Free «Human Resource Management in an International Context» Essay Paper
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The global business environment is constantly changing, and businesses experience a lot of pressure because of globalization and the requirement to obtain numerous benefits that come with international presence. In most cases, the major consideration that companies look at before going global is the amount of capital that they require and the source for more funds if they are needed. While capital is a very important factor when going international, businesses have a greater challenge than just money. They need to be able to operate their human resources departments seamlessly across the world, regardless of the number of national borders that they cross. At a local level, human resources management is considered amongst the most sensitive aspects of running a business. The components of human resources management are considered crucial to the company as employees are responsible for companies' operations and can thus determine their success or failure. In the international market, the stakes are even higher. The criteria used to look for employees within a local environment are different from those of international status due to the prospects of deploying their workforce overseas. This can be explained by the fact that the international business environment has some rather different needs and expectations from human resource management. The good news here is that there are numerous technological innovations that have greatly improved the capabilities of human resources departments, including human capital management. This means that companies today can easily manage their human capital across the globe. The general question is whether international companies should make human resource management a centralized responsibility of their headquarters.
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Kiessling & Harvey (2005) argue that strategic global human resources management (SGHRM) is the way to go when managing an international business. The authors claim that in the world where globalization is as established as it is at the moment, managing an organization with simplistic concepts like Domestic HRM is not very effective, given that the rules of the game have changed significantly as well as the expectations of the market in general. While some companies may continue to ignore the significance of consolidating their HRM operations, it is important to appreciate that those applying SGHRM are often seen to succeed more in the global front than their DHRM counterparts. With this in mind, it can be stated that there have not been enough studies about SGHRM.
Kiessling & Harvey (2005) further believe that rather than relying on one method, it is important to use mixed methods when seeking to evaluate the relevance and effectiveness of SGHRM. This concept suggests using the global business strategy as a bottom line for the company’s HRM activities and policies. When operating in the global environment, it is expected that the company will be worrying about how to be sustainable and profitable, and, as a result, HRM practices will be aimed at improving the company’s situation from the global perspective. Kiessling & Harvey (2005) further insist that the significance of SGHRM is so widespread within the organization in question that it is not possible to decide on its effectiveness by looking at one component of the organization’s operations. There is often a need to look at organizational performance from a broader and rather specific perspective, having established how SGHRM actually affects the organization. The main factors to consider include organizational culture, organizational diversity, and country culture among others.
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Festing, Budhwar, Wayne, Dowling and Scullion (2013) discuss various approaches to IHRM as understood in the world of business management. International HRM can be cross-cultural, cross-country, or multinational in terms of its approach. This means that depending on the situation at hand, one could explain IHRM in the context of companies operating across different cultures, or simply as a consideration for companies that work within more than one national system or, alternatively, operations of multinational corporations with respect to their overall HRM practices. Festing et al. (2013) set out to explain various approaches to IHRM, conceding that each HRM situation is rather unique and politically correct in its own way. Companies often have to look at their specific circumstances in order to determine how they define their version of IHRM.
In a company like Wal-Mart, for example, dealing with local customers would put local employees in a favorable position, while a company like Fujitsu is more likely to benefit more from cultural diversity within its taskforce. Companies that depend more on cultivating interpersonal relationships with their customers are more prone to consider IHRM from the perspective of a cross-cultural operation since they need to take into consideration cultural competence more than those that do not reach consensus, which means that companies cannot simply borrow a HRM strategy for their international operations. To be more precise, they must pay attention to their specific needs in order to define their contexts and find the right approach.
Harzing & Pinnington (2010) suggest that contrary to popular belief, IHRM is not always about culture. There are some situations within the context of IHRM where culture does not play a significant role. Operating in a cross-cultural platform presents challenges that may include conflicting cultural contexts among other things, and it is important to really examine the situation and establish the cause of the challenge rather than regard culture as the main problem that international organizations have to deal with. In order to fully grasp what companies need in terms of their IHRM strategy, it is often important to note the details of their operations and highlight the problematic concepts that may vary within involved cultures. In most cases, it will be found that culture only presents some minimal challenges and that, for most of the time, the problem is strategic rather than cultural. Different locations generally have different factors to grapple with, and while culture may present some difficulties, IHRM is more about handling the general environment of businesses within the new country and not just addressing cultural issues. Significant considerations for IHRM include legal, economic, and political aspects of a given environment. The socio-cultural factors are also important but should not become focal point in this context.
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In their analysis, Brewster, Sparrow, Vernon, and Houldsworth (2011) emphasize the significance of understanding globalization as a business concept when considering IHRM. The idea behind international businesses is to cater for a large market and take advantage of the free trade concept that has reduced the restrictions that kept businesses within their domestic markets. This means that businesses are likely to have more new factors to consider as they venture into the larger market. In order to fully understand what they need to prosper, it is very significant to pay attention to the basic concepts of globalization as these dictate what they need as companies in the first place in order to succeed internationally.
All this literature emphasizes the need for companies to be specific and rather detailed in their search for a HRM strategy that will work in an international context. It can be stated that in most cases companies choose to adapt a given strategy based on the available research on its effectiveness. What they businesses may fail to recognize is that they have their unique circumstances that could make a given HRM strategy destructive. Consequently, it is important for companies to consider the factors that affect them directly in order to establish the best approach for the HRM in an international context.
