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Issues and challenges in global staffing


There has been a rapid pace of internationalization and globalization over the last decade. Expanding business operations beyond national boundaries while continuing commitment to local markets requires more complex business structures. One of the most critical determinants of an organizations success in global ventures is the effective management of its human resources. Globalization symbolizes the structural making of the world characterized by the free flow of technology and human resources across national boundaries presenting an ever-changing and competitive business environment. A vital aspect of globalization is the way diverse challenges are being faced by nations in an increasingly inter dependent world. The question arises here is- Why have Human Resource considerations become so important in International Business Management?

The environments within which international business is carried out in the first

Decade of the new millennium is increasingly competitive. The technological environment is such that technology supremacy is fleeting and since it does not last long, it cannot be considered a strong advantage of a company. The economic environment is effected by too many uncontrollable factors which mean a stable economic situation is less certain. The economy can be affected negatively by things which large companies and federal governments have no control over. The political environment responds to the socio-cultural environment - which in many countries, is undergoing the stresses of large immigration movements and cultural and religious frictions. Very few regions of the world are free of conflict so no place has a distinctively advantageous political environment. The geographic environment, long affected by rampant pollution, deforestation, greenhouses gases from autos and factories, acid rain from coal fired generators, declining water reserves etc. etc. has seen a bit of Mother Nature fighting back in 2003-2005 with some spectacular events such as a massive tidal wave, numerous destructive tornadoes, larger and more frequent hurricanes, volcanoes, mudslides, sandstorms, drought and crop failures and so on. As a consequence of the changes to and changes by the geographic environment, almost every place on the planet has had to endure weather that has negatively affected business and agricultural productivity.


The coming of the 21 century poses distinctive HRM challenges to business especially those operating across national boundaries as multinational or global enterprise. Competing in global markets entail many factors and centralization of its human resource practices is certainly vital to improve global competitiveness and empower employees for global assignments. To achieve success in global marketplace, the challenge of all businesses regardless of their size is to understand global corporate cultural differences and invest in human resources. There are certain human resource management issues that are particular for the global enterprise. The key issues involve staffing policies selecting and retaining talented employee, training and development whilst encouraging employees to be innovative and creative, culture barriers, and legal frame work. Others issues include understanding the challenges of living and working overseas, performance appraisals from a distance, training and management development, compensation packages, and labor relations and organized labor laws. The way in which it can extend its basic mission of "getting the right people into the right places at the right times" and contribute to resolving the conflicting pressures within the corporation of centralization and decentralization and at same time Foster teamwork and learning within the transnational, and in developing a competitive culture.

Global Human Resource Management is a process concerned broadly with recruiting of persons, training them and putting them to the most productive usage. It is also concerned with maintaining of congenial international industrial relations. It is the essential prerequisite for the success of the international firm owning to its complexities.

Ø Global human resource management (GHRM) is the planning, selection, training, employment, and evaluation of employees for global operations.

Ø GHR managers serve in an advisory or support role to line managers by providing guidelines, searching, training, and evaluating employees.

Ø How a firm recruits, trains, and places skilled personnel in its worldwide value chains sets it apart from competition. The combined knowledge, skills, and experiences of employees are distinctive and provide myriad advantages to the firm's operations worldwide.

Ø Four major tasks of HRM

o Staffing policy

o Management training and development

o Performance appraisal

o Compensation policy

Ø Strategic role: HRM policies should be congruent with the firm's strategy and its formal and informal structure and controls

Ø Task complicated by profound differences between countries in labor markets, culture, legal, and economic systems

• Staffing policy

International management encounters many problems above those faced by a domestic organization. Geographic distance and a lack of close, day-to-day relationships with headquarters represent a major challenge to multinationals. "It is essential, therefore, that special attention is given to the staffing practices of overseas units" (Pigors 1973: 690).

According to Pigors (1973: 690) there are three different sources of employees with whom an international company can be staffed. First, the company can send employees from its home country, which is referred to as expatriates, expats or home country nationals. Second, it can recruit host country nationals (natives of the host country), and third, it can hire third country nationals who are natives of a country other than the home country or the host country.

