CHAPTER I INTRODUCTION

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1 CHAPTER I INTRODUCTION The International arena of business has in the recent decades been faced with changes guiding businesses and industries into more global. New markets for Multinational Companies (MNCs) have emerged through increased competition and globalization, improved communication technology as well as converging consumer habits and tastes. (Martinez & Quelch, 1996). Thus, to handle the influx of international competition, MNCs have recognized the increased importance of an efficient and effective organization (Pucik, 1998). In a global market where competition is constantly growing, organizations need to staff employees from the home country company in the subsidiaries abroad in order to create a local presence and sustain the international competition which is referred to as expatriation. In order for MNCs to utilize the benefits of international experience, they should ensure that repatriates stay with them upon return from their international postings. Unfortunately, many global organizations complain of disconcertingly low retention rates, and characterize repatriation as one of their greatest human resource challenges. Repatriates knowledge and expertise are created and reside within the person s mind, and therefore remain person-bound (Bender and Fish, 2000). When repatriates leave, the company is losing their knowledge and newly developed skills, quite probably to competitors (Jana, 2000; Poe, 2000; Caligiuri and Lazarova, 2001; Lazarova and Tarique, 2005). High turnover rates among repatriates also have a potentially negative influence on the desire of new cadre to volunteer for international assignments (Tung, 1988). Thus, the purpose of this thesis is to contribute with an understanding of problems which repatriates encounter during their repatriation and how the repatriation process can be improved. 1.1 INTRODUCTION ON MULTINATIONAL COMPANIES IN INDIA (MNCs ) Multinational Company or Corporation (MNC) is any company that manages its operation or production or service delivery from more than a single country. Such a company is even known as international company or corporation. As defined by I.L.O. (International Labor 1

2 Organization), a M.N.C. has its operational headquarters based in one country with several other operating branches in different other countries. The country where the head quarter is located is called the home country whereas the other countries with operational branches are called the host countries. After the liberalization in 1991, it has brought in hosts of foreign companies in India and the share of U.S shows the highest. They account about 37% of the turnover from top 20 companies that function in India. 1.2 HISTORY OF MNC According to Franklin Root (1994), an MNC is a parent company that engages in foreign production through its affiliates located in several countries, exercising direct control over the policies. These corporations originated early in 20 th century and expanded after World War II. Almost all the earliest and largest MNC s were American, Japanese or West European. Its structure can be Horizontally integrated, vertically integrated and diversified MNC s. Organizations of MNC s are subsidiaries, joint venture, franchise holders and turnkey project. TABLE 1.1: LIST OF TOP 10 FORTUNE 500 COMPANIES WORLD WIDE (2013) Rank Company Revenues ($ millions) Profits ($ millions) Nature No. of Employees 1 2 Royal Dutch Shell, Netherlands Wal-Mart Stores, U.S Petrochemicals 87, Retail 2,200,000 3 Exon Mobil, U.S Oil & Gas 88, Sinopec Group, China China National Petroleum, China Oil & Gas 10,15, Oil & Gas 16,56,465 6 BP, Britain Oil & Gas 85,700 7 State Grid, China Electricity/Power 8,49, Toyota Motor, Japan Volkswagen, Germany Automobile 3,33, Automobile 54, TOTAL, France Oil & Gas 97,126 Source: Secondary data; 2

