Executive Summary This report provides an analysis and evaluation of the human resource

management. To understanding and creating solutions that may be used to solve the existing problems
to improve the human resource function that allocated to the headquarters and the host country and
how do Spanish MNC need to consider in order to establish a subsidiary in Malaysia.. Method of analysis
to determine the IHRM functions includes recruitment & staffing, training, and compensation. Also other
analysis about factors affecting HRM in term of cultural and contextual issues. All of the results can be
found in the report. The objective of this report is to study about the difference between domestic
human resource management and international HRM in general. Do research on contextual and cultural
explanations for varying manifestations of HRM across national boundaries. The reports finds the
prospects of the advantages of localised functions HRM in its current standings for the headquarter and
host country.

1 Table of Contents Executive

Summary.................................................................................................................1 1.0 Human Resource
Management....................................................................................3 1.1 Domestic Human Resource
Management...................................................................3 1.2 International Human Resource
Management.............................................................3 1.3 The Spain Human Resource
Management..................................................................3 1.4 The Malaysian Human Resource
Management..........................................................3 2.0 Factors Affecting HRM of the
MNC...........................................................................4 2.1 Cultural
Perspectives..................................................................................................4 2.2 Contextual Issues and
Legal Requirements................................................................4 3.0 Function
Division..........................................................................................................5 3.1 IHRM
Functions..........................................................................................................5 3.1.1 Recruitment and
Staffing.....................................................................................5 3.1.2
Training................................................................................................................5 3.1.3
Compensation.......................................................................................................5 3.2 Functions Allocated
to Headquarters.........................................................................6 3.2.1 Recruitment and
Staffing.....................................................................................6 3.2.2
Training................................................................................................................6 3.2.3
Compensation.......................................................................................................7 3.3 Functions Allocated
to Host Country..........................................................................7 3.3.1 Recruitment &
Staffing........................................................................................7 3.3.2
Training................................................................................................................8 3.3.3
Compensation.......................................................................................................8 3.4 Advantages of
Localised Functions............................................................................8
Conclusion.................................................................................................................................9
References...............................................................................................................................10 2 1.0
Human Resource Management Human Resource Management (HRM) is the function within an
organization that focuses on the recruitment of, management of, and providing direction and guidance
for the people who work in an organization.

1.1 Domestic Human Resource Management Domestic HRM is the process of procuring, allocating and
effectively utilising the human resources in local countries. domestic HRM counterpart works within the
set, local, and national borders.

1.2 International Human Resource Management IHRM can be defined as set of activities aimed
managing organisational human resources at international level to achieve organisational and achieve
competitive advantage over at national and international level. IHRMs work internationally or beyond
national borders 1.3 The Spain Human Resource Management Job design in Spain appears to be
adopting few new forms. A study of 965 large manufacturing firms showed that Spanish plant workers
have jobs that are monotonous, routine, and nontechnical, and that workers have very little discretion in
their jobs: 92 percent being closely supervised and only 7 percent having a high amount of autonomy
(GarcíaOlaverri & Huerta-Arribas, 1999).

1.4 The Malaysian Human Resource Management A study by Chim and Maniam (as cited in Chew, 2005)
summarised that the basic structure of Malaysia HRM practices are replicas of British HRM practices
introduced during the colonial days, influenced by the diverse cultures of Malaysia’s multi-ethnic society
on various management practices and the increase of Malaysian companies replicating the modern
Western HRM style while maintaining the general values shared by most Malaysian. A study by Hirano
(as cited in Chew, 2005) supports the above and categorised Malaysian HRM practices into two
categories which is the British-oriented values and ethnic-oriented values.

3 2.0 Factors Affecting HRM of the MNC 2.1 Cultural Perspectives Hofstede (1980) further commented
that since countries differ in their values, firms from countries with certain culture values are able to
adapt their HRM practices to local conditions compared with certain countries which do not share the
same culture values. According to GLOBE, a recent study of cultures around the world, the Spanish
culture is characterized by high power distance and high family collectivism, on one hand, and low
uncertainty avoidance, future orientation, and institutional collectivism, on the other (Correia Jesuino,
2002).2 Thus, Spaniards tend to accept that institutional and organizational power is unevenly
distributed, and they are authority conscious. They are collectivist when it comes to family, expressing
pride and interdependence in their families, but are much less loyal and cohesive when it comes to
institutional practices at the societal level. on the other hand considered the export of Spanish
management practices is an issue of ‘fit’ into the socialcultural environment of the host country.

