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Question 1 Evaluate Coca Cola’s Human Resource policies in…
Question 1
Evaluate Coca Cola’s Human Resource policies in relation to the three international staffing policy options available to multinationals. Elaborate your anwers
Coca Cola case study:
The Coca-Cola Company is one of the most successful multinational enterprises. With operations in close to 200 countries and nearly 80 percent of its operating income derived from businesses outside the United States, Coca-Cola is typically perceived as the quintessential global corporation. Coca-Cola, however, likes to think of itself as a ‘multi-local’ company that just happens to be headquartered in Atlanta but could be headquartered anywhere and that presents the Coca-Cola brand with a ‘local face’ in every country where it does business. The philosophy is best summarised by the phrase “think globally, act locally,” which captures the essence of Coca-Cola’s cross-border management mentality. Coca-Cola grants national businesses the freedom to conduct operations in a manner appropriate to the market. At the same time, the company tries to establish a common mind-set that all its employees share.
Coca-Cola manages its global operations through 25 operating divisions that are organised under six regional groups: North America, the European Union, the Pacific Region, the East Europe/Middle East Group, Africa and Latin America. The corporate human resource management function is charged with providing the glue that binds these various divisions and groups into the Coca-Cola family. The corporate HRM function achieves this in two main ways: (1) by propagating a common human resources philosophy within the company; and (2) by developing a group of internationally minded mid-level executives for future senior management responsibility.
The corporate HRM group sees its mission as one of developing and providing the underlying philosophy around which local businesses can develop their own human resource practices. For example, rather than have a standard salary policy for all its national operations, Coca-Cola has a common salary philosophy – the total compensation package should be competitive with the best companies in the local market. Twice a year the corporate HRM group also conducts a two-week HRM orientation session for the human resource staff from each of its 25 operating divisions. These sessions give an overview of the company’s HRM philosophy and talk about how local businesses can translate that philosophy into human resource policies. Coca-Cola has found that information sharing is one of the great benefits of bringing HRM professionals together. For example, tools that have been developed in Brazil to deal with a specific HRM problem might also be useful in Australia. The sessions provide a medium through which HRM professionals can communicate and learn from each other, which facilitates the rapid transfer of innovative and valuable HRM tools from region to region.
As much as possible, Coca-Cola tries to staff its operations with local personnel. To quote one senior executive: “We strive to have a limited number of international people in the field because generally local people are better equipped to do business at their home locations.” However, expatriates are needed in the system for two main reasons. One is to fill a need for a specific set of skills that might not exist at a particular location. For example, when Coca-Cola started operations in Eastern Europe, it had to bring in an expatriate from Chicago, who was of Polish descent, to fill the position of finance manager. The second reason for using an expatriate is to improve the employee’s own skill base. Coca-Cola believes that because it is a global company, senior managers should have had international exposure.
The corporate HRM group has about 500 high-level managers involved in its ‘global service programme.’ Coca-Cola characterises these managers as people who have knowledge of their particular field, plus knowledge of the company, and who can do two things in an international location – add value by the expertise they bring to each assignment and enhance their contribution to the company by having international experience. Of the 500 participants in the programme, about 200 move each year. To ease the costs of transfer for these employees, Coca-Cola gives those in its global service programme a US-based compensation package. They are paid according to US benchmarks, as opposed to the benchmark prevailing in the country in which they are located. Thus, an Indian manager in this programme who is working in Great Britain will be paid according to US salary benchmarks – and not those prevailing in either India or Britain. An ultimate goal of this programme is to build a cadre of internationally minded executives from which the future senior managers of Coca-Cola will be drawn.
