Essential Factors Considered In Hr Practices Commerce Essay

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Human resource management (HRM) is known and accepted in the broadest sense of the term, as a form of management that includes "all management decisions and actions that affect the nature of the relationship between the organisation and the employees - its human resources" (Beer et al., 1984, p. 1). As can be observed based on the definition, the tasks of those belonging in HRM can be complex as it involves all issues that encompasses employee and firm relationship. Believing that the most important asset of a business is the people in order to achieve sustained business success is the core philosophy of human resource management (HRM), and realising this leads to a strategic management of people within the organisation.

The effective management of human resources is increasingly being recognised as a major determinant of success or failure in international business (Tung, 1998), in practice many organisations are still coming to terms with the human resources issues associated with international operations (Ferner, 1997). In the international arena, the quality of management seems to be even more critical than in domestic operations (Tung, 1998). This is primarily because the nature of international business operations involves the complexities of operating in different countries and employing different national categories of workers (Morgan, 1986). The field of international human resource management, however, is only slowly developing as a field of academic study and has been described by one authority as being in the infancy stage (Laurent, 1986).

Primarily, the main goal of this paper is to provide insightful details regarding the concept of the international human resource management in relation to a multinational company like Honda. In addition, this paper will discuss some factors that must be considered when managing people in the international environment. This paper will focus in three areas: The Organisational Structure in the Context of Globalisation, Global Leadership in a Global Environment and Transferral of Employees Internationally.

Company Profile

Honda is the world's largest manufacturer of engines, ranging from tiny single-cylinder lawn trimmers to the mighty V-10 engines of Formula 1 racing. Honda Motor CO., Ltd. is considered as a limited liability and a joint stock corporation which was incorporated on September 24, 1948 under the Commercial Code of Japan known as Giken Kogyo Kabushiki Kaisha. The company was formed to the firms of an unincorporated business founded in 1946 by the late Soichiro Honda, to produce or manufacture motors for motorised bicycles. Honda was unusual in having already created an industrial model by the time it entered the automobile industry. Twelve years after it was founded in 1948, Honda had become the world's largest motorcycle manufacturer, on the basis of a strategy which focused on product innovation and production flexibility and on the mass production of products which had in effect opened new market segments. The firm's success owed much to the mechanical and commercial imagination of Soichiro Honda himself. His associate, Takeo Fujisawa, who was in charge of the organisation and its finances, had been concerned from the start to find the resources needed to overcome the difficulties inherent in this profit strategy.

Industrial models which are to be consistent with part of a strategy of 'flexibility and innovation' must therefore give the firm the resources to counter these risks or reduce their impact. By 1967 Honda had become a proper car manufacturer. It opted for an innovative automobile niche and exportation in order to create a place for itself among Japanese producers. It marketed a mini front-wheel-drive car with a small but powerful air-cooled engine. The model's commercial success in Japan propelled Honda into third place behind Toyota and Nissan, with an annual production of 277,000 passenger cars in 1970 (Mair, 1994).

Honda became the world's largest motorcycle producer twelve years after it was founded in 1948. The company entered the automobile industry during the early 1960s. It then grew continuously for three decades, overtaking established automobile producers to rank tenth in the world and become one of Japanese 'Big Three' alongside Toyota and Nissan. During this period Honda developed an image as a 'different' company with an idiosyncratic trajectory led by innovative products. Growth was seriously challenged in the 1990s. Yet by now Honda had deepened and globalises an industrial model of 'flexible mass production'. Accordingly, Honda remained profitable during the 1990s Japanese recession. At the same time the crisis forced a rethink of the product innovation strategy (Freyssenet, 1998). Today, Honda is being regarded as one of the multinational automotive companies operating in different parts of the world. Honda had been able to penetrate the global market including countries in different parts of Asia, USA and Europe.

Organisational Structures in the Context of Globalisation

The true worth of international HRM is becoming more widely understood as IHRM steadily interweaves all aspects of people management and development within the company (Williams, 1995). According to Lipiec (2001), HRM is defined as the process of coordinating an organisation's human resources, or employees, to meet organisational goals. Human resource professionals deal with such areas as employee recruitment and selection, performance evaluation, compensation and benefits, professional development, safety and health, forecasting, and labour relations. There are many factors in which multinational companies must consider, and one of these is about giving emphasis to the organisational structure imposed in the globalisation context. A key issue in accomplishing the goals identified in the planning process is structuring the work of the organisation (Zammuto & O'Connor, 1992). Organisational structure is the formal decision-making framework by which job tasks are divided, grouped, and coordinated.

The organisational structure of multinational companies is being influenced or affected by the emergence of globalisation. Globalisation is easier to describe than to define. This is because, in its present form and usage, it is a new, complex, dynamic, multidimensional, and worldwide phenomenon, which means different things to different people and different things to the same people across time and space (Rosenhead, 1996). It evokes strong emotions because it is associated, rightly or wrongly, with most of the world's significant challenges and opportunities (Kiggundu, 2002). As mentioned, one of the Multinational companies that are being challenged by the concept globalisation in terms with organisational structure is Honda. The organisational structure of Honda comprises of board of directors, senior management, different committees on finance, and employees. As of March 31, 2003 the company has been able to employ 126, 900 full time employees which includes approximately 65, 000 local employees employed in international subsidiaries (See Appendix 1).

