according to fortune 2009 survey. The company operates a franchised distribution system dating from 1889. The Coca Cola Company is headquartered in Atlanta, Georgia.
Its major markets consist of Britain, Europe, Middle East, Asia, Russia and North America. It has activities in 200 countries, about 3000 branches, and 55,000 employees across the world. Over 200 expatriates are assigned for international positions every year, as region managers. Most of the expatriates are sent from USA and Britain, and most often sent to the Middle East, Asia and Russia.
Expatriates Selection process
Expatriate selection process starts when they need to fill abroad position due to lack of local talent and/or management experience working in a multinational. Selection process is not defined with rules at Coca Cola. Every international assignment requires different criteria. Usually, familiarity within the exact area of international assignments is recommended but not for all times a prerequisite.
Moreover, Coca Cola has lately changed their way when selecting expatriates. It used to concern of sending executives as expatriates, while at the present it has the concern of sending younger employees of higher potential.
Coca Cola usually considered the recommendation and suggestions of candidate expatriates. Significant sides of the candidate improve his chance to be selected, and can also raise the issues for instance, losing some employee within the department or whether it can give advantage in the future. Coca Cola does not focus on developing repatriation training programs for the expatriates. However, the expatriates informed that at the end of assignment they will return home and they will have their job back. This gives expatriates secure feeling once they leave the international assignment
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Factors influencing the Expatriates selection
Coca Cola looks at several vital criteria when selecting candidates for international assignments. Expatriates should be aware of Coca Cola’s values, additionally the ability to deliver their knowledge and expertise, and gather further knowledge as they are overseas. Expatriates are employee that Coca Cola has faith in and believe them to be exceptional performers within the company. In general, selected expatriates are employees who hit the expectations when dealing with everyday difficulties and critical jobs. Besides that, they are motivated employees with a capability to solve problems from a strategic standpoint.
Expatriates are required to have certain abilities such as, technical and managerial skills, in order to complete the requested task when selected for international assignments. The technical ability is considered a significant factor when selecting expatriate candidates. The technical skill of expatriates is a vital criterion to be taken into consideration and in real assignment, to be considered significant. The evaluation of the expatriate candidate’s technical ability is based on previous job performance. On the other hand, past performance in some cases does not play major role when they try to work out particular difficulties in a new host country, new culture and environment. At Coca Cola the technical ability has significant weight when decide who to select for international assignment. However, expatriates with extensive international knowledge are sent to achieve more specific knowledge and expertise, whereas expatriates with general expertise are sent to achieve more international knowledge.
Cross-cultural suitability is an important attribute and has to be considered when assessing expatriates candidates as they will work in different or unfamiliar environments. The cross-cultural suitability of expatriate candidates is evaluated at Coca Cola but not measured as a significant selection factor. The cultural understanding and the importance for expatriates to value and respect diverse characteristic and features of other cultures. Moreover, they emphasize the importance to tolerate the differences in race, beliefs and cultures, including the norms and values. It is hard to assess the cultural suitability because it is difficult to determine exactly what aspects should be comprised.
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Family has strong influence on the expatriate’s success in international assignment. However a few global organizations focus on the family aspect and not to consider family as disadvantage aspect when selecting expatriates’ candidates. As a result of incapability to integrate into a new culture, families can experience feeling of loneliness. Furthermore, Coca Cola does not consider that as disadvantage when assessing expatriate candidates. Once the decision is made, then they consider the family for any further training or advice. The partner’s job, kids’ disruption in education and the looking after old parents are issues of family pressure.
Country and cultural requirements is considered when selecting expatriates for international assignments at Coca Cola. First of all, the host government may stop expatriate for many reasons, such as visa issues and no available candidates can fill the position from the host country, and legislations. Moreover, some international assignments at rural area or war-zone mean hard living conditions. So if the expatriate candidate can’t handle it then they can’t be selected.
Language skills of expatriates are sought as an additional factor when selecting expatriate. Expatriates who have language skills will be more effective, gain the respect and trust of their colleagues, and more easily establish partnerships and solid working relationships with local nationals that will, in turn, generate good will for the organization and positively impact the bottom line.
Character and skills of the expatriate are another important aspect to be considered. Coca Cola states that some of the preferred attributes are personal liability, enthusiasm to build up his experience and develop the organization, ability to be criticized, and be self-confident. The interpersonal talents of expatriate are not a spoken criterion, but if the expatriate do not have the ability to work with people, then they will not be chosen.
Finally, Coca Cola highlighted the individual’s motivation. The people who select expatriates review their explanations to select them for international assignment, and as staffs apply for international assignment, take into consideration that they are to some extent motivated.
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Expatriates Roles
There are many reasons for transferring employees for international assignments as expatriates linked to the intended purpose of the expatriate. Roles of expatriates are listed as the following
First of all, Coca Cola uses expatriates as agents of direct control. The expatriate’s role is to make sure subsidiary commitment through direct administration and management. They also manage personal and cultural matters in the host country.
Knowledge can be shared cross international assignments. As a result, Coca Cola uses oversea agents of socialization, which is likely to help the integration of corporate values and beliefs. It is a means of informal and non-direct control. Expatriates are labeled as “bumblebees” since they help in the transfer of a common culture of companies. This formulates and creates more decentralized organization.
In addition, Coca Cola can use expatriates as agents to build and enhance the network between the host and home branches. Internationally they strengthen the links between individuals is significant ways of implementation of informal control. It is also a way to transfer ideas and efficiency.
One of the expatriate roles is to increase the organization borders . Expatriates would have an exceptional ability to gather information on the market, and enhance the representation of the company in the host country.
