Running Head: Employment Strategic Analysis
The purpose of this paper is to find out how the similarities and difference in culture, economic and political environment that affects the operation of the business in Poland. We have to compare the two different cultures (American and Polish) and find out if what may be the possible outcome of such differences, how will it affect the business and what adjustments are possible. Moreover, the government policy and economic condition promoting and safe guarding international business are also an important factor. Being specific, our purpose create understanding, if establishing our new plant in Poland is a good business decision, allowing us with the opportunity to grow and expand. Our analysis will be based on our findings of general characteristics, economic conditions and various personal, organizational and governmental considerations.
GENERAL CHARACTERISTICS:
Poland is an ancient nation that was conceived near the middle of the 10th century. Its golden age occurred in the 16th century. During the following century, the strengthening of the gentry and internal disorders weaned the nation. In a series of agreement between 1772 and 1795, Russia, Prussia, and Austria partitioned Poland amongst themselves. Poland regained its independence in 1981 only to be overrun by Germany and the Soviet Union in the World War II. It became a Soviet satellite state following the war, but its government was comparatively tolerant and progressive. Labor turmoil in 1980 led to the formation of the independent trade union “Solidarity” that over time became a political force and by 1990 had swept parliamentary elections and presidency. A “shock therapy” program during the early 1990s enabled the country to transform its economy into one of the most robust in Central Europe, but Poland still faces the lingering challenges of high unemployment, underdeveloped and dilapidated infrastructure, and a poor rural underclass. Solidarity suffered a major defeat in the 2001 parliamentary elections when it failed to elect a single deputy to the lower house of Parliament, and the new leaders of the Solidarity Trade Union subsequently pledged to reduce the Trade Union’s political role. Poland joined NATO in 1999 and the European Union in 2004. With its transformation to a democratic, market-oriented country largely completed, Poland is increasingly active member of Euro-Atlantic organizations with parliamentary democratic government.
Poland is located in the central Europe at the east of Germany. The capital of Poland is Warsaw which is one of the largest cities in Poland. The border countries are Belarus, Czech Republic, Germany, Lithuania, Russia, Slovakia and Ukraine. Poland covers the total area of 312,685 sq km in which the land coverage is 304,255 sq km and water coverage is about 8,430 sq km. The natural resources of Poland are coal, sulfur, copper, natural gas, silver, lead, salt, amber, arable land, etc. The arable use of land in Poland is about 40.25%, land use for permanent crops is about 1%.
The total population of Poland is about 38,482, 919 (July 2009 est.). While talking about the age structure, 71.6% of the total population are 15-64 years, 15% are 0-14 years and 13.4% of the population are 65 years and over. The population growth rate of the country is -0.047% (2009 est), the birth rate is about 10.04 births/1,000 population whereas death rate is about 10.05/1,000 population. The urban population of Poland is 61% of total population. According to the 2002 census, the ethnic groups in the nation are divided as: Polish 96.7%, German 0.4%, Belarusian 0.1%, Ukraine 0.1%, other and unspecified is about 2.7%. While talking about religion, about 89.8% are the Roman Catholic; Eastern Orthodox 1.3%, Protestants 0.3%, other 0.3% and unspecified is 2.2%. The Polish language is spoken by overall 97.8% of the total population whereas other and unspecified languages are spoken by 2.2%. The literacy rate of the Polish population is 99.8% where male literacy rate is 99.8% and female is 99.7%. Poland has democratic republic government. The school life expectancy (primary to tertiary education) totals 15 years: male is about 15 years and female is 16 years. The total education expenditure was 5.5% of the total GDP in the year 2005. The GDP (purchasing power parity) is almost $690.1 billion in 2009 and the GDP (official exchange rate) is $427.9 billion (2009 est). The GDP-real growth rate is 1.7% and the GDP-per capita is $17,900. The total labor force in 2009 estimates about 16.99 million among which the agricultural labor force is 17.4%, industrial is 29.2% and services are 53.4% in the year 2005. 1 U.S dollars is equivalent to 3.1 zloty with the import of 26305,0 million USD and export of 23814,2 USD. The unemployment rate according to the 2010, January estimates 8.9%. The population below the poverty line in Poland is about 17%.