In order to cope with the various influences and effects of globalisation, the management of Honda, has been able to improve and expand its organisation so as to conduct environmental activities on a global scale. The management has improved its organisational structure to achieve their organisational objectives (A sample of organizational structure of one of the subsidiaries of Honda is seen in Appendix 2). One of these objectives is to be able to pursue an environmental conservation programs at all phases of Honda's operations and throughout the lifecycle of Honda's products. In addition, the improved organisational structure is done in order to initiate speedy and flexible measures in managing their internationally diverse employees.

In this manner, Honda ensures that the manager that they will hire certainly have the ability to adjust the human resource policies and practices to foreign environments. In the competition for global talent, corporations that are reluctant to consider foreign nationals for top management positions will lose out; the most talented people simply will not join an organisation that holds no promise of promotion (Keeley, 2001). As of March 31, 2003, Honda had 139 Japanese subsidiaries and 173 international subsidiaries (See Appendix 3). As Honda gain more experience they are able to adopt a more global approach to the management of all their operations both domestic and international (Dowling & Schuler, 1990). Researchers have long acknowledged that there are differing types of organisational structures that produce differing types of manager-subordinate relationships. Honda try to enhance cross-value capabilities by facilitating dialogue, camp sessions, or brainstorming seminars held outside the workplace, and even drinking sessions

(Nonaka & Takeuchi, 1995).

Organisational structure had a bigger role in the organisational practice of the management of Honda. It has been evidently shown that when the leader had a great strategic plan and whose plan had been vision and delivered well, the company will have a greater probability to succeed. Since, the competition are very high in the market be especially in the global arena, Honda has been able to consider the strategic function of its organisational structure internationally.

Global Leadership in a Global Environment

Due to the emergence of globalisation and its intense effect to different companies, many of the businesses are trying to cope with this situation and be known not only in the local marketplace but also in the international level. However, operating in the international arena is not that easy because of different factors to consider. When a firm decides to expand its venture to international market, it faces different challenges that need to be given emphasis (Klein, Ettenson & Morris, 1998). One of the most important considerations that should be given enough attention by the management of any industry is the management of the human resources and the determination of the international human resource management (IHRM) practice that will be implemented through the global leadership ability. Leadership comprises the aptitude and ability to inspire and influence the thinking, attitudes, and behavior of other people (Adler, 1991; Bass, 1985; Bass and Stogdill, 1989; Bennis and Nanus, 1985; Kotter, 1988). Leadership is a process of social influence in which one person is able to enlist the aid and support of other individuals in the achievement of a common task (Chemers, 1997).

The achievement of corporate success can only be accomplished by people who have broader knowledge in leadership (Cascio, 1995). In an international marketplace where borderless organisation is quickly becoming the norm, the leaders of Honda has been able to recognise that employees have an increasingly important role in the cultivation of the company achievements. The level of employee involvement in companies has expanded in general and in internationally-oriented corporation, progressive manages must recognise that only through effective management of people can organisations survive (Bartlett & Ghoshal, 1989). The concept of international human resources refers to the process procuring, allocating and effectively utilising human resources in an international corporation. The leaders handling IHRM is said to be significant in the attainment and accomplishment of companies in the global scene. IHRM apparently draws the line between a company's endurance and obliteration (Sims, 2002).

In line with the global leadership of Honda, the company has been able to utilise a system that would give balance to their imposed international human resource management. One of the leadership ability that Honda, inherited from Soichiro Honda, is his visionary ability. The visionary leadership ability of the leaders of Honda encompasses their ability to eliminate management layers to become visible within the organisation and being active, early participants for future projects and operations. The leaders of the company have been able to be directly involved in every operation and become a powerful role model to their subordinates (Nevis, DiBella & Gould, 1995). In addition, the company had been able to utilise the permissive (delegative) or the so called laissez-faire style. In this manner the employees of the company in the international level are permitted to be involved in the decision making process. In this manner, the management implements minimal control or manipulation on their employees both local and international. However, the management is still accountable for the final decision to be made. Herein, the opinion and ideas of the Honda employees are being valued by the leader and each employees and staff encompasses different tasks set by the leader.

Transferral of Employees Internationally

Another factor to consider when managing international human resources is the concept of transferring human resources to international operations. Part of the concept of transferral of employees to international organisation is the recruitment context. Recruiting in the international arena is taken a lot more seriously and given a lot more thought than it used to be. Gaining competent employees at all levels of the organisation is more than a matter of training. It stems from changes in recruitment and selection philosophy (Ashkenas et al, 1995). Recruiting the most competent employees for each and every organisation is continuous challenge for the human resource management, specifically in the international arena (Henderson, 1996).