3 1.3 MNCs in INDIA A Multinational Corporation (MNC) or Multinational Enterprise (MNE) is organization that owns or controls production or service facilities in one or more countries other than the home country. India is ranked as 10 th largest economy, 4 th largest in terms of purchasing power parity with 1 billion population. GDP is growing at 7-9% making it one of the fast growing economies in the world. First MNC in India is EAST INDIA Company in American companies account for 37% of the turnover of the top firms operating in India. Finnish mobile handset manufacturing giant Nokia is the largest MultiCorporation in India. Italian automobile giants like Fiat, Ford, Piaggo expanded their operations in India. South Korean Electronics giant Samsung, LG electronics and mid-segment car Hyundai are operating in India. Rank Table 1.2: LIST OF FORTUNE GLOBAL 500 MNCS LOCATED IN INDIA (2013) Company GLOBAL 500 RANK City Revenues ($ millions millions) 1 Indian oil 88 New Delhi Reliance industries 107 Mumbai Bharat Petroleum 229 Mumbai Hindustan Petroleum 260 Mumbai State Bank of India 298 Mumbai Tata Motors 316 Mumbai Oil & Natural Gas 369 Deharadun Tata Steel 471 Mumbai 24.8 Source: Secondary data; HISTORY OF IT MNCs IN INDIA Information technology in India is an industry consisting of two major components: IT Services and business process outsourcing (BPO). The sector has increased its contribution to India's GDP from 1.2% in 1998 to 7.5% in According to NASSCOM, the sector aggregated revenues of US$100 billion in 2012, where export and domestic revenue stood at US$69.1 billion and US$31.7 billion respectively, growing by over 9%. The major cities that account for about nearly 90% of the sector's exports are Bangalore, Chennai, Kolkata, Hyderabad, Trivandrum, Noida, Mumbai and Pune. Bangalore is considered to be the Silicon Valley of India because it is the leading IT exporter. According to Gartner, the 3

4 "Top Five Indian IT Services Providers" are Tata Consultancy Services, Infosys, Cognizant, Wipro and HCL Technologies. The first center, the National Centre for Software Development and Computing Techniques (from 1973 onward) was at the Tata Institute of Fundamental Research in Mumbai and was focused on software development. The National Informatics Centre was established in March The inception of The Computer Maintenance Company (CMC) followed in October From 1977 to 1980, the country's Information Technology companies Tata Infotech, ProcSys, Patni Computer Systems and Wipro had become visible. The 1999 government which placed the development of Information Technology among its top five priorities formed the Indian National Task Force on Information Technology and Software Development. TABLE 1.3: "BIG FIVE" IT SERVICES COMPANIES Firm Revenues Employees Fiscal Year Headquarters Tata Consulting services $11.57 billion 254, Mumbai Cognizant Technology Teaneck, New $7.05 billion 185, Solutions Jersy Infosys $6.69 billion 153, Bangalore Wipro $6.87 billion 140, Bangalore HCL Technologies $4.3 billion 85, Noida Source: Secondary data; IT MNC s TAKEN FOR THIS STUDY Towards this research, the researcher has taken top 10 IT MNCs which is listed by NASSCOM. TABLE 1.4 LIST OF IT MNC S S.NO. COMPANY NAME RANK ( ) 1 Tata Consultancy Services Ltd 1 2 Infosys Ltd 2 3 Wipro Ltd 3 4 HCL Technologies Ltd 4 5 Mahindra IT & Business services 5 6 MphasiS Ltd 6 7 igate 7 8 Larsen & Toubro Infotech Ltd 8 9 Syntel Ltd 9 10 CSC, India 10 Source: Secondary data; 4

