2011 saw the Takeda Pharmaceutical Co. Ltd, a Japanese firm, acquire Nycomed for 9 million Euros. Nycomed already have an established operating base in Europe, and Takeda believes that the acquisition of Nycomed will allow them to build upon past successes and transform themselves into a global organisation.A recent (2007) survey by Accenture suggests that cross-border mergers and acquisitions are becoming a central strategy for international growth, but that such trans-national deals mix sizeable opportunities with a number of risks (Accenture 2007).Many such deals (up to 70%) result in failure, primarily as a result of culture clashes and communication problems. Cultural expectations and mis-managed communication can lead to unequal expectations as well as a lack of understanding of “behaviours, practices, processes structures and reward schemes” (Culture and Communications Skills Consultancy 2011, p. 2). These issues might be summarised as ‘people issues’, but they are also issues which directly impact the future performance of the organisation (Ferris et al 1995). There is consequently a need for a clear strategy on the part of Takeda’s International Human Resources Management (IHRM) team. As well as managing communication and culture clashes, IHRM in Takeda need to focus upon recruitment and retention, while bearing in mind the organisational commitment to employee empowerment and diversity. The following looks at the obstacles facing IHRM in Takeda, and assesses the likelihood of Mr Takeda being able to see his vision for the company’s future achieved.
2. Challenges for IHRM
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Takeda’s operating experience has so far been confined to Japan. While they have been successful there, the Japanese environment, ways of doing business and culture is very different from that found in Europe. There are many challenges faced by HRM in integrating international workforces and recruiting new staff. It has been claimed that HRM is even more important for an organisations success internationally than it is at home. The need to understand the difficulties faced by HRM in contributing to international success has, in addition, been recognised only since the 90’s, and there is correspondingly less theoretical guidance than in other areas of HRM (Kirkbride 1994). There are a number of issues which HRM need to manage. Armstrong suggests these include the impact of globalisation, environmental and cultural differences, whether practices in different countries should converge or diverge, and recruitment, retention and training of employees (Armstrong 2010).These will now be investigated in turn.
Globalisation challenges include the increase in logistical organisation, needing increased flexibility, responsiveness, and risk management (Armstrong 2010). One key challenge for IHRM in Takeda is having flexible enough systems to respond to this change of pace and demand. Deans and Karwan (1994) suggest that this means a turn away from scientific principles of management with over-defined rules and regulations and strict hierarchies to embrace a more participatory HRM style in which employee feedback is encouraged, and in which “central importance” is given to employees’ capacities to innovate and learn, to participate in decision making and problem solving, and to work effectively with a diversity of external and internal stakeholders” (Deans and Karwan 1994, p. 411).Fortunately, Takeda are already committed to employee empowerment (Takeda.com [online] 2011). Empowerment covers a psychological aspect: individuals working for the organisation feel that their role has meaning, that they are involved at all levels with the organisation, that their views are heard, and that they have control. It also includes practical organisational structures set up to ensure that employees have a way to make their opinions clear, and that institutional practices encourage empowerment (Potterfield 1999).That Takeda are committed to empowerment suggests they already have in place structures for ensuring empowerment and participation, however there might be a need for IHRM to audit existing provisions to ensure they are adequate for new global challenges.
2.2 Environmental Differences
One of the biggest challenged faced by IHRM is that of managing the environmental and cultural differences between countries in which the organisation operates. This is not least because the heading covers a number of diverse areas (Armstrong 2010). Environmental differences are usefully defined within a PESTEL framework, that is, covering political, economic, social, technical, environmental and legislative constraints on organisational and employee behaviour (Yates and Wakefield 2003). The political environment includes all the ways in which government behaviour affects business, and Takeda will need to research the different regulations and guidelines within the EU as a whole and the individual countries in which they are likely to do business. Economic factors which impact upon IHRM include interest rates, exchange rates and the current employment situation in the new country. Social aspects need particularly careful analysis by IHRM in Takeda, as each country has a different demographic, and different lifestyle factors are prominent. For example, as it becomes increasingly acceptable in parts of Europe for older people to lead an active life and retire later, with changing attitudes about working longer in Sweden for example (Employment in Europe 2008) expectations of working people about retirement might differ. Technological and environmental differences perhaps need less consideration by IHRM in order to facilitate the most successful global organisation, however HRM do need to be aware of the different legislative environments in which the organisation operates. Japan and different European countries will have differing legislation regarding employee rights, compulsory retirement, redundancy and dismissal, for example.
2.3 Cultural Differences
Perhaps the greatest challenge for IHRM is that of reconciling cultural differences between Japan and Europe.Cultural differences can make a range of issues for IHRM. These include ideas about social justice and remuneration, ideas about what constitutes good management, how employees assume an organisation can be structured and feedback and performance reviews (Armstrong 2010). There is a need for HRM to look critically at the set of assumptions held about HRM practice, be aware of differences between the home and host country, without prejudice about one or other having a better approach, and have a genuine belief in, and commitment too, a truly international approach (Armstrong 2006). The extent to which cultures are different was most comprehensively theorised by Hofstede (1991) who pointed out that different nations hold different sets of attitudes towards a number of variables including orientation towards past or future, attitudes towards power in society, acceptance of ambiguity, and whether a society is primarily masculine or feminine (Albrecht 2001). Using Hofstede’s ideas to compare Japan with the UK, for example, reveals that Japan is a society more comfortable with hierarchy than the UK, but that the UK is more individualistic than Japan (Geert-hofstede.com 2011 [online]). It has been suggested that cultural differences like this need to be taken into account. HRM should try to communicate between cultures and establish a mutual dialogue in understanding of difference, rather than assume that the management culture practiced in the home country is to be forced onto host country organisations (Briscoe et al 2008). However, not all are convinced of the efficacy of Hofstede’s ideas in practice, with Gerhart and Fang arguing that Hofstede’s cultural dimensions in fact have little ability to predict employee behaviour differences. In addition, some suggest that the role played by cultural differences is mediated through “interlinked organizational structures, HR architectures and people management practices at the level of the firm or local subsidiary”. This, together with the “two-way, recursive relationship”(Sparrow 2009, p. 315) between culture and employee behaviours and perceptions, mean that the management of cultural differences is difficult.
