Questions on international human resource management

Using references to academic research, analyse and explain the main human resource issues, dilemmas and complexity facing Paine & Co (P&C) as a result of its decision to build an international presence. You may focus on one or two selected issues for deeper analysis.

Looking at the company’s experience so far, and drawing on research in the field, prepare a statement for the board outlining and justifying the core components of the HR strategy that Paine & Co (P&C) will need in order to implement its business strategy and build long-term competitive advantage.

Table of Content

Executive Summary

Abbreviations

Question 1 –

Explain the main human resources issues

Go International

Abbreviations

HR

Human Resource

HRM

Human Resource Management

HQ

Headquarter

IHRM

International Human Resource Management

P&C

Paine & Co

Question 1

Using references to academic research, analyse and explain the main human resource issues, dilemmas and complexity facing Paine & Co (P&C) as a result of its decision to build an international presence. You may focus on one or two selected issues for deeper analysis.

The role of IHRM

As the globalisation trend advanced, IHRM (International Human Resource Management) plays a critical role in helping companies evaluate the human resource skills /capabilities and possibilities involved in moving to different regions of the world (Luthans, Marsnik and Luthans,1997).

The HR (Human Resource) function is to help manage the organisation’s people as effective as possible based on the organisation business objectives for competitive advantage (Porter, 1990).

International HR issues faced by P&C

To be successful in the global marketplace, a need for “global mindset” is the key source for long-term competitive advantage.

The current HR issues face by P&C is illustrated in Appendix A.

Going International

Looking at the current HR issues that P&C is facing, the complexities of operating in different countries and employing people of different nationalities are the main issues arising from the internationalisation of business and the HR strategies, policies, practices that P&C needs to undertake in multinational ventures (Scullion & Linehan, 2005).

Company characteristic, business strategy and organisational structure are important elements in policy choice for the Flexibility and HRM strategies (Delery and Doty, 1996; Tsui et al., 1995; Mayne et al., 1996; Doorewaard and Meihuizen, 2000).

According to Philip Condit (Financial Times 1997), as the era move towards global markets, it is advantageous global companies workforce, management transform into a global enterprise.

A standardized approach to IHRM may put an organisation to disadvantage because cultural differences are ignored rather than built upon. (Adler,1991).

Expansion Problem

Competing demands of global integration and local differentiation are important elements which give rise the need to develop human resources as a source of competitive advantage (Caligiuri and Stroh,1995;Schuler et al.,1993;Taylor et al.,1996).

P&C required to adopt a geocentric approach to IHRM integration to balance between the conflicting priorities of global integration and local responsiveness (Caligiuri and Stroh (1995).

It is challenging for P&C to build a competitive and diverse workforce effectively. A shortage of skilled talent can damage its competitive position.

The critical HRM challenges that an organisation faced when it decided to go “International” is illustrated in Appendix B.

The ‘people challenge” is the most difficult human resource strategy faced when organisation decided to expand internationally as acquiring the most competent workforce is the most critical to success.

The most challenging HR issue face by P&C is to capitalise on the diversity of global workforce without suppressing each other nation’s desire to maintain its own cultural heritage.

IHRM Learning & Control

Although it is tough, P&C have to build, maintain and develop its corporate identity, by managing its people on a worldwide basis, local responsiveness by adapting and conforming to the norms and customs of different societies in which P&C operate (Laurent, 1986). This will enhance worldwide competitiveness, innovation combined with achievement/consistent across MNE units (Bartlett and Ghoshal, 1989).

According to Schuler and Florkowski (1994), for control purpose, flexible HRM policies and practices at the local level must be balanced with the requirement of MNE to maintain its global set of IHRM policies.

Deeper Analysis-HRM issues

a) Training and Development

As noted in P&C case, there is no formal training to consultants after recruited. Failure to train employees can affect the values, beliefs, and assumptions shared by employees to the organisational culture (Bunch, 2007, p. 157). Au and Chong (1993) conclude that failing to incorporate organisational culture in training programmes might lead to total failure in building a successful organisation.

Listed below are the ways to determine employees training needs:

1)

Observe employees

2)

Listen to employees

3)

Ask superior about employees’ needs

4)

Examine problems employees have

Source : Developing Human Resources -HRM (John M.Ivancevich)

In today’s highly competitive global business environment, human resources play an important role in developing and sustaining organisation competitive advantage (Brewster,2002).

IHRM has enforced common methods of acquisition of knowledge (hiring and training), distribution of knowledge (training and development), and utilization of knowledge (performance management) in an organisation.

