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For many years human resources management (HRM) has become more than a simple department inside companies, for many of them it has a strategic focus, related to resource-based conception of employment relationship. Thus, HRM can be seen as part of companies' strategic managerial function in development of business policy.
Mendenhal et al (2007) suggest that HRM has some specific goals inside company such as facilitating organizational competitiveness, enhancing work productivity and quality, complying with legal and social obligations, and promoting individuals growth and development. Moreover, HRM tries to standardize policy, practices and philosophy among its main directions such as recruitment and selection, reward and remuneration, trainings and employee development, and performance appraisal.
However, when companies are initiating new businesses with or working in different countries, it means inside a globalization process, HRM starts to assume a different role into those companies. Because at the same way that a business analyse must take place to understand and compare important business attributes among countries such as raw material offer, infrastructure, suppliers and so on; there are other essentials issues (that will be discussed later on) which can be very precious or dangerous for them if not analysed properly, thus companies must be aware of that, and the analysis must take place either, otherwise they can fail to jump into an "unknown" country.
Therefore, inside that situation HRM begins to have a focus on globalization as well, and then moves toward to the International Human Resource Management (IHRM). That according to Maund (2001) IHRM is connected to globalization, but it needs space to managers understand important factors and work with that in increasingly global area.
IHRM plays a very important role into multinational companies, because those must to understand much more about the local culture, educational system, behaviour, labour market, industry, employment laws, language and other factors that they subjugate necessary. Without that knowledge and without knowing how to work with, companies can face many problems and struggle themselves to apply the companies' philosophy, policy and practices.
Variables that moderate differences between domestic and international HRM
The model above shows the variables that come into IHRM, and then because of the importance that IHRM has been gaining within multinational companies, Maund (2005) argues that IHRM is better than HRM. So this report will bring different perspectives, analyses, and how much important IHRM is for multinational companies to contrast with Maund arguments.
2. Literature Review
International human resource management has increased at almost the same step of the development of companies' strategy; according to Tayeb (2005) IHRM is an essential factor that leads multinational organizations to the success. But to achieve that success, companies must be aware of variation between countries that may affect their IRHM system such as tax regimes, training and qualification systems, diverse systems of employment laws, and dismissal and discrimination laws.
Moreover, Harries et al (2003) argue that IHRM has been covered under three main headings, the cross-cultural management, the comparative human resource management and the international human resource management itself.
In other words, understanding about other countries must be taken in consideration to IHRM system, otherwise companies will not be capable to deal with people and get the best from them, and consequently, achieve the main reason to move toward for another country. It is essential and crucial to survival, performance and success of companies outside their borders.
According to Armstrong (1999) IHRM can be defined as a process for multinational organizations that employ and develop people outside their boundaries, in order to achieve companies' objectives and goals. Furthermore, Maund (2001) supports that IHRM has to take HRM functions from domestic market and apply those for international workforce adapting them for specific countries.
IHRM is extremely important to all companies which work or are planning to go beyond the national limits, according to Maund (2001) it happens because inside companies' business strategy, discussion about international issues regarding countries such as the level of development, level of specialized workforce, employment laws and educational system for instance will play an important role inside the companies' strategy. Besides other issues such as infrastructure, raw material and workforce cost are extremely important and for many companies those are responsible to a company goes to a certain country, the other factors and issues presented must take place inside the strategy to inhibit future problems.
In addition, IHRM 'is about understanding, researching, applying and revising all human resource activities in their internal and external contexts as they impact the process of managing human resources in the enterprise throughout the global environment to enhance the experience of multiple stakeholders, including investors, customers, employees, partners, suppliers, environment and society' (Briscoe and Schuler, 2004)
3. Main Body
Year after year companies are operating in overseas markets and competing on the globalized world in order to remain in the market, consequently competitive advantage is becoming less effective when look at traditional sources; so organizations have to seek for new ways to gain competitive advantage, one of these ways certainly is the management of international human resource. However, firstly companies have to understand that countries are not equal and they differ from each other in many aspects such as political, economic, social policy, language, culture, labour market educational system, laws, trade unions, expectations, and so on. Adler (1986) sustains it saying that organizations will deal not only with cross-culture environment, but also with cross-national environment.