Faced with the problem of conducting recruiting effort to fill critical position in any level of organisation, the international HRM practice must create an Employee Recruiting Policy to identify the critical activities in the recruitment process and monitor its results. In case of Honda Motor, the international human resource management of the company has been able to plan an IHRM Recruiting Program clearly state the mission and objective of the recruitment process to be done. Specifically, the purpose of such policy is to offer a criterion and standard measure for recruiting human resources that will be work in the international level. The recruitment imposed by the international HRM also includes a procedure so that the recruitment process for the international subsidiaries of Honda should be accurate and correct. In this manner, the international HRM of Honda also ensures that they are updated when it comes to job position, if a new position is required or if a transferred/reassigned or terminated workers or employees would need a replacement.

In addition, the move of Honda to transfer employees to international subsidiaries aims to promulgate their organisation culture even in the global arena. Honda Motor has make it sure that they always follow the international labour policies. In this manner, before an employee is given an opportunity to work in the international level, the company provides all the necessary trainings, in order to ensure that the transferred human resource or employees will be able to provide the necessary responsibilities allotted effectively and efficiently. Another important factor to consider when transferring an employee to an international subsidiary is the orientation of the management system of the host country in order for the transferred employee to adjust with the present situation of the international organization. In the case of Honda, the company has been able to provide a comprehensive orientation to employees who will be transferred regarding the culture, attitudes values and other human factors that can be encountered to such international subsidiary.

It is also equally important to note that since, Honda, belongs to a company which manufactures quality and innovative cars, sharing of knowledgeable and efficient employee or managers is one of their style. These transferred employees, are responsible to collaborate with other employees in such international subsidiary (Gallie, 1998). The creation of work teams with collective responsibility for the management of a group of machines or a specific segment of the work process was based on a managerial initiative.


In any business enterprise, employees are considered as the most vital assets. In order for these companies maximise their assets, the management should have the ability to effectively manipulate employees' working condition (Ulrich, 1998). Herein, the employees must be allowed to be involved in the decision making process to further enhance the organisational structure (Delaney & Huselid, 1996). Moreover, the structure of tasks among the employees strengthens the organisational performance (Wilson, 1989). As problems of regional and cultural diversity politically led administrative issues impede the functioning of the organisation, it is very essential understand the employees (Schneider, 1983). The enhancement, building, enthusiasm, motivation and development of the employees of any organisation depend largely on the leadership, mandate and vision of the organisation (Rainey & Steinbauer, 1999).

The management of Honda has been able to employ the general HRM practices of Japan with their international subsidiaries like the United States. Hanada (1989) described five phases in the development of international human resource management through which Japanese firms such as Honda pass as it become increasingly involved in global activities. In stage one of Honda's international activities, the programs are limited to export of its product for example in Philippines, Taiwan and USA and its International HRM function is mainly concentrate in an export department. With the urge of the company to be known in the global context, Honda has been able to establish foreign assembly or operations like in USA, UK and other part of Asia.

Herein, the increase human resources of Honda, is usually handled by creating an overseas operations department. The establishment of an overseas human resource department characterises the structure of the firm which is substantially modified to reflect the increasing interaction between Honda's domestic and foreign operations. In addition, there are also times when Honda, felt to have greater control of their international operation. Herein, the International HRM of Honda, functions mainly in different areas and practice of HRM. In this manner, the company gives emphasis to the differences of their employees so as to have a harmonious human resource relationship. There are also times in which the company had been able to reach the globalisation phases that the management of Honda, attempts to thoroughly internationalise its human resource management and there is no distinction between foreign and Japanese employees with the international division.

All in all it is very crucial that an international organisation should make a way in adjusting their management styles and approaches to adhere with the differences and similarities of the employees, specifically those in the international environment so that IHRM may catalyst the motivation among diverse individual. It is also important to note that international human resource management should have the ability to employ the principles and concepts of emotional intelligence and give emphasis to the importance of self-awareness in dealing with different kinds of people, winning their trust and to ensure that the people's values and the organisations objective will intersect to a common goal and that is to incorporate good employment relationship.


In managing people, the international human resource management, Honda Motor Corporation and other Multinational Corporations should be able to have the ability to think more systematically and strategically in handling one of the most valuable factors within the organisation, i.e. its human resources. Herein, IHRM practice should be able to develop a successful organisational culture and a stable organisation by means of effective management of the people. In addition, communication is a very important factor to use in order to have a harmonious and smooth relationship between the management team and the employees in the international level.

In addition, the management should try to integrate its own management system with the management system of the host countries, in which MNC are operating. The main goal of this integration is to let the employees within the international operation feel that their culture, values and traditions are not being discriminated by the management. In this case, if Honda would continue to implement a strategic international human resource management, it will be able to handle and manage their human resources in each international operation successfully.


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Appendix 1

Total Number of Employees of Honda Motor Co. Ltd

As of March 31, 2003
















Appendix 2

Organizational Structure of Honda (Based in Pakistan)