Critical Examination of Practices within SME’s and MNE Organizations: In the context of Talent Management
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Abstract
The aim of this research is to critically examine the practices of SMEs and MNEs specifically in the context of talent management. The study specifically seeks to evaluate if there is different in talent management practices of the two types of organizations.The research design employed for the research is exploratory, the research approach is inductive and the data collection is qualitative and performed through the secondary sources of data. The data analysis method selected is ethnographic content analysis. It is highlighted that the consideration of the ethics of the research and research limitations is highly important. It is concluded that the talent management practices at SMEs and MNEs are quite different from each other. It is also concluded that the SMEs have slightly unstructured HR and talent management practices which have caused the lower effectiveness in the talent management on the part of SMEs as well. It is further concluded that the HR cost as a percentage of sales is significantly higher for the SMEs.as compared to the MNEs. It is also analyzed in the section above that MNEs, on the other hand, tend to have structured HR policies and procedures to select and manage their talent. The recommendations to the SMEs, MNEs and future researchers are provided at the end of the research.
Table of Contents
Talent management in a multinational enterprises (MNE) versus small and medium enterprises (SME)- 5
Significance of the Research. 8
Chapter 2: Literature Review.. 8
Introduction to the Chapter 15
Ethical Considerations of the Research. 17
Limitations of the Research. 17
Chapter Four – Data Analysis. 18
Talent Management Practices at SMEs. 18
Talent Management Practices at MNEs. 19
Comparison of Talent Management Practices at SMEs and MNEs. 20
Objective # 1: To study the concept of talent management in the modern era. 21
Objective # 2: To evaluate how the companies perform talent management in the modern era. 21
Chapter Five – Conclusion and Recommendations. 22
Introduction to the Chapter 22
Recommendations to the Future Researchers. 23
Chapter 1: Introduction
Introduction to the Chapter
The first chapter of the research focuses on all introductory aspects of the research which include the research aims, objectivesand questions and purpose of the study. The introductory aspects are covered in detail as these help the researcher form the basis for this research and recognize why the research is important in the modern era.
Background of the Research
Critical Examination: All human resource management (HRM) practices, due to aggressive technological outbreaks and advancements in innovative capabilities, have evolved monumentally over the past few decades (Cappelli, 2009). It is now a challenge for HR departments to acquire thebest talent, retain and manage diversity as companies operate in a global market. Due to its significance talent management is of top priority for firms (Blass et al., 2006;Sandler, 2006).
With increasing globalization and talent wars human resource managers today face a multitude of challenges. These challenges are posed by different forces in the economy and market ecosystem that are strongly interlinked to the labor market. For survival companies are evolving their human resource management practices i.e talent management, to stay relevant to the ever-changing market needs and priorities. Moreover, the life cycles of a firm and its phases eg. growth and maturity bring on its own requirements.
Critical Examination: It is crucial for a firm to strategically manage HR i.e. set targets (corporate objectives), identify gaps, acquire and manage talent to fulfill its needs as it moves through the company life cycle. This link between a company’s vision and HR planning can be critical to its ultimate success. Drotter, Noel, and Charan (2001) advocate that in the longer run when a company strengthens its HRM practices it develops an internal value by creating leaders reducing its dependability in current leadership creating ease in transition from one leadership to another.
Talent management in a multinational enterprise (MNE) versus small and medium enterprises (SME)-
According to the European Commission definition “the category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro.”No standard definition for MNEs is available in theliterature (Pagell and Halperin, 1999).
A firm irrespective of the size has to ensure towards acquisition, development, and retention of its talent to meet its corporate objectives and vision consistently balancing between firm expenses and employee expectations. No doubt that the dynamics of larger firms compared to smaller firms vary significantly.
Critical Examination: The first and most primal difference between firms is the money and resource allocations (Iles et al. 2010; Festing, Schäfer and Scullion 2013; Valverde, Scullion and Ryan 2013). Smaller firms with typically with fewer employees to manage to seem to have unstructured and improper HR systems. Furthermore smaller firms are restricted in terms of budgets and time whereas larger firms can afford well-structured HR policies and systems to manage a bigger employee population. This can be exemplified through the talent acquisition processes in both types of firms. Internal job postings, informal networks, word of mouth and referral are some common methods adopted by smaller firms to initiate a recruitment process.
On the other hand, larger firms invest in several recruitment stages such as advertising through proper newspapers, interviews and aptitude tests to gauge a candidate and to ensure recruitment of an ideal candidate. Training methods in smaller firms are normally on voluntary basis depending on senior-junior relations whereas larger firms deploy proper training and development budgets for their employees normally outsourced through professional training institutes Critical Examination.
Furthermore, these firms to differ in compensation and career advancements as well. Larger firms are deemed to have well-structured pay scales based on the job level, nature, responsibility, and requirements. Compared to smaller firms larger firms are better paymasters and offer added benefits such as health insurance, provident fund, and travel allowances.