When international expansion of the company is in its infancy, management is heavily relying on local staff, as it is extremely respondent to local customs and concerns."As the company′s international presence grows, home-country managers are frequently expatriated to stabilize operational activities (particularly in less developed countries). At later stages of internationalization, different companies use different staffing strategies; however, most employ some combination of host-country, home-country, and third-country nationals in the top management team"

• Types of Staffing Policy:

v Ethnocentric Policy

ü Key management positions filled by parent-country nationals

ü Best suited to international businesses

ü Advantages:

o Overcomes lack of qualified managers in host nation

o Unified culture

o Helps transfer core competencies

ü Disadvantages:

o Produces resentment in host country

o Can lead to cultural myopia

v Polycentric Policy

ü Host-country nationals manage subsidiaries

ü Parent company nationals hold key headquarter positions

ü Best suited to multi-domestic businesses

ü Advantages:

o Alleviates cultural myopia

o Inexpensive to implement

o Helps transfer core competencies

ü Disadvantages:

o Limits opportunity to gain experience of host country nationals outside their own country.

o Can create gap between home and host country operations

v Geocentric Policy

ü Seek best people, regardless of nationality

ü Best suited to global and trans-national businesses

ü Advantages:

o Enables the firm to make best use of its human resources

o Equips executives to work in a number of cultures

o Helps build strong unifying culture and informal management network

ü Disadvantages:

o National immigration policies may limit implementation

o Expensive to implement due to training and relocation

o Compensation structure can be a problem

Staffing the Global Organization

Ø International staffing:

- Expatriates (expats): Noncitizens of the countries in which they are working.

- Home-country nationals: Citizens of the country in which the multinational company has its headquarters.

- Third-country nationals: Citizens of a country other than the parent or the host country.

Ø Offshoring

- Having local employees abroad do jobs that the firm's domestic employees previously did in-house.

ü Issues in offshoring

o Having an effective supervisory and management structure in place to manage the workers.

o Screening and required training for the employees receive the that they require.

o Ensuring that compensation policies and working conditions are satisfactory.

The HR Challenges of International Business

Ø Deployment

- Easily getting the right skills to where we need them, regardless of geographic location.

Ø Knowledge and innovation dissemination

- Spreading state-of-the-art knowledge and practices throughout the organization regardless of where they originate.

Ø Identifying and developing talent on a global basis

- Identifying can function effectively in a global organization and developing his or her abilities.

Global Staffing Issues

Ø Selecting candidates for overseas assignment

Ø Assignment terms and documentation

Ø Relocation processing and vendor management

Ø Immigration processing

Ø Cultural and language orientation and training

Ø Compensation administration and payroll processing

Ø Tax administration

Ø career planning and development

Ø Handling of spouse and dependent matters

Strategic HRM as a response to the challenges of globalization

The world has undergone a dramatic change over the last few decades, the forces of globalization; technological changes have greatly changed the business environment. Organizations were required to respond in a strategic manner to the changes taking place in order to survive and progress. Strategic Human Resource Management (SHRM) involves a set of internally consistent policies and practices designed and implemented to ensure that a firm's human capital contribute to the achievement of its business objectives. Strategic human resources management is largely about integration and adaptation. Its concern is to ensure that: (1) human resources (HR) management is fully integrated with the strategy and the strategic. Change management represents a particular challenge for personnel management staff, as this expertise has generally not been a consistent area of focus for training and development of HR professionals. This may also be the reason why it is cited as the foremost issue as HR continues to attempt to help businesses move forward. An intensified focus on training may be needed to develop added competencies to deal with change management.

Leadership development also proves to be a big challenge. HR professionals continue to wrestle with understanding the best ways to keep people in the pipeline and develop leaders for future succession planning. Increasingly recognized as becoming strategic business partners within their organizations, HR professionals are expected to provide the essential frameworks, processes, tools, and points of view needed for the selection and development of future leaders. Across the globe leadership development has been identified as a critical strategic initiative in ensuring that the right employees are retained, that the culture of the organization supports performance from within to gain market position, and that managers are equipped to take on leadership roles of the future so that the organization is viable in the long term. Measuring HR effectiveness is an interesting new top three focus for HR as it highlights the profession's need to measure results -not only in terms of transaction management but also in terms of driving the business. HR professionals have been questioned in the past regarding their business acumen. Utilizing metrics to determine effectiveness is the beginning of a shift from perceiving HR's role as purely an administrative function to viewing the HR team as a true strategic partner within the organization. In fact, the next section reports that survey participants believe a critical future issue for HR will be organizational effectiveness - again supporting HR's critical role as a strategic partner to management.