The principle industries of Poland are mining and manufacturing. Coal mining has been a traditional employer of thousands living in the regions of Upper and Lower Silesia. Poland is also mining lignite, used as a fossil fuel for power generation. Poland is the third sulphur producer in the world and had produced 1.247 million tons in 1999. In western Poland, around the town of Lubin, copper is mined. Poland was the world’s eighth largest copper producer in 1999 and copper is a major export commodity but as the world demand is slowing down, it does not encourage further expansion of mines in Poland. The manufacturing sector of Poland has been undergoing major restructuring since 1990. Due to the changes in the political and economic system, many industries are forced to compete on the market rather than having their production and prices set by the government. Steel manufacturing continues at modernized mills near Cracow and in Silesia in southern Poland. Demand for steel comes from the automotive industry and shipbuilding. Some of the car plants including the Italian Fiat and GM are located in Silesia. Volkswagen operates a new plant in Poznan and Daewoo operates in Warsaw. The shipbuilding industry continues to build vessels in Szczecin, Gydnia, and Gdansk located in Baltic Sea. There is a large demand for steel that is represented by the construction industry. Besides steel, Poland is a producer of aluminum, lead and zinc. Fuel, oil, gasoline, and lubricants are also some of the products produces by the oil processing industry in Poland. Fertilizers such as phosphorous and nitrogen, are produced at the several locations in Poland. The chemical industry produces a number of goods including sulphuric acid, synthetic fibers, synthetic organic dyes and cautic soda. Poland increased the production of refrigerators, automatic washing machines, computer systems, and electronic calculating equipments as well as television sets in the 1990s.
Source:
2. ECONOMIC CONDITIONS:
STANDARD OF LIVING:
The 2007 Social Diagnosis study indicates Poland's living standards are rapidly improving. According to Dziennik, the unemployment issue is being resolved, poverty is at a lower level and safety in Poland is better than it has ever been. According to Dziennik, Poles are wealthier, happier, and more optimistic about the future. The fourth Social Diagnosis study about Poland's standard of living has surprised everyone. Poland is now viewed as being half way between transformation and stabilization. The findings indicate that those living below the poverty line (earnings of less than 360 zloty per month) have fallen to 4.8 percent. This is three percent less than what the survey indicated two years ago. Poles are happier with their financial situation, no longer fear loss of employment and are happy with the way the economy is developing. The improvement in their financial situation means that Poles can now afford more than the bare essentials. The sales of books, movie tickets, theater tickets, magazines and newspapers have all increased in the last two years. Break-ins and robberies have also fallen by 30 percent, increasing the general consensus that Poland is becoming a safer place to live. The cost of living is low in compared to countries in EU which is accompanied by low income and pay.At the beginning of 2008 Polish Zloty started to strengthen significantly. But with the global economic downturn also influenced also Polish economy and the polish currency became weaker and EUR or USD reached its previous purchasing power.
Despite the positive findings by the study, there are also some downfalls. Poles are more likely to divorce than two years ago and maintaining contact with their children is also on the decline. Friendships are beginning to suffer due to lack of time and Poles are becoming increasingly more distrusting of strangers. All signs of a society developing along the lines of a Western model.
INCOME DITRIBUTION:
Poland is changing from an economy where the state sector, dominated to one where the economy is controlled privately. In 1989, 95 percent of those employed were in the state sector, which generated 90 percent of the gross domestic product (GDP) and received 85 percent of individuals' investment funds. By 1997, 67 percent of those employed were in the private sector, which was producing 63 percent of the GDP. In 1999, the private sector, generated about 70 percent of economic activity.
