International Human Resource Management - Essay Example

Critically appraise the idea that international human resource management offers a universal panacea for managing people in an international contextThe process of globalization involves all areas of public life, including economy, politics, social sphere, culture, ecology, and safety. It is one of the most influential forces determining the future global development of HRM. The basic sphere of globalization is the international economic system, i.e. global manufacture, national economies and the world market. The research is aimed to explore the influence of change on IHRM policy and the role of cultural diversity in international organisations as well as the methods used by international managers in order to manage human resources within international organisations; to explore functional requirement of HRM in the international arena, the influence of legal regimes on IHRM and the key employment relations issues. Finally, the research will evaluate the strategic importance of IHRM and the impact of such factors as economic, social and political pressure on IHRM. 1. An international organisation can only perform effectively through interactions with the broader external environment of which it is part. The structure and functioning of the international organisation must reflect, therefore, the nature of the environment in which it is operating. Factors such as uncertain economic conditions, fierce world competition, the level of government intervention, scarcity of natural resources and rapid developments in new technology create an increasingly volatile environment (Nath, 1988). In order to help ensure its survival and future success the international organisation must be readily adaptable to the external demands placed upon it using appropriate structure and support of its HR management team. In this case, the international organisation must be responsive to change through people employed by it. Contemporary developments in the field of IHRM suggest that the main pressure of change is from external forces. The IHRM must be properly prepared to face the demands of a changing environment. On the one hand, contemporary developments in the field of IHRM "incorporate the broader contextual reality" (Schuler et al 2002, p.43). Contemporary developments show that IHRM is that part of the process of management that is concerned with the maintenance of human relationships and ensuring the physical well being of employees so that they give the maximum contribution to efficient working. Another contemporary development is called strategic IHRM. It "encompasses a strategic perspective and use their framework as a contemporary description of HRM" (Schuler et al 2002, p.43). It is obviously closely related to the management process as a whole and each functional manager and supervisor must apply the principles effectively. Effective leadership should ensure human resources policy is adhered to and department activities are successfully carried out. It is essential that every manager and supervisor is aware of the principles of IHRM (Bartlett, Ghoshal 1999). International human resources management is vulnerable to a greater extent if its work can be devolved back to other national managers. In the light of these developments it is not surprising to find many theories which attempt to outline and explain cultural similarities and differences among societies. 2. The current state of the IHRM is described (Barham, Conway 1998) as homogeneity, which have obscured the real challenge of managing across cultures in the world. It is unlikely there will ever be a truly single homogeneous HR in the European HRM in the sense of there being a single, homogeneous culture. While this has led to some to argue that the proposed benefits of the IHRM greater opportunities for achieving economy of scale, improve efficiency and stimulate innovation can never truly be realised, they are perhaps missing the point. The cultural diversity need not be considered as a barrier to achieving wide objectives, but a facilitator of achieving improved competitive advantage. According to Armstrong (2003): " the concept of HRM could be regarded as a philosophy governing how employees should be treated in the interests of the organization. But this philosophy can be applied in many different ways and there is no single model which can be used to describe HRM (p23)" The idea of IHRM incorporates all the functions of HRM applied on the national level but pays more attention to cultural differences and diversity. According to Schuler et al (2002) "International Human Resource management is about world wide management of human resources" (p.41). On the one hand, the idea of international human resource management is a universal panacea for managing people as it is intimately involved with the environment in general and certain trends are noticeable. Diversity is an important issue of IHRM. In general sense, diversity means the removal of prejudice from the organisation and the individuals it employs, to ensure that all employees, regardless of gender, ethnic origin, religion and lifestyle, receive equal treatment in the organisation. Organisations which have a multicountry operation or business should give some thought to how intercultural differences impede or enhance business success (Dowling et al, 1999). This becomes of even greater importance when entering into strategic alliances with organisations in other countries; in acquisition situations; when departments in different countries (such as research and development) have to work closely together; when individuals of one country are sent to work in another; and when there is a need to have subsidiaries of various countries commit to a common vision, and common methods and processes. Language is the important issue of cultural diversity as most multinational organisations choose an official language, often English, local affairs are usually in the language of the country, and not all employees speak the official language. Attention to language skills in recruitment and opportunities for employees to learn another language are commonplace solutions which need no discussion. The