International Human Resource Management Strategy Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

In the context of economic globalization, it is more important than ever to comprehend how an transnational organisation can operate more efficiently (Schuler et al., 1993). Among all of the strategies a company uses, human resource management strategy appears to be the primary and major one. Specifically, the strategy of international human resource management (IHRM) is of paramount importance in the process of helping the organisation to achieve its goal (Brewster, 1991).

International human resource management (IHRM) can be simply defined as the management of organisational human resources in an international environment (Redman & Wilkinson, 2009). To explain it precisely, it is a set of activities that aiming at managing organisational personnel in a global environment to achieve organisational objectives and achieve competitive advantage over competitors at national and international level. Typical HRM functions such as recruitment and selection, training and development, performance appraisal and compensation management done at international level could be included in IHRM. The intention of IHRM is to enable the transnational organisation to be successful globally (Dowling, Schuler & Welch, 1999).

To identify the connotation of transnational companies, it is essential to distinguish it from other types of company. Normally, within the global form of organisations, structure could be catalogued into four alternatives: the multinational structure, the international structure, the global structure and the transnational structure (Barlett & Ghoshal, 1991). The multinational company is organised by geographical location and is very dispersive (Roth, Schweiger & Morrison, 1991). The strategy of this kind of organisation is often domestic-oriented and has advantageous environment adaptiveness (Markusen, 1995). Respecting to the international company, which exists in one country, it imports raw materials and exports products all around the world. Global companies present in many countries, import and export products worldwide. Generally the central office plans the strategy on global basis. The transnational company, however, is much more complicated than the three others. It has invested in foreign operations, have a central corporate facility but give decision-making powers to each individual foreign market. To be more specific, the transnational form involves the creation of sites' integrated network, each of which acts as a characteristic role in the organisation. The branch office within the network has distinguishing character, whose brief is to specialize in a special part of the provision process. Because of the distinction, the branch offices are free to some extent to react to local environment and therefore adapt to the environmental differentiation (Edwards & Rees, 2006).

This essay begins with exploring the particular goal for the transnational company and then focus on leveraging international human resource management system to achieve the goal in four different aspects, which include recruitment and selection, training and development, performance management and reward management.

The goal of a transnational company

According to the features of transnational companies, as they have the characteristics of both the centralisation and the decentralization that allows them to 'think globally and act locally' (Hocking, Brown & Harzing. 2007), the goal of a transnational company could be summarised into three parts: responsiveness, integration and efficiency.


Responsiveness could also be called as local sensitivity, which represents the ability of adapting and reacting to customers' requirement. When a transnational company wants to start a business in a new environment and flourishes there under the fierce competition with other competitors, it will confront simultaneous pressures to be local responsive. Local conditions such as laws and culture make it essential for transnational companies to understand the need to adapt their human resource practices (Schuler et al., 1993). Consequently, the transnational company needs to be sensitive to the local environment thereby grasping the market share of it.


Integration is significant for a company who involves the creation of an integrated network of sites (Edwards & Rees, 2006). Since each site possesses a distinct role and have some freedom to respond to local factors, the headquarters must control them to some extent and keep them connecting closely as an entirety. Otherwise the company would be break down into separate parts and lose the centralisation.


For survival, transnational companies have to achieve efficiency. By having and utilising the most suitable methods and processes, transnational companies produce and transport their products and services all around world to get profits (Schuler et al., 1993). This does not only require speed, but also focus on quality. Speed could guarantee the production, while quality could ensure the sales. Thus, efficiency is a vital sector for a transnational company's success. Simultaneously, a systematic approach to develop human resource practices would give competitive advantage for transnational companies to operate more efficiently (Galbraith, 1992).

IHRM strategy of a transnational company

To achieve the objective of a transnational company, there are four aspects of international human resource management strategy. They are recruitment and selection, training and development, performance management and reward management respectively.

Recruitment and selection

As Beardwell and Wright (2004) defined, the process of recruitment and selection is relative to identify, attract and select suitable people to meet the demand of organisation's human resource. It plays a vital role as a 'vacuum' and a 'filter' that enables organisation to acquire competent and skilled human resources (Rohitarachoon & Hossain, 2012). For a transnational company, which establishes filiales all around the world, it is essential to recruit and select the talents from local market on the purpose of enhancing efficiency. The reason for it is manifest, if a transnational company intends to adapt to the local environment and seize the market share rapidly, the employees of this company should be familiar with the culture, custom, policy and market conditions of local environment, and otherwise it would waste amounts of time in adjusting and changing.