Currently there are six strata or groupings: peasants, workers, intelligentsia, szlachta (nobles or gentry), the nomenclatura (the ruling group during the existence of the communist government), and a nascent middle class. The workers and intelligentsia have increased both numerically and proportionately. The ruling class that held power during Communist rule is fighting to regain political power and maintain economic power. The szlachta may still constitute some 10 to 15 percent of the population, but their significance has been practically eliminated. People starting businesses are just beginning to differentiate themselves. The income distribution of Polish income can be described through following diagram:
Income distribution in Poland
WAGE LEVEL:
The wage level of Poland is comparatively lower than United States. The main reason why wage levels are much lower in emerging economies than, for instance, the United States or the EU-15 is that productivity is also lower. From the producer's perspective, labor compensation should bear some relation to the amount of output per employee, in other words to labor productivity. This happens because both wages and productivity are lower in the emerging economy. For instance, in 2002, the labor compensation per hour in Polish manufacturing was 14.2 percent of the U.S. level. But productivity was also lower at 19.4 percent of the U.S. level. As a result, unit labor cost in Poland amounted to 73 percent of that in the United States, which still suggests a competitive advantage for Poland but one that is much smaller than relative wage levels alone would suggest.
The size of the unit labor cost gap obviously depends on how the labor compensation gap and the productivity gap compare. Generally, the gap in labor productivity between emerging economies on the one hand, and the United States and other advanced countries on the other hand, is smaller than the wage gap which gives the emerging economies an advantage in unit labor cost. Global companies are likely to operate at smaller wage margins among their plants in different countries, and therefore pay wages at much higher levels than domestically owned plants in emerging economies. Is it also true that the huge labor compensation gap between the United States and emerging economies is not only due to the latter's low wages, but also because U.S. manufacturing wages are the highest in the world. Poland is one of the country with the lowest wage rate in EU.
EMPLOYMENT RATE:
Poland is a country with the smallest growth of unemployment rate among young people. According to a report by Eurostat, in the first quarter of 2009 five million young people in the European Union, between 15 and 24, were unemployed. The rate rose by 0.9 percent from December 2009 and is the highest since in Poland May 2007 when it reached 13 percent. Youth unemployment rate in Poland inccreased from 17.8 percent to 18.2 percent. In Poland, the total unemployment rate is still quite high which is 18 percent. With the Global economy experiencing a serious downturn, in 2009 approximately every fifth young person in Poland did not have a job. The overall unemployment rate in 2010 is 11%. However, with the economic and political liberalization there is increasing employment rate of women and minorities accompanied by highly skilled youth generation in Poland.
DETERMINATION OF WAGES:
According to the principle of supply and demand, the price tends to be lower if supply is more. likewise the supply of labors in Poland is higher than the demand since the unemployment rate is 11% in 2010. Therefore the wage determined by supply and demand theory is low since there are excess of unemployed labor.
The system for determining wages in Poland is a multi-tiered one, even if the relative significance of each tier and the scope of decisions made at a certain level do vary. At the central national level, there is the Tripartite Commission for Social and Economic Affairs, which includes a task force for budget, remuneration, and public benefit issues. It is charged with reviewing proposals and drafts for legislative acts, government programs, and similar documents. In this scope, the task force issues its opinion of the basic tenets of the state budget and of the actual budget draft as well as assessing proposed pay increase indices for the private and public sector. At sectoral level, there are pay negotiations involving more than one employing entity, geared at drawing up multi-employer collective agreements. The number of multi-employer pay agreements in force remained very small, and – apart from a few exceptions - their influence on the general state of wages in Poland is modest. Company level collective agreements might be considered an important wage setting mechanism affecting wages. However, a number of reservations apply. First of all, they can only be executed among entities which have trade union representation, and this prerequisite is not always fulfilled. Of course, the presence of a trade union does not necessarily lead to execution of a collective agreement.
Collective bargaining is not a key mechanism for the determination of wages in Poland. In a sense, this is a lost opportunity – many experts agree that collective current agreements are of increasing quality. Until recently, there was a consensus that collective agreements basically duplicate relevant provisions of the Polish Labor Code. However, recently, some collective agreements are taking the employment regulation as a point of departure for creative solutions.
EMPLOYER PROVIDED BENEFITS:
Polish employees can enjoy many additional benefits. Employee benefits can be grouped into Social Security Benefits and Private Employee Benefits. First group is financed by the mandatory deductions from employee's remuneration and the second one is optional and is financed by the employer.
