A Discussion of Potential Problems and Opportunities of Staffing a Polish Subsidiary, and Suggestions of the Implementation of an Effective Staffing Strategy
Peter Engholm, Veronika Brekk, James Robertson
Monash University, October 2000
This report discusses what problems and opportunities a company may expect relating to staffing issues in overseas operations for upgrading telephone, facsimile and computer links in Poland.
Culture, Strategy, IHRM, HRM, Staffing, Poland, Management
This report discusses what problems and opportunities this company may expect relating to staffing issues in the company’s proposed overseas operations due to its recently won long-term contract for upgrading telephone, facsimile and computer links in Poland.
The report consists of three main sections. The first section discusses some cultural, social, political and industrial differences between Australia and Poland that are important to be acknowledged before further action should be taken. In the next section, a strategy will be proposed for establishing and maintaining staffing aspects of these operations. Solutions to overcome anticipated problems with recruiting, selection, developing and rewarding managers and professional staff are discussed in the last section.
It is not the aim of this report to in detail discuss all the implications and problems that could be expected with the company’s proposed overseas operations, as that would be impossible to cover in a short report like this. The aim is, rather, to discuss a few of the issues that the Human Resource Management team believes are of main concern and should be addressed primarily before developing an effective strategy, and to assist the company’s managing directors in their important decision-making process in regard to this. The report is also concerned solely with staffing issues, and not with other organisational issues that would be relevant to the proposed overseas operations.
Some general knowledge of Australia and Poland forms the backbone to the discussion of the differences between these two countries, and this is supported by discussion and findings in relevant articles and publications. The proposed strategies, and solutions to overcome potential problems, are supported by contemporary Human Resources theory.
1.5 Assumptions & limitations
It is assumed that the surveys and facts referred to in this report are based on valid, reliable and non-biased research. Lack of extensive knowledge of the Polish society and telecommunication industry within the company’s Human Resource Management Team is a limitation that should be acknowledged. It should also be noted that Poland is a country in rapid transition to become more ‘Westernised’, and current changes may have occurred that is no longer consistent with some of the discussion in this paper.
According to a recent article by Balcerowicz (2000), Poland has made considerable progress over the past decade in transforming its centrally planned economy into a market-oriented one. This has opened up opportunities for foreign companies to invest in the Polish market. Balcerowicz (2000) further notes that the inflow of long-term capital will contribute to an increase in productivity through such means as transfer of technology and introduction of better management techniques, and it is here that our company has the potential to make a successful impact. Not only would our introduction to the Polish market benefit the Polish people, but the economical climate offered seems to indicate benefits for this company as well. For example, the recent efforts to privities the telecommunication industry was the ‘carrot’ out company needed to move ashore. According to the Polish Agency for Foreign Investment (PAIZ, 1997), there were approximately 150 telephones per 1,000 people in Poland in 1998. This year, the figure is expected to reach to 270. There are currently three GSM mobile phone networks, with the amount of mobile phone users growing steadily. For this company, these figures naturally indicate a huge opportunity, but as argued by Culpan (1995: 11), it is first necessary to closely study the Polish society, market conditions, as well as organisational characteristics in order to take advantage of these business opportunities and the transfer of know-how. Strategic questions for our company, such as staffing and training issues, depend on a thorough pre-analysis of the Polish culture. For this company, it could be devastating to assume that transfer of knowledge and technology can occur without considering the differences between the Australian and Polish society. After all, contemporary Poland has risen from the ashes of Communism, with all its values and beliefs that inherently would still exist in some parts of the society. The contemporary transformation of Poland, as argued by Weclawowicz (1996), is still in the formative stage. Australia, on the other hand, has developed in a much more liberal way, based on Western attitudes and beliefs.
Hence, before developing a staffing strategy for this company’s operations in Poland, this paper will now discuss some of the differences between the two countries, and what problems and opportunities that may result from these. The analysis begins with looking at what role culture and the Polish society plays for making managerial decisions.
3. PROBLEMS AND OPPORTUNITIES
As argued by Tregasis (1998: 137), cultural studies reveal that: “the peoples of different countries share values, cognitions and behaviours that differentiate them from other cultures, and these differences are also evident in nationally different work values and managerial attitudes”. These facts thus have implications for organisational practices such as selection, recruitment, training and development of labour - especially relevant to consider when a company plans to invest in another country.