To recruit qualified local talents, two ways of recruitment could be introduced: external recruitment and internal referral. In terms of external recruitment, the universal method is internet recruitment. Transnational companies could not only post the job vacancies on their official websites, but also rely on publicly sites like the UK's Jobcentre Plus to appeal talents (Hasluck et al., 2005). In addition, a recent trend is 'viral recruitment' where companies use social network such as Facebook or Twitter to target 'Generation Y' applicants such as college students, graduates and school leavers; companies like Procter & Gamble and Unilever have such pages to target their recruitment (Tenwick, 2008). In these public ways, a transnational company could cast the nets widely to recruit local talents and at the same time, advertise itself in local market; it is a strategy of killing two birds with just one stone. Moreover, to recruit those skilled and experienced advanced talents, consulting to agencies and headhunters could be a good choice because it is time-saving and highly efficient. Regarding to internal referral, transnational companies could formulate policies to encourage employees to recommend their talented relatives and friends to the company. Once the recommended person successfully passes the interview, the referrer could receive related reward. With the combination of external and internal recruitment, transnational companies could efficiently hire the talents they require.

However, to achieve the goal of integration, transnational companies also need to recruit international talents. This process normally implemented by the headquarters. The head office proceed the recruitment and selection in a concentrated scale, identifies the qualified person who is suitable for working around the world, trains them, and then sends them to the destination for working. These expatriates could bring the core policy and strategy into branch companies (Thomas, 1994), therefore ensuring the branch offices not to be too decentralized from the head office.

Training and development

The belief that investment in employees training and development has bene¬ts for both the organisation and its workforce has been convinced for a long time (McDowall & Saunders, 2010). Normally, an organisation formulates its training plan based on its objectives, demand and expectation. For the big transnational company, to achieve the goal of effectiveness, responsiveness and integration, it is necessary to consider two problems when it conducts the training strategy. The first one is how to enables expatriates to get used to the local environment. The second one is how to enables local employees to accept the international managerial strategy from the head office (Hocking, Brown & Harzing. 2004). The following training content could be delivered.

Language skills

All the oral and written communication is based on language. Since the transnational company expands its scale all over the world, it is of great necessity to help its staff to require the language skill. In general, English is the official language used worldwide that each employee should at least understand it. But for a higher efficiency and integration, company should trains its staffs to master English in listening, reading, writing and speaking comprehensively. Besides, expatriates should grasp the local language of the place they are going thereby minimizing the adapting time and communicating more efficient (Haas, 2006).

Culture knowledge

Culture is also an indispensable factor that influences the responsiveness and integration of a transnational company. Without the acknowledgement of culture, the central strategy from the headquarters may be impeded in the branch office because of culture differentiation. Also, the culture differentiation may cause conflicts between the expatriates and local colleagues (Hansen, 2002). For instance, thumbing up in many countries means praise. However, in Bangladesh, it is a symbol of insulting. In order to avoid such misunderstanding, introducing culture knowledge into training content is seriously essential.

Professional skills

Apparently, giving training on professional skills is the most important part of the whole training process that greatly conducive to boost the efficiency of employees (Orlikowski, 2002). Normally, this training is conducted by the both the headquarters and branch offices. Most of the big transnational company would have their own training centers which facilitate to give corresponding training to the staff all over the world. For instance, the German company Bosch has its training center called BTC that give all-sided training to the branch companies (Bosch, n.d.). This training center could give unitive training thereby integrating the different levels of professional skills.

Performance management

Local Government Management Board (1994) has defined performance management as 'systems and attitudes that help organisations to plan, delegate and assess the operation of their services'. It is a shared vision of the company's goals communicated through a mission statement to all employees. By regularly reviewing the working process towards targets, the company could assess whether the individual performance targets are related to operating unit and wider organisational goals (Bevan & Thompson, 1991).

Since performance management connects so close to the achievement of company's objectives, how is appraisal conducted? There are various methods could be used to implement performance appraisal, from the simple one like ranking scheme to complicated behavior-anchored rating scheme (Snape et al., 1994 ). The nature of a company's appraisal scheme is actually a mirror that reflects its managerial beliefs (Randell, 1994). For a transnational company, since it has a large amount of available resources and expertise, complicated and resource-consuming systems such as Key Performance Indicators (KPIs) system and 360°appraisal could be adopted (Redman & Wilkinson, 2009).