Social security benefits includes pension/disability pension, Survivor’s pension, health care, unemployment and other benefits including parenthood benefits, family allowances, health benefits, workmen’s compensation and so forth financed through employee’s renumeration. Private employee benefits include Group life insurance, Group Pension fund and etc which are to be provided by employer.
WORKING CONDITIONS:
Informal observation suggests that practices of this sort, assuming that they occur at all, are quite rare. These questions are not debated, and it is but rarely that they become the subject of some small-scope publication. At the same time, it would appear that many people working in this way are capable of tying their actual or potential situation in with their professional circumstances. Anecdotal evidence indicates that people working off the company premises tend to discern the standard inconvenience associated with:
· Working time organization
· Intensive nature of the work (at least sometimes), excessively long hours (again, sometimes);
· Monotonous and abstract nature of some of the work;
· Dependence of work on availability of technical resources (for persons working with a PC);
· Disruption of rest and of family life;
· Limitation of social and professional interaction.
· Defect-prone computer hardware, unwieldy software;
· Unsatisfactory work station, most particularly ill-suited desk, seat, space and improper lightning
Polish occupational health and safety laws may be applied according to the specific case of long-distance work. This comment applies, at least in theory, to many cases of 'work-away-from-work'. In practice, however, duly enforcing employee rights in this area would probably be a tall order. E.g. health and safety regulations specified precisely the terms of accident at working place and during the way to work, but it is not clear if all of them are not applicable to “working away”. The least amount of difficulty attaches to applying those occupational health and safety rules which prescribe initial and periodic health checks.
SKILLS AVAILABLE:
One of the major factors of drawing foreign investment is the high availability of the highly skilled manpower with the quality of work matching highly developed countries standard and much lower cost. The advantage of Poland is the availability of highly skilled labor and manufacturing tradition is very long and rich like automotive industry. With the high level of literacy finding manpower is not difficult even specialist engineers as well. However, one need to consider the regional difference in the availability of workforce. Highly skilled workforce can be easily available in biggest cities with academic centers. Example of international companies which have invested in R&D in Poland are numerous and reflects the availability of broad range of skilled available in the country apart from manufacturing and low skilled job. A huge percentage of youth with higher education are entering the market creating abundance of skilled labor.
INSTITUITIONAL CONSIDERATION:
With Poland entering the WTO and as a member of EU, there lie huge opportunities for business to grow in Poland. Poland is a larger trade partner in Eastern Europe with opportunity for further expansion. Globalization and internationalization of business has created requirement for organizations to consider various aspects of the culture they are operating in. One needs to consider various aspects while making feasibility analysis for international business operation. Business practices in a particular unit largely depend upon the personal values, ideology, ethics and culture of the country or the location of that unit. Managerial practices are to be modeled in the sense that it has strong local fit. Making institutional considerations about Poland we need to consider the personal aspects and motivational factors in response to the organizational needs and performance.
PERSONAL:
Hofstede’s dimension of culture can be used in understanding various aspects of the culture and their role in each culture. According to Hofstede, Poland has moderately above average power distance. Their average score for power distance was 61 which might be the result of the prior communist government that demanded equality in society. However, with the transition of the country to capitalism, the free market economy and EU, the values and beliefs are gradually changing. Employees from countries with lower power distance are not seen as people that tend to display high level of autocratic structure in organization. Employees are not afraid of their bosses and there is open communication and the decision making process is participative. Whereas, country with higher power distance tend to display organization structure with top down communication with high level of formalization and central control. With the moderately above average concept of power distance in Poland, the people tend to display a moderate level of open communication in the organization. The decision making process is not as participative as here in United States with a characteristics of centrally controlled structure.
Poland display extremely high level of uncertainty avoidance. The individual in Poland consider uncertainty as huge threat. They are threatened by uncertain or unknown situations and continuously try to avoid it with their high uncertainty avoiding characteristics. Polish people believe in following rules and try to minimize the uncertainty factor with laws, rules, safety and security measures. Hence, Polish people are motivated by security and esteem or belongingness. This characteristic of Polish culture hinders change and innovation with less value on diversity.