Training is recognised as an important means for socialisation – orientation (Child, 1984; De Meyer, 1991; Derr and Oddou, 1993; Ondrack, 1985). This is where new employee learns the organisational goals, corporate culture, job and to develop realistic expectations.

Formal training on the other hand promotes shared values and facilitates network building between headquarters and subsidiaries.

Training Assessment

Assessment needs is used to determine if and what type of training is necessary to acquire skills, knowledge, cross cultural training and improvement in order to perform well for the organisation growth and success. (Refer to Appendix C -General Systems Model of Training and Development).

Only successful organisation will believe/continue to train, develop their employees in order to adapt to the constant change in the dynamic working environment as new technologies developed and emergence of global assignments. (Refer to Appendix D – Diagnostic steps in Development Programmes)

Learning Organisations

According to (Bramley, 2003), extensive training, learning and development are important.

Learning organisations (example: Xerox, General Electric) have applied three stages of learning perspective.

Learning Perspective in Learning Organisation.

Cognitive -members exposed to new ideas, expand knowledge, think differently.

Behavioral – employees alter behaviour

Performance Improvement – changes in behaviour lead to improvement in results

P&C needs to ensure that outstanding talent remain at the forefront of its field in terms of professional expertise and product knowledge gained through training which facilitates learning so that employees can become more effective in carrying out their task.

It is essential as people, technology, jobs, and organisations are always evolving. Technology is advancing at a staggering pace. Therefore, it is vital that employees be trained and developed to utilise the latest technology so as to attain the highest levels of productivity.

b) International Managers

As International business continues to grow intensely, P&C must understand the need for highly qualified international managers, a crucial factor in implementing global strategies for business success (Gregersen, Morrison, & Black, 1998).

Overall International managers need to have effective cross cultural communication, non-judgemental capability, flexibility, empathy (Berrell et al.2002:92).

Expatriates

A successful expatriate manager must have a high knowledge of technical, functional, cultural, social, and political skills (Bartlett, 1986; Bartlett & Ghoshal, 1994; Ghoshal & Barlett,1997).

The most common factors that determine the expatriates’ success or failure is illustrated in Appendix D.

Motives for International transfers

Edström and Galbraith (1977) describe why international transfer of managers happened. (Refer Appendix G)

The key point for international transfer is to initiate, expand and control international operations to ensure various organisational units strive towards achieving organisation common goals which is linked to HQ control aspects. (Edström and Galbraith,1977)

According to Roessel (1988), the benefits of various functions of international transfers can enhance internationalisation of the MNE, which make it more sustainable in international market.

Inpatriates

The value of managers with unique local market knowledge can develop a dynamic capability for global assignments. In this manner, inpatriate manager is another option envisioned to build managerial talents which organisations can develop distinct competitive advantage in the market they entered.

The inpatriation process is positively related to the global HRM for organisations’ development of organisational capabilities: quality, low-cost operations, speed, learning, innovation and customer focus (Lawler, 1996; Urlich & Lake, 1990).

The criteria and characteristic of the right candidate for inpatriate managers are similar to the expatriate factors which illustrated in Appendix D.

Although HQ prefers the expatriate managers contribution in multicultural management on the stabilisation control aspect for competitive advantage (Dadfer & Gustavsson, 1992; Granstrand, Hakanson, & Sjolander, 1993), inpatriate managers do play an important part in the bridging role between HQ and the emerging market that the organisation wish to penetrate (Harvey et al., 1999b,c,d).

Inpatriate managers, as substitutes and complements of expatriates, can provide accurate advice on adaptation of technical dimensions of HR processes (recruitment criteria, compensation, appraisals, training and development of host country nationals).

Inpatriate managers also act as a mentor to caliber managers from host country nations to insure a succession plan when new inpatriate managers are moved into the home country organisation.

If P&C would to consider inpatriate manager option, it has undertaken the step in developing a multicultural strategic leadership capability in developing a global learning organisation to compete worldwide effectively (Aguirre, 1997; Hofstede, 1980, 1984; McBride, 1992; McMillen, Baker, & White, 1997; Nemetz & Christensen, 1996; Reynolds, 1997).

Question 2

Looking at the company’s experience so far, and drawing on research in the field, prepare a statement for the board outlining and justifying the core components of the HR strategy that Paine & Co (P&C) will need in order to implement its business strategy and build long-term competitive advantage.

Statement to the Board of Paine & Co (P&C)

– Core Components of HR Strategy

Introduction

For management consulting multinationals, definition of HRM policies at international level should be followed by a more standardised local implementation (Boxall and Steeneveld (1999)

At the same time, applying the “right kind” of policies and practices was a condition of ongoing viability, the success to implement HR policies and practices synergistically constitute the basis for competitive advantage.