understanding of social behaviour and good manners in each country is also a very important sphere of IHRM practices. The previous area is closely connected with the national differences in culture which cause people to look at the same issue in different ways. The solution is to ensure that there is a shared understanding of these differences, and deliberate action to make choices in a way that enables all cultures to work in the most effective manner (Armstrong 2003). In light of the facts mentioned above there is a great important of managing cultural diversity for international organizations as it has a direct influence on the successful international activity and image of a firm. While cultural differences may be regarded as a barrier to the achievement of a truly harmonised single market, they do not act as a barrier to doing business abroad. By adapting to local cultural conditions firms can operate successfully across the nations. Indeed, it is possible to argue that the divergence of cultures actually offers international firms an advantage over their international competitors as it permits scope to identify national strengths and weaknesses and develop strategies which tap into these critical resources. Equally, exposure to different cultures provides opportunities for learning new ways of doing business and improving company performance (Hannagan 1995; Brewster 1993). 3. Porter (1990) developed a model to explain the competitive advantage of different nations. While, in the past, advantages were assumed to result from comparative advantage in factors of production, growing evidence in the world economy that factors of production are mobile, means that these give only transitory advantages, and do not support long-term competitive advantage. Porter therefore focused on four key aspects of national environments which support the development of different national advantage. International staffing and development helps to organise HR in accordance with the needs of the company. For instance, a significant aspect of this new competition has emerged from Japan, whose management practices have been envied by managers in the West. It is no coincidence that many features of HRM can be likened to Japanese employment relations' practices where "Respect for workers is a prerequisite for the full use of the available human resource necessary for achieving the cost objectives" (Russell, Pater 1999). Changes in technology have added to the demand to use employees more flexibly than hitherto. Many companies have employed foreign HRM models in order to meet the needs of a particular culture and country. This is both a total management issue and of importance to IHRM itself in the design of international HR processes and procedures. Because it is not something which figures significantly in as many organisations as it should, it is worth looking at this issue in greater depth (Kirkbride 1994). The influential movement on the international staffing and development that emerged from the USA built around the concept of corporate culture and the notion that 'excellent' companies serve as models for others to follow. Many of the companies defined by Pascals and Athos (1988) as excellent operate HRM policies. In General Motors, for example, managers worked closely with the Union of Auto Workers in setting up HRM style practices at the Cadillac plant at Livonia, and in all its plants attempted to change management-worker relations from low to high trust and seek productivity gains through workforce cooperation and commitment (Hendry 1994). IBM Corporation is a vivid example of successful implementation of International Human Resource concept. Many of its current employment and personnel practices were developed during the depression in the USA and many were ahead of their time. The company scrapped payment-by-results methods for its manufacturing employees treating all employees as salaried staff and in effect offering them lifetime employment. Around the same time the company introduced job enlargement and flexible working and embarked on a programme of involving all employees in the design of new products. Employee training has always been a major feature of the company (Ouchi 1981). IBM is often cited as a model for human resource management practice and one that others would do well to emulate. Some organisations consider their workforce purely as an economic asset, expendable at any time. Others are more concerned about the welfare of their employees and consider not only their job role, but also their personal well-being. Differences of this kind obviously have a bearing on the way in which managers' liase and co-operate with staff lower down the organisation, training and individual development. Implicitly, differences of this kind impact on motivation and loyalty. Porter (1990) wrote: "... the primary reason behind the Japanese preference for close and long-lasting supplier relationships in the automotive industry is economics, not culture. A deeper investigation shows that close vertical relationships are necessitated by just-in-time production which, in turn, was invented as a result of a factor condition - the severe shortage of factory space in Japan" (p178). Followed Emmott et al. (2002) it is possible to say that reason for the growth of interest in HRM lies in the relationship between personnel specialists and other managers in the organization. The lack of access to strategic decision-making and low status felt by many personnel practitioners may well have created a receptive environment for HRM to flourish, with its promise of a high-level strategic approach. To other managers who saw the policies of traditional personnel management as inadequate and inappropriate for entry into the 1990s, IHRM may have offered a favourable alternative. 