Despite of the communist history, Poland with some collective values display more individualistic approach. They have moderately above average individualistic approach where individual opinions are encouraged with social recognition. Influenced by the Western culture, Polish culture promotes individual contribution and individuals are expected to be rewarded where competition and performance appraisal is considered important. It is considered that people are motivated by economic and material incentives. However, with liberalization of economy, globalization and western influences their culture will be more individualistic in future.
Poland culture displays average masculinity- feminine attitude. In Poland masculinity assertiveness and competition is also as valued as feminine nurturing and concern for relationship. Polish culture emphasizes on material success and progress with consideration to relationship and security. With the culture that is oriented toward both people and achievement, it gives flexibility in relation with other cultures and prevents conflicts as well. Like Americans, Polish people have short time orientation referring frequently to the past. Considering perosnal aspects of Polish people, they tend to show high degree of Power Distance and Uncertainty Avoidance, average in Individualism, are moderately above average in Masculinity as compared to Hofstede's Hermes data-base results. These culture characteristics are discussed from the perspective of their possible impact upon the adaptation of Western managerial concepts in Poland.
One need to undersatand these values and rules such that it facilitates the operation in Poland. Religion based differences among societies are important determinant of how international business functions in various part of the world. Catholicism is the de facto religion of the State, even though Poland remains a secular country.Using its formal and informal ties with political parties, over the past two decades the Church has reinforced its power in public debates. However, the affect of religion in employment and organization seems quite negligible in the case of Poland unlike other India and Arab countries
EMPLOYEE MOTIVATION:
Motivation is a cognitive process that lies in the mind of worker. It explains how workers get started on task, how they maintain performance, why they keep working and why they might quit working. Motivated workers don’t mind walking extra mile with the organization. Based on information provided by “Hudson” and research conducted on several motivational factors for people in Poland, we can describe their priority for different factors for motivation through the diagram presented below:
People in Poland are highly motivated by the development possibilities in the job. Polish people value quality of job such as interesting, challenging and creative job content over other aspects. Intrinsic factors for motivation tend to be more important in Poland being more of a individualistic culture and high in uncertainty avoidance. Moreover, with highly uncertainty avoidance characteristics people in Poland also place importance to extrinsic factors such as safety and continuity of employment and remuneration.
The most important motivational factor for Polish people are quality of job, work pay and work condition, personal life , self realization, interpersonal relation, respect, supporting other people, organizational culture.
Polish people are generally considered to be hard working ensured that their preferences or factors of motivation are met. Poles people are able to make decisions quickly and successfully as they perform task based on rules as to avoid uncertainty. With importance to intrinsic factors, if Polish are emotionally managed they are able to make great performance and sacrifice. They neglect details, are impatient and lack persistence. It can be concluded that Polish employees had a greater preference for intrinsic factors
ORGANIZATIONAL CONSIDERATION:
Considering the various organizational aspects in Poland, we need to a think about various factors such as performance evaluation, recruitment and training and dispute resolution aspects of the organization.
PERFORMANCE EVALUATION AND DISCIPLINE:
The international and global corporations, the complexity of performance evaluation increases as the organization has responsibility of developing systematic processes of evaluation in accordance with local system and culture.Since, the Polish economy shifted to the free market in 1990, Polish companies have had to pay more attention to performance evaluation, internal and external training activities to help their organizations compete effectively and survive in a market-driven system. The law regarding performance evaluation in Poland specifies that performance evaluation should be conducted every once in 2 year’s period. Basically, the employee performance evaluation process in Poland includes goal setting, performance measurement, providing feedback and employee recognition. However, it differs with the different organization and the way they perform their respective method of evaluation derived from their parent company culture and methodology. The major findings from a reserch concluded that many companies in Poland neglect to assess training needs and fail to evaluate the results of their training efforts.
REQRUITMENT AND TRAINING:
An employee, who doesn’t have required set of skills or qualifications, is not familiar with the principles of safety and health at work wouldn’t be permitted to work in Poland. An employer requires providing all kind of training prior to work related with job, health and safety issues.