Despite the lack of agreement on the nature of cultural differences and despite the complexity of the way they operate, there seems to be a clear need for Takeda’s IHRM to successfully negotiate culture specific differences between employees in Japan and Europe. There are a number of different approaches to managing such differences, for example the need to understand that cultural differences are simply that – differences – and that there is no one ‘best’ way, to consider local delegation of administrative functions, that HR practice carries within itself a set of assumptions about culture which need to be brought to light and perhaps challenged, and the need to be creative and flexible in devising ways to manage cultural differences (Mabey et al 1998).
2.4 Convergence or Divergence?
A further challenge for IHRM at Takeda concerns the notion of convergence of divergence. In other words, should HR management develop identical models of practice in each subsidiary organisation around the globe, or should different practices be toleratedThere is a need to achieve a workable balance. There has been a long debate between academics on either side (Beardwell and Claydon 2007).When globalisation arose as a business possibility, it was assumed that convergence offered the most appropriate solution to IHRM issues, because different countries would face similar problems created by technology and industrialisation. It was also pointed out that people’s lives around the world are more similar today than they have ever been. However, it was argued that government and other local conditions mean that global convergence is unlikely, and that a divergent approach is more appropriate (Liu et al 2004). While there might be an assumption that the home organisation (Takeda) leads the way in HRM practice, this is not necessarily the most appropriate solution (Armstrong 2010).Some also suggest that the most appropriate course is to include practices that are both convergent and divergent (Edwards and Rees 2006). Takeda might benefit from a loose set of convergent HRM practices that leave flexibility for country-specific adaptations to the host country.
2.5 Recruitment and Related Issues
Along with the management of cultural issues, resourcing and recruitment are likely to provide one of the biggest challenges to Takeda’s growth as an international organisation. Not only do local differences in the employee market-place need to be understood, together with legal, social and government constraints, there is a need now to recruit international-calibre staff, at least for some organisational positions (Armstrong 2010). Certainly, some staff will be based locally: others will need to possess skills to move from home to host organisation and back (Armstrong 2010). Leblanc (2001) suggests that these skills include high tolerance of differences between countries, and the ability to be sensitive to such differences; tolerance of different physical and environmental conditions; be accepted by local employees; be good at communicating the home organisations policies, and understand the complexities of legislation and contracts. Training and employee education also pose challenges. The overall perspective on company-wide training may depend on whether the organisation adopts a fully convergent perspective, or a divergent one. If fully convergent, organisations might underline the need for ‘global thinking’ and educating employees to see themselves as part of a global team (Briscoe et al 2008).Training and education issues are made more complex because of the diverse mix of employee types: employees could be, for example, host country nationals, foreign parent expatriate, home country national or third country expatriate. Not only does training have to accommodate cultural differences and various country-specific expectations and experiences, there is a need to address the type of training on offer. Should cultural awareness training be given, and if so, to all employees or just those who work overseasShould training be carried out by local staff, or by expatriates from the home organisationThese and similar questions make the provision of training more difficult (Harzing and Ruysseveldt 2004).
3. Conclusion: Will Mr Hasegawa’s Vision be Achieved?
While Takeda have a history of successful operation in Japan, with net sales of over $17,000,000 to 2010 (Takeda.com [online] 2011), they have so far enjoyed less success in Europe. The purchase of the Swiss firm Nycomed offers an opportunity for growth in the European market (Matsuyama and Kresge 2011), but this will mean challenges for Takeda’s IHRM. While a new global market offers opportunities for firms to expand beyond their geographical horizons, cultural and other differences in operating environment need to be carefully negotiated.HRM need to be creative and flexible to respond to the increased pressures of the international arena, perhaps by an even bigger focus on employee involvement and engagement. The differences in environment need to be fully researched and understood, across a number of fields including the legal, social and technical. Cultural differences are particularly important. Despite disagreement between academics regarding the relationship of cultural differences to organisational performance, attitudes to working, fellow employees, team-work and face-to-face criticism (to name just a few variables) have the potential to create a severe impact on operational success.Recruitment and training may also prove difficult. In addition to micro-management of there is an additional need for strategic decisions about whether convergent or divergent HR perspectives are most appropriate. It is likely that an approach which is broadly convergent but allows for diversity is most appropriate. In conclusion, there are many different areas which need to be addressed by HRM in Takeda, but given that these areas are researched thoroughly and a comprehensive plan of action developed, there is no reason that difficulties cannot be overcome, and Takeda can deliver Mr Hasegawa’s vision within three years.
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