Unit 5 Case

298 CASE 4 STRATEGIC FORECASTS AND STAFFING FORMULATION

CASE 4

STRATEGIC FORECASTS AND STAFFING FORMULATION: EXECUTIVE AND MANAGERIAL PLANNING FOR BOSCH-KAZAKHSTAN^

By M a r i o n Resting a n d M a n f r e d F r o e h l e c k e ^

Introduction

Personnel planning and staffing issues are critical suc-cess factors in foreign subsidiaries of multinational enterprises. They must be designed in the context of corporate goals and issues and the specific situation in the host country. From a firm-internal perspective, human capital/talent planning and staffing decisions are related to a co mpa ny’ s corporate strategy and e m b e d d e d in the corporate human resource strategy. Thus, planning and staffing decisions must be coordi – nated with other HR activities within the MNE, such as human resource development . This perspective must then be balanced with a careful consideration of the particularities in the host-country context and the avail-ability of qualified individuals within the external labor market.

In this case study, w e will first outline the company background and then describe the situation in the country of interest, which is Kazakhstan. Based on this information it Is y o u r p a r t t o t a k e t h e r o l e o f a B o s c h c o r p o r a t e H R m a n a g e r You are sup – posed to analyze both, the company and country-specific context, and outline a proposed model for personnel planning and staffing of the Bosch subsidi-ary in Kazakhstan. By drawing on the Ethnocentric, Polycentric, Regiocentric, Geocentric (EPRG) Model of Perlmutter (see Chapter 5), please decide which staffing strategy would be the best choice. Discuss on this basis h o w many expatriates and h o w many local employees you would plan in a short- or medium – term at the different hierarchical levels. If you should per-ceive any further information needs please explicitly define a realistic set of supporting assumptions . Please justify your decision. Which are the advantages and disadvantages of your decision?

Company Background: Robert

Bosch Groups

The Bosch Group is a leading global manufacturer of automotive and industrial technology, consumer g o o d s and building technology. It w a s founded in the year 1886 by Robert Bosch (1861 – 1942) and w a s called ‘Workshop for Precision Mechanics and Electri-cal Engineering’. The Bosch Group today comprises a manufacturing, sales and after-sales sen/ice network of over 3 5 0 subsidiaries and regional companies and more than 1 5 0 0 0 Bosch service centers in roughly 150 countries.” One statement by the founder Robert Bosch is important t o understand the HR philosophy characterizing this MNE: ‘It is my intention, apart from the alleviation of all kinds of suffering, to promote the moral, physical and intellectual development of the people’. In fiscal 20 1 0, some 283 507 employees gen – erated sales of 47 . 3 billion Euros.^

FIGURE 1 Bosch sales by region in 2010

Including other countries

Source; Robert Bosch GmbH (2011:18)

CASh 4 STRATEGIC FORECASTS AND STAFFING FORMULATION

299

TABLE 1 Bosch Employees by Region

Worldwide

2 8 3 5 0 7

Europe

186602

Of these in Germany

1 1 3 557

Americas

33689

Asia-Pacific (including other

6 3 2 1 6

regions)

Source: Robert Bosch GmbH (2011:19)

Even if 77 per cent’^ of the business volume has been generated outside Germany (see Figure 1), about 40 per cent of the total numbers of employees are working in Germany (see Table 1).

Executive and Managerial Planning (EMP)

The international executive and managerial planning (EMP) activity at Bosch is part of the Strategic Planning Process of the company . Once a year, the global ex-ecutive staffing needs for selected countries are derived from each division’s long – term strategic plan-ning activities. Starting from the current local structure, the required number of managerial positions is deter-mined within the parameters of a rolling eight-year forecast. Various measures are taken to meet the managerial staffing needs. They can be short – term (e.g. hiring of managerial staff from the external labor market, assignment of expatriates) or rather m e d i u m / long – term (e.g. development of high-potential employ – ees – see the employee development discussion below) or special programs like Junior Managers Pro-grams (JUMP).

The EMP is carried out using a standardized tool from the divisional HR department in cooperation with the various regional HR departments . Aggregated results are analyzed from division-, regional- and Robert Bosch World (corporate) levels. Continuous comparisons of the planned versus actual labor staff-ing situations provide feedback on those assignments which have to be initiated or redefined.