HRM – IT Consultancy Firm

IT consultancy firms depend highly on qualified and specialised professionals to offer services based on their creativity and intellectual work. This profession requires versatility, adaptability and constant learning due to its ever evolving job nature (Starbuck, 1992; Ram, 1999; Ka¨rreman, 2002).

In this case, P&C should look at the need for highly qualified multicultural workforce as a means to build managerial talents, develop organisations competitive advantage in the market it enter. Furthermore, global competition has caused organisations to be more conscious of cost and productivity.

Strategic HRM

HRM strategies must reflect clearly the organisation’s strategy – people, profit and overall effectiveness in managing an increasing diverse workforce to compete in an increasingly complex, competitive world. (See Appendix E -Important Factors /Requirement in HRM).

According to Sparrow 1998, recognising organisations’ need for “multiple and parallel flexibilities” especially in a time of increasing international competition and technological change is vital (Atkinson, 1987; Tsui et al., 1995) especially for IT consultancy firm.

The “best practice” recommended core components HR strategy that P&C should apply to enhance performance and build long-term competitive advantage is highlighted in Appendix F.

Based on “Best Practice” HRM, staffing need to be highly selective, performance regularly and systematically assessed, teamwork orientated, autonomy and responsibility were encouraged (Huselid, 1995; MacDuffie, 1995; Delery and Doty, 1996).

Developing A Cross National HR Strategy

With the growth of P&C business internationally, P&C needs appropriate information to develop its HRM policies and practices through comparing cross-national dimension on an international perspective (Brewster et al., 1996; Clark et al., 1999; Kochan, Dyer, & Batt, 1992) in line with its business strategy to develop a bigger market share one step ahead of its competitors.

Cross-national HRM policies and practices are influenced by both ”culture-bound” variables such as national and organisational culture, institutions, and industrial sector dynamics and ”culture-free” variables such as age, size, nature, and life cycle stages of organisation (Brewster, 1995; Hofstede, 1993; Jackson & Schuler, 1995; Sparrow, 1995).

The degree and direction of influence of these factors varies from region to region (Jackson & Schuler, 1995; Locke & Thelen, 1995).

Factors Determining Cross National HRM Practices

Creating a global corporate culture requires a geocentric mindset, drawing upon cultural capabilities that exist across the global operations and incorporating diverse cultural values and practices. Understanding HRM roles/strategies requires a contextual approach, underlining the importance of taking the institutional context into account (Paauwe, 2004). The table below shows the factors determining cross culture HRM practices.

Source : P.S.Budhwar, P.R. Sparrow (2002),Human Resource Manegement Review 12. p.387

A detailed list of the subcomponents factors and variables are explained in Appendix G as attached.

Resource Based Theory

The strategic importance of unique, specific and valuable human capital for knowledge-intensive firm like P&C would suggest a preference for employment internalisation (Matusik and Hill, 1998; Lepak and Snell, 1999).

P&C must actively seek “creative destruction” of its existing competencies to retain competitive advantage in the marketplace (Schumpter, 1934,1942) via an adequate HRM policies and practices.

Organisational competitiveness will depends on the strength/capacity of P&C to shape a unique set of resources where competitors find it hard to copy, which mobilized with the help of company-developed organisational and managerial systems that provide the organisation with a series of distinctive capacities that allow to generate long-term sustainable income (Fernández Rodríguez, 1995).

The process of continuous learning and modification of resource bundles for efficiency and effectiveness of strategies contribute to development of the organisation’s dynamic capabilities (global management capabilities difficult to imitate) to gain/sustain competitive advantage. (Teece,1988; Teece, Pisano & Shuen, 1997).

According to Barney (1991), if resources meet the following elements, the firm earns a unique strategy profile which assist for international expansion, for example, HR aspects.

Elements

Remarks

Valuable

Resources add value, enable firm to pursue competitive strategies to improve efficiency and effectiveness.

Rare

Rare resources, not all competitors have access to them.

Imperfectly mobile

Structures and processes that allow resources to be used.

Inimitable

Hard/expensive to copy resources, competitors cannot easily duplicate or find suitable substitutes.

Source : Barney,1991

Behavioural Theory

Behavioural Theory is based on the assumption that different strategies require different behaviours, attitudes and capabilities in workers (Schuler, 1987).

According to this theory, HR practices do influence workers behaviour which results in improvements of organisational performance (Lawler,1986; Huselid, 1995; Becker, Huselid, Pickus & Spratt, 1997; Guest, 1997;Appelbaum et al., 2000; Takeuchi, 2003), which means P&C must implement a set of personnel practices consistent with the organisation business strategy to build its international presence successfully (see table below).

