Culture has had multiple definitions and according to Schein (1985) "Culture can be defined as the interweaving of the individual into a community and the collective programming of the mind that distinguishes members from one group from another. It is the values, norms, beliefs and customs that an individual holds common with members of a social group or unit". Hofstede (1988) also identified two main elements of culture which are internal values of culture and external values of culture. He described the internal values as invisible and the external values of culture as observable through practices such as greetings, words and gestures used as well as heroes observable in television etc.(Hofstede, 1998). We are not born with a certain culture but we grow into the culture that surrounds us without being conscious of the values, norms, beliefs that have been conditioned into our mindset in particular during childhood. In other words what each individual perceives as appropriate within a social or work context is a product of the many factors surrounding us. Quite commonly an individual is actually not aware of how many cultural surroundings have conditioned him/ her until the individual has to leave these familiar surroundings and live within a different culture (Dowling, Welch, 2004). This can result in a culture shock which can be moderate during short trips but may have an immense impact for an individual having to live and work and these new cultural surrounding. This culture shock may have critical implications for MNE sending employees to other countries which in the worst case scenario could cause an early return home and therefore to an expatriate failure.
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Awareness of different cultures and the implications it may have are therefore very important, in particular for Multinational Enterprises (MNE) and IHRM. This is due to the fact that they are conducting business in different countries and hiring or moving employees from their different business locations to one another. Hofstede (1983) stated "The national and regional differences are not disappearing[...]these differences may become one of the most crucial problems for management-in particular for the management of multinational, multicultural organizations, whether public or private". Ignorant behavior or insensitivity toward culture differences have been named the reason and caused many failures for international businesses in the past (Dowling, Welch, 2004).
In general HR practices and policies would have been developed in the parent country, which of course would be suitable to the parent country culture. These practices need to be adjusted to take into account the cultural surroundings while at the same time maintaining an alignment with the desired corporate strategy and corporate culture while operating in different countries (Schneider, 1988). All HR practices and areas like recruitment selection, training, performance appraisal, remuneration, type of management style and motivation may need to be approached differently depending on the country and type of industry.
Awareness is also critical in order for IHRM to decide if expatriates should be used on an assignment or if a HCN or even a TCN would be more appropriate for assignment type and the cultural surroundings etc.
Hofstede (1988) argued that in particular nationality is a very important factor for management and he named three reasons for this. The first reason he claims is a political reason, due to the fact that each nationality has its own encompassing history, education system, legal system, labour and government systems etc. The second reason he thinks are sociological factor, which he believes has great symbolism for people within a nation. According to Hofstede, each individual defines him/herself belonging to a region or nation because it is part of their identity which in times of war will make them want to fight for their country. The third reason he thinks is psychological, and refers to the way that culture has been conditioned into our mindset through the surroundings of upbringing and experiences.
The differences between HR and IHR management, are not as apparent on first glance as they both encompass the general HR activities defined by Dowling(2004) as human resource planning, Staffing , Performance management, Training and development, Compensation & Benefits and Labour relations (Dowling, Welch, 2004). These activities basically increase and get more complex for a company operating internationally and therefore pose a different challenge for IHRM.
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Dowling argues that the following outlined factors contribute to the increased complexity of IHR activities which include more hr activities, the need for a broader perspective, greater involvement in employees life, changes in emphasis as the workforce mix of expatriates and locals varies, greater risk exposure and broader external influences.
Hr activities are increased for IHRM due to the fact that the administrative task like selection of expatriate, relocating, pre departure training, legal formalities such as visa applications or international tax advice, provision of housing, organising schooling arrangements, arranging compensation packages and services to support expatriates would not occur in a domestic hr department (Dowling, Welch, 2004). IHRM needs to provide this supportive network in order to ensure that expatriates assignments runs as smoothly as possible and that outside factors like a cultural shock does not lead to expatriate failure. Relocating overseas can be a stressful experience for expatriates and their families and IHRM support can make or break such a situation. Providing a greater supportive network for expatriates means simultaneously a greater involvement in the personal life of employees including but not limited to the activities listed above.
As already outlined earlier, a person travelling to a new cultural environment may experience a "culture shock". Four phases of cultural adjustment outlined the different stage expatriates (or any other person in a new cultural surrounding) are possible to experience (Cieri, Dowling, Taylor, 1991). The first phase is the Tourist phase; the new culture leaves positive and negative impressions on the individual. The second phase is where the actual culture shock takes place and which leads to negative feelings towards the culture and is likely to cause expatriate failure if it prolongs. The third phase is called the "pulling up" where the individual starts to adjust to the surroundings again. Last but not least the fourth phase is called "the adjustment". During this phase the expatriate will start to recover from the initial culture shock experienced and every day life will start to normalise.