The planning period of eight years consists of two parts: The input for the first four years stems from business plans and succession planning. Forecast for the last four years is based on more global – macro

assumptions, e.g. changes in the leadership projected at a figure of 5 per cent. Therefore, EMP is linked to instruments of employee development in the Bosch Group .

Employee Development in the

Bosch Group

Bosch understands that employee development is a continuous process of maintaining and further devel-oping those employees qualifications needed to c o p e with present and future challenges, A major principle in this respect is the promotion of employees from within Bosch rather than the acquisition of new hires from outside.

HR departments support employees and m a n a g – ers by providing tools and programs and giving guid – ance. The universally standardized systems and processes for employee development are depicted in Figure 2.

An important procedure for the development of employees is the Management Potential Review (MED, see Figure 2)/, which is conducted on a worldwide level. It pursues the following objectives;

• Full utilization of the c o m p a n y ‘ s resePi‘es of high-potential employees without compromising performance standards.
• Staffing requirements and development planning (middle and upper management) for the upcoming four years (succession planning – see EMP above).
• Consistency in planning and a systematic tracking of employee development and career advancement measures.

• • Use of overseas assignments, project tasks, and cross-functional moves as c o m m o n development measures.

Employees w h o show an above-average development potential with regard to specialist and management positions will be systematically prepared for the next management level by way of the ‘Manager Develop-ment Plan’ (MDP). Besides outstanding performance, B o s c h expects ideal employees to meet a task or role-relevant personality profile, s h o w a preparedness to take on new tasks and greater responsibilities, general mobility potential as well as a willingness to take on

300 CASE 4 STRATEGIC FORECASTS AND STAFFING FORMULATION

FIGURE 2 Instruments of Employee Development

Performance discussion with each associate

Once a year between associate and supervisor

Individual development discussion upon request of

Associate, supervisor or HR department at greater intervals

Management potential review (MED) all associates

Once a year between supervisors and HR department

Results

Goal achievement over the past year Goal agreement for the coming year Feedback on performance Measures: maintaining/improving performance

Results

Associate’s personal development goals over the next three to five years

Strengths and growth potential Developmental activities

Results

Evaluating potential

Supplemental development activities Planning for staffing needs

Decision on admission to manager development plan (MDP)

Leadership development center

Results

new members of MDP

Potential analysis

Advice on strength and growth

potential

Suggestions for development and

career activities

Career advancement discussion only w i t h members of MDP

Subsequent to admission to MDP and (if possible) Subsequent to participation in leadership development center international assignments. MD P is a prerequisite for promotion into managerial ranks.

The preparation of the MD P candidates is a mixture of on-the-job and off-the-job measures with the goal

Results

Agreement of career advancement goals and suitable measures over a period of up to four years

of bringing the employees into the next management level in no more than four years. In many cases the achievement of the career advancement objective is connected with a transfer to a new assignment.

CASE 4 STRATEGIC FORECASTS AND STAFFING FORMULATiON

301

Talent Management

As stated before, Bosch mainly relies on hiring and developing talent from within the firm. Consequently, it is important to focus on the acquisition of qualified uni-versity graduates and professionals to meet a wider range of potential future managerial requirements. Besides direct entries and local programs, Bosch has a standardized Bosch – wide entry program for junior managers (JtJMP).^ The goal of the program is to recruit junior managers {master’s degree with up to three years of professional experience) with the poten – tial to assume a middle management position in six – eight years.

The program lasts one and a half to t w o years and is comprised of three to four stages, including a six-month stay abroad as well as a cross-divisional assignment. This form of training- emphasizes a c o m – m o n set of worldwide standards, experiences and activities, and is designed to permit more rigorous and systematic preparations for a range of management tasks .

Expatriates

Currently more than 2 2 0 0 expatriates^ are working for Bosch worldwide . An expatriate, as defined by Bosch, is an employee working for more than 24 month out – side his or her home country with special contractual conditions (contract in the host country for a limited period of time – normally three to five years – special allowances for hardship, cost of living, etc.). Over 1100 Germans are working in more than 4 0 countries, approximately 400 employees from Bosch subsidia-ries are working in Germany (inpatriates) and roughly 4 0 0 Third Country Nationals (TCNs) are assigned to locations outside their home countries for limited peri-ods of time. A majority of these employees were assigned due to technical and process expertise, yet s o m e assignments were made for career development or training reasons. T w o thirds of the expatriates are assigned in managerial fspks.