When considering the cultural opportunities and obstacles relevant to the staffing of the operations in Poland, Geerd Hofstede’s four cultural dimensions is a useful tool. Hofstede’s ideology consists of a notice that businesses function with regard to culture-related power distance, uncertainty avoidance, collectivism or individualism and masculinity/femininity. These four dimensions of cultural impact are discussed next.
3.1.1 Power distance
According to a survey conducted by Nasierowski and Mikula (1998), Polish respondents scored high in Power distance (72), while Australians, according to Hofstede (1980, p.104), show a significant lower score (36). This means that the Polish society has a higher degree of power distance than the Australian society. Societies with higher power distance tend to have a greater degree of centralisation and an uneven distribution of power, and subordinates are likely to accept closer supervision from their managers. This often leads to that employees avoid disagreeing with their superiors, and do not cooperate as much as wanted. Polish workers might accept an authoritarian style without difficulty, while such a style tends to be related to the ineffectiveness of the earlier communist regime (Nasierowski and Mikula, 1998). This could be an obstacle when it comes to staffing of the proposed overseas operation. Polish workers may have a different attitude towards the management team than workers in Australia. Some of the workers, for instance the young ones, could tend to have a more relaxed relationship to authorities, while older workers, which have worked under the former regime, could be used to a more strict management style.
The high power distance in the Polish society can also be examined from an alternative perspective: formal vs. real authority. In the former communist society, the Communist Party leaders were often more important than managers of the companies, and people that did not recognise their official authority were often persecuted. On the other hand there are real authority, based on values that people recognise and accept (Nasierowski and Mikula, 1998). Despite the fact that conditions have changed in Poland in the last decade, people may still make a distinction between official and unofficial power. Regarding to this, management styles (centralised and mechanistic) recommended for societies with high power distance may be ineffective in Poland. Since the society still have some of the values left from the former communist regime, while it is moving towards a more western and democratic society, it could be difficult to choose the right way to manage a Polish workforce. Yet again, the younger generation seems to more easily adapt to western (and Australian) approaches to work. Considering that Poland has one of the youngest populations in Europe - 29 percent of Poles are under 19 years of age - any potential foreign investors could in the long run expect benefits from a growing customer base and a large, qualified workforce (Hirvonen: 1998).
3.1.2 Uncertainty Avoidance
Uncertainty avoidance can be defined as an estimation of how actively the society avoids risk-taking, and therefore creates a sense of control. In Nasierowski and Mikula’s (1998) survey they found that the Poles score very high in uncertainty avoidance (106), which can be explained by that in the past an individual had limited chances to control his or her destiny as everything was done in the interest of the Communist party and not in that of the individual. As a result, the Poles have long traditions of trying to find ‘loopholes’ in existing law system, which, in turn, has driven the parliament to prepare very detailed and complicated laws in order to stop possible devious ideas (Hirvonen: 1998).
Today, one could expect that younger workers would have lower uncertainty avoidance, but the survey does not show any evidence of that. A high degree of uncertainty avoidance reflects a lower willingness to put on risk, and this could imply that there is a need for close supervision and a high degree of centralisation when it comes to decision-making. According to Hofstede’s (1980, p.165) study, Australians have a lower score for uncertainty avoidance (51), and this could therefore be another obstacle regarding the staffing of the overseas operation. If a Polish workforce needs to be managed in another way than an Australian, this could create a problem if we choose to use PCN’s in the management and Polish workers in the rest of the staff.
3.1.3 Collectivism vs. Individualism
Collectivism versus individualism is a factor where the members of the culture are controlled through societal pressure of shame, or then through internal pressure of guilt. Poles also tend to have a relatively low score on individualism (56) (Nasierowski and Mikulas, 1998). Compared with Australia, which in Hofstede’s study (1980, p.222) has a score of 90, this indicates another difference of the two countries. The Polish society seems to be a more collectivistic society than the Australian is. However, with the changes from a communist regime to a democracy, the Polish society is quite difficult to picture right. People might tend to be less individual than people from more western style countries are, but at the same time they may reject a too collectivistic style because it is a reminder of the former regime. This also creates a problem for our staffing of the overseas operations. If we choose to use Polish workers and Australian managers, we must be sure that the Australian managers are aware of the problems they might face by managing a Polish workforce, and they must be trained in handling these problems.