5 a. Tata Consultancy Services Limited (TCS) is an Indian Multinational Information Technology (IT) services, business solutions and outsourcing services company headquartered in Mumbai, Maharashtra. TCS is a subsidiary of the Tata Group and is listed on the Bombay Stock Exchange and the National Stock Exchange of India. It is one of India's most valuable companies and is the largest India-based IT services company by 2012 revenues. b. Infosys Limited (formerly Infosys Technologies Limited) is an Indian multinational provider of business consulting, technology, engineering, and outsourcing services. It is headquartered in Bangalore, Karnataka. Infosys has global offices in Europe, South America, North America and India. Infosys has a global footprint with sales offices in 29 countries and development centers in India, US, China, Australia, UK, Canada, Japan and many other countries. Infosys has over 153,761 employees of 95 nationalities. c. Wipro Limited (formerly Western India Products Limited) is an Indian multinational provider of information technology (IT) services, consulting and outsourcing services. It is headquartered in Bangalore, Karnataka, India. As of 2012, the company has over 130,000 employees and a worldwide presence with global centers across 54 countries. d. HCL Technologies Limited (HCL) is an Indian provider of Information technology (IT) services and consulting company headquartered in Noida, Uttar Pradesh, India. It is primarily engaged in providing a range of outsourcing services, business processes outsourcing and infrastructure services. HCL Technologies is the fourth largest IT company in India and is ranked 48 in the global list of IT services providers. e. Mahindra Satyam IT & Business Services formerly Satyam Computer Services, is an Indian IT services company based in Hyderabad, India. It was founded in 1987 by B Ramalinga Raju. Mahindra Satyam is a part of the Mahindra Group which is one of the top 10 industrial firms based in India. The company offers consulting and information technology (IT) services. f. MphasiS, a unit of Hewlett-Packard Co., is an information technology services company based in Bangalore, India. MphasiS is certified with ISO 9001:2008, ISO/IEC 27001:2005 and is assessed at CMMI v 1.2 Level 5. MphasiS is ranked #7 in India IT 5

6 companies and overall #165 by Fortune India 500 in 2011 with more than 40,000 employees as of The company has 29 offices in 14 countries with delivery centers in India, Sri Lanka, China, North America and Europe. g. L&T Infotech (Larsen & Toubro Infotech), a subsidiary of L&T (Larsen & Toubro), is a global IT Services and Solutions Provider Company based in Mumbai, India. L&T Infotech is ranked #8 in India IT companies in The company has 39 registered offices in 22 countries. h. Syntel, Inc. is a U.S. based multinational provider of integrated technology and business services. Headquartered in Troy, Michigan, Syntel services its clients through 16 global development centers in India and the United States. As of September 30, 2013, Syntel had over 22,936 employees and annual revenues in excess of $723 million. Syntel has 16,000+ employees in India. Syntel was founded in Troy, Michigan in 1980 with an initial investment of $2,000 by Bharat Desai, and his wife, Neerja Sethi. Syntel's global headquarters is located in Troy, Michigan, in suburban Detroit, but has 27 worldwide facilities located in the U.S., UK, Germany, Singapore, Australia, and Hong Kong. The company's 12 offshore software development centers are located in Mumbai, Chennai, Gurgaon and Pune, India. i. CSC, started it s journey in India began in 1991 and have been continuously expanding and establishing the presence ever since. Currently the company strategically located in seven cities in India including Noida, Indore, Hyderabad, Chennai, Mumbai, Bangalore and Vadodara. With more than 24,000 employees including 3,000 in other geographies that support our India operations, one of the Top 10 IT services firms in India and also CSC's second largest operations globally. Services includes applications development and product support, infrastructure services and BPO services. CSC India has been recognised consistently in many best employer award categories. 1.6 RESEARCH QUESTIONS The purpose of this study is to gain a deeper understanding of problems faced by repatriates and International Human Resource Manager in IT MNCs towards retention of repatriates. To fulfill the purpose of present study, the following research questions were addressed. 6

7 Research question 1: How can the repatriation measures adopted by IT MNCs prior to employees departure for international assignment, during expatriates assignments and after repatriates departure be described? Research question 2: Whether there is any change in repatriates career, compensation, standard of living and social status, cultural shock before and after international assignment? Research question 3: What support initiatives are taken by IT MNCs to improve ROI towards retention of repatriates? 1.7 STATEMENT OF THE PROBLEM The increased internalization of business has made the understanding of International Human Resource Management problems important for executives in IT MNC. When IT MNC think about repatriation, the common opinion is all employees are coming home, so what special adjustment difficulties could they have? The majority of repatriated employees are dissatisfied with the repatriation process which is supported by Black & Gregersen (1999). Hence, the researcher identified repatriation as a problematic process in International Human Resource Management. Further, repatriation is often an overlooked aspect of global work assignment. Studies of International Human Resource Management focus predominantly on expatriate adjustment in the country of assignment and less attention has been paid to prepare the employees for returning home. Following facts supports this: a. Repatriation adjustment is more difficult than expatriate adjustment (Adler 1981;Clague Krupp 1978; Howard 1980;Murray 1978). b. Significant majority of repatriated employees are dissatisfied with the repatriation process (Gomez- Mejia & Balkin 1987; Napier & Petersen 1991). c. Approximately 25% of repatriated employees leave their firm within 1 year of repatriation (Black 1989). Based on the facts, the researcher identified retention of repatriates is a difficult process to be dealt with. Hence, the researcher decided to study retention of repatriates. The study was further narrowed down by analysing both repatriates and International Human Resource 7

