R o l e o f T r a i n i n g i n Emer g i n g M a r k e t s

How critical is training in emerging markets? Two studies in different sectors in Ethiopia and Jordan
reveal the importance of training. In the first study, researchers surveyed 333 employees of three public
banks in Ethiopia and examined whether the HRM functions have effects on the employees’ job
satisfaction. The study included data on recruitment and selection, training and development as well as
performance appraisal and compensation (discussed later). The results of the study showed that training
and development, performance appraisal, and compensation have some of the strongest effects on
employee satisfaction. However, most importantly, all HRM functions had positive effects on employee
satisfaction.
A second study shifted the focus from employees to the firm-level. Researchers looked at the HRM
practices of all 104 firms in the financial sector (banking, insurance, real estate, brokerage, and others)
in Jordan. Jordan is an important emerging market and plays a critical role in the Middle East. The study
examined whether the typical HRM practices such as recruitment and selection, training, performance
appraisals, and internal career opportunity had any impact on firm performance. Unlike the previous
study, results showed that only training had a positive effect on organizational performance. In fact, the
researchers conducted a survey on perceived financial performance (respondents were asked to rate
their performance relative to their rivals on selected indicators such as profitability, market share, etc.)
and also collected data on actual performance indicators such as return on assets and return on equity.
Results showed that training had a positive effect on both performance measures.

Source: Based on A. W. Ijigu (2015), Emerging Markets Journal, 5(1); T. K. Darwish, S. Singh and G. Wood (2015), Human
Resource Management, 55(2).

T rai n i n g i n C h i n a a n d I n d i a
Multinationals operating in China and India have slowly realized that training is an essential
component of their ability to do well. Why is training so important? Training is important to impart
the necessary skills to develop the employees. However, many multinationals are finding that training
is crucial if they want to be able to attract and retain talent. Consider that the demand for top talent in
China and Hong Kong is extremely high. It is not surprising for employees to receive phone calls from
new employers with offers of double and even triple their current salary. However, companies in China
also find that Chinese employees do not always place emphasis on compensation packages. Chinese
nationals place very high value on training opportunities and those multinationals that provide such
training to their employees are more likely to retain the talent. Such training needs will remain despite
the economic slowdown.
India is also having similar experiences. Both local market multinationals and foreign multinationals
are finding that training can be an important asset to organizational performance. Various practitioners
have called for increased training in industries such as insurance and others. Some have also commented
on the need of training at a national level. For instance, given that micro, small, and medium enterprises
contribute to a significant percentage of India’s GDP, training for micro-entrepreneurs has been
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 suggested. These entrepreneurs often lack basic management, knowledge, and entrepreneurial skills.
Training in these areas would be very beneficial.
Source: Based on D. Nag and N. Das (2015), Journal of Entrepreneurship Education, 18(1); S. Singh (2015), Human Capital,
April.

W o men Expatriates in China

Despite the growing demand for talented expatriates, reports show that only 19 percent of expatriates are women. Experts attribute
this underrepresentation to many factors. For example, only 22 percent of multinationals seem to have systems in place to formally
select individuals for individual assignments. This may therefore mean that biases against women may lead to fewer women being
selected for such jobs. Furthermore, the fact that many women still shoulder the bulk of family duties such as taking care of children,
etc. also implies that women may also be self-selecting themselves out of such jobs.
An additional factor often mentioned is the lack of acceptance of women expatriates in the countries they work in. A recent study
of Chinese women expatriates provides some insights on how devastating the lack of acceptance of locals can be. In that study, the
researchers examined the prejudice of host country nationals against women expatriates and found that such prejudice can result in
poorer performance. Such prejudice can also result in lowering the women expatriates’ self-efficacy. In other words, prejudice
against women expatriates can also result in lower belief among these women that they can succeed in their international
assignments.
Hence multinationals have an ethical obligation to create an environment whereby women expatriates are not only selected but
also have chance of succeeding. Multinationals are advised to develop formal selection and recruitment programs to encourage
women to consider global assignments. Furthermore, host country nationals should be trained to welcome and appreciate women
expatriates. Multinationals may also want to provide more short-term assignments to make it easier for women expatriates to accept
such assignments.
Source: Based on Brookfield Global Relocation Services, 2016 ; S. Jie and J. Fuming (2015), International Journal of Human Resource Management, 26(3).