2.2 Contextual Issues and Legal Requirements Schuler et al. (1993) commented that firms need to obey
to the local environment and regulations which at the end may influence the HRM practices of MNCs
operating at the host country. For example, working hours and unionisation recognitions are often
related to local practices as they are controlled by local regulations (Rosenzweig and Nohria, 1994) and
national labour laws (Brewster, 1995). In the Malaysian context, union can generally be classified into
the following two categories: national union and in-house union (Legal Research Board of Malaysia,
1989). Union formation, whether it is national or in-house is legally permitted by the Government of
Malaysia. The workers have right to form or associate with unions which is provided for under the
Malaysian Industrial Relations Act 1967 (Legal Research Board, 1988) and the Employment Act 1955
(Legal Research Board, 1991) except for the electronic industry. 4

3.0 Function Division 3.1 IHRM Functions

3.1.1 Recruitment and Staffing The success of recruiters and employment specialists generally is
measured by the number of positions they fill and the time it takes to fill those positions. Recruiters who
work in-house -- as opposed to companies that provide recruiting and staffing services -- play a key role
in developing the employer's workforce. They advertise job postings, source candidates, screen
applicants, conduct preliminary interviews and coordinate hiring efforts with managers responsible for
making the final selection of candidates.

3.1.2 Training Employers must provide employees with the tools necessary for their success which, in
many cases, means giving new employees extensive orientation training to help them transition into a
new organizational culture. Many HR departments also provide leadership training and professional
development. Leadership training may be required of newly hired and promoted supervisors and
managers on topics such as performance management and how to handle employee relations matters at
the department level. Professional development opportunities are for employees looking for
promotional opportunities or employees who want to achieve personal goals such as finishing a college
degree. Programs such as tuition assistance and tuition reimbursement programs often are within the
purview of the HR training and development area.

3.1.3 Compensation The compensation and benefits functions of HR often can be handled by one HR
specialist with dual expertise. On the compensation side, the HR functions include setting compensation
structures and evaluating competitive pay practices. A comp and benefits specialist also may negotiate
group health coverage rates with insurers and coordinate activities with the retirement savings fund
administrator. Payroll can be a component of the compensation and benefits section of HR; however, in
many cases, employers outsource such administrative functions as payroll. 5 3.2 Functions Allocated to
Headquarters

3.2.1 Recruitment and Staffing Recruitment methods in Spain are informal. Favored methods include
personal contacts, unsolicited applications, and internal advertising (Baruel, 1996; FlorezSaborido,
GonzalezRendon, & Alcaide-Castro, 1992). More than half of the companies, all large in size, surveyed by
Rodríguez (1991) reported that they did not have a formal recruitment strategy. However, there does
appear to be an increase in the use of press advertising, headhunters, and temporary work agencies
(FlorezSaborido et al., 1992). Segalla and his colleagues (Segalla, Sauquet, & Turati, 2001) asked nearly
300 managers working in financial institutions in England, France, Germany, Italy, and Spain their
recruitment preferences in a given situation. They found that Spanish managers were more likely to
adopt internal promotion policies and tended to prefer local candidates over foreigners (Segalla et al.,
2001). They also found that Spanish recruiters focused on technical skills rather than on formal training.

3.2.2 Training At an institutional level, it is broadly recognized that training is vital for coping with the
continuous changes in the environment. Social agents in Spain are making a great effort to design policy
that promotes, coordinates, and instigates training initiatives. Although most Spanish companies
consider training to be an important HRM issue, and a high degree of time is allocated to training, the
expenditure on training in Spain is very low (Florez-Saborido et al., 1992; Holden & Livian, 1992). Spanish
companies spend less than 2 percent of their payroll on training, which is lower than many other
European countries (Filella, 1992). A study of 130 industrial companies with more than 500 employees
showed that most training in Spain is carried out in an informal fashion and tends to be reactive,
focusing on short-term results (Valle et al., 2001). A recent study reported that only about a fourth of
the companies they surveyed had a written policy for management development, versus 40 percent that
reported having an unwritten policy, and 34 percent having no management development policy at all
(Dolan et al., 2003). 6