Since the beginning of the transition to a market economy the Polish government has applied a wide menu of Active Labor Market Policies (ALMP) to combat unemployment and long-term unemployment. In terms of expenditures three programs have been of particular importance: training, intervention works and public works. The major focus of the training program is to solve skill mismatch in the Polish labor market. The training is provided to the workers with redundant or no skills and they are trained in those occupations where there exists a strong demand by the entrepreneurs in the expanding sectors of the economy. Intervention works is basically a program that in essence provides wages or jobs subsidies in the amount of the level of unemployment benefit. These wage subsidiaries are given to firms in the private or public sector if they hire an unemployed person and are larger the longer this person is kept on the firm.
DISPUTE RESOLUTION:
Some investment disputes have arisen in the last few years. Often they have involved state-owned enterprises, difficulties obtaining required permits, or government actions in sectors subject to heavy regulation. However, we can see that government's move towards full adoption of EU regulations, and more clearly defining the role of the state in economic activity should all lead to a reduction in investment disputes. Generally, foreign firms are wary of the slow and over-burdened Polish court system, preferring to rely on other means to defend their rights. Contracts involving foreign parties frequently include a clause specifying disputes will be resolved in a third-country court or through offshore arbitration. Decisions by an arbitration body are not automatically enforceable in Poland. They must be confirmed by a Polish court.
Poland Labor law states that, basic working may not be longer than 8 hrs in 24 hrs time period and 40 hrs in average 5 day working week in Poland. However, there is certain provision to work 12 hrs in 24hrs time periods based on certain conditions. Moreover, there is a general agreement (employment contract) that has to be provided to the employee within the first days of employment that clearly states the agreed upon terms of wage, benefits, working hours and conditions between employer and employee.
C. GOVERMENTAL:
EXTENT OF GOVERMENTAL INTERVETNTION IN PRIVATE EMPLOYMENT:
Market competition is clearly defined both from both a macro- and microeconomic perspective. The state fully guarantees the rules of the game for market competition, and all market participants have equal chances. Despite their protectionist rhetoric, the government refrained from restricting the activities of economic agents. The informal sector is estimated to contribute about 20% of GDP. The freedom to set up a business is not restricted, but is rather complicated due to too much bureaucracy and high costs for setting up a firm. The PO government has already introduced measures to facilitate this process. There is a coherent and effective anti-monopoly policy, supported by trade policies that are consistent with nondiscrimination principles. A 2005 amendment to the Act of 15 December 2000, dealing with competition and consumer protection, brought Polish law into full compliance with EU requirements. In its competition policy for 2008 to 2010, the PO government has developed more appropriate tools to promote competition in the post-monopolistic sectors of the economy, aiming at achieving more deregulation and competition advocacy than has been the case in previous years. As a result of EU membership, Poland has been able to increase the inflow of foreign direct investment (FDI) significantly; the average value of FDI doubled between 2001 – 2003 and the period after EU entry, when FDI value reached €12.1 billion (2004 – 2007).
Capital markets are open to domestic and foreign capital, with sufficient resilience to cope with speculative investment. Private companies are viewed institutionally as the primary engines of economic production, and are given appropriate legal safeguards. For several years, their share in employment has remained at about 70%. More than 50% of the market is dominated by foreign bank institutions. However, there is some level of government intervention in foreign trade in terms of import and export
EXISTENCE AND IMPACT OF LABOR LAWS:
Most aspects of employee-employer relations are governed by the 1996 Labor Code, which outlines employee and employer rights in all sectors, both public and private, and has been gradually revised in order to adapt to EU standards. The Polish government also adheres to the International Labor Organization (ILO) Convention protecting worker rights. The labor law and code prohibits employment for children under the age of 15. There are strict rules governing the work standards for those between 15 and 18 years old, however these are not regularly enforced. The minimum wage in state-owned enterprises was $180 per month in 2002, although large number of workers earn less than the minimum wage. The legal standard workweek is 42 hours with one 24-hour rest period. The labor code defines occupational safety and health standards but they are not consistently enforced. Despite of the several codes of labor law there is some weakness in the enforcement of the rules and procedures.
Generaly, in most of private organization there is a employment contract by which the employee voluntary agrees to personally perform work for the employer under supervision of the employer and in location and time indicated by the employer, being in turn entitled to remuneration for the work performed. However, types of employment contracts distinguished by the law are: a trial contract, a definite term contract, a contract for the duration of a particular task, a replacement contract, an indefinite term contract.