Bosch requires all top managers, beside their other experiences, to have at least t w o years’ international w o r k i n g experience. This \nt.ernafena\e is an

explicit prerequisite for promotion .

Country-Specific features of Kazakhstan”^ ^

Kazakhstan is located in Central Asia with China, Russia, Kyrgyzstan, Turkmenistan, and Uzbekistan as neighbor states (as s h o w n in Figure 3 below). It covers a total of 2 727 3 0 0 sq . k m .

The population is 16 . 4m . inhabitants (January 1, 2011) including a wide ethnic diversity (with 64 . 03 per cent Kazakhs, 24.78 per cent Russians and Ukrainians, 11.19 per cent other ethnic minorities). 54 . 5 per cent live in cities . ” Main religions are Islam (70.2 per cent) and Christianity (26.2 per cent).”^ The state language is Kazakh but Russian is used in everyday business by most of the people and has a status of an official language. Kazakhstan became independent from the former Soviet Union in 1991 and is now is a republic characterized by an authoritarian presidential rule. The capital is Astana.

EcOROmic data; The economic situation of the country can be described by a GDP of roughly 148.1 billion US Dollars in 2 0 1 0 versus 115.3 billion US Dol-lars in 2009 . The country has an unemployment rate of 5.8 per cent (2010), an economically active population of 8.6 million persons and comparably low labor cost. The average salary equaled in 2 0 1 0 to about 527 US Dollars per month . The export volume in 2 0 1 0 amounted to 59 . 8 billion US Dollars.^’* Main exports include oil, ferrous and nonferrous metals, machinery, chemicals, grain, wool, meat and coal.

Education system: The education system is one of the major concerns of the country. However, this was not reflected in the public expenses for education. Today, the education system consists to a high degree of private education institutions. Funding of research is low and these institutions are dependent on foreign investments. However, a reform of the education sys – tem is one part of the strategic planning of the Kazakh Republic. To date, the Universities have been restruc-t u r e d according to the gudeUnes of the Botogna

Reform. Even if a relatively high number of persons hold a University degree, companies have problems finding adequately prepared personnel that have sW«is sets which correspond t o the c o m p a n y ‘ s needs.

302 CASE 4 STRATEGIC FORECASTS AND STAFFING FORMULATION

FIGURE 3 Kazakhstan’s geographic location

Your Task: Executive and Managerial Planning (EMP) for a subsidiary in Kazakhstan^ ^

The Board of Management of the Bosch Group has requested an EMP for Kazakhstan in line with the yearly Strategic Long – term – planning (eight years fore-cast – see the third section above). The plan should predict the d e m a n d for executive staffing at all levels and for all divisions. It should also specify how the d e m a n d will be met, including staffing sources such as the use of expatriates, local management develop-ment plans (MDPs), special programs, e.g. J U M P or external hires.

As seen from Bosch’s corporate perspective, the situation in Kazakhstan is as follows:

• • • There are four production sites in different rural locations. Each one belongs to a different product division: Gasoline, Bosch – Rexroth, Security Systems and Diesel motors .

• • • Organizations are characterized by different market/product maturity stages: Gasoline, Bosch – Rexroth, Security Systems are consolidated. Only a small or no growth in headcount is planned over the next ten years. In contrast, Diesel is still growing fast (present headcount plus 30 per cent estimated in the next three years).

CASE 4 STRATEGIC FORECASTS AND STAFFING FORMULATION

FIGURE 4 Form for situation analysis

Case Study: Executive and Managerial Planning Kazakhsta n

(D Describe the corporate philosophy

Scan environmental conditions

Evaluate corporate strengths and constraints

Develop objectives and goals

Develop strategies

The labor market for qualified managers and specialists is very small. External tiires in Kazakhistan will take muchi longer to begin w o r k than in equivalent hiring processes operating in Germany. Local candidates have very little mobility and largely lack broader national or international experiences.