There is more than one reason of using expatriates for international assignments. First, if there are no appropriate managers available at the host country for a specific project or function, then the employment of expatriates could be used to guarantee the desired value of work. In addition, using of expatriates gives the chance for managerial development. They will build and developed their competences throughout the international assignment and motivate the organization for using expatriates and help achieve the organizational development.
international training & Development
International training and development is another aspect of IHRM. Training intends to develop employee skills and behavior, whereas the development objective is to increase abilities in relation to some potential position. This is generally a managerial skills.
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Expatriates need a set of context-specific abilities like industry-specific knowledge and a central part of certain skills. For example cultural sensitivity, the ability to handle responsibility and develop subordinates. These skills are measured as vital international competencies at Coca Cola and all can be developed through effective international training and management development.
Coca Cola focuses on human resource development by concentrating on the education and training of its employees as an important part of their development. Coca Cola allegedly spent millions every year for training its employees. On the other hand, Coca Cola undertook a cost cutting drive, and started looking for methods to train its staff effectively at lower costs. After significant investigation and researches, Coca Cola in 2007 launched Coca Cola University (CCU).
This is a global university for all learning and utilizes capability-building activities across the company. E-Learning was used to train Coca Cola newly recruited managers and expatriates.
Pre-departure training for expatriates:
Once expatriates are selected for an international assignment, they will receive language training and an orientation to the host country culture. Family will be included in orientation training sessions. These training sessions will provide expatriates and their families with information related to housing, schools, shopping, and health care facilities in the host country. During the training, expatriates will have full discussion with the organization about how the international assignment would fit into their profession strategy and what future position they would have when returning to home country.
On-site training for expatriates:
At the host country the expatriate will receive additional onsite training to familiarize the expatriate with the local working procedures and work environment. These formal programs will deliver orientation about the host country customs and cultures.
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Slide1: International strategy (tiêu đề của slide nhé c) The enterprise has core competencies => the competitors in the host country does not have or difficult to develop, catch up or imitate Being not under pressure to localize products and to reduce production costs Company’s head office played a central role Slide 2: International strategy of Coca Cola (1900 to 1950) 1899-1909: added ...
Repatriation:
Expatriates and their family will adapt to the host country norms and culture, especially in long-term assignment. Usually they will experience high level of stress and cultural shock when returning to the home country as a result of changes that have taken place since their leaving. Expatriates have to assume what ability they want to build up and the sort of jobs that might be offered in the home country with those new skills. As the expatriate abroad, many changes at the home country company could happen such as colleagues or managers may leave. Therefore expatriates should maintain contact with the home country company. Otherwise, expatriates will have re-entry shock because of new employees, a new passion, and a new culture that may have changes.
Performance Management
Coca Cola manages its performance management system through 4 Stages during an Annual Business Cycle and has multiple objectives. Some of these include objectives leading to significant accomplishments, breakthrough objectives, and business plan achievement objectives. Furthermore, Coca Cola has an extensive training and development programs for the employees to focus on the day-to-day needs of the employees and to adapt to new culture difficulties and differences.
Competency framework encompasses thought leadership, people leadership and results leadership that Coca Cola uses to manage and assess its workforce. A point ranking scale is used to define a system in an organized systematic form to avoid ambiguity and bias when conducting performance appraisal and rating to compensate employees based on performance and competencies as identified in the appraisal process.
When expatriates agree to have the job for international assignment, they will look forward to having financial benefits from doing that assignment. Therefore the organization should take compensation packages into its consideration because it has major affects at the expatriate when making decisions. Expatriates successes will have big advantage for the organization especially in this competitive market.
Firstly, the Going Rate Approach
Going Rate approach is straightforward and easy to understand which makes the compensation package parallel to the host country nationals. In this approach the base salary is linked to the salary structure of the home country. It is based on local market rates. This compensation approach has some disadvantage especially when expatriates return to the home country. When the going rate is different in the host country, there might be some pay cut.
Secondly, the Balance Sheet Approach
Balance sheet approach delivers a compensation package to balance an expatriate manager’s purchasing power between host country and home country. In other words, since expatriates are assigned to an international position by using the balance sheet approach, they will not be affected by spending power. The negative side of the balance sheet can be its cost and unfairness between expatriate managers and local national managers. It can also have effect on the expatriates who come from different countries.
Components Coca Cola takes into consideration when it comes to an International Compensation:
Base Salary
Extra pay the expatriate receives for working outside his or her country of origin which encourage to accept foreign postings
Allowances
– Housing allowances
– Cost-of-living allowances
– Education allowances
– Relocation allowances,
– Parent country wages everywhere
– Regional markets
Tax differentials
Coca Cola pays the expatriate’s income tax in the host country when a host country has a reciprocal tax treaty with the expatriate’s home country.
Benefits
Coca Cola ensure that their expatriates receive the same level of medical and pension benefits abroad that they received at home
The new host country environment and difficulty to function efficiently are core problems for the majority of expatriates. Pre-departure training is essential for improving the expatriates’ cultural knowledge and cross-culture adjustment. On the other hand, many cross-culture training is not sufficient since it’s hard to assess the efficiency of such training.
Healthcare is another significant aspect when it comes to a compensation package. Many international organizations would have different health care insurance companies between home and host country.
Coca Cola’s rewarding system for employee is excellent to retain, motivate and influence employees towards organizational goals with their best potential utilization. Coca Cola uses self-assessment tools for staff to assess themselves on top accomplishments in the previous year.
Analysis
Operating as agents of direct control is usually not the role of expatriates at Coca Cola. Expatriates are often used to control and monitor local operations. Another role of expatriates is agents of socialization, where they are likely to share business values and beliefs so as to build some informal control.