Critical Examination Very few small enterprises can invest in these additional employee benefits. Employees working with larger firms also tend to have various growth opportunities internally and externally. Since these companies expose an employee with a broad experience typically consisting of avariety of challenges, projects and problem-solving the individuals are well sought after in the market. Smaller firms provide less such opportunities.
Critical Examination The learning and growth curve heavily depends on the firm’s own growth. Interestingly the type of talent management policies adhered to can also be dictated to a certain limit by the regulatory framework present in the country the firms operates in. Minimum wages, annual leaves, overtime payments are a few examples of such legal requirements.
Employee motivation can also be a challenge for large firms. Motivating employees is to make them persistently apply their efforts in the direction consistent with the organizational goals. MNEs employ motivational techniques and strategies to satisfy and retain their human capital. Intrinsic motivation is self-generated and cannot be created by external factors. Researchers suggest that job design and dimensions, i.e. job complexity, competency, Critical Examination,significance and autonomy are crucial factors that can enhance intrinsic motivation. Extrinsic motivation is when external motivators like rewards, incentives, and positive reinforcement influence people to perform better. Similarly, punitive actions like withholding pay or criticism deter employees from lacking at work. Extrinsic motivation although short lived has an immediate and powerful impact.
Purpose of the study
So would it be safe to say that talent management would considerably be much better in larger firms compared to smaller firms? This research seeks to evaluate and understand whether this is true. Whether SMEs or MNEs differ in talent management practices and how these practices eventually impact company success. The significance and uniqueness of these practices will be discussed throughout the following discussions. It will be of particular interest of how these firms engage their employees in creating higher value for the company or else trading longer more sustainable returns for short-term costs. Firms committed to quality HRM are often seen to hold employee potential and engagement at the core of its competitive advantage. Even though committed what limits a firm’s capability to manage its talent properly and drive employee satisfaction and well-being? How talent management practices influence or shape the culture of a firm and vice versa. The paper also presents the evolutionary talent management processes a firm goes through during its life cycle using a contemporary model “The Talent Management Maturity Model” devised by Bersin & Associates, 2008 (Deloitte). The paper will investigate secondary and literature sources to consider and present perspectives on practices being employed in both types of firms to draw a critical comparison. The paper will conclude with recommendations to stakeholders in the industry to reflect upon while making operative decisions to manage their talent optimally.
Research Question
The main research question for this research is as follows:
“How talent management practices compare between the SMEs and MNEs in the modern era?”
Research Objectives
The aim of this research is to critically examine the practices of SMEs and MNEs specifically in the context of talent management. The study specifically seeks to evaluate if there is different in talent management practices of the two types of organizations. The research objectives formed for the research are as follows:
- To study the concept of talent management in the modern era.
- To evaluate how the companies perform talent management in the modern era.
- To analyze and compare the practices of talent management of SMEs and MNEs in the modern era.
- To make recommendations to SMEs and MNEs in order to help them improve their talent management.
Significance of the Research
Every research carries significance to different people, organizations, and societies as a whole. Conversely, this research also carries significance for different stakeholders in the society and related people specifically. Firstly, the research carries significance for thetop management of SMEs and MNEs to find out where their organizations lack in talent management in general. Secondly, the research is highly significant for the people related to academic researches or academicians as well because every research tends to fulfill some research gaps and advance the academic literature. Thirdly, the research carries significance to the researcher himself as it will advance the knowledge of the researcher in the future and increase his knowledge pertaining to talent management specifically. This suggests that the research carries very high significance for different people in the society.
Chapter 2: Literature Review
Introduction to the Chapter
The second chapter of the research is based on the analysis of the literature review. The literature review analyzes all the theoretical aspects necessary for the research and also studies the findings of past researchers who conducted researches on the titles related to this research. The chapter also helps analyze the research gaps left out by the past researchers as evident from the discussion of past literature.
Literature Review
Definitions-Talent management was gist fully annotated as “The War for Talent” for companies by Armstrong (2006).Very aptly put, hiring and keeping the right talent satisfied is imperative for companies in this day and age when skilled HR is considered as a vital competitive advantage (Iles et al,2010). Derived from his definition and based on other literature available talent management is the firm’s capability to acquire talent, develop, compensate, promote and motivate to intrinsically commit to achieving its corporate vision and objectives. Bersin and Associates 2007 aptly defines it is as “a set of organizational processes designed to attract, manage, develop, motivate and retain key people to create a highly responsive, high-performance sustainable organization that meets its business targets.”
In simple terms, talent management is a core function related to identifying gaps in the human capital required to meet company targets and taking effective measures to fulfill those gaps ensuring sustainable outcomes. To overcome the challenges of the modern business world talent management has to be aligned and integrated with the company’s overall strategic direction (McCauley and Wakefield, 2006). Thus companies driven towards talent management need to be proactive rather than reactive to their human resource needs. Figure 1 below shows the components of the talent management framework…………………………………….continued
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