3.1.4 Masculinity vs. Femininity
When it comes to masculinity, the Polish respondents in Nasierowski and Mikula’s (1998) survey, and the Australian respondent in Hofstede’s (1980, p.279) survey, scored about the same (Poles 62, Australians 61). This could be considered as an opportunity for our firm. The two cultures have about the same values when it comes to a need to succeed and more masculine values vs. more feminine values will not be a problem between managers and workers from different cultures.
3.2 Language, Education & Labour
It must be pointed out that Hofstede’s model should only be used as one instrument among many to identify differences between Australia and Poland. Some other issues that must be considered as relevant to the staffing aspect of the overseas operation are differences in language, education level, available workforce, and labour costs. According to Austrade (2000), the Polish population is well educated and dominated by youth, with 60% under 40 years, and, as previously mentioned, a large percentage of the population under 19 years of age. That so many people are under 40 is a great advantage for our particular staffing questions, because it means that most of the workforce is younger people that probably do not have to many perceptions tied to the former regime.
Modern management practice is being introduced, and this provides opportunities to business management training in English. The level of English usage is still thin, but is improving among the young, and English is emerging as the preferred second language among businesses and in schools (Austrade, 2000). Various education programs are being introduced, such as KREATOR, which aims to improve basic transferable managerial skills such as ability to effectively organise, plan, communicate, solve problems, work with others and use of IT skills (Lowe: 1997).
A low level of English speaking people can be considered as an obstacle for our staffing. A normal problem that can arise is communication problems. If we choose to staff our operation in Poland with Australian managers, and use Polish workers in the rest of the workforce, the language might create management problems. The same might happen if we choose to staff the whole operation with Polish people. Then there could be a communication problem between the overseas operation and the home office.
The participation rate in higher education has recently increased sharply from 10-12% under the People’s Republic to 33.5% in 1998-99 (Economist Intelligence Unit, 1999). This indicates that the level of education is increasing, and there are well-educated people that can be hired to do a good job. Still, to attract the best people, we might want to offer higher wages and a better compensation package than is normal.
Another opportunity relevant to the staffing of our overseas operation is the low wage level in Poland. According to Euromonitor: Global Market Information Database (2000), the average hourly earnings in Poland in 1998 were US$ 2.0 (7.0 New Zlotys), while it for Australia was US$ 10.1 (AU$ 16.1). The average monthly earnings in Poland were US$ 369.9 (1,285.5 New Zlotys), while it for Australia was US$ 3,925.0 (AU$ 6,248.0). This means that it is much cheaper to hire Polish workers than to train Australian workers and send them over there. Also, while Poland has the most expensive labour in Eastern Europe (the state charges employers about 49 per cent of workers’ gross salaries in healthcare, social security, funding for handicapped workers, and other wage add-ons) (Reed, 2000), the labour cost is cheap compared to western countries. According to the Polish Agency for Foreign Investment (PAIZ, 1997), the cost of high skilled workers is only 20% of that of labour in USA, and 15% of the workforce in Poland’s closest western neighbor, Germany.
3.3 Trade Unions
Trade unions are also an element for our business to consider. The Polish trade union movement has now and then been problematic for foreign investors, particularly when managers of newly privatised small enterprises have instituted management changes (Country Library, 2000). In recent years however, strike activity has decreased considerably and is no longer threatening or noticeably compromisingly to Poland’s industrial infrastructure, although it should not be forgotten that the liberal strike laws that still exist in Poland allow for employees the right to strike to protect what they perceive to be in their ‘social and economic interests’ (Fine: 1997). Despite the fact that Solidarity (the largest trade union in Poland) 20 years ago had 10 million members - a quarter of the population - and today only claims just 1.2 million, the union influence politics to a degree that is unheard of in Western Europe and Australia (Reed, 2000).
