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Human resource management (HRM) is universal in terms of strategies, policies and processes. The term has gradually replaced personnel management. Managing and developing human resources in the international (global) setting is increasingly recognized as a central challenge, particularly to multinational enterprises (MNEs). Human resource management is both academic theory and a business practice that addresses the theoretical and practice techniques of managing a workforce. While the theoretical aspects of the discipline may also be universal, the same cannot be said of its practice. The paper defines human resource management, the theoretical basis of the discipline, business practice and global or international human resource management. Thereafter, the paper concentrates on global perspective or issues in international human resource management practice.
HUMAN RESOURCE MANAGEMENT
Human resource management is the strategic and coherent approach to the management of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business. The terms "human resource management" (HRM) and "human resources" (HR) have largely replaced the term "personnel management" as a description of the processes involved in managing people in organizations.
Human resource management can also be defined as the function within an organization that focuses on recruitment of, management of, and providing direction for the people who work in the organization. As a change agent, it is concerned with the nature of and regulation of the employment relationship at the level of the workplace and broader society.
The human resource management model emphasises.
The need to search for new ways of working
The central role of managing in promoting change
The treatment of workers as individuals rather than part of a collective workforce
The encouragement of workers to consider management as 'partners' rather than as opponents - 'us and us', rather than 'us and them'.
The theoretical discipline is based primarily on the assumption that employees are individuals with varying goals and needs, and as such should not be thought of as basic business resources, such as trucks and filing cabinets. It takes a positive view of workers, assuming that virtually all wish to contribute to the enterprise productively and that the main obstacles to their endeavours are lack of knowledge, insufficient training, and failure of process. It is an innovative view of the workplace management, which, asserts that human techniques when properly practiced, are expressive of the goals and operating practices of the enterprise overall.
As an academic theory, the goal of human resource management is to help an organization to meet strategic goals by attracting, and maintaining employees and also to manage them effectively. The key word here is "fit", that is, human resource management approach seeks to ensure a fit between the management of an organization's employees, and the overall strategic direction of the company. The basic premise of the academic theory of human resource management is that humans are not machines, therefore, we need to have an interdisciplinary examination of people in the workplace. That is why fields such as psychology, industrial engineering, industrial and organizational psychology, industrial relations, sociology etc play a major role.
Human resource management (HRM) as a business practice comprises several processes, which used together are supposed to achieve the theoretical goals mentioned above. These practical processes include:
Recruitment (sometimes separated into attraction and selection)
Induction and orientation
Training and development
Compensation in wage or salaries
Travel management (sometimes assigned to accounting)
Payroll (sometimes assigned to accounting)
Employees benefits administration
Personnel cost planning
GLOBAL OR INTERNATIONAL HUMAN RESOURCE MANAGEMENT
Global or international human resource management is the process of employing, developing and rewarding people in international or global organizations. It involves the world-wide management of people, not just the management of expatriates. An international organization or firm is one in which operations take place in subsidiaries overseas, which rely on the business expertise or manufacturing capacity of the parent company. Such companies or organizations bring with them their own management attitudes and business styles. Human resource managers of such organizations cannot afford to ignore the international influences on their work.
ISSUES IN INTERNATIONAL (GLOBAL) HRM
International human resource management involves a number of issues not present when the activities of the firm or organization are confined to one country. The issues in global HRM include:
The variety of international organizational models that exist
The extent to which HRM policy and practice should vary in different countries. (This is also known as the issue of Convergence and Divergence).
The problem of managing people in different cultures and environments
The approaches used to select, deploy, develop and reward expatriates who could be nationals of the parent company or 'third-country nationals' (TCNs) - nationals of countries other than the parent company who work abroad in subsidiaries of that organization.
INTERNATIONAL ORGANIZATIONAL MODELS
Bartlett and Ghoshal (1993) have identified 4 models
Decentralized federation in which each national unit is managed as a separate entity that seeks to optimize its performance in the local environment. (This is the traditional multinational corporation).
Coordinated federation in which the centre develops sophisticated management systems enabling it to maintain overall control, although scope is given to local management to adopt practices that recognize local market conditions.
Centralized hub in which the focus is on the global market rather than on local markets. Such organizations are truly global rather than multinational.
Transnational in which the corporation develops multi-dimensional strategic capacities directed towards competing globally but also allows local responsiveness to market requirements.
CONVERGENCE AND DIVERGENCE
Another issue facing international organizations is the extent to which their human resource (HR) practices should either 'converge' worldwide to be basically the same in each location, or 'diverge' to be differentiated in response to local requirements. There is a natural tendency for managerial traditions in the parent company to shape to the nature of key decisions, but there are strong arguments for giving as much local autonomy as possible in order to ensure that local requirements are sufficiently taken into account. (This is known as global/local dilemma). Convergence may be increasing as a result of the following factors:
The power of markets
The importance of cost
Quality and productivity pressures
The development of like-minded international cadres
The widespread practice of benchmarking 'best practice'.
Culture and environment diversity is a key issue in international human resource management (HRM). In a study that become a classic in the study of cultural differences, Hofstede (1980) investigated value differences between over 11,000 employees in some 40 countries employed by International Business Machine (IBM). His study focused on the influence of national culture on the sub-cultures of the worldwide organization.
4 key dimensions were identified.
