Importance of effective management of the culturally diverse social capital in a multinational company for achieving strategic corporate objectives with regard to HRM

Author: Iloka Benneth Chiemelie

Published: 14/12/2013

The international HRM field has rapidly developed over the past decades, and this is in line with the growing importance and scope of the activities of MNCs across the globe (Keating and Thompson, 2004). The outcome of the whole process is that structural solutions are becoming less effective due to the dynamic nature of the global market place and the dispersion of key assets (with special reference to humans) across the glove; making IHRM becoming very important when measuring the success of implementing MNC strategy (Bartlett and Ghoshal, 1989; Sparrow et al., 1994; Taylor et al., 1996; De Cieri and Dowling, 1999).

Global organizations’ network started creating social capital in order to handle the emerging issues with IHRM (Nahapiet and Ghoshal, 1998; Kostova and Roth, 2003; Griffith and Harvey, 2004; Gomez and Sanchez, 2005a,b; Lengnick-Hall and Lengnick-Hall, 2006; Taylor, 2006). The definition offered for social capital is the sum of all the actual and potential resources that are embedded, made available through, and obtained via the network of relationship possessed by an individual or a social network (Nahapiet and Ghoshal, 1998: 243), and it is the actual outcome of developing social networks.

The main purpose of social capital is to increase flow of knowledge and information within the system. As such, considering the fact that differences in culture influences willingness of staffs to share knowledge with special reference to virtual firms, it can easily be seen that effective management of social capital is important in MNCs. The importance is reflected by the understanding that it will create the right environment for effective and efficient knowledge sharing and transfer in the organization (Kogut and Zander, 1992; Nahapiet and Ghoshal, 1998; Storey and Quintas, 2001). The benefit of such will be an increase in productivity as staffs have the needed information on how to go about their daily business.

The concepts of globalisation, localisation, and glocalisation on HRM

Globalization – this implies that the company will develop a common approach to HRM that will be adopted in all of its firms across the globe. The benefit will be standardization which will make transfer of employees from its unit in a given country to another country easier.

Localization – this implies that the firm will adopt different approaches to its HRM in its different markets. The benefit is that these approaches will be tailored to what is obtainable within the market and increases chances of social capital development because trust is higher in this approach

Glocalization – this is the “think global, act global” concept that has been made famous by McDonalds. It implies that the firm has a global standard in its operations, but how it is performed can differ in terms of differences in cultures and markets.

McDonalds is the right company to example how these concepts are applied. From its code of business ethics, it is understood that the company has a global approach to HRM, which involves recruitment the best professionals in the field in order to deliver the same standard across the globe (globalization), but how the recruitment is done can differ with respect to the cultures and markets (either by selection or recruitment) (localization), and the main focus is to always have the brand vision in view when performing any HRM activity (glocalization) (McDonald’s, 2013).

Importance of social capital in all the approaches

Since the main purpose of social capital is to provide the company with necessary information that will be used to understand the needs of its markets (influence productivity possibility) and understand its competitors (design effective marketing strategies) (Kogut and Zander, 1992; Nahapiet and Ghoshal, 1998; Storey and Quintas, 2001), it can easily be concluded that social capital is important in all these paradigm. This because whether the company is globalizing, localizing, or glocalizing it’s HRM, knowledge needs to be shared in order for the staffs to have information on how to go about their daily businesses available. Thus, it is important in the entire paradigm because it will influence productivity positively.

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