International Human Resource Management is a branch of Human Resource Management that has gained exceptional importance in recent years as the world becomes a global village where international borders are becoming insignificant and huge multinationals and conglomerates emerge. IHRM started off dealing with the issues of expatriation and their handling overseas; however in recent times it is more to do with international hiring, selection, international reward, programs concerned with the training of employees, their development, and managing their performance. In other words it will be fair to define it as global HRM.
The concept of flexibility in international human resource management has evolved tremendously with time and has redefined the way Human resources are managed. It may come as a surprise to many that till date there isn't a single definition for the practice of flexibility in IHRM. Hilary Harris, Chris Brewster, and Paul Sparrow put it very beautifully in their book International Human Resource Management as "The concept of flexibility working practices an area bedevilled with terminological problems". To better understand the implications of flexibility on IHRM we need to broadly define the concept of flexibility. Previously the neo-liberal definition explained flexibility to "entail the ease of labour market institutions in enabling labour markets to reach a continuous equilibrium determined by the intersection of the demand and supply curve" (Standing, 1989; Jimeno and Tohara, 1994). On the other hand Siebert states that the labour market institutions were seen to inhibit:
"the clearing functions of the market by weakening the demand for labour, making it less attractive to hire a worker by explicitly pushing up the wage costs or by introducing a negative shadow price for labour; by distorting the labour supply; and by impairing the equilibrating function of the market mechanism (for instance, by influencing bargaining behaviour)."
However the concept of Flexibility in IHRM can be better understood by Atkinson's Flexibility Model (1984), which categorizes flexibility in to distinct parts that is Internal Numerical (better known as temporal), External Numerical, Functional, and Financial flexibility, Outsourcing and In-sourcing. Temporal refers to working time flexibility, while external refers to the adjustment of the labour intake, or the number of workers from the external market. Functional refers to the extent to which employees can be transferred to other tasks and activities in the firm. Financial or wage flexibility refers to varying wages amongst employees.
The dimension that this essay will be focussing upon is the implication of off shoring; more specifically call centre business in India which is a branch of external flexibility, on IHRM. Flexibility is an integral part of IHRM, there might be differing opinions about how old this practice is however there is no doubt that it is being practiced more than ever before for various reasons like cost reduction, market penetration, forced strategy, etc.
The essay broadly focuses on off-shoring in India, specifically on the call centre industry. It is important to differentiate between outsourcing and off shoring terms commonly used interchangeably, which creates a lot of confusion. Out sourcing defined in off-shoring: an elusive phenomenon (Janet Norwood, Carol Carson et al, 2009, p.27) "is a business restructuring or change in current business practice that shifts operations or processes previously performed within the company to an outside entity-an independent third party. One result of outsourcing is that the locus of work shifts, and associated jobs migrate, outside the company". While off shoring refers to, "the shifting abroad of business activities or processes. Off-shoring can be a subset of outsourcing, if the new supplier of the outsourced activity is located in a foreign country" (Janet Norwood, Carol Carson et al, 2009, p.27).
So why would companies outsource indeed the advantages associated with it must out weight the disadvantages. The exercise of flexibility in shape of off shoring leads to lower costs or enhanced quality of the off-shored commodities and services. Furthermore it results in increased competitiveness, price reductions, expanded market share and increase in profits (Janet Norwood, Carol Carson et al, 2009, p.32). The company is also in a better position to focus upon its core competency and leave the noncore processes to other firms that have already specialized in that very field, for example technological expertise. Also gaining access to world class society that is willing to offer their services at far cheaper rates and lesser wages. It may seem as a win win situation for the firm as well as the country in which the company ventures into when it is offshoring part of its business resulting in job creation and foreign direct investment for the country however there are some problems that come with offshoring which results in deviation from IHRM practises that we will discuss later in the essay.Below is a table which gives an idea about the type of offshoring or outsourcing as it is called here.
Chiamsiri, S., Bulusu, S. D. & Agarwal, M. (2005). Information Technology Offshore Outsourcing in India: A Human Resources Management Perspective, Research and Practice in Human Resource Management, 13(2), p.105-114
Call centres in India, if monitored performance wise they are no doubt the best in the world when it comes to answering time (Holman, Batt, and Holtgrewe: 2007). The answering time defines percent of calls answered within the set target time. Till date they aren't even unionized making it easier to handle by Human Resource Managers. The concept of flexibility in IHRM is most widely exercised through the call centre industry; therefore it is important to shed light on the implication of flexibility on IHRM through the call centre industry.
Indian call centres have hired almost 75000 to 115000 employees and has almost 60 call centres nationwide in June 2003 (Taylor and Bain: 2003b: 83-85). The call centre industry in India is relatively new; the typical age of call centres in India is 6 years making flexibility exercised through call centres rather new International Human Resource Management practice (Holman, Batt, and Holtgrewe, 2007). The portion of call centres in India that serve the international market is almost 73%, compared with US and UK which serve only 2% and 18% respectively, giving India the highest share in the world when it come to call centre industry (Holman, Batt, and Holtgrewe, 2007). It is pertinent to note here that quiet a significant number of employees in the call centre industry in India are college graduates and statistically around 70% of them are fresh college graduates. Unlike in other markets these graduates are hired on full time basis (Holman, Batt, and Holtgrewe, 2007).