The understanding is essential to companies do not commit mistakes, even though sometimes companies may misunderstand factors and generate problems to them for instance. Culture could be described as one of the main factors that companies have to understand correctly, for the reason that culture has been building through many years and assemble a mixture of behaviour, attitudes, values and way of life.
Thus, IHRM will help companies to trade or run internationally to capture a perspective about countries using their knowledge, skills and abilities to comprehend important factors that dealing with employees may influence into the company.
It makes IHRM extremely important to companies at the first moment, once it explores how organizations have to analyse and deal with international workforce to do not mislead the spotlight.
3.1. Strategy focus
The management of human resources internationally has been increasing since the last decades (Dowling et al, 1999), so it shows that for many companies the understanding and management of people are extremely important to them, to consequently drive the company to gain competitive advantage against it competitors or sometimes it is just a way to do not let competitors achieve a better IHRM system, and as a result the company could face problems related to the management of human resource and cost-effective practices for instance.
Harries et al (2003) support that IHRM practices must be different through many countries, because multinational corporations have to be able to achieve the same or similar result (in proportion) independently where their sites are bases on. For example American companies do not use the same performance appraisal as in organizations running in pacific countries for instance, because in the pacific countries the hierarchical assumptions and loss-of-face fear are greater than in USA.
Sparrow et al (2004) highlight that inside the majority of firms; people are the largest resource of operational costs, so the management of this resource is extremely important to all of them. Thus, national or international companies must have a well defined and organized structure about the IHRM functions, otherwise problems can rise and difficult to manage people will increase much more than it supposed to be.
Moreover, Bartlett and Ghoshal (1989) argue that IHRM has to be directly linked to international corporate strategy. It can be justify through strategic problems for top managers are the balancing between the integration between firms' economic need and social, cultural and political pressures for the locals.
In other words, IHRM supports companies' strategic planning and an appropriate structure must be designed to organizations be based on and achieve objectives and goals operating in foreign countries and market. Thus, multinational corporations have to incorporate IHRM within their strategy appropriately.
Inside multinational companies, senior managers who will be sent to work in other country have to gain and learn specific skills that will help them to carry the integration about goals and objectives through local workforce perception. So, in order to make that happen, managers need accurately knowledge and skills regarding to local culture, language, flexibility, interpersonal and communication ability and capability to deal with complexity and diversity in the workplace.
On the other hand, Schuler et al (2002) has pointed typically reasons which multinational companies might face and would drive them to failure in develop global mindset into their expatriates senior managers, those reasons are defined as cultural insensitivity, lack of information, inward-orientation and ethnocentrism.
Furthermore, Taylor (1996) argues that IHRM system is the best way that senior managers will gain efficiently and effectiveness knowledge to manage and control international operations. However, managers within international environment might suffer more impact of regional, multi-country and global change than managers in national environment operations. It can be justified because the decision making process includes complex and ambiguous context to managers as presented previously.
In other words, the knowledge sharing has to be constantly initiated by senior managers who obtain the business strategic and operational understanding added to the recognition of culture, language and hierarchy barriers from the local workforce. So, it is very significative for organizations that managers have the know-how to motivate, encourage and overcome those barriers into their employees within the value chain to share knowledge among each other.
As illustrated earlier, senior managers who might be sent to run sites, areas and departments have to acquire specific knowledge and understanding as described previously. So, the same logic has to occur for expatriates' employees, in many cases such as engineers, specialists, technicians and many others are necessary in sites around the world.
Typically those kinds of employees do not have the same background and knowledge about companies' strategy and operational goals like senior managers, and much less skills to deal with unexpected situations, events, happenings inside the new culture. In that case, Dowling et al (2008) suggest that intercultural trainings must take place to help expatriates cope with the unexpected in a proper manner.