ROLE OF UNION:
In 1992 two nationwide labor unions existed. The Solidarity labor union (Solidarnosc) was internationally known for the decade of strikes and efforts to achieve reform that finally thrust it into a central political role in 1989. The National Coalition of Labor Unions, originally established by the communist government after the suppression of Solidarity in the early 1980s, became independent of state control in 1990 and began to compete with Solidarity for members. We can say that the union had significant role in the goverment and politics in the past as the labor union facilitated the huge movement and brought changes in the country. But, after the librelaization of economy and free market concept, the overall degree of unionization fell from 80 % to 14%. At the same time there is huge difference between private and state organization where 3% of employee are into union whereas 28 % of workers belong to unions in state owned organization.According to the report, “Working Polish people 2006” less than 15% of the total worker belong to the trade union and scale of unionization is similar at the low level. Union members are often persecuted and often discriminated against at work.
Under the legal provision, unions have the right to strike and bargain collectively, although union officials report that workers in the private sector are encouraged not to join unions by their employers and workers organizing unions often face discrimination. In Polish company, the union deserves the legal right to negotiate in job protection, employment contract issues, worker housing and benefits, and certain type of monetary issues.
HRM ANALYSIS:
In HRM analysis part we will be dealing with several aspects of human resource in Poland in terms of the benefits that will be achieved to our organization and possible liabilities. We will analyze possible problems in Poland for foreign investment and provide possible solutions for the problems prevailing. Finally, based on evaluation of all these factors, we will make recommendation whether locating in Poland can be a profitable and better business decision such that organizational objectives are achieved.
- Benefits
- Liabilities
- Potential solutions
- Recommendation on whether to locate in this country
- BENEFITS:
With a population of 38 million, Poland has vast potential for companies with both consumer-centric and labor intensive operations. Covering a vast 312 million sqm of land, Poland is home to the largest and most developed warehouse market in the CEE region. Some of the important reasons and benefits that have attracted many foreign investors can be stated as follows:
i. Relatively low labor cost and a skilled workforce continue to make Poland an attractive option for large-scale multinationals. Poland has a well-educated and skilled labor force. Productivity remains below western standards but is rising rapidly and unit costs are competitive. At the end of November 2008, the average gross wage in Poland was $1140 per month. Labor costs in Poland are low, mainly due to low wages. However, non-wage costs of employment are relatively high. In relation to net wages, taxes and social insurance contributions in total amount to 74%, rising to 77% if the Labor Fund contribution is included. But it is still cheaper than in other countries. It costs just $2.6 an hour (including social security contributions) to employ a skilled manufacturing worker in Poland. This is twice the rate paid to workers in the early 1990s but still much lower than the $19 and $22 paid to skilled workers in France and Germany respectively.
ii. In addition to the size and location of the domestic market, companies can access it affords to the larger EU market. With its centralized location; it is the most attractive logistics and warehousing location in Europe. Poland is the best gateway for 750 Million population market providing huge opportunities for the company. Currently, locations with the best leasing possibilities are located in the south part of Poland, as well as Silesia region.
iii. The new and less unionized private sector has risen has already brought more flexibility to the labor market. Moreover, the availability of labor and unemployment rate has also added in labor market flexibility. After the librelaization of economy and free market concept, the overall degree of unionization fell from 80 % to 14%. The ratio of people graduating from universities is increasing, having positive impact on the availability of highly qualified employees as labor for foreign companies. It has the largest working population in Central Europe. Poland also has one of the youngest populations on the continent, with 50% of the Polish society under the age of 34 and 35% under the age of 25.
iv. Polish workers are usually eager to work for foreign companies. Polish employes are highly evaluated by foreign investors as motivated intrinsically and very much success driven.
v. As a NATO and European Union member, Poland has a proven record of political stability and commitment to free market principles and providing proper business environment in Poland. There is a broad concensus across political lines that welcome foreign direct investment, and the government offers many incentives to attract new firms that can bring capital, technology and jobs to Poland.
