In order to answer this question and put forward a balanced analysis of the challenges face by international resource management, this report will look to outline a number of key areas where the IHRM management are experiencing convergence, divergence and cross-vengeance within their human resource practices.
For that reason structure of this report will provide a brief outline what International Human resource management is, what problematic scenarios they deal with and most importantly how they deal with. Furthermore to this, this section will also critically evaluate the effectiveness of each of their strategies, by highlighting both the positive and negative ramifications of employing such strategies within their workforce, at the same time as providing a number of suggestions on how they could improve on their current strategies.
Once this overview of the has been provided, the next section of this report will specifically highlight a number of models and theories used by the IHRM and critically analyse how effective and ineffective they are, in terms of dealing the challenges faced by this particular organisation.
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The final section of this assignment will then conclude by critically evaluating the impact that the IHRM in-house strategies have had on the challenges faced by this organisation, by outlining how theories and models used by this organisation have converged, diverged and in some cases overlapped. Once this has been discussed to concluding section will provide a number of solutions that will look to improve IHRM current theories and models, in order to put help the organisation move forward in the future.
International Human Resource Management (IHRM)
Before an accurate definition of what International Human Resource Management can be put forward, this assignment will firstly need to explain what HRM (Human Resource Management) is. According a definition put forward Mullins (2002:685),
"Human resource management is 'resource-centred', directed mainly at management needs for human resources to be provided and deployed."
A number of activities for HRM may include, but is not exclusive to the following tasks:
human resource planning
recruitment and selection
performance management and appraisal
career development and KPI's
pay management and bonus structure
employee relations and team building exercises
training and development.
A number of academics have argued that the core practices of HRM has evolved in harmony with globalisation; in the modern climate business tend to operate in an international environment and this has lead to the development of International Human Resource Management. Moreover, according to research by Almond and others, IHRM is also referred to as the management side of the Human Resources in the majority of Multi National Corporations (MNC's) (Almond et al. 2004: 606).
IHRM (international Human Recourse Management) is a management process utilised by organisations on an international scale. In a similar fashion to national HRM (Human Resource Management), such as recruitment, training, section, development programmes, reward schemes, KPI's, appraisals and disciplinary procedures. However, unlike nationalised HRM, IHRM is done on a global scale. The main purpose of IHRM is to manage human recourses at (MNC) Multinational Companies, in order to provide organisations with the opportunity to expand into the global market, at the same time as remaining competitive within its host nation.
Although this management method does have a number of positive benefits, it also has a number of negative ramifications, too. For that reason, the purpose of this report will provide an in-depth investigation on the various decisions that MNC's have for designing their IHRM structure, by analysing the following areas; the strategies MNE pursue, the approach they take to employee relations and their approach to staffing.
In addition to this, according to research put forward by Perlmutter (1969) there is three main strategies which have been put forward, in order to dilute the complexity of the MNC's. Those main strategies are referred to as; ethno- centric, polycentric and global. An ethnocentric strategy is a process where a company utilises the same HR practices overseas as it does at its home office. Conversely to this, a polycentric strategy is when a company adheres to local HR practice in its overseas operations. Then finally, there is the global strategy, this is where a company when a company attempts to implement common HRM strategies for all of its overseas operations. (Myloni 2002:183). However, these strategies are not set in stone, and in a number of cases, senior managers will tend to implement an amalgamation of each of these theories.
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Ethnocentric is a staffing policy that is used in companies that has primarily international strategic orientation. This policy is generally adopted by headquarters by sending employees from the home or parent countries to the host country. This approach is used best in some situations such as, a team is sent from the home country to help setting up a new plant as well as train subsidiary personnel to use new system. The benefit of having staffs from home country abroad is that employees may gain experiences worldwide in order to become higher level in management of their headquarters because international managers require broad perspective and international exposure.Â
Polycentric is the policy involved hiring and promoting employees who are citizens of the host countries that the subsidiary is operated. This policy is best used when companies want to keep hiring cost low. Moreover, employees who are hired at subsidiary level would not have any problem adapting to the culture. Communication is smooth within the operation.Â
Regiocentric staffing policy involves hiring and promoting employees Â based on specific regional context where subsidiary is located. This approach is used when regional employees are needed for important positions. However, both employees from host countries and a third country are employed. The disadvantage of using this type of policy is that sometimes employees from home or host countries are not unselected. Instead, employees from a third are selected to subsidiary in which they may face cultural differences.Â
Benefits of IHRM and global expansion
IHRM not only provides an organisation with an ideal platform for it to expand into a global market, but it also provides valuable research for normal HR departments to become more internationalised, by providing them with information on how the MNC operates. For case in point, reports from the IHRM can provide a series of facts and statistics on the population they are working in, the economic difficulties they face, the attitudes of their work force, the life-cycle stage of the firm and how they deal with apprising employees. This will enable national HR departments to develop new management strategies, which will help them with their approach towards employee relations and staffing within the national HR department, by adding valuable research and solutions on how to deal with diversity management issues.
As previously mentioned in this report, one of the chief objectives of IHRM is enable an organisation to grow into a MNC, so that it can to become completive throughout the world, thus generating more revenue for a company in the long term, which is an obvious benefit. In addition to this, other benefits may include enhancing the public perception of a business abroad by increasing the acceptance of the company on a global scale, to maximise the number of options available within the local area which an organisation is about to expand into. What is more, international trade is growing at rapid pace, as research by Brewster suggested, a large number of organisations have a number of employees working across a national boarder, in order to generate more revenue and enhance the overall perception of the organisation.