The need for a broader perspective also arises from the fact that IHRM is dealing with employees from various national backgrounds regarded as parent country national (PCN), Host country national (HCN) and Third country national (TCN). Equalities issues may arise due to the very regular view to pay PCN or TCN a premium for working overseas whereas HCN are likely not to be considered for such premiums. IHRM needs to be aware of possible equality issues when it comes to organising and structure policies within an IHR department. IHRM activities have a higher risk exposure due to the fact that an expatriate failure would result in vaster cost compared to domestic HR activities as an expatriate position may cost three times as much as a HCN position due to relocation, premium, training cost etc (Dowling, Welch, 2004). as well as invisible cost such as damaged relationships with subsidiaries or business partners. A possibility for terror threats may be another factor for greater risk depending on the location of subsidiary.
Greater external influence for IHRM may occur where governments dictate labour laws to increase opportunities for minority as was the case in Malaysia during the 1970 according to Dowling and Welch (2004). IHRM must spent more time of understanding and interpreting the way business is conducted in less developed areas where regulations is less strict and maybe quicker overcome compared to other countries (Dowling, Welch, 2004).
Hofstede (1983) defined that natural culture is compromised of four dimensions which include Power distance, Individualism/ Collectivism, Masculinity/ Femineity and Uncertainty.
Power Distance (PD) refers to the way of how a society handles inequalities within the culture. Being aware of power distance is important in terms of hiring, recruitment structure, selection process, training style, type of management style but also how the company structures its organisation. In a low PD country like the US, employees are selected on the basis of educational or past performance achievements (Cullen, Parboteeah, 2005). Contrarily a country with high power distance will select on the basis of social background and at which University a degree was obtained. For example Japanese companies tend to hire employees fresh from university with a generalist education/ background (Beechler, Yang, 1994 p. 479), with is a suitable fit to the company and will receive extensive on the job training. A low PD country will usually adopt a participative leadership style which effectively also flattens the organisations traditional pyramid. If a US based company would operate in a high PD country, a manager would be expected to be an authoritarian leader who will supervise employees closely. This will also influences training style of employees. Compliance and obedience would be a key point in high PD countries.
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In an individualistic country the cultural belief is that "competition allows the most qualified individual to get the job" (John B Cullen, K Praveah Parboteah, 2005). A highly Individual country like the US (Hofstede, 2009), believes that every individual is responsible for themselves (Cullen, Parboteeah, 2005). Whereas collectivistic countries view the group they belong to as a definition of their identity in which they will be protected and reach decisions. This will impact the conduction of training and performance appraisals. In Japan the training of an employee will be regarded as an investment to the company (John B Cullen, K Praveah Parboteah, 2005) whereas further on the job training in the US is perceived as enhancing personal skills and traits which may be an advantage for their career. Performance appraisals in the US is based on meritocracy, being higher rewarded for better performance(John B Cullen, K Praveah Parboteah, 2005 p. 447) and is usually desired for individual performance. In collectivist countries formal performance appraisals are less desirable as the team usually knows the low performers within a group and Japanese supervisors may just ignore badly performer as a from of indirect feedback(Cullen, Parboteeah, 2005 p. 449).
In a masculine country, like Japan gender roles are clearly distinguished and work take priority before duties such as family life (Cullen, Parboteeah, 2005). The well recited "lifetime employment' in Japanese firms is actually only for men (Cullen, Parboteeah, 2005 p. 442) as women are expected to leave employment at 25 years of age or work part time (Cullen, Parboteeah, 2005 p. 57). Especially in higher ranking roles in Japan are dominated by men (Tomoko, 2008). In the US work is less centralised and "worklife balance" is promoted to increase quality of life of employees. The distinctions of female and male roles within a company are not as apparent due to a higher female employee's participation rate and greater job opportunities. This is important for filling vacancies but also what a company should provide in terms of childcare facilities, flexible work arrangements etc.
In a culture with high uncertainty avoidance (UA) like Japan (Hofstede, 1983), risky situations are upsetting people, therefore rules structures and guidelines are very important and followed by employees. An employee would not expect to reach decisions individually from the group. In the US (Cullen, Parboteeah, 2005) which is rated as a low UA culture, the managerial prerogative is very important. However employees are encouraged to take initiative and take on responsibility to stick out of the crowd to enhance their career. This has great implications on the management style, training and the way work procedures are organised within a company.
In conclusion, yes the cultural environment can be called a key variable which moderates differences between domestic and international human resource management. Moderate is not supposed to be mistaken for reducing but rather putting emphasis on the differences. Even though human resources practices within country borders have acknowledged and embraced the necessary idea of encouraging and managing cultural diversity, IHRM has to deal with cultural diversity on a grander scale. A lot of research has been conducted into cultural differences and similarities, which are important to be aware of when it comes to operating efficient and effectively across borders with a multitude of stakeholder from different backgrounds. However there can be no one step to step guide which could easily be used when dealing with people from different cultures, as culture is moving and ever changing within cultures itself. Certain identified generalised cultural behaviour patterns, discovered through past research projects like Hofstede but also past experiences of MNE can serve as guidance and assist IHRM to deal with the greatest challenge, simply people.