Individualism versus Collectivism - i.e. where individualism is a national cultural attribute that favours people looking to themselves and their families as their first priority, and where collectivism is an attribute that favours people giving their prime loyalty to, and finding protection in, the wider group.
Power distance - i.e. the extent to which different cultures accept different distributions of power within the society; High Power distance society accepts wide differences of power between those at the top of society and those at the bottom, while Low Power distance society sees power as being shared much more equitably, leaving less of a power gap between the top and the bottom ranks.
Uncertainty Avoidance - i.e. the extent to which a society is tolerant of uncertainty and which therefore feels less need to avoid it (Low Avoidance) or feels threatened by it (High Avoidance).
Masculinity versus Femininity - i.e. where a nation has a tendency to prefer assertiveness and materialism (masculinity), or has a higher concern for relationships and the welfare of others (femininity).
Comparing the results obtained from the 40 different countries against the criteria of the framework, produced 8 'culture clusters', labeled according to geographical areas (Asian, Near Eastern and Nordic) or language (Latin, Germanic and Anglo) and economic development (Less developed or More developed).
1. More developed Latin 2. Less developed Latin
High power distance High power distance
High uncertainty avoidance High uncertainty avoidance
High individualism Low individualism
Medium masculinity Whole range of masculinity
(Belgium, France, Brazil (Columbia, Mexico, Chile,
Argentina, Spain, Italy) Venezuela, Peru, Portugal)
3. More developed Asian 4. Less developed Asian
Medium power distance High power distance
High uncertainty avoidance Low uncertainty avoidance
Medium individualism Low individualism
High masculinity Medium masculinity
(Japan) (Pakistan, India, Taiwan,
Thailand, Hong Kong,
5. Near Eastern 6. Germanic
High power distance Low power distance
High uncertainty avoidance High uncertainty avoidance
Low individualism Medium individualism
Medium masculinity High masculinity
(Greece, Iran, Turkey, (Austria, Israel, Germany,
7. Anglo 8. Nordic
Low power distance Low power distance
Low-medium uncertainty avoidance Low-medium uncertainty
High individualism Medium individualism
High masculinity High masculinity
(Australia, USA, Canada, (Denmark, Norway, Sweden,
Great Britain, Ireland, Finland, Netherlands)
New Zealand, South Africa)
From this Hofstede concluded that it was impractical to produce a unified managerial approach that could be adopted world wide to meet the needs of individuals and groups, their structures and the requirements of change.
The conclusion to be drawn from this study is that a contingency approach to human resource management is called for in these circumstances.
Ouchi also made an important contribution to our understanding of the international dimension of human resource management. He studied the characteristics of Japanese and American organizations to see if selected practices from Japan could be translated to the United States. Ouchi discovered the following differences in the behaviour of Japanese and American organizations.
Japanese organizations American organizations
Offer lifetime employment Offer (generally) short-term
(Core workers only) employment
Promote from within Recruit form outside
Career paths are non-specialised Generally specialised career paths
Shared decision-making Individual decision-making
High degree of mutual trust/loyalty Varying degrees of trust/loyalty
between managers and employees between managers and staff
Importance of collective responsibility Individual responsibility for results
Long -term performance appraisal Short-term performance more
Success seen in terms of Success seen in terms of
Co-operative efforts individual achievements
Ouchi then proposed what he called 'Theory Z' as opposed to McGregor's Theories X and Y as a means by which American companies could imitate certain features of the Japanese approach to managing people. He argued that American firms could make changes in the following areas of human resource management:
They could offer more secure employment prospects and better prospects of a career
They could extend employee participation in decision-making
They could place greater reliance on team-spirit and on recognizing the contribution of individuals to team effort
They could encourage greater mutual respect between managers and their staff.
Given the difficulties of developing careers in today's' business organizations, where reducing the number of job levels, as well as minimizing the number of jobs is commonplace, it seems unlikely that most international organizations can offer their employees guarantees of long-term prospects. However, some of these characteristics have adopted in many organizations and indeed are regarded as 'good' or 'best practices'.
In view of the above, the 'universalistic' approach to HRM prevalent in the USA is rejected in Europe where the basic functions of HRM are given different weights between countries and are carried out differently. In addition, the cultural differences mentioned above have produced the slogan in international human resource management "Think GLOBALLY and act LOCALLY". This means that an international balancing act is required, which leads to the fundamental assumption made by Bartlett and Ghoshal that: 'balancing the needs of co-ordination, control and autonomy and maintaining the appropriate balance are critical to the success of the multinational company'.
To achieve this balancing act, there are six capabilities that enable firms to integrate and concentrate international activities and also separate and adopt local activities:
Being able to determine core activities and non-core activities;
Achieving consistency while allowing flexibility;
Building global brand equity while honouring local customs and laws;
Obtaining leverage (bigger is better) while achieving focus (smaller is better);
Sharing learning and creating new knowledge;
Engendering a global perspective while ensuring local accountability.
Global human resource management provides an organized framework for developing and managing people who are comfortable with the strategic and operational paradoxes embedded in global or international organizations and who are capable of managing cultural diversity. Because of cultural diversities and issues of convergence and divergence, it is impractical to develop a truly international approach to global human resource management. This means that organization structures, management styles, organization cultures and change management programmes have to be adapted to the dominant cultural attributes of the host nation just as a careful balancing act is sought between being global and local needs.