4. Functional areas and requirement of IHRM include industry and firms strategy, training and health care. Organisations employed IHRM practices have the potential to maximise benefits from different business practices and national economic conditions through a variety of means: locating businesses in markets where factor conditions are favourable leading to cost advantages and efficiency; operating in non-domestic markets where demand conditions are more favourable and profit potential apparent (Brewster, Harris 1999). According to Brooke (1986) and Dijck (1995) this critically involves the identification of common patterns of demand and sub-markets which are likely to cut across national boundaries; the development of relationships with suppliers can improve the quality and efficiency of inbound logistics. Europe wide sourcing facilitates this process. Companies can build relationships with suppliers in other national companies which show a high propensity for co-operation and long-term relationship management; joint ventures, strategic alliances and mergers allow firms to internalise not only the knowledge and learning of organisations from other national corporations (and thus potentially benefit from their comparative advantages) but also new business practices. IHRM requires firms to adjust their strategic thinking. While, in the past, firms believed that mass decentralisation of decision making to subsidiaries in the various countries allowed more effective management at the local level, it is important to develop structures which, while sympathetic to market differences, concern themselves more with similarities and commonalties (Hickson 1993). One of the biggest hurdles ahead for most firms will be changed thinking: a new view of what Europe has to offer and how this can be tapped for competitive success; a willingness to learn and develop within wide context. "Some firms operate with a mixture of two or even three of these models of organizational structure simultaneously. Changes in organizational structure have important implications for the management of people within those structures" (IHRM, 2005). At the international level the main stages of training need, however, to be related to the context of the external environment in which the organisation is operating. Different stages of training will be most appropriate at different times. There are a wide range of forces acting upon international organisations and which make the need for change inevitable. Training for change is vital for the long-term survival of an organisation. Increasing emphasis is being placed on both the need for continuous training to support change and on training as a vital investment for the future. Awareness that HRM need to be able to operate across cultures is leading to a new agenda for the establishment of career paths and new demands for skills and learning. Sending successful domestic managers abroad to conduct the activities of the firm in foreign markets has, for a long time, been considered less than ideal (Harzing, Ruyssevelt, 1995). 5. IHRM should create an environment which encourages the creativity of all, and enables everyone to work without feelings of insecurity, and without insult. In the USA the drivers of the movement included legislation, and the realisation that the make-up of the working population was changing, and that white Anglo-Saxon males would never again be the majority component of the working population. many of the pressures to ensure that everyone is treated with respect and fairness are becoming stronger. The policy about such issues may have been clear, but it is equally clear that it is not always implemented by those with responsibilities for others. At peer level the treatment of some women and black males has been abominable, to the point where they have been forced to leave. Apart from the loss of talent to the organisation, there are increasingly the risks of expensive legal challenges, and high-profile media attention (Black 1999). Much has been written about the success of Japan in recent years, researchers looking for clues as to why the Japanese have been able to outperform their Western counterparts (Anon 2005; Budhwar, Debrah 2001). Much of this research has focused on cultural differences between Western and Japanese management practices. For the sake of convenience, 'Western' management practices are "grouped together" (Linehan 1999) although as has already been demonstrate. In many international organisations responsibility for the media of internal communication may not lie with IHRM, although in many others it will have responsibility for at least some of the internal media. The official media, such as the company magazine or newspaper, may be important, but may not have as much impact as the day-to-day communication activities of managers. Actions that may be necessary include setting appropriate policies, monitoring the effectiveness of these, training, and an effective system of receiving and dealing with complaints about discrimination. In the USA, part of the training, which usually extends to all employees, is about understanding and being sensitive to cultural differences. This may not be enough to remove deep-seated prejudices, but can be effective in improving the situation among those who are merely thoughtless. 6. Multinational and transnational firms (Beardwell et al. 2004) which have been exposed to different cultures as part of their normal day-to-day business practices (either through working with intermediaries, selling to final customers, acquisition of foreign organisations, joint ventures and alliances) are likely to have adopted a international HR practices and managerial ethos which is distinct from other companies operating purely within a single nation state. It is, therefore, possible to suggest that multinational organisations are likely to be more akin to each other than they are to other organisations within the nation in which they are headquartered. This relates back to the first point above, and suggests that levels of development and common experience can shape companies as much as domestic national characteristics (Black 1999). The traditional view of employee relations' has often been associated in particular with the activities of trade unions and their officials. Trade unions may be seen as existing, primarily, to promote the best interests of their members, and to improve their quality of working life and general standard of living (Sparrow, Hiltrop 1994). Through the process of collective bargaining, trade unions endeavour to improve