The internationalization of business makes International Human Resource Management (IHRM) a valuable tool in order to grasp a better concept of the globalization of business. It helps business corporations and international companies to obtain concrete processes that will help entrepreneurs to understand variable and distinct institutional and cultural differences existing in an organization. Briscoe and Schuler (1995) identify the concept of national identities of corporate firms as becoming obsolete thus there is a continuing need to understand the globalization process of businesses.
There is a big difference between management of domestic context from global management with variance of the challenges faced by the management with broader scope of cultural differences and boundary spanning (Stahl & Bjorkman, 2006). This is the challenge that business corporations need to face as they venture in the highly globally competitive challenge of globalization of business. This essay will discuss institutional and cultural differences involving IHRM and the concept for its development and processes in meeting these different challenging concepts in human resource management pertaining to internationalization of business by multi-national companies.
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There are striking differences between domestic and international human resource management. Globalization of business requires IHRM to adopt appropriate human resource policies and knowledge management in consideration to the cultural differences that may arise on the process. Thus, this essay will also deliberate the differences that will commonly affect a company's management system in alignment to what they need in order to adapt to internationalization and globalization of business.
IHRM is a valuable tool among multi-national companies (MNC) owing to the globalization of business. Du Plessis, Venter, and Prabhudev (n.d.) recognize its effect in the HRM policies, standardization process, recruitment, compensation and other practices involving the global workforce. While globalization is a matter of attracting foreign investment while developing international alliance to penetrate new market (Perkins & Shortland, 2006), it gives pressure for the need to organizational change. The more complex difference between domestic HRM and International HRM lies on the different cultures of employees of various nationalities (Aswathappa & Dash, 2008) and IHRM thus help in a company ways of strengthening their policies in HRM while defining a broader perspective of adapting external influences in the work performance of employees from various countries.
IHRM can be a channel for formal and informal human resource-related approaches (Ferris, Rosen, Barnum, 1995) that can help an organization improve their manager's ability to push towards global competitiveness by designing activities of finding the right employees, career planning, position alignment for employment, encouraging development of working skills and rewarding employees for their contribution to the company. It cannot be more than overemphasize the valuable role of human resource in any organization being a valuable asset that undertakes complex and challenging tasks that may extend beyond the usual personnel management to people management (Monye, 1997). Sparrow, Brewster, and Harris (2004) indicate the institutional differences among countries affecting IHRM that are common in the practice of lobbying and adjusting to governmental actions on equal opportunities for legislations, and tripartite institutions with trade unions. The value systems and beliefs of employees lie on their cultural differences which may overlap among nationalities which are among some of the factors that the IHRM should address. IHRM involves the international context of transnational requirements involving the activities such as recruitment, performance and reward system, and the management of diverse workforces (Banfield and Kay, 2008). This are additional responsibilities to the domestic HRM policies used to be restricted only within the region or country which they need to broaden in order to become more competitively advantage. Traditional personnel management involves certain functions such as dealing with recruitment, hiring, training, compensation, performance appraisal, and promotion processes (Tayeb, 2005). Multi-national companies need to extend their HRM policies to expatriate employees as they adopt globalization of business and must come in terms with the implication of dealing with varied cultural differences and legal systems to conform with. Managing a cross-cultural organization is difficult and the primary role of the IHRM is to ensure uniformity in the organization (Bhattacharyya, 2010).
Schuler and Jackson (2007) see management of people from various countries to be fundamentally different owing to the differences in the educational system and the legal process of employment distinct from every country that affect the process of employment system by multi-national companies of their workers. These differences may promote conflicting issues such as the one cited by Dickmann, Brewster, and Sparrow (2008) on multinational companies of Germany and China engaged on a joint venture where the tension relations between the expatriates and local staff concerning personnel matters ended with a sour relation between the two companies.
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Based on a survey reflecting cultural differences in most corporations, the systematic differences among nationalities involve power distance, collectivism-individualism, uncertainty avoidance, and masculinity-feminity. (Hendry, 1995) This may implicate behavioral problems as culprits to cultural differences that IHRM more often encounter that affect both the managerial and non-managerial functions of employees like motivation, courage to take risks, interpersonal skills and the quality of decision making. Multinational companies need to adopt globalization of business in order to target broader market. It is a survival requirement in order to keep the business going and be competitive in the market.