What are the HR challenges you were facing 3 years ago, what they are today and what you believe they will be in 3 years (Global responses)

Challenge 3 Yrs Ago Today In 3 Yrs

Benefits costs: Health & welfare 10% 13% 13%

Benefits costs: Retirement 3% 9% 5%

Change management 36% 48% 28%

Compensation 31% 24% 15%

Employee rewards 13% 12% 12%

HR effectiveness measurement 13% 27% 17%

HR technology selection & implementation 13% 9% 5%

Industrial relations 12% 7% 8%

Leadership development 24% 35% 33%

Learning and development 23% 19% 19%

Legal/Regulatory compliance 8% 7% 5%

M&A integration/restructuring 16% 11% 6%

Organizational effectiveness 23% 25% 39%

Other 5% 7% 4%

Outsourcing 15% 8% 8%

Staffing: International mobility of employees 7% 4% 13%

Staffing: Recruitment & availability of skilled local labor 22% 24% 24%

Staffing: Retention 15% 16% 23%

Succession planning 8% 20% 21%

('BOLD' responses represent challenges most often selected by participants.)

Change management and leadership development were, are and will be important issues for HR professionals. Compensation has moved down the list of perceived challenges while organizational effectiveness is expected to play a larger role in the years to come. Where HR departments have traditionally focused on measuring their own effectiveness, there is an evolving recognition that they can provide organizational value by measuring the effectiveness of the entire business organization. The shift is significant as it represents movement from simply counting the numbers hired to determining the ROI of collective and individual hires on a long-term basis. Going beyond measuring turnover, this new approach considers "bad" turnover and "good" turnover along with the overall cost of replacement hires.

Compensation was one of the top three issues in 2001 because of factors including mergers and acquisitions (and pay equity among new divisions), the invention of new systems for human capital management (including stock option plans), and global competition (in which attracting and retaining key employees became increasingly important). While these factors remain important in 2004, compensation has fallen to 5th place in the tier of challenging issues. The survey respondents expect it to be in 9th place three years from now. Some key issues surfacing in the survey's look ahead include recruiting and availability of skilled local labor, succession planning, learning and development, and the measurement of HR effectiveness. In addition, outsourcing and cost of retirement benefits were mentioned in many of the comments as a concern.

Five Factors Important in International Assignee Success and their Components

v Job Knowledge and Motivation: Managerial ability , Organizational ability, Imagination, Creativity, Administrative skills, Alertness, Responsibility, Industriousness , Initiative and energy, High motivation, Frankness, Belief in mission and job Perseverance.

v Relational Skills: Respect, Courtesy and fact Display of respect, Kindness, Empathy, Integrity, Confidence.

v Flexibility/Adaptability: Resourcefulness, Ability to deal with stress, Flexibility, Emotional stability, Willingness to change, Tolerance for ambiguity, Adaptability, Independence, Dependability, Political sensitivity, Positive self-image.

v Extra cultural Openness: Variety of outside interests, Interest in foreign cultures, Openness, Knowledge of local language[s], Outgoingness and extroversion, overseas experience

v Family Situation: Adaptability of spouse and family, Spouse's positive opinion, Willingness of spouse to

live abroad, Stable marriage.

Global Staffing Market Needs Long Term Strategies

A few years ago the world staffing market was hit by a tsunami called the recession. This resulted in job loss, sacking, cost cutting, and a quick fall in recruitment. Though there is still some hiring that is going on but it is happening in snail's pace. According to the industry experts the staffing sector will still face some more challenges before it finally gets better. Market watchers who are observing this trend in the staffing market are right now pointing out that the years 2009 and 2010 would find it a bit tough to make too much recruitment. This may also put some adverse affect on the finances of these companies. Right now the world staffing market is worth almost $ 300 billion.

Now to counter this down trend and keep a steady profit margin various staffing companies are meeting in various seminars and pondering over various ways to tackle this problem. The thinkers involved with this industry are also trying to work out various strategies in order to handle the situation. One thing that has come out from all these sessions is that staffing companies have to be patient and have to work out long term strategies. Though venturing into other countries may sound lucrative and promising but in the long run it may not give enough dividends. That is why it is also suggested by some industry insiders that one should not change a particular country in a hurry.

There are some countries in addition to the US that have imposed some restrictions that are not doing any favor to the staffing business. Countries like Brazil and China have imposed some regulations that make it quite difficult for staffing industries to make recruitments there too soon. In these cases the only thing that can give somewhat satisfactory result is negotiation. One can make an effort to talk with these governments, which is, of course, quite time consuming.

Another way of tackling this situation is to tap the temporary staffing or flexi staffing market. This market was worth more than $ 120 billion in the year 2003. In the year 2007 only the US temporary market generated revenue of $ 91 billion. In this country about 80.8 percent of staffing revenue comes from temporary staffing sector. But still this country has the largest staffing market. Other countries that have quite a big market include the UK, and Japan. Thus only a tactical change can help the big staffing industry to get back into profitability.


(Global staffing by Hugh Scullion)

HUMAN RESOURCE MANAGEMENT by Snell/Bohlander pg 530-532