strategy human resource- MNC

strategy human resource- MNC

the case study is about POG company which is MNC and global enterprise. you wouldclassify the Group’s: organizational structure orientation to

national culture, and staffing arrangements. 4. To what extent are the HR issues identified in POG Azerbaijan explained by a gap between Groupâ€â

„¢s rhetoric and the locals’ reality? 5. What steps would you recommend to secure and develop the effective contribution of the companyâ€â

„¢s human resources towards achieving POG Azerbaijan’s long-term success?

CASE STUDY
A global enterprise operating in a host country – HR strategy in practice?
Premium Oil and Gas (POG) is the Dutch holding company of one of the world’s largest petroleum and gas groups. The organisation employs over

80,000 staff in 80 countries and is best known to the general public through its 25,000 service stations.
POG’s main activities are the exploration and production of crude oil and natural gas, together with the marketing, supply and transportation

of these products. The company earns revenues of around £100 billion per annum based on its daily production of two million barrels of crude oil

and eight billion cubic feet of natural gas, plus daily sales of six million barrels of refined products.
Over 90 per cent of POG’s executives are Dutch nationals, of whom five per cent are women. This concentration can be explained by the

company’s Dutch origins and its consequent patterns of recruitment. Recently, however, POG’s Chief Executive Officer, Ruud van der

Zende, has pronounced that for the company to achieve its aspiration of being a ‘truly great global company’ it must work towards

building a top management team that is visibly diverse. It should also continue to strive towards being ‘genuinely meritocratic’ at

every level, attracting and retaining talent across the globe regardless of background, gender, nationality or sexual orientation. POG’s

stated intention is to respect different cultures and the dignity of individuals in all countries.
The company also aspires, says van der Zende, to be a ‘modern, global learning organisation’. This will, he claims, enable success to be

spread right across the company. The aim is to run a company that is responsive and flexible and that is distinguished by core values and objectives

that are embedded everywhere.
This vision represents quite a challenge for a giant of a company that seeks to connect its central (group) headquarters with more than 120

decentralised business units. Business unit leaders are ‘encouraged’ to operate in many ways as if they are running their own separate

business, but they are also ‘required to comply with group policies and are absolutely accountable for the achievement of annual performance

targets, which are subject to regular monitoring’. The rationale behind this management structure is its professed ability to ââ

‚¬Ëœfacilitate rapid responses to new situations without the need for constant referrals to headquarters’.
One such business unit is POG Azerbaijan, enticed by the oil and gas reserves of the Caspian Sea, which are comparable to those in the USA and the

North Sea. POG has been involved in offshore exploration in Azerbaijan for ten years, but has only recently begun actual production, delayed by

political uncertainty and complex government relations. The development of offshore platforms and export pipelines represents for POG a £10

billion investment, which is critical to its long-term future.
The CEO of POG Azerbaijan is an experienced Dutch expatriate, Edwin de Boer. He heads up a company of almost a thousand employees, of whom 40 per

cent are Azerbaijani nationals. However, over the next five years the workforce is set to double and de Boer has targeted to increase the local

workforce to 90 per cent of the total. Privately, though, he thinks this is unrealistic. Recruiting qualified engineers (mechanical, electrical,

production, instrument) and geosciences specialists will present particular difficulties, even though the company has an annual recruitment programme

for graduates and trainees every spring. Other areas for active recruitment include drilling, commercial, health, safety and environment, public

relations and human resources.
Interviewed recently for the company magazine, de Boer explained how one option for POG Azerbaijan would have been to rely on experienced expatriates

to do the whole job, but that was not POG’s way. His focus, he said, was on the recruitment of nationals, who could be developed so that they

can ultimately manage the operation. Right now, 40 Azeri employees were undergoing technical training at POG’s development centre in the

Netherlands. For one thing, he continued, it costs considerably more to bring expatriates to Azerbaijan and it was important to employ those who

understand the local environment, who know how to get things done. This fitted in with the company’s belief in recruiting the best-possible

staff to plan, build and operate the platforms and pipelines. A constant concern, however, was that Azeri standards were currently well below

international standards on health and safety.
Recruitment and selection is a key function in a meritocratic company committed to employing the ‘best of Azerbaijan’s well-educated

workforce’. Unfortunately, expatriate and local managers are known to ‘turn a blind eye’ to the nepotism and networking that

secures employment. In order to combat such possibilities Group HR has instituted its assessment centre process for the Azerbaijani operation,

including the use of standardised psychometric testing, designed to ensure consistency of selection worldwide.
However, the local HR services manager has expressed some reservations. Ongoing evaluation of the process has raised questions over the validity of

westernised tests for the selection of nationals. In addition, candidates have shown their distrust of a process they see as impersonal and alien, at

odds with more familiar face-to-face methods of recruitment.
With regard to training, Group HR, based in Amsterdam, is very much the champion of the ‘learning organisation’ advocated by van der