Albrecht (2001) refers to global skills as not merely a speciality of business but must form an essential part of an enterprise integrated throughout its operations. She identifies how managers find this an essential force to establish good management in the human resource. There are significant practices in various countries as customs in making business. In Japanese culture for instance, establishing group identity is essential while in Saudi Arabia, it is not doing immediate business that is an important initial step in doing business but taking the necessary steps to build acquaintance and trust. In other cultures, handshakes play a primary importance in making business while in some countries the practice of bowing is a sign of good will. Managers thus need to employ multinational skills in doing business with various countries as well as adopt an efficient IHRM system that will conform to the usual culture and legal systems involved for employment from various countries.
Sparrow (2009) mentions there are different forms of international employment and quoting Briscoe and Schuler as saying that the definition of international employees inside the organization continues to expand, he thereby acknowledge that the human resource department of an organization needs to understand the growing numbers of expatriate employment to be more effective in their policies. Vance, Vance & Paik (2006) maintain that managers have critical responsibilities to transfer knowledge across borders through effective communication to workers from various cultures and norms. Communication and cultural barriers can hamper the progress of multinational companies as it may complicate relationships of managers and their subordinates. As Stredwick (2005) puts it, no organization, even small or local in its activities, are immune in the international dynamics of globalization. This gives an understanding on the concept of IHRM more valuable to various corporations.
IHRM needs to address the variable of a reward system in the company. Incentives are ways of a company to attract a worker's attention to inspire them to work (Pattanayak, 2005). It is the contention of Brewster and Harris (1999) that both cultural and institutional differences result to the consequence of international reward system. The national business system also plays a role in consideration to the national education and training; employment and tenure; and national cultures as those seen in Europe, Japan, and USA. IHRM usually is faced with complex issues that need to be regarded efficiently. Among the considerations of multi-national companies need to recognize are the immigration laws as they hire foreign employees, working permit, medical requirements, and other procedures that may require for employment. This also requires that the company adopt in their IHRM system training for managers to know the proper reward system to give to their import employees including the tax requirements and social security system processes (Newlands and Hooper, 2009). The reward system employed through an effective IHRM can help the company exert better control, strategic fit and address better some cross-cultural issues affecting employees (Agmon, Drobnick, and University of Southern California. International Business Education and Research Program, 1994) and they also employ a more stringent recruitment and selection procedures to qualified workers that come from various countries of different cultures and work behavior. Sims (2002) identifies IHRM as involving a broader perspective of engaging managers from the local headquarters of multi-national companies to perform activities like dealing with issues on international taxation; international relocation; orientation and administrative support to expatriate employees, training, selection of local and international applicants, and hosting governmental relations with various countries.
The proper selection, recruitment and training methods in IHRM should be considered as an efficient intervening factor to the common issues confronting globalization of business that affect human resource management. IHRM usually involves the management of the recruitment process from the parent country of the company where its main office has the headquarter; the host country of its subsidiary companies: and other countries where the company obtains its labor force (Scullion and Collings 2006). The management needs to adopt a kind of uniform recruitment system to find properly skilled workers with the right cultural behavior in terms of their work responsibilities. This can help bring uniformity of goals and objectives within the company's human resource forces from various countries for the labor force. While domestic human resource and IHRM both involve recruitment responsibilities, managers of IHRM are regarded to require some higher degree of cultural sensitivity (Daft, 2008) coupled with more efficient communication process to express the company's goals and objectives to various workers of diverse culture and work behavior.
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The role of IHRM is quite broader, more complex, and challenging than domestic human resource management. They involve the process of going beyond the usual personnel management system employed in local corporation units. The role of IHRM is vital among multi-national companies where the management are required to address variable considerations as to the existing institutional and cultural differences of employing expatriates in the company. IHRM involves internationalizing the standards of recruitment, selection, training, compensation or pay and reward scheme, legality of employment system according to the national laws of foreign employees, the establishment of uniform standards and ethics, as well as the social responsibility of the company conforming to globalization standards. There is an extra effort in the human resource management of a corporation to extend their internal policies in conformity to the international standards and laws of the countries where their subsidiary companies may be located. Although the institutional and cultural differences are the common issues confronting the IHRM system of a company, it is a challenge that most multi-national companies take in order to improve their competence in training their managers and executives in dealing this broader concept of management in the human resource aspect of globalization of business.