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In order to establish whether HRM should be a centralized function in an international organization or not, this study has used mixed methods for data collection and analysis. The first method involved interviewing a few leaders of international business organizations to establish how they arrived at their current HRM system. These interviews were conducted via email, considering that the participants were significant individuals working across the world in their various organizations. The duration of interviews was not restricted in any way, and the participants were expected to send in their responses at their conveniences. The interviews mostly consisted of open-ended questions that were meant to encourage the leaders to share their insights about the subject. With their experience, they were in a better position to provide a lot of pointers regarding the objective of this study. The participants were selected according to their position within the organizations.
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Considering that there are thousands of successful international businesses, yet only fifty leaders were involved in the study, it can be conceded that the selection of participants was carried out through random sampling. Having established that the study was about international businesses, there was a need to ensure that the collected data would be a representation of the whole international business industry. The leaders were mostly very knowledgeable people with years of expertise and informed about the pros and cons of HRM within their respective circumstances (Bucker & Poutsma, 2010). Random sampling ensured that the study would be relevant to a variety of companies across different industries. There was other source of data for this study; some content analysis conducted on academic papers on HRM in an international context. The keywords used to search the available databases were HRM, IHRM, SGHRM, DHRM, globalization as well as business management in an international context. The obtained resources were then studied and their various views on the subject recorded before being synthesized and presented in the results section.
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Results and Discussion
First, it can be appreciated that international businesses are more likely to take on an ethnocentric perspective in their international HRM practices. Most of the interviewed leaders in this study admitted to sending their Parent Country Nationals (PCNs) as top executives in their overseas operations. In places like China and India however, it has been established that PCNs are only able to register success in their management if they exhibit impressive levels of cultural competence (Bucker & Poutsma, 2010). Their position at the top of the organization does not guarantee success, especially since most of them are too entrenched in their own culture to actually learn a new one and run the company according to the social set up of the host country.
Another important finding in this study is that the concept of IHRM is not in any way inseparable from most international organizations. They simply take on the international market with a DHRM perspective since they are too busy worrying about the financial angle of their globalization initiative (Bucker & Poutsma, 2010). On that note, it can be concluded that in most cases companies use IHRM as a last resort when they face challenges of running their global business. This may explain why most companies end up incurring major reshuffles in their management soon after going global. They fail to plan strategically for the HRM function of their international enterprise and this oversight catches up to with them eventually, often with significant losses.
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It can also be appreciated in this study that while each company is left to decide on whether to apply DHRM in each of its regional office or to use IHRM from a centralized point of business, there is a number of basic criteria that all companies need to consider with respect to seeking and posting international employees (Kotabe & Helsen, 2010). These is a set of competencies that are very significant to employees who are set to work within the globalized organization in any capacity and at any location. These criteria are discussed in detail below.
The first criterion is technical competence. When seeking employees for an international organization, it is important to note that the organization will have to spend a lot in terms of sending and keeping them overseas. This means that it is important to limit the expenses by ensuring that employees are sent to work in the right capacity. This implies a need to choose right people for right jobs within the organization. In order to avoid having to train someone in customer care, for example, a company like Fujitsu would have to hire an individual with a customer care, academic, or other background. The idea is to ensure that the employee in question has the right qualification to take on their role and responsibilities, without needing to be trained by the company. Technical competence is all about looking for the right qualifications in order to make sure that the organization keeps operational costs at a minimum. In cases where the required qualifications are seen as scarce, it may be justified to hire people outside their desired competences, but this is often not advisable since it only significantly impedes the company’s growth, especially if they are already dealing with financial constraints.
The second criterion is personal traits. They determine employees' ability to effectively function within the new environment. It can be appreciated that different people are equipped differently in terms of the necessary traits for social and professional co-existence within different contexts (Kotabe & Helsen, 2010). The best employees for an international organization need to be willing and able to handle interpersonal relationships well enough. In the new environment, they should manage to not only work well with their new colleagues but also be able to make friends and fit in to their new home. Most companies post PCNs overseas for long-term engagements and these employees must be in a position to embrace the new socio-cultural context within which they have to live and work for some time.
Teachability is the third significant criterion that directly determines employees' viability in the global context. They may have the right competences but if they are not willing to learn, they are not likely to interact well with the new cultural dispensation of the host country. As a result, teachability is all about the willingness to learn new things, embrace new ideas, and test new concepts, especially in the socio-cultural context that continues to prove challenging for international businesses (Baumuller, 2006). Teachable people are generally good team players who able to improve the organizational performance by ensuring that there is some coordination amongst the organization’s various offices across the globe.
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The fourth criterion is family. Having established that employees need to be comfortable at all times in order to have intrinsic motivation and do their best at work, it can be stated that international companies are better off hiring people with smaller families or even those with none. Long term contracts often require from employee to travel with their families, thus translating into more expenses on the part of the company. It is very important to consider employees' family situation in terms of whether they would be comfortable working abroad without their families or of their spouses would be willing to move with them.
The significance of these criteria lies in the decision of the company to use DHRM or IHRM within their human capital management department (Glader, 2011). Both concepts have their own merits and demerits but, from the discussions in this paper, it is possible to reach a conclusion that the better option is often to consider the situation of the company at hand, before implementing a given approach for HRM. Companies that choose to apply IHRM often have to deal with high operational costs along with complex policies aimed at streamlining business processes across the geographical divide.
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It can be appreciated that international companies often have to manage their manpower strategically in order to conduct seamless operations across various regions. As such, these international businesses are more likely to take on an ethnocentric perspective in their international HRM practices, which often include sending PCNs abroad to work as executives. This is a common practice and in some cases even the best one, but it does not under any circumstances guarantee companies' success in the host country. This study has reached consensus that each company has a unique situation that must be painstakingly analyzed before deciding on whether to centralize their IHRM or to allow local management in terms of DHRM.