However, Edwards and Rees (2006) have analysed this process and they argue that expatriating process creates an enormous financial problem when expatriates do not accomplish their assignment successfully, and they explain it with the lack of concert among many managers around them.
In other words, expatriates have to obtain personal specifications that address specific factors required for the job plus intercultural trainings to help them within the new environment which they will face.
Additionally, not only the expatriates can create dilemmas for companies but also their families. In many cases, families will play a very important role in the success of the expatriate assignment, if the family is not able to deal with the new culture, style of life, language and so on, it might influence in the expatriate's decision to drop the job for instance and come back to their country. According to Dowling et al (2008) there are companies which have extended pre-departure training programs to the family, to minimize problems.
Expatriates might be very important to companies inside subsidiaries to implant policies, practices and perhaps philosophies, but they have to be prepared to the job and must be able to share and retain knowledge, and treat local colleagues according to their culture and manners. Otherwise, they will drop the job and the investment made by organizations will not be used as it should.
Besides many authors suggest that IHRM is very important for companies in the globalized world, managers and employees have to deal with all the diversity among cultures, countries, language and so on, the research carried by the IPD (1996) shows that people when crossed boards must have strongly intercultural, communication skills, knowledge of local employment conditions and strategic business aims, and understanding of international business environment.
Global workforce requires more attention for companies because issues about equity, fairness, benefits and appropriate compensation have to meet their expectations, moreover the issues have to combine both national and international dimensions (Vance and Pail, 2006)
Armostrong (1999) argues that IHRM system is responsible to comprehend, develop and apply efficient and effective managing process to complexity in workforce, diversity and communication. The fast increases in global activity and global competition have resulted in a rise in the number of multination companies, thus the understanding and management of workforce are extremely vital to those companies to compete and operate correctly inside their market.
According to Boxall (1995) IHRM not only has an important use for international application, but also in areas within countries. For many countries, the regions have different perspectives, social policy, laws, trade unions, educational system and so on, for example USA, it is a country where each state has its own laws and systems, it creates the need for the better analyse even inside countries.
Moreover, organizations have to inhibit discrimination based on race, age, gender, minority inside their sites in foreign countries; the workforce has to be fairness treated, has a good environment in the workplace and equal opportunities based on merit.
IHRM in the globalized world is vital to companies remain competitive and obtain the best from their employees. However, as presented earlier, specific knowledge and skills are required to companies develop an important IHRM system to deal with new culture, workforce, environment, and so on.
The report presents that IHRM might supply knowledge and skills to manage human resource, that will drive companies to gain competitive advantage through facilitating the development of competencies such as knowledge sharing, competence transferring, building complex social relationships and flexibility.
External and internal cultural diversity pressures might occur and companies knowing how to manage the problems with the necessary knowledge and skills plus their own way to deal with IHRM may those gain competitive advantage
IHRM has to use effectively and efficiency human resources available outside boundaries. The information available in this report shows that IHRM system tends to reduce the risks, manage diversity, avoid culture risk, expatriates problems and others discussed.
Moreover, situation in the globalized world such as merges, acquisition and advance in technology may push companies to work much better in a global sense, consequently the need for IHRM system application.
Companies have to develop always an international mindset into their expatriates' employees, it does not matter if it is a manager or an engineers, all of them have to get the same mindset about the companies goals and objects when firms go global.
Problems related to expatriates, failure if not apply correctly and not trained properly, firms need the right mix of knowledge and skills to be able to apply IHRM system,
In conclusion, IHRM is very important to all multinational companies that work outside their boundaries, but IHRM is based on HRM. In other words, if the HRM system is not designed properly back home, companies probably will face much more difficult to design and implant an IHRM system. So, this report understands that HRM is very important for all companies but in a global sense IHRM has more relevant application, for the reason that it takes in consideration important factors about countries and implements it into its structure.