Taking KPIs system as an example, the selection of KPIs is of paramount importance. HR specialists should choose those indicators that are combined closely with the efficiency of work (Fitz-Gibbon, 1990; Armstrong, 2006). If choose KPIs for a salesman, the indicators such as new customers acquired should be taken into account. Moreover, since transnational company also has the target of achieving responsiveness, the local customers' condition and reaction to the products is also imperative. Therefore, other indicators such as status of existing, customer satisfaction and repurchase rate could be involved. When implement the KPIs appraising process, HR specialists could use a table to record the performance of salesman as showed below.

KPIs evaluation form of Salesman





New customers acquired.




Potential customers

40/ month



Status of existing customers

Business man

Business man






Customer satisfaction




Repurchase rate




The evaluation form showed above is a simple but typical sample that using KPIs to evaluate employees thereby motivating them to accomplish the goal. Target in the form means the aim of the achievement of this KPI; Benchmark represents the average score of this KPI that achieved by others in the industry; Current is the score that achieved by the staff being assessed. By using this form, HR specialists could easily compare the performance of each employee and give corresponding rewards and advices to them, and employees would be motivated to work harder to achieve the goal of them, which finally achieves the goal of the company.

Reward management

In the global economy of contemporary situation, transnational companies face the added problems on how to manage reward and pay 'across different national systems, cultures, institutions, legislation and collective bargaining regimes' (Redman & Wilkinson, 2009). Dowling et al. (2008) state that reward management is increasingly considered as a mechanism to build and reinforce a global company culture, a primary method for corporate control, precisely connecting performance outcomes with associated costs, and 'the nexus of increasingly strident, sophisticated and public discourses on central issues of corporate governance in an international context'.

For the transnational companies, how to balance the conflict between the reward at an international standard and the payment adapting to local compensation level for the achievement of both integration and responsiveness is a big question that should be seriously tackled. Normally, the level of salary is the competitive outcome of the forces of the supply and demand for labour. In competitive labour markets, the same skilled and occupational workers would ultimately be afforded the same wages (Redman & Wilkinson, 2009). A transnational company will not have the market power to sustain deviations and reward decisions which are determined by the local job rate. Therefore, the reward of a branch office should adapt to the local reward level, which could achieve the goal of responsiveness. However, in terms of those high level jobs, such as the executives and the directors of each core department, their wages normally reach at a universal international level, for the reason that almost all of them are top and international talents that requires a high standard of reward to retain them in the company.

Besides, for the normal workers, a reasonable salary that accorded with local compensation level is just a prerequisite; a competitive reward compared to other companies in the same industry could be a motivation that stimulates them to work more efficiently. This competitive reward is not just about money, but includes the insurance, welfare, stock right and even the scholarship for their children.


Transnational companies confront many international human resource management issues and challenges in the process of achieving its goal. This essay has explained the intension of international human resource management (IHRM), and has distinguished the transnational companies from other form of companies such as international structure, global structure and multinational structure. Since the transnational company is the collection of other three types, the goal for it includes integration, efficiency and responsiveness.

For achieving these goals, transnational companies could use IHRM strategy in four aspects: recruitment and selection, training and development, performance management and reward management. In the recruiting process, it is important to use different platform to attract local labour force in branch offices and intensively recruit international talents in headquarters. After hiring the talents, giving them corresponding training that helps them to work more efficient is also essential. Especially for those expatriates, the training on language and culture could facilitate them to get used to the unfamiliar environment and devote themselves to the work more quickly. In respecting of performance management, transnational companies should select the right evaluating indicators that relevant to the objectives of companies; therefore the employees would work with the same goal of organisations. Based on the employees' performance, companies should distribute the salary in a just level within the company and a competitive level compared to competitive companies. In these ways, transnational companies could achieve the goal of responsiveness, integration and efficiency finally.

Since the field of international human resource management is burgeoning and booming, the academic exploration on it is still underway. And because of the complexity and variety of transnational companies, approaching the study of it requires a broad perspective and a suite of comprehensively multidisciplinary tools such as psychology, sociology, anthropology, business, law and organisational behaviour theory (Sundaram & Black, 1992). This essay has tried to explore the IHRM in transnational companies in a precise way, but some of the factors may be omitted. Moreover, the research on the implementation of IHRM still needs to be examined and perfected by practices; adjustment and modification will be added according to the reality.