vi. Tax incentives are also major benefits for the businesses in Poland. Poland corporate tax rate of 19% is among the lowest in the EU, which provides investors and companies with incentives of a higher profit margin. There is possibility to operate within Special Economic Zones and benefit from income tax exemption up to 50% of capital expenditure or labor costs.
vii. Poland has been experiencing a huge economic growth since its openness to the world economy and free market principle. Poland economic growth was 5.7% for 2004 and is forecasted at 5.2% for 2005. This is much stronger than the Euro zone (1.3%) and higher than an average of 25 European Union members (1.6%). This growth has been driven to a significant extent by exports, industrial production and investment.
viii. The currency of Poland is convertible and recognized in the world money market. Moreover, they have been taking steps in partciaption for development of common european currency such that it facilitates the trade and stability in exhcange rate.
LIABILITIES:
From our analysis there might be some possible liabilities in terms of operating in Poland and they can be stated as follows:
- Many key Polish economic sectors remain in the hands of the state which might create significant effect and risk to the foreign companies operating in Poland. The sectors that lie within state are obviously creates significant threat to foreign organization as the result of state protection, interruption and operation.
- Factors, including the political culture are also a significant liability to organization operating in Poland. On the other hand, it takes a few decades to change the minds of the people affected by communist ideology. In my view, communist ideology is deeply rooted in the minds. There is prevailing environment of corruption and spread of bribery which might affect the organization operating there.
- Key infrastructure particularly road and rail transportation remains underdeveloped. This is one of the biggest challenges for the organization operating in Poland.
- The conflcit between major ruling parties in practice hinders effective policy-making. Unless this conflict is somehow overcome, it will remain very difficult to continue and implement necessary reforms in business environment and predict what the nations perspectives and policy towards the foreign investors will likely to be.
- The monetary and fiscal instability leading to the instable excahnge rate is also one of the major factos to be considered. This is created serious challenges for businesses as there in instable currency in Poland. The World Bank identifies as one of the least hospitable climates for new business formation in all of Europe.
- The business culture and style of communication can be liabilities for foreign organization in Poland.
- The regulation concerning hiring and firng of employees can be seen as the liabilities for organization which is more regulatd by goverment and unions with very slow beareaucratic process. IMF has also urged Poland to relax the regulations concerning hiring and firing of workers.
- The collective bargaining power can be huge liabilities for the company as it is permitted by law. This can be threat to organization as unions have more power to bargain and affect the policies and operation. Moreover, the Polish employee union has the history of changing the complete political scenario of country.
POTENTIAL SOLUTIONS:
Poland is a country of interest and very attractive location for many global companies. Many companies haveinvested heavily since the early 1990’s after the country’s transition from communism to democracy and the establishment of a market-driven economy. However, there need to be improvements and development in certain areas such that it facilitates the operation of foreign business in Poland and attracts more number of foreign companies. Primarily, there should be political assurance to the foreign investment that they will be safe in Poland. The conflict in government should be solved in a manner that facilitates stable policy and safeguards the foreign investment in country. Similarly, country should introduce the euro as Poland’s currency for establishing monetary stability and excahnge rates. The power of union should be strcutured in a manner that encourages the foreign investment in country. The legailty of collective bargaining can be threat for operation of foreign companies. The power in the union should be structured in a manner to facilitate and negotiate in job protection, employment contract issues, worker housing and benefits, and certain type of monetary issues. Finally, the investment and development of infratsructure is most such that it faciltates trade and attracts foreign investors as the most feasible place for foreign companies to operate in Europe.
RECOMMENDATION:
Poland’s strong economic growth, low corporate tax rate, educated, affordable work force and central European location have made it a very attractive country for international companies to operate in Poland. Many U.S. and international companies are finding Poland a very attractive and advantageous country to establish manufacturing and operational centers for Europe. One of the important factor for the foreign countries to locate in Poland is the work environment and human resource that meets the standard of foreign companies..
Thus, looking at the government policies and protection toward encouraging foreign investment, location, availability of skilled, motivated and low wage labor, tax incentives and standard of work environment and human resource, we recommend to locate in Poland.
References:
Phatak, Bhagat & Kashlak, International Management, 2nd ed., McGraw-Hill Irwin, 2009
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