The discussion above has identified some problems, but also some opportunities, for this company in moving into operation in Poland. Based on this discussion, a general strategy for staffing will now be proposed. This is a proposition that should assist the company’s top management in its decision-making process concerning staffing issues.
4. GENERAL STAFFING STRATEGY
4.1 Strategic approach
Whilst the company would need to pay an additional 49% in state charges, as mentioned in the previous section, the overall labour costs would still be much lower than what they are in Australia if mainly Polish labour is used for the overseas operations. However, education is the key to success in technology, and Australia’s education sector is overall superior to Poland’s - therefore it makes a lot of sense for the company to initially employ Australians in high skill, high wage positions where they can apply their know-how and develop a strong innovative and competitive climate that should benefit the company in the long-run perspective. In Human Resources terms, this is described as an ethnocentric approach, described by Dowling, Welch and Schuler (1999: 70) as mainly filling the key positions in the international subsidiary with parent-country nationals (PCNs) instead of using host-country nationals (HCNs).
By expanding to Poland, the firm will build on its experience in Australia by having a well-educated, young workforce, which, if managed correctly, could prove to be a great success story for the firm. Sending well-educated Australian employees as managers to Poland - who can share their skills and knowledge in a way not dissimilar to mentoring - could give the firm a sizeable advantage over its competitors in the Polish market. It also ensures a strong link between the subsidiary and the parent company by ensuring the subsidiary’s compliance to corporate objectives and goals (Dowling et.al, 1999: 70).
4.2 Language & Learning
As noted before, Polish citizens are still fairly “thin” on their English skills. Utilising bilingual expatriate Australian managers for the task (speaking Polish and English) would enable knowledge to be shared with the Polish employees in a much more effective and pleasant fashion. That is, compared to using non-Polish-speaking Australian managers, will allow much smoother dissemination of information from managers to workers, as well as between managers at various levels of the subsidiary. In the longer term, the firm should be aiming to utilise some of their Polish employees once they have been properly trained to perform management tasks - indicating a move towards a more geocentric approach - described by Dowling et.al. (1999: 71) as recruiting HCNs for top managerial positions in the international subsidiary. Replacing expatriate managers with Polish managers should lead to a fall in labour costs (as Polish wages are lower than Australian wages), whilst ensuring that the decision making process does not suffer (if the Polish have been properly educated).
Education and training, of course, is an on-going process and the process of disseminating information from the Australian parent company to its Polish subsidiary must be adhered to perpetually in an on-going fashion.
4.3 Training strategies
In terms of employment, the firm should aim to retain the services of their employees for the longer term. The firm will be investing in training and development of their workforce and will need to recoup these costs in the long run by having loyal employees using their skills for the betterment of the company. The firm could be done a lot of damage if it were to invest heavily in training its staff only to have the same staff take their skills elsewhere (to perhaps a competitor). In order to retain and be in a position to fully utilise their educated workforce, a fair and rewarding remuneration package must be put in place. The idea is that employees would not only be motivated to remain and use their skills for the betterment of the firm but also be challenged to improve their education and skills in the pursuit of material reward.
As has been mentioned, there tends to be a higher degree of power distance in Poland compared to Australia. Bartol & Martin (1991) state that: “There is clear evidence that managers operating in different cultures need to adjust their leadership behaviours according to the different power-distance expectations of subordinates”. It is the expatriate managers who must adjust their behaviour to fit with the local employees - not vice-versa. A very basic part of the training process for the expatriate Australian managers will be to inform them of the difference in power-distance between the different cultures. Otherwise, an Australian manager may assume that the Polish workers agree with what he/she has said without accounting for the fact that the workers may not feel comfortable “speaking out” and disagreeing. Expatriate managers must be able to make decisions without the need for discussion with their sub-ordinates.