• Bosch’s major production sites are by and large not attractive locations to most qualified employees.

The high numbers of expatriates were the result of the rapid in-country growth especially for the Diesel site. Higher management positions are currently all filled by expatriates.

Taking the role of HR manager at Bosch you must address the following three questions:

Considering the facts about Kazakhstan, please discuss which staffing strategy – according to the EPRG Model by Perlmutter – would be the most suitable for Kazakhstan. Please justify your answer.

j

i l BOSCH

C o m m e n t on advantages and disadvantages of your decision.

Analyze the c o m p a n y and country-specific situation by using the steps outlined in Figure 4. Plan the number and nature of short/medium – term ( 2 0 1 3 – 2 0 1 6 as well as long-term (2017 – 2020) staffing requirements for Bosch Kazakhstan in analogy to the strategic c o m p a n y goals. The staffing plan should consider the sources of staffing (expatriates, employees of the local Management Development plan or special programs such as the J M P program or external local staff).

Fill in your figures in the planning chart below (see Figure 5).

Finally, prepare an action plan describing how you will meet managerial staffing targets. Look especially at information provided in the ‘Employee development’ and ‘Talent management’ sections of the case for activities and timetables. Write d o w n your action plan.”®

304 CASE 4 STRATEGIC FORECASTS AND STAFFING FORMULATION

FIGURE 5 Planning chart

Staffing need

Current 2013-2016

Prognosis 2017-2020

Sources

1 I M

Ij MM

1 UM

LM

I MM

1 UM

Total

Expatriates

Local MDP attendents

Development Program (JMP)

External hires

Total Staffing need

7 4

3 5

2

5 4

3 6

2

2 0 3

Source: List of Bosch-specific abbreviations and definitions:

MDP/DG: Management-Developing-Program/Development Group JMP = Junior Managers Program

LM = Lower Management, MM = Middle Management, UM = Upper Management

N O T E S A N D R E F E R E N C E S

1 . Tlie case study is imaginary. Boscti tias no such activities in Kazakhstan. However, the described HR measures reflect current practices within this MNE.

Marion Resting is Professor of Human Resource Management and Intercultural Leadership, ESCP Europe, Berlin/Germany; Manfred Froehlecke, Vice President, Corporate Department Human Resources Management – Executives, Robert Bosch GmbH, Stultgart/Germany.

See also www.bosch.com and Robert Bosch GmbH. (2011). Annual Report 2010. Retrieved October 10, 2011, from http://www.bosch.com/worldsite_startpage/ flashbool</GB2010„EN. pdf.

• Robert Bosch GmbH (2011:41, 80).

Robert Bosch GmbH (2011:19, 82),

Robert Bosch GmbH (2011:139)

MED is the German abbreviation for “Mitarbeiterentwicklungs-Durchsprache” or in English “Management Potontial Review”.

The standardized entry Program JUMP is still in the implementation phase. Other – comparable programs, e.g.. Management Trainee Programs, have been in place for some time.

Robert Bosch GmbH (2011: 59)

• This section is mainly based on Agency of Statistics of the Republic of Kazakhstan (2011 a). Demographic Yearbook of Kazakhstan [in Russian). Retrieved November 18,

2011, from http://www,stat.i<z/publishing/20111/ Dem2010.rar and Agency of Statistics of the Republic of Kazakhstan (2011 b). Kazakhstan in 2010, Retrieved November 18, 2011, from http://www.eng.stat.kz/ publishing/DocLib/2011/Statyear2010.pdf.

1 1 . Agency of Statistics of the Republic of Kazakhstan (20118:8,25). _

• Agency of Statistics of the Republic of Kazakhstan (2010). 2009 Population Census Results [in Russian], Retrieved Retrieved November 18, 2011, from http:// wwwy.stat.kz/news/Pages/n2_12_11 _10.aspx,
• Agency of Statistics of the Republic of Kazakhstan (2011b: 9,10,167,400).
• The case study is imaginary, Bosch has no such activities in Kazakhstan.
• The Case Study is simpilfied. A detailed planning of functional areas Is not the intent of this case exercise. The student should learn to ask the right questions about how to source manpower, what challenges the company faces in a difficult environment and what measures must be taken to meet the future demands.

 

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