Per fo r m a n c e A p p r a i s a l i n G h a n a
Performance appraisal plays a critical role in ensuring appropriate human resource management. Performance appraisal enables
the multinational to determine how well the employee is doing to implement appropriate strategies to keep employees performing.
However, despite the best intentions, performance appraisal systems may not work because systems are not implemented correctly.
Furthermore, in some emerging markets, multinationals may avoid performance appraisals to prevent employees from losing face.
A recent study of performance appraisal in the Ghanaian civil service sector provides some insights into the challenges facing
that sector. Despite the introduction of the system in the early 1990s, the study finds that the performance appraisal system has not
resulted in increased employee performance. The authors identify a number of factors that have severely constrained the
performance appraisal system’s effectiveness. These include:

• Lack of expectations from the system—the effectiveness of any performance appraisal system is clear communications of the
intent of the system. Unfortunately, this is not communicated to Ghanaian public sector employees. In fact, the process is used
mostly for promotion rather than ongoing individual development. Employees therefore do not take the process seriously.
• Lack of objectivity—another critical challenge noted by those interviewed suggests that the performance appraisal is not
conducted objectively. Most appraisees get positive reviews and almost everyone expects good ratings. This thus limits
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 the usefulness of the system.
• Lack of incentives in the appraisal system—performance appraisal can have motivating effects on employees if it includes
appropriate incentives. Unfortunately, the performance appraisal system in the Ghanaian civil service has no clear links
between strong performance appraisal and desirable outcomes. If one gets an excellent appraisal, there are no rewards
associated with strong ratings.
• Self-ratings—most performance appraisals were completed by the individual rather than by his/her supervisor. They were
therefore more likely to be lenient in their ratings. This, coupled with the fact that most employees get high ratings, means
that the information garnered from the performance appraisal is severely limited.
• Lack of managerial interest in the process—a performance appraisal system is effective if the supervisors and other raters
have positive attitudes about the system. In Ghana, most supervisors did not put much faith in the process. This also
therefore severely limited the ability of the process to help individuals develop.

Source: Selon Ohemeng et al. (2015), “Performance appraisal and its use for individual and organisational improvement in the civil service of
Ghana: The case of much ado about nothing?” Public Administration and Development.

South Korea and Labor Relations

South Korea has had a long history of labor unrest and strikes. For a long time, the South Korean
government has accepted that strikes are an acceptable ritual of the South Korean business environment.
Workers typically strike during the summer and end up with significant raises.
Furthermore, many companies have routinely paid the salary of union leaders and authorities have been
reluctant to use police force to break strikes. Labor unions in Korea thus have significant political
influence. Past and more recent events show that South Korean workers are willing to continue to strike
in order to get higher wages and better working conditions. However, as trade globalizes and competition
increases, South Korean companies are starting to find that they can no longer afford to pay higher wages.
Frequent disruptions because of strikes have also taken a toll on companies. Consider the case of Hyundai
Motors, which has had some form of labor disturbance every year for a significant period of time. In 2006,
Hyundai Motors faced a month-long strike, resulting in work slowdown and losses amounting to $1.3
billion. Furthermore, in 2012, rotation of night shift workers was abolished while incentives and wages
were increased. These changes were brought about because the bargaining power of labor unions affected
Hyundai’s operating flexibility. Similarly, steelmaker Posco had to cave in to its workers’ demands of
higher wages to end a nine-day strike. For the Korean auto industry, such strikes have resulted in
significant decreases in exports and losses.
Recent research suggests that South Korean multinationals pay a price for dealing with labor unions.
Using data from non-financial firms from the South Korean stock exchange, the study finds that if firms
were involved in more unionized industries, their cost of capital was higher. In other words, because
of strong labor unions, firms are limited in terms of their ability to restructure operations and even close
factories. This lack of operational flexibility means that such firms have to face higher costs of capital.
As such, it is undeniable that South Korean firms face challenges because of the bargaining power of
labor unions. To face the strong unions, many South Korean companies are slowly setting up operations
in countries with lower wages and more favorable labor relations. For instance, Mando, a Korean car-
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parts company, now has a factory in Alabama. Mando also has operations in India, China, and Russia.
Both Posco and Hyundai either have planned or are planning major operations in India. Samsung also
has many plants in China.
Will such movement to other countries lessen the influence of labor unions in South Korea?
Many experts argue that continued strikes and wage increases are putting South Korean multinationals at
a disadvantage. These experts believe that such changes are inevitable and necessary as such labor unrest
continues to present the South Korean economy with a weak spot.
Source: Based on Choi et al. (2015), South Korean Journal of Business Management, 46(4); Sender (2016), Wall Street Journal,
Aug 14.