Zende and is investing heavily in the Learning and Development (L & D) division of its Azerbaijani subsidiary.
The L & D team of five local staff, headed by a Dutch expatriate, is fully stretched. Its main responsibility is for the six months’ dedicated

training provided for each new intake of technician grade personnel, who are selected for their technical expertise and (preferably) previous

experience with one of the national oil companies. In practice, L & D has to deliver three training and development programmes a year, covering a

total of 120 entrants. Ominously, the planned expansion of POG’s Azerbaijani operations will require future investment in the training of 600

over the next five years.
In addition to specialist modules in technical subjects and company procedures, English as a foreign language is taught every day throughout the six

months. By contrast, the expatriates are not required to learn either of the local languages of Azeri or Russian.
Another key module is ‘Communication and Team Working’, which is seen by Group HR as a vehicle for promoting POG’s corporate

culture. Trainees find aspects of this module particularly alien. They are inherently suspicious of western multinational corporations, unlike their

Azeri colleagues with several years’ service, who appear to have internalised the POG ‘mindset’ and as a consequence tend to

deride their newer co-workers’ reluctance to follow suit.
In communication skills, trainees undertake activities that encourage them to adopt behaviour patterns that are consistent with the open and

questioning culture of POG. Trainees are taught not to be afraid to ask questions, to raise issues with their managers and to learn from their

mistakes. Trainees have found these ‘simple’ lessons problematic and the trainers have experienced initial difficulties engaging the

trainees’ active involvement.
For locals to ask a question is to admit to not knowing, incurring ‘loss of face’. To raise an issue with a manager is also resisted. In

a society typified by deference to authority there is a fear of undermining your superior’s authority, with the danger of damaging relations

with that manager. To learn from one’s mistakes is also difficult, since it first requires admission of being responsible for an error!
Group HR has assumed that a collectivist society like Azerbaijan will be ideal for ‘teamworking’, so that any skills training in this

area should be fairly straightforward. Yet trainers have found this especially challenging, since Azerbaijan is also a status-conscious society.

Group HR aims to promote teamworking based on shared responsibility and equality of status, whereas in Azerbaijan team members are recognised for the

status they bring with them. Hence, their teams inherently operate on the basis of the recognition of inequality.
Initial delivery of ‘Communication and Team Working’ modules has been by a visiting British academic, who is perceived by his trainees

as an ‘expert’. He shares each session with a local L & D officer, a highly qualified but young female, with the intention of eventually

devolving the training delivery to her. Unfortunately, such a transition is proving impossible. The trainees resent being addressed by such a person,

since Azeri male oil workers find it offensive to accept advice or instruction from a local female, and the head of the L & D team is reluctant to

cause an upset.
There is no doubt that it will be the effective contribution of the company’s human resources that will secure its future success at a time of

significant expansion, but this case study raises some pressing HR issues and there remains a big concern over the degree of integration between

Group HR and the HR function in Azerbaijan and a need to embrace the rhetoric from Amsterdam and the reality as seen in Azerbaijan.

Activity Managing HR in a global enterprise
1.    POG can be identified as a MNC and a global enterprise, but how would you classify the Group’s:
a)    organisational structure,
b)    orientation to national culture, and
c)    staffing arrangements?
2.    What evidence is there to suggest that the senior decision-makers of POG aspire towards creating a ‘transnational’ organisation?
3.    To what extent and why does POG fall short of being a ‘transnational’ organisation?
4.    To what extent are the HR issues identified in POG Azerbaijan explained by a gap between Group’s rhetoric and the locals’

reality?
5.    What steps would you recommend to secure and develop the effective contribution of the company’s human resources towards achieving POG

Azerbaijan’s long-term success?
6.    Reflecting on your reading and analysis of this case study, what have you learnt about managing human resources in an international

organisation?

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