their members' terms of employment and conditions of work. Good management-staff relationships, however, are not limited to trade unions and employment legislation existing in a country. A central feature of employee relations in the international organisation is managing through people and regulating the employment relationship in accordance with the legal regimes. Traditionally, employee relations in Europe has been characterised by the concept of free collective bargaining between employees and employers. However, in recent years this philosophy has been underpinned by increasing amount of labour law. During the last two decades, however, this area of law has been significantly extended, introducing new statutory rights for both those in employment and seeking employment. These rights are now subject to more realistic enforcement procedures through a tribunal system, and cover a range of issues from relatively minor matters such as time off for public duties, to the more important protection rights across EU. 7. The strategic important of IHRM can be explained in terms of the role corporate and management culture has at the international level. It is possible to distinguish between different corporate and management cultures according to national affinity (Adler 1991). Swedish firms, therefore, are expected to demonstrate decentralised and democratic decision making with high levels of worker consultation, common communication and understanding. Managers are also given freedom to make decisions outside of formal rules and are encouraged to think innovatively (Held, et al, 1999). French firms on the other hand are expected to show high formality in their rules and structures, authoritarian and coercive management practices. While innovation is encouraged, this can only take place within the strict regulatory rules. Consultation is encouraged, although not necessarily the basis of ultimate decisions. Finally, Italian firms are likely to show similar characteristics to their French counterparts, with rather less emphasis on authority and coercion and more emphasis on results and profit (Ronen 1986). Another important dimension which should be taken into account is international corporate culture which differs from the concept of national culture. International corporate culture is the product of the firm's history and development which may, for multinational organisations, be "an mixture of experiences" (Terpstra 1985) in a number of national marketplaces. It is, therefore, unique to the individual organisation and carves out a path for behaviour and practices which may be distinct from other firms operating within the same locale cultures and management styles are highly simplified for the purpose of analysis, it is possible to project different corporate and business cultures for firms operating out of countries on the basis of this thinking. By plotting these scores for the USA, the UK and Japan (Trevor 1993; Swann 1993) and assuming that they have an impact on company culture for firms with their main operating base in each of these countries, it is possible to compare corporate cultures pertaining in firms from each nation. Even those with only a brief knowledge of IHRM managers will be aware that there is some validity in these distinctions with firms from the various countries highlighted exhibiting characteristics in line with these distinctions. However, suggesting that all firms within each country display all these characteristics to the same degree would be misleading. 8. Cultural differences pertinent to managers within the nations cover "a wide array of factors blanketing" (Davis 1989) the state of intellectual development of the people and the state of commercial development of the nation. As culture is learned and not innate, there appears to be no reason why managers cannot embrace the challenge of learning about foreign cultures and their implications for doing business in other countries. For instance, "Economic policies of American unions are one reason why US firms have difficulty competing with foreign producers" (Schuler et al 2002, p. 59). I this case, IHRM will depend upon its ability to resist the pressure of external environment or adapt a change. Commitment to the objectives and policies, people's cognitive limitations and their uncertainties and fears, may mean a reluctance to accept change. The converse is predicted in times of negative munificence, as politically active labor organizations seek to embarrass the opposing ('anti-labor') party in power" (Schuler et al 2002, p.60). IHRM may also find it difficult to make short-term, rapid changes in technological resource allocation. It is important, however, that the organisation does not restrict innovation but is ready to respond positively to changing circumstances and, increasingly, to anticipate future change. Management has to balance the need for adaptability in meeting the challenges and opportunities presented by change with, at the same time, preserving an atmosphere of stability and continuity in the interests of members of the organisation (Torrington, 1994). Attention to social issues can make a significant contribution to the business. This may become even more important when the organisation's strategy is taking it into new countries, or different forms of alliance and collaborative ventures. IHRM can contribute to the success of such plans by ensuring that social differences are considered when common policies are defined, that announcements are made in a way that is most effective for each culture, and that managers who have to operate across country borders understand the nature of the cultural differences involved, and adjust their own behaviour to obtain the best result. To conclude, IHRM plays a major and continuing role on the international areana , especially with the growth of large-scale international business organisations and the divorce of ownership from management. The decisions and actions of IHRM have an increasing impact on individuals, other organisations and the community. IHRM involves setting policies, formulating plans, and trying to make the best decisions possible. 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