India has the lowest percentage of applicants that are hired which is 7 % as compared to US and UK which is 20 and 30 percent respectively showing how tough their selection criteria is and highlighting the fact that graduates still prefer working for call centres proved by the dominance of the call centre industry in India compared to countries like US and UK (Holman, Batt, and Holtgrewe, 2007). In India the recruitment and selection process in call centres an integral part of HRM is taken quite seriously, applicants have to be screened with the help of specially tailored selection tests. Almost 77% of call centres extensively use selection test for hiring employees (Holman, Batt, and Holtgrewe, 2007). The reason behind such a Human Recourse practice is to employ those candidates that are proficient in the language of the country they are going to deal with as well as have strong communication skills and in most cases have good selling abilities. This affects the normal practises of IHRM as the knowledge of the country, region, culture, rules and regulations as well as such norms as restriction of women working, becomes essential. Keeping this factor in mind most companies have also opted for outsourcing parts of their HR to the country in which they want to exercise flexibility in shape of offshoring. This may mean costs greater than at home but it might be an opportunity cost for the success of the business.
The expected job skills and requirements from a worker vary from firm to firm as each firm concentrates only on some particular products and processes. This puts a lot of emphasis on the practice of HRM which is training, it is very important to train the newly hired worker, to be ready for the actual task. They normally receive a training of 15 days in India (Holman, Batt, and Holtgrewe, 2007). The workers then need some time, approximately 11.5 weeks, to be proficient at their jobs, which unfortunately is not the case in India (Holman, Batt, and Holtgrewe, 2007). Once the initial training is complete the workers in India are expected to do their job. Beyond this the employees also need timely trainings for any changes in products and processes. Internationally on average experienced agents receive an average of 6 days of training per year. However experienced agents receive 10 days training a year, in countries like Germany, India, Korea, Poland, South Africa and Spain. (Holman, Batt, and Holtgrewe, 2007).
As far as the flexibility of employment mix in terms of temporary workers and full time workers is concerned, in India, employers normally prefer full-time workers. 97% of the work force is hired on full-time basis because of the high initial investment they make in accent building, and training (Holman, Batt, and Holtgrewe, 2007). Previous research suggests that high turnover rate has a direct impact on higher costs of recruitment, selection and training. The high turnover makes it a huge challenge for IHRM teams to keep a steady pool of employee to fulfil their business needs. Therefore this business model in flexibility require constant hiring, training and management of staff making the practises of HRM in such a case more intensive.
Overall the concept of flexibility has had a lot of implications on the practises of IHRM. Some positive while other controversially negative. Let us now consider the negatives of flexibility on IHRM as relates to call centre industry. The employees in the Indian call centres are the major victims of exploitation. It is reported that employees have to strictly follow a company provided text and are actively monitored. This result in the employees tending to lose interest in their jobs as following the monotonous routine of calling for 8 to 10 hours on a daily basis gets less and less interesting with time (Taylor & Bain, 2005). This keeps the human resource managers on their feet as they try to keep the work environment interesting by offering rewards and incentives that keep the interest of the employees in the job. The growth aspect for employees is not very bright either as most good CSR's manage to become team leaders with a slight increase in pay . As the employees normally work at night-shift, they tend have sleep disorders (Dr. Naveen R., 2005). Even the work environment at these call centres in India are not very comfortable; the agents are restricted to sit in their small work stations on a stretch. This leads to a high turnover rate, affecting the industry as a whole. The turnover rate is the highest in India. In India the labour cost contributes to almost 57% of the total cost (Holman, Batt, and Holtgrewe, 2007). . The cost of turnover is estimated as 16% of gross annual earnings about two months pay (Holman, Batt, and Holtgrewe, 2007).
It is mainly due to outsourcing that IHRM practitioners are able to take advantage of the flexibility in Indian work force. With no proper unionised work force in this industry the employees have very less room to resist the mal practices of the organization. The most they can do is to quit. There is no concept of pension and or job security . An agent not selling well is usually warned and then layed off in a period of less than a month.
Another major aspect of off shoring is that the workers in the parent country suffer. Almost 75,000-115,000 (Taylor & Bain, 2005) employees are hired by the call centre industry alone, if the option of off shoring was not available such jobs would have been created and allocated to local people. However the picture is brighter for countries where offshoring is carried out as it creates many jobs.
Offshoring also implies that internal customer management still are weaker. The costs rise in searching for vendors and keeping a more active and larger legal team to deal with the different laws and contract that the new country might have.
In the words of Friedman(2005) "the world is flat" or at least flattening by the combined processes of technological diffusion and integration of factor markets including that for labour. Flexibility changes the dynamics of HRM to a great extent. Ulrich (1998) proposed that an HR should be a strategic partner an administrative expert, an employee champion and a change agent. It is through off shoring that the in-house human resource professional is liberated and takes a more strategic part in design and implementation programs to retain the work force and enhance its performance. Flexibility through off shoring has ended the institutional and geographically contained organisations and created a whole chapter in which the companies do business and IHRM is at its heart. Some may beg to differ in some cases with ULRICHS definition for an HR professional in recent history when it comes to being a champion of employees as we put forward many IHRM practises in the call centre industry earlier that suggest otherwise. The implications of flexibility in case of off shoring will be different depending on whether an entire function like maintenance is contracted out in which some or all employees are made redundant or moved to a different location, or partial contracting of some activity to other agencies who may join forces with the firms existing employees (Gianni Zappala, 2000, p12 ).In conclusion offshoring is "considered to be growing due to reduced costs , lesser complication to capital and technology transfer (enabling sourcing at different wage and value levels), enhanced overseas capabilities and skill levels, domestic problems of labour turnover and/or skill shortage and weakened union resistance to organisational restructuring" (Jill Rubery, Annamaria Simonazzi and Kevin Ward, 2010, p77-80) .Human resource management at a global level is indeed redefined by the concept of flexibility having different implications on the way markets are operated in around the world.