8 Managers at 3 stages i.e. before, during and after International assignments towards retention of repatriates. 1.8 NEED FOR THE STUDY Retaining repatriates from global assignments in this competitive world is very difficult unless the company adopts some international strategy as the gain of global expertise through global assignments. The related knowledge transfer implications are essential. This has resulted in a renewed focus on the repatriation of employees and the importance of retaining returning expatriates. Repatriation is although often a disregarded aspect of global work assignments when it comes to research. More attention in international studies is on expatriate adjustment in the country of assignment and less focus lies on the preparation of the employees returning home. Expatriation offers the opportunity to acquire knowledge but repatriation creates the opportunity to transfer this knowledge back to the home country and implement it into the organization. Research shows that the difficulties of repatriation adjustment and that the majority of repatriated employees are dissatisfied with the repatriation process. The globalization of economies conveys large amounts of invested capital in personal and growing incidents of foreign postings. More analytical information is hence needed for managers to inform about what actions should be taken and which can produce the most advantageous results. The attrition rate of employees returning from international assignments is a matter of great concern if the assignment is used for development of high potential employees, meeting immediate project strategic needs, and/or meeting strategic needs by building a pool of employees for international assignments. Thus, the aim of the study is to further examine how IT MNCs can retain repatriates. Both repatriates and International Human Resource Manager s opinion towards repatriation process were analysed in 3 stages before, during and after international assignments. Secondly, this study focuses on the importance of various variables towards repatriate s retention in IT MNCs. Finally, this study can help firms to better manage their repatriated employees. 8

9 1.9 SCOPE OF THE STUDY The scope of this study extends to 3 perspectives Employees before International Assignment MNCs send employees overseas for transferring skills to local employees, maintaining corporate control and starting a new operation. Selection of highly qualified employees for expatriation might be important to ensure successful overseas performance by looking at both the technical and human relation perspectives (Dowling et al, 1999, 1988). Thus, this study extends to understand how IT MNCs depute employees to International Assignment Expatriates During International Assignment (Expatriation) This study pertains to the problems faced by Expatriates during expatriation by considering previous reviews as base. Tung (1988) explored that a mentor from the home organization should be selected to have the responsibility for monitoring the expatriate career path. During expatriation, organizations can assign sponsors, or contact persons, for expatriates, who are only responsible for communication with the expatriates. Career planning of expatriates should be conducted carefully from a realistic perspective with regard to repatriation, and overseas assignment should be linked to long-term career plans (Andreason & Kinneer, 2005; Caligiuri & Lazarova, 2000; Jassawalla et al., 2004; Lazarova & Caligiuri, 2000; O Sullivan, 2002). Expatriates should put an effort to maintain contact with their social and job related networks, especially with possible future supervisors who may offer them good job opportunities. In short, they should be proactive in career development and maintain visibility of business circles in order to avoid job related disappointment. They can also put extra energy for keeping up-to-date about occurrences and problems in their home countries, as well as about the changes in their parent organizations. Finally, they should not trust HR systems of their organizations too much, instead they should claim the responsibility of their possible problems (Andreason & Kinneer, 2005; Liu, 2005; Peltonen, 1997). 9