4.4 Approaches to the Polish culture
The distinction between Etic and Emic approaches must be made. On one hand, the differences in workplace cultures between Poland and Australia necessitate that employee strategies used in the two nations must differ to an extent (emic). Some of these cultural differences have already been outlined. However the etic approach must also be used because there are common culture practices. Globalisation has made the world ‘smaller’ in terms of access to information (particularly due to telecommunications) - information that nowadays can be shared across national boundaries in an efficient manner. This occurrence (and because of its heavy use of information technology) strongly supports the convergence hypothesis, which explains that organisations and employees in the world are becoming more alike (Dowling et.al., 1999: 13). However, the previous discussion in this report of especially cultural and social differences between Poland and Australia, indicates that a divergent approach is more appropriate for the time being, explained as the differences in behaviour of individuals due to culture-specific factors (Dowling et.al., 1999: 13).
Hence, it is unclear what approach should be emphasised for the operations in Poland. With no doubt, however, the expatriate managers will help to bridge the ‘gap’ in the cultures so that new work practices can be adopted by the Polish if it is believed to be to the overall benefit of the firm. The following section discusses in more detail some of the problems that may need to be overcome in regard to staffing an Australian/Polish subsidiary.
5. STAFFING PROBLEMS & SOLUTIONS
There are, of course, many potential problems with above-mentioned strategy in terms of staffing the Polish subsidiary. Apart from general problems in sending expatriates to a different country and culture (some of which have been discussed above), there are some problems specifically important to Australian operations in a Polish culture, and these are discussed next.
5.1. Selection and recruitment
As has been proposed, Australian employees (PCNs) should initially be selected to top managerial positions in the Polish subsidiary, gradually to be replaced by local employees (HCNs). The most preferred solution to selection and recruitment issues would be to find employees that have extensive knowledge of the Polish culture and society. This is not likely to be the case, though, for this company - particularly due to its lack of international experience. Instead, the company must focus on finding people that have the ability and willingness to learn and adjust their behaviour to fit with the Polish culture and society. This ability is of prime importance if expatriate failure is to be avoided (Dowling et al. 1999: 82).
Knowledge of the Polish language has already been mentioned as an important selection criterion, due to the facts that show some lack of knowledge of the English language among the Polish population (Kasperson & Dobrzynski, 1995: 131). Hirvonen (1998) argues that only the younger people can speak foreign languages well and hence communicate with expatriates of the international firm. Again, it would probably be hard to find suitable Australian employees with knowledge of the Polish language, but a long-term goal to overcome this problem could be to focus on keeping a young workforce in the Polish subsidiary. It has already been mentioned that 29 percent of the population is under 19 years of age, so it should not be too hard to fulfil this goal, and thereby overcome language barriers in the long-term perspective.
Another issue to be considered is the differences in existing management styles between the two nations. As noted by Reineke (1995: 96), imposing Western management behaviour on Eastern [European] managers in new ventures, would be difficult in the context of an Eastern, formerly socialist and national culture, such as Poland. A study by Liberman and Torbiörn (2000: 42) also reveals that direct managerial control of daily staff was a common perception of Polish management - not the participative and individual style that Australian managers usually adopt. Hence, if the objective is to gradually transfer Australian know-how and management skills to Polish employees and managers, it is probably wise to begin with sending expatriates that Polish workers may identify with. Having a higher degree of power distance, Polish workers are for example more likely to accept stronger supervision and autocracy than Australian workers. In its search for suitable candidates, this company should therefore try to find people whose personality characters are closer related to a Polish way of thinking, rather than Australian. Various personality tests, such as Myers-Briggs, could be used in the selection process to determine these candidates that are most likely to ‘fit in’ with the contemporary and traditional Polish society. Tayeb (1995: 599-600) is keen to point out, however, that a successful management style depends not only on personality characters but also on the ability, willingness and other characteristics of the respective local employees. Therefore it must be stressed again, that the people selected for the assignment must first of all have the ability and willingness to adjust to new situations, so that the subsidiary can become successful no matter what external factors threaten the operations. If imported techniques and skills are not modified to local conditions, Tayeb (1995: 601-602) warns, the transfer process will most certainly fail.
Finally, but probably the most important first step in this company’s staffing policy, is the need to find a good lawyer who can work the local Polish political and trade union scene and fix problems that inevitably will occur. Bobinski (1998) warns that investors in Poland should never take anything for granted in the country, and managers may need the help of some knowledgeable professional in order to fully adapt to Polish customs.