German management and unions

During the 1970s and 1980s, German manufacturing workers made substantial gains at the bargaining table.
However, these successes are now coming back to haunt both them and their unions. In 1990, the average hourly
manufacturing cost in the United States was $15 while Germany’s was $22. Between 1985 and 1990,
manufacturing cost in US dollars in Germany increased by 130 percent due to the strength of German currency and
a 28 percent increase in labor costs in German currency. By 2003, average hourly manufacturing cost in Germany
was at the
$29.91 level, mainly as a result of the rising euro. This is much higher than in the rest of Western Europe. In Italy
it is $18, in the UK $20, and in Portugal it is a mere $6.23. In the Czech Republic, labor costs in manufacturing are
only $4.71 per hour. Across the Atlantic, US hourly manufacturing costs average $21.97.
In 1999, Volkswagen was prevented from laying off some 30,000 excess German workers by tough unions and
labor laws. Job security and high wages are not the only labor disadvantages for German firms, which provide
shorter labor-hour weeks, six weeks of paid vacation, and a very generous sick leave plan that promotes
absenteeism. As a result, German products were having trouble finding international markets. In response,
employers began looking for ways to turn things around.
In particular, companies began demanding wage concessions and started working to eliminate jobs. IBM’s
German subsidiary, which had almost 25,000 employees, divided itself into five companies, leaving only the
6,000 workers in the production unit working under a union contract. The remainder of the employees were
not covered by the collective agreement, allowing the company to increase their work week to 40 hours. Other
companies began implementing similar strategies, convinced that labor leaders would make concessions in order
to ensure the long-run survival of the business. In particular, managers pointed to the fact that international
competition was threatening German jobs and, unless productivity could be increased, there was a good chance
that more and more local firms would go out of business. These strategies, and a decrease in the exchange rate,
have led to real wage decreases and a restructuring of the labor market over the last few years.
A growing number of companies are now winning concessions from their unions. One is CED
Informationstechnik GmbH, a small firm that assembles personal computers. The firm’s union contract allows it
to cut back the workforce when orders are weak. And since CED focuses on delivery of computers within 24
hours of receiving an order, it has no need to build inventory. Thus, the workforce size is tied directly to the amount
of orders on hand, allowing CED to operate with a basic crew of only 200 people. In turn, another group of
approximately 40 workers has contracts guaranteeing them at least 1,000 hours of work annually, so these people
can count on approximately 20 hours a week on average—although this is all tied to work orders. The remaining
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300 employees at CED work as needed and can find after a month or two of large orders that things dry up and they
have no work for the next couple of months. It is a chance they have to take.
An 8.5 percent and 18.5 percent unemployment rate in West and East Germany, respectively, and the
relocation of operations outside Germany by both domestic and foreign companies have increased the
pressure on unions to accept less favorable contracts. While all of this is a big change from the days when
the unions used to dictate terms, it is one that is accepted by both the workers and the CED’s worker council.
This attitude is reflective of a growing number of unions. In 1999, when Wacker-Chemie workers were in
danger of losing their jobs because the company was losing millions of dollars, the union proactively allowed
the adjustment of wages and an adjustment in workers’ hours. As a result, jobs were saved and Wacker-
Chemie was allowed to get back on its feet. Thanks to compromise on the part of its union, management in the
chemical sector can, upon consultation with workers, decrease wages by up to 10 percent per year, eliminate
Christmas bonuses, and adjust the hours of work. In 2000, workers at Philipp Holzmann, a construction firm
undergoing problems, bargained a wage decrease with the condition that workers will share the company’s future
gains. This new-found flexibility offers the promise of making German industry more competitive than it has
been in a long time.
Indeed, during the economic crisis, Germany export rose 18.5 percent in 2010. In March 2011, German exports
totaled €98.3bn ($142bn; £87bn), almost 16 percent higher than the same month in 2010. This figure was the highest
monthly total since data started to be compiled in 1950. One difference was that Germany has embraced reforms.
At the same, German companies made changes — but without the big bang of deregulation. The country embraced
labor market reforms, but in a measured way. It is now easier to hire and fire. Companies have also taken
advantage of the pool of workers in the east of the country (after the full opening of the German labour market on
May 1, 2011). Volkswagen and BMW, for example, have found it easy to move production to lower cost eastern
sites around Leipzig. Unions now recognize that the quid pro quo for government help in the recession is some
restraint on pay. BMW is hiring another 2,000 workers; BASF, the world’s biggest chemical company, reported
a 40 percent jump in earnings; Siemens, Europe’s biggest engineering company, said profits would nearly double
in 2011. Bosch has post-recession sales at a record of €47bn.
Websites: www.vw.com; www.volkswagen.de; www.ibm.com; www.wacker.de.