Source: McMahan et al. (1999) Behavioural Theory applied to the effectiveness analysis of HRM

When workers have positive perceptions, this will increase their work commitment with the organisation, degree of involvement and their level of working satisfaction, which results in better performance for P&C and talented workers can be retained for future prospect.

Developing a systematic approach of HR policies and practices consistent with business strategy can assist in the integration of business, may in fact result competitive advantage, where every possible source of competitive advantage need to be identified/utilised in facilitating the learning and knowledge transfer processes across units (Schuler et al. (1993:427).

Best Practice – High Performance Work System (HPWS)

R1

HPWS is positively related to Business Performance

R2

HPWS created Human Capital training, which enable the acquisition of new skills and knowledge,

rigorous selection techniques guaranteeing talent and capability in hired workers,

incentives encouraging workers to find new skills,

competitive wages retaining the most suitable workers,

post design which turns out to be motivating and favours continued learning,

promotion and stability systems to be perceived by workers as indicators of the organisation’s commitment and participation mechanisms,

fostering knowledge transfer within the organisation.

R3

HPWS related to HR outcomes

workers’ satisfaction

commitment

rotation

absenteeism level

capacity to attract and retain talented personnel

R4

Human capital influence the relationship between HPWS and business performance

R5

HR & Organisational Objectives

Workers’ productivity, creativity, effort and higher profit, growth levels, which imply an increase in the company’s market value (effect on individual behaviour)

R6

HR Outcomes (motivation, working atmosphere, working satisfaction, rotation and absenteeism) influence the relationship between HPWS and business performance.

Source: Takeuchi´s model (2003)

These high-performance practices are perceived by workers as organisation’s commitment (Batt, 2002).

Definitely with HPWS implemented in P&C, it will be able to develop talented, motivated employees to meet organisation’s objective to achieve competitive advantage in the international arena (McDuffie (1995) by developing the necessary skills, knowledge and increasing motivation of employee contribution. At the same time, P&C can reflect the opportunities to realize economies of scale at the international level, rapidly evolving technologies which encourage P&C to engage in innovation and continuous learning across its operation.

According to Wright & Snell (1991), a successful organisation should have motivated workers who are involved in the achievement of organisational objectives.

Building a Competitive workforce

IHRM policies and practices are influenced by the organisation’s structure, strategy, its institutional and cultural environments (Ngo et al., 1998;Schuler and Rogovsky, 1998; Schuler et al., 2002; Sparrow et al., 2004).

According to Tehrani et al. (2007) managers responsible to create a more positive environment where employees can flourish and increase their feelings of wellbeing at work. Line managers are responsible to deliver the HR practices and to ensure that the perception of support, trust, fairness and consistency are maintained amongst workers.

The biggest mistake unsuccessful global organisations make is to assume that there is “one best way” to structure HRM policies and practices. Trying to apply HRM principles that work well in one environment may not lead to the same level of degree of success in another.

HRM Strategic Challenges

Globalisation competition has become so intense; HRM professionals require to optimise the skills, talent, creativity of every employee more effectively. Failure to do so will probably mean the organisation cannot compete in the flat world.

Every aspect of HRM strategic can be influenced by cultural differences in one or more dimensions.

International organisations need to understand the cultural differences and ensuring HRM and cultural orientation of workers are coincide with one another without sacrificing efficiency.

The real challenge of global HRM is to capitalise on the diversity of a global workforce without suppressing each other’s desire to maintain its own cultural heritage.

To be successful in the international marketplace, P&C must ensure HR policies are “fit” with strategic international plan of the organisation and with the work-related values of foreign culture due to cross-cultural interaction.

Reflection

After going through the IHRM module, I find this subject challenging combined with an experienced lecturer who makes this subject even more enjoyable to study. I appreciate the lecturer’s idea of forming us into teams to provide breakfast to the whole Cohort for Sunday morning.

I have encountered difficulties to look for suitable journals/articles to support this assignment. The more I read, the more confuse I got.

Due to the word count limitation, I will have to drop-off the topic on “global mindset”, ability to balance competing realities, demands and understanding complex often unexpected business, cultural and geopolitical dynamics which are the attributes needed to gain success in the international market.

I have learnt that it is important to look at cultural issues, adapt local responsiveness in HRM for international business environment. Motivation, good working condition, work diversification, international assignment, training and development, retain talented employees are values needed to embrace in this business arena.

Overall, trust in management and support promotes employee wellbeing at work (commitment, job satisfaction, work-life balance, pay what you worth) also build long-term competitive advantage.

With the knowledge gained, using diverse perspective HRM practice to grow, support and develop best people will definitely transform them into a global leader.