"Many international organisations such as those in the UN family, OECD, the regional trading bodies, have employees working across national borders. So do many charities and religious groups." (Brewster and Lee, 2006)
This demonstrates that a large number of organisations have already expanded internationally and employed workers from across the national boarder. However, in order to do this they will need to spend more resources on developing IHRM strategies, which can prove to be both expensive and problematic. For that reason, the next stage of this report will focus on the challenges faced by IHRM and the strategies they use to solve them.
Challenges faced by IHRM
Despite the financial benefits that may result from expanding a business into a international market, there is also a number of problems that any MNC's and MNE human resources departments must address in order to become successful. Those problems include those in the UN family, OECD, charities and regional' all have employees working across national borders .
Despite the financial benefits that may result from expanding a business into a international market, there is also a number of problems that any MNC's and MNE human resources departments must address in order to become successful. The nature of these issues can stem from Cross-Culture Management, Cultural differences within a workforce and Diversity Management.
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Cross-Cultural management is process that aims to manage cultural differences that may arise across the organisation. Conducting business on a global scale requires a company to have a well balanced understanding of different cultures. For instance,Â what management strategies may work well in one country might not work well in another. Therefore, one of the key strategies an IHRM department with have to implement is gaining relevant knowledge on geographical location and cultural diversity. To illustrate this point further, every nation has its own set of deep-lying values and philosophies, and these will be reflected in way those societies and economies operate. What is more, this also provides an insight on how people work and how they are managed at work. It is important to note, that different nations will have different values, and these values may affect the way that HR departments organise, conduct and delegate workloads to their employees. Awareness of these issues is a crucial area for an IHRM to ascertain. Therefore, normal HR activities as mentioned previously in this report will have to reflect the practices and consensus of the hosting country. This generates the issue of delegating time and resources to learning about cultural diversity and cross-cultural management processes.
The cultural differences that may affect an international business extend far beyond the aptitude to introduce yourself to your international colleague in their native language. There is a number of cultural issues which need to be addressed, for instance, what political views they adhere to, what international labour legislation do they abide by at the same time as having a clear knowledge on the international trade unions bodies that may be applicable their country. Learning a culture for an expatriate should be based on the respect of a new culture, as Zhangi mentioned, only through 'respect and equality can cultural differences be understood', in essence, an MNC's needs to provide a 'no culture distance working environment' in order for it to be successful. (Zhangi, 2001: 386-388). Cultural difference may have a significant impact on the overall image and management strategies implemented by an MNC's. For instance, if a company brunching out into Spain then they will need to take into account the siesta period, which a habitual day time sleeping period for a large number of Spanish people. In some cases, this could have an effect on both business trading times and what hour's employees are willing to work. Therefore, in-depth cultural studies, provided by qualified experts will ensure that unnecessary errors are avoided. What is more, learning about new cultures also enhances personal knowledge that deepens our empathy of others; thus encouraging acceptance, understanding, and most importantly, a level of cultural empathy.
Language and Communication
Language plays an integral role in negotiating and in allowing negotiators to prepare for cross-cultural interactions (Rubinstein, 1999). According to Harrison, language and communication can also be defined as, "The ideologies, beliefs and deep-set values which occur in all firms... and are the prescription for ways in which people should work in those organizations". (Harrison, Harvard Business Review, 1972);
As previously mentioned in this report, various cultural factors make up the character of an individual. This rule also
The fundamental differences between languages and culture will have an impact on the success of a MNC's ability 'to negotiation across the globe' according to (Hargie and Dickson, 2004). For that reason, it would be Imperative for an IHRM management team to start preparing for international negotiations by learning the language and own cultural values of country the company is about to expand into, at the same time as paying close attention to and 'how much they differ from those of the other party' (Hofstede and Usunier 1996, p. 126). There is not set rule about the level cultural understanding that employees from IHRM should take into account when negotiating with an international collage, however, they all members of staff should have a solid grasp of the chosen language they chose to communicate in.
Therefore, langue has a major influence on the way people communicate negotiate and behave in any setting. However, for a business to be trusted by their international counterpart it is important to 'share the national culture' and have a solid grasp of the language which is spoken by the country is looking to negotiate business with (Hofstede and Usunier 1996, p. 120).
To conclude, cross cultural management takes into account a number of cultural diversities, such as time zone differences, working hours and language spoken. Therefore it would be highly important for a IHRM team to delegating a significant amount of time and resources' on ensuring that all staff can communicate in a international business language.
Do you keep your own standard Human Resource Practises or do you alter them?, this should be asked when expanding into an international organisation. To address this, research should be done into the culture and traditions of the host country, which will help generate a better insight into the possible problems that may accor internally and externally.
In summary, there are many potential problems that need to be address in a international organisation. This is generally addressed through the IHRM department, where they implement several strategies, such as Ethnocentric, Polycentric, Geocentric and more.
Polycentric policy can be used to hire in the local work force within the host branch of the organisation. This bring in the customs and traditions in to the host branch. Which helps the organisation adapt to the local settings whilst creating local awareness within the organisation.
Other solutions many include cross culture training as it is seen as the primary method of eliminating cultural conflicts.
Also the organisation may adopt to a more international coherence policy approach when dealing with staff, whilst this irons out most of the cultural conflicts that may acor, it can cause other problems, such as making the organisation come across arrogant to the host countries.
IHRM also can focus on how different organisations manage their staff across national borders. There is typically high operating costs associated with managing visa's and working permits, this can be another factor why Geocentric would help reduce the overheads. however some organisations may choose to move a small percentage of staff across international borders in order to share the tacit knowledge gained from the host branches of the company.
Looking at technology trends with the way communication is changing and adapting, it could be possible to reduce the costs adapt with the way knowledge is shared across the host countries. Such as the use of 'Skype', it could be used for low cost video conferencing or interviewing staff internationally.