Student name and ID – Harmanjot kour (12102273)

Campus – Melbourne

HRMT20025 Assessment 1 Type- ESSAY

Statement- Centralising HR decisions are necessary for MNEs to be

Word- 1200
In the new century, with the quick development in information expertise, a huge personnel market with
the superior rate of efforts by employers in concert with an increased staffing and preservation efforts
together with a progressively more mobile workforce in an international market. In this market, the
significant changes found in the human resources operations and functions, all these changes characterize
the mutually the opportunities and challenges for all multinational companies all over the world. The term
multinational enterprise refers to business operation on international levels. Multinational companies refer
to the business organization having a great volume of sales and employees outside the countries. For
controlling management, multinational companies use either centralization or decentralization human
resources decisions for solving the global obstacle. In the Centralization, human resource is making all
the decisions in my headquarter or centralized offices that followed by all countries subsidiaries. I
strongly agree with the centralized human resources decision that plays become essential roles for
multinational enterprise on the international scale. But a few disadvantages of centralized decision-
making in the last paragraphs.

There are several advantages of centralization of human resources decisions that will enhance the
preference of multinational companies for the international scale. First of all, multinational companies
tend to apply the central human resources policies in the identical technique by the utilize of the ordinary
recognized system crosswise their worldwide firms. Then it will influence its substantive policies in all
the subsidiaries. Particularly, cooperative corporation policies in substantive areas such as payment,
training, employee participation, the company’s cultural management may broadcast to subsidiaries
during the open official routinized system in the multinational companies. Moreover, the centralized
human resources play a crucial role for avoid the uncertainty that will create from the internal as well
external environment of the company. If every different subsidiary located in different countries follow
the same policies and strategies. Then it wills easy for companies to tackle the obstacles with the help of
ordering guidelines from headquarter. Besides, all different subsidiaries can easily avoid the
unpredictable situation in the future. Human resource management and industrial relation strategies are
frequently a smaller amount centralized than other business areas. To give a clear example- United States
multinational companies are additionally centralized on such issues than other multinational businesses.
Control centers play a significant role in setting or influencing policy on compensation systems,
cooperative bargaining training strategies, and social welfare. Along with that, American firms have
additional centralized control over finance, production, and human resources decisions. So, the
centralization of human resources decisions helps to control all the subsidiaries and mitigate the risk and
other obstacles.

Moreover, the centralization of human resource management plays a crucial role in multinational
companies. The central human resource management tradition is based on the resources and competences
available at the head office and subsidiary level. Central human resource decisions assist in monitoring
the establishment of cooperating human policies and strategies followed by overseas subsidiaries.
Furthermore, in centralization, human resource management on the international level parent company
takes all the responsibilities to implement and share their decisions for overseas firm’s directions in any
situation. In this technique, firms will understand the norms and values of the company. So, for
centralization of the human resource decisions human resources requirements to become an effective
political influencer to be able to manage the internal labor market to handle the overall global market. For
instance- corporation such as MacDonald, IBM, and Hewlett- Packard all identify from their labor force
demonstration, have similar transferred analogous policies to any of their overseas functions. These
companies' headquarter office to share all policies and decisions that must be similarly followed by all
firms located in different countries. Additionally, formal human resource functions and control systems
and utilize capabilities to apply central strategies to manage more than the geologically isolated firm.
Along with it, the centralization is encouraging by giving sources for the exertion of central influence in
organized codified methods. Centralizing human resource decisions and policymaking essential for
securing employees’ commitment and retaining organization control. This kind of development may
deliver the proper potential for a centralized tactical approach to intercontinental human resource
management. Besides, cooperate human resource management designed the human resource policy in the
centralization system that should be fed out to all subsidiaries. Last but not the least, most of the
multinational enterprise issues related to cultural diversity. Since operating firms in different companies
imply with employees from a different country and cultural background. This situation may be made a
rigid condition for the firms because different cultural workers may work together in the same workplace.
Therefore, there is a need to understand various challenges that will be faced by multinational companies.
But the centralization of human resources decisions is the best dimension to solve it. All the overseas
firms must follow similar policies and strategies related to their workers. As consequently, there will
nothing to arise the biasness, partiality, conflict situation in the workplace.

On the other hand, there are a few demerits to follow the centralization of human resources decisions by
multinational companies on an international scale. In the centralization of human resources, policies will
not enhance the local motivation and morale between the employees in different overseas firms. They
may be restricted to follow the parent company's strategies, values, and decisions for their operations.
Moreover, the centralization of human resources will suitable for small-scale business than an
international scale. Because centralization decisions will suitable for different subsidiaries and their
worker. There is different cultural and context form other countries. So, the parent company cannot
develop suitable decisions regarding human resources based on customers' and workers' satisfaction. So,
the decisions related to the human resources department for international scale may depend upon the
different location and their culture.

To conclude, it can be said that human resource management is the backbone for every company either
national or international. The centralization of human resources decisions is crucial for multinational
companies on an international scale to control companies' workforce, complexity, and mitigate the
personnel-related issues in different subsidiaries located in a different location. But some issues related to
centralized decisions can diverse the mind from centralizing to decentralize. So, this is the best option to
select suitable approaches according to different subsidiary nation values, culture, and other conditions
base. The parent company will not face any circumstances related to the workforce and others in the
future.
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