5.2 Training and development
As emphasised by Reineke (1995: 97), it is important for the firm not to neglect the ‘orientation stage’, which can be defined as a system of preparing employees and dependents for their overseas assignment. The managers should be given training in all the important areas. Investing resources into the orientation program can pay off big dividends later. Neglecting this stage can lead to employees feeling isolated and disillusioned, and the overseas assignment can end up being counterproductive (Dowling et.al., 1999: ch.5). Information or fact-orientated training must be used to educate the employees about important facts (for example where to buy food, areas to avoid, location of embassy, and so on). Attribution training is also important so that the employee can understand how the natives are likely to behave and why (see it from their point-of-view). It can be easy to misunderstand and misinterpret the behaviour of people from other cultures if there is ignorance about existing values and beliefs in these cultures. Cultural awareness training (which is about one’s own values, attitudes and behaviours) is tied in with this. Expatriate managers must learn to become less ethnocentric: they must put aside any prejudices that they may be harbouring for the betterment of the firm and employees. As noted by Fine (1997), recognising the need for cultural sensitivity to the workforce can ease tensions and help build mutual respect between labour and management. Cultural awareness training could help deal with this.
Cognitive behaviour can differ markedly between cultures (for example, reward and punishment) and so proper training to prepare the expatriates for this can be vital. It would be terrible if an expatriate were not aware of the laws and subsequently broke the law because of ignorance and was hence punished for it. In Poland, for example, even a lowly ranked clerk could be involved in a criminal investigation simply because he or she signed the wrong paper! (Bobinski, 1998)
Continuous training and development would also mean gaining a competitive edge in the Polish market, especially due to the fact that more than 60 percent of Polish companies state that they have no long-term management training plans (Eddy, 1999). Using training programs, such as previously mentioned KREATOR, could be one way to overcome various managerial problems that occur due to lack of management and technology knowledge.
5.3 Rewards and compensation
Considering the low cost of living in Poland, the Human Resource Management Team does not foresee any particular problems with compensation packages for its chosen expatriates. Rather, problems may occur when comparing rewards and compensation between HCNs and PCNs. It should be acknowledged that the traditional Polish manager did not expect to be rewarded for individual productivity or achievement (Savitt, 1995: 22), which often resulted in underachievement and low performance. Rather, a person-based reward system existed, which allowed for Polish managers to use political means in order to gain more status in an organisation. This system is extensively discussed by Pearce, Branyiczki and Bakacsi (1993: 133-162), but is not analysed further in this report except for acknowledging that such as system is not compatible with a traditional Western system of performance-based rewards.
Hence, it follows that a careful design and implementation of incentive system is needed to avoid problems and schisms between Australian and Polish management. Not only that, but because Australian managers are likely to expect being well rewarded for international assignments, schisms may also arise if reward and compensation policy is covering not only the expatriate managers, but local managers and employees as well. If the company is to successfully adopt a more polycentric approach to its operations in Poland, it cannot spoil its PCNs with high wages and benefits, and at the same time keep local HCNs at national low levels of compensation.
Further detailed analysis of current Polish wage and compensation policy and legislation is needed to successfully determine this company’s decisions in this issue. Again, the local lawyer (proposed earlier to be employed in the initial stage of operations) may contribute with important suggestions of how to avoid problems and how to best determine a fair reward and compensation policy.
This report has identified some cultural, social, industrial and political factors that may create problems, but also opportunities, in relation to this company’s proposed staffing operations in Poland. Special attention has been given to the differences between the Australian and Polish culture, and it has been argued that it is important to be aware of these differences in various staffing activities.
A strategy for establishing and maintaining managers and employees in the subsidiary has been proposed, including a discussion of the impact this would have on various Human Resources issues such as recruitment and selection, training and development, and reward and compensation policy.
It must be stressed that this report has been written by the Human Resource Management team to assist the company’s managing directors in their important decision-making process in regards to doing business in Poland; to identify some of the opportunities and problems that the company should expect to face; and to suggest some solutions to these problems. More research is needed to clearly define the path this company should take in the nearest future, but the Human Resource Management team hope this report will be a valuable source of information - not only in this initial stage of internationalisation, but also in the company’s future attempts to capture valuable shares of the global market of communication and IT.
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