3.2.3 Compensation Spanish organizations are showing some progress toward the use of “global”
compensation practices. Although evidence suggests that Spanish organizations are still traditional as far
as compensation goes, usually having rigid salary hierarchies, limited transparency, and a lack of long-
term orientation (Valle et al., 2001), other researchers have found certain trends toward modernization
with the implementation of practices such as pay-for-productivity or individual performance. A recent
study reported that around 56 percent of firms surveyed determined pay at the individual level for
professional and technical workers (Dolan et al., 2003). They also found that 86 out of 124 firms used
merit and performance-related pay for managers. A large study of manufacturing plants reported that
more than half of them based pay on the number of units produced. Fringe benefits are also gaining in
popularity. One study suggests that there has been a marked increase in fringe benefits because of their
financial advantages and the need to attract and retain highly qualified staff (FlorezSaborido et al.,
1992). Despite these trends, variable pay is relatively low in Spain when compared with other European
countries. Certain resistance to variable compensation still exists in Spain—for instance, most blue-collar
workers oppose a rise in the variable component of their pay (Florez-Saborido et al., 1992). However,
while pay-for-performance appears to be increasing at the individual level, there is not a similar trend as
far as group- and organization-level incentives go. The tendency of Spanish firms not to use
organizational incentives may be influenced by the fact that the Spanish government has not adopted a
policy to encourage the implementation of financial participation schemes (Bayo-Moriones & Huerta-
Arribas, 2002).

3.3 Functions Allocated to Host Country

3.3.1 Recruitment & Staffing On the hiring process, recruitment in Malaysia is done on an ad-hoc basis
or whenever the needs arise. Jain (1990) indicated there is a mix of hiring process in Malaysia, with
practices depending on the type of position to be filled. These findings again are consistent with
research conducted by Chong and Jain (1987) and Putra (1993) which they indicated of no particular set
of recruitment pattern for either the entry level of middle levels position for countries like Singapore
and Malaysia. It is 7 also common for most of the firms in Malaysia to hire experienced employees from
other companies (Chong and Jain, 1987). 3.3.2 Training Abdullah (1995) stated that most training in
Malaysia firms are unstructured, short in duration, ad hoc and mainly are given emphasis on production
workers. He further observed that in some small local firms, budget is not available for training
Malaysian local firms reluctant to train employees beyond the necessary skills, as additional skills is
often associated with higher pay and is a treat for staff retention. The situation was so alarming that the
government had to interfere by coming up with a Double-deduction Incentive Scheme in 1988 and the
Skill Development Fund in 1993 to encourage training (Abdullah, 1995). Most firms in Malaysia are
heavily oriented towards the on-the-job training (Jain, 1990; Koike and Inoki, 1990). On-thejob training is
advantages for most Malaysian employee as it is cheap, effective and relevant to the requirement of the
firm (Abdullah, 1995). Mirza and Juhary (1995) revealed that lectures, case studies, seminars and role
playing are heavily used in training for most of the Malaysian white-collar personnel.

3.3.3 Compensation The Social Security Organisation (SOCSO) operates as a social insurance programme
managed by the government of Malaysia to provide financial assistance to employees and their families
in the event of accidents, resulting in death, disablement, or affliction with occupational diseases.
Employees with a monthly income of RM 3000 and below, along with their employers are required to
make contributions.

3.4 Advantages of Localised Functions The Spanish subsidiary’s welfare and remuneration benefits for
both the blue and white-collar employees resemble very much like the local practices. For example, the
benefits such as yearly local trip, bonus (once a year), insurance, medical coverage, meal allowances,
dormitories, shuttle bus, uniform and food allowances during overtime are common for most of the
manufacturing firms in Malaysia. Similarly, the benefits are also not extended to family members, unlike
in Spain. On the after work drinking practices, findings revealed that it was not in favour by the
management. Likewise, the practice of spending time with employee on every matter which inclusive of
personal life which is a common practice in Spain was also not applied here. 8 Conclusion The operation
of MNCs from developed countries to developing countries is fundamentally problematical, this
difficulty being potentially more prominent when MNCs from developing countries operate in advance
of market economies (Thite, 2013). Caligiuri and Stroh (1995) explained that the management practices
of the foreign subsidiaries could resemble the parent home country (ethnocentric), conform to local
practices/the subsidiaries home country (polycentric) or the geocentric strategy, of which is a balance
between global integration and local adaptation. Interesting findings, however, revealed that only part
of the home country’s practices has been exported to overseas Spanish subsidiaries (Dedoussis, 1995).
There is evidence that Spain is slowly adopting global HRM practices (Filella, 1992; Valle et al., 2001).
However, in most cases, the adoption of these practices has been on a pick-andchoose basis. According
to Brewster (1995) and Jackson and Schuler (1995), local contextual factors such as labour market
conditions, unionisation, legal and sociopoliticalenvironment and home-country culture influence the
transfer of human resource practices to the overseas firms. Furthermore, it is widely acknowledged that
national culture does influence the HRM practices (Hofstede, 1983). Lastly, staffing practices has not
been adopted by the subsidiary due to local environment conditions and regulations. On the pattern of
recruitment, although it resembles the practices in Spain, however, it has not been faithfully adopted in
Malaysia.

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