10 1.9.3 Repatriates After International Assignment (Repatriation) After their return, organizations should put extra effort in maintaining quality of interaction, being flexible in process, utilizing repatriates as trainers, providing them the personal and career counseling, relocation and financial assistance. They should finally provide support to spouses and children. (Andreason & Kinneer, 2005; Caligiuri & Lazarova, 2000; Jassawalla et al., 2004, Lazarova & Tarique, 2005, Morgan et al., 2004; Stroh et al., 1998). On the other hand, many organizations do not make special efforts for their returning expatriates. Dunlap-Hinkler and Parente (2004) mentioned that, according to the annual survey of Organizational Resource Counselors in 1998, 76% of the organizations had no formalized repatriation policies, even though expatriation policies were generally very strong (Baruch et al., 2002; Stahl & Cerdin, 2004). During repatriation, repatriates should first try to change their perspective and realize that repatriation may be a backward step in one s career. They should make personal attempts for resocialization, try to stay informed about changes, and contact with previous repatriates to observe them as role models who know possible negative experiences upon return. In addition, instead of criticizing and humiliating their home countries, they should try to combine best aspects of foreign and home cultures. They should also be aware of the fact that apart from their country, organizations and friends, they themselves have also changed to some extent during the international experience. Finally, they should try to remain patient and flexible during adjustment, to achieve better results (Andreason & Kinneer, 2005; Bossard & Peterson, 2005; Liu, 2005; MacDonald & Arthur, 2003; Peltonen, 1997) OBJECTIVES OF THE STUDY Primary Objective To identify and analyze the opinion of repatriates and also International Human Resource Managers towards retention of repatriates in IT MNCs with special reference to Chennai city Secondary Objectives To identify the challenges faced by repatriates before, during and after international assignment. 10

11 To analyse the impact of career development, financial implication, cross-cultural preparation, and job assignment of repatriates before, during and after foreign assignment. To explore the problems faced by repatriates after repatriation. To analyze the International Human Resource mangers opinion towards retention of repatriates. To findout the reasons for International Assignees attrition and to study the support initiatives to improve ROI towards International Assignment. To suggest appropriate measures for the retention of repatriates in IT MNCs in the globalised competition LIMITATIONS OF THE STUDY The study was restricted to repatriates who work for IT MNCs in Chennai city only. Due to time and cost factor, the sample size was restricted to 500 repatriates. The sample is only made up of repatriates who continue working in IT MNCs CHAPTER ARRANGEMENTS This study is organized into six chapters. Chapter 1: Introduction This chapter provides an introduction to Multinational Corporation, its evolution, history of IT MNCs in India. The background directs to the problem discussion, need, scope, research questions, objectives of the study and limitations which in turn leads to the formulation of the purpose of this thesis. Chapter 2: An Insight into Repatriation It gives an overview on basic concepts of repatriation, models of repatriation, theories of repatriation, factors that influence repatriates to leave the organization after international assignment and stages of repatriation. 11

12 Chapter 3: Literature Review It focuses on the various reviews on aspects pertinent to repatriates retention at 3 stages before, during and after international assignment. Chapter 4: Research Methodology This part gives an understanding of how the research has been conducted. It provides a detailed description of the research methodology used, namely, the research design, sampling technique, data collection procedure and statistics used for analysis. Chapter 5: Data analysis and interpretation This chapter is divided into two parts. Part one deals with repatriates opinion on problems faced by them before, during and after international assignment. Part two presents the International Human resource managers opinion on retention of repatriates. Various statistical tools like factor analysis, cluster analysis, chi-square, t-test, and ANOVA, correlation, regression, Z-test and discriminant analysis were used. Chapter 6: Summary of findings, suggestions and conclusion Finally this chapter summarizes the findings, suggestions & conclusions of the study. The implications for further research were also presented CONCLUSION This chapter provides a greater understanding towards introduction on MNC s, History of MNC, MNCs in India, history of IT MNCs in India, IT MNCs taken for study, research questions, statement of problem, need for the study, scope of the study, objectives of the study, limitations of the study were explained. Following chapter deals with theoretical background on principles of repatriation & stages of repatriation. 12