The Changing Role of Human Resource Management - Term Paper Example

International HRM What role can and should HRM play in an organization that is seeking to expand itsinternational operations? Introduction The basic reason for the changing role of human resource management in the context of expanding international operations is the growth in globalisation and the operations of business without boundaries. While it might have been possible in the past to create and operate a company which has all inputs as well as outputs located in one country, it is certainly not the case today (Edwards & Kuruvilla, 2005). A company can have its head office in London, the production facility in China, the research laboratories in Germany and the customer support centre in Pakistan. As the individuals working for the company in different locations are likely to come from different cultures, the culture of the company itself can only be established with good HR policies and effective HR management (Hollinshead & Leat, 1995). Definitions As defined by Ozbilgin (2005), International HRM is the practice of getting the maximum business value from human assets which are distributed across the world working under the umbrella of a single company. Historically, the cultural differences between the home office and the branch office located in a different country meant that sooner or later HR managers had to face the problem of culture clash which is defined as different cultures affecting work processes and workflow (Faulkner, D. 2002). In the past, these cultural differences were largely ignored and it was thought that the culture of the company would prevail while the culture of the country where the company was located would not matter as much (Kamoche, 1996). However, recent evaluations have shown that culture conflicts might need to be actively countered and could even be used to motivate workers rather than put various managers in conflict (Bartlett & Ghoshal, 1998). With these definitions and with the help of practical examples as well as expert opinions, it can be shown that the role played by HRM in an organisation that is seeking to expand its international operations is a twofold role. Firstly, HRM can help the arms of an organisation (both local and branch offices) come to terms with each other in view of their different cultures. Secondly, HRM can help and should help in creating policies which are localised for international operations. HRM & Culture The central cultural difference that exists between the UK and a culture such as China or India comes from the very basis of the culture i.e. language. While the predominant language in the UK is English, it may not be used as the lingua franca in China since it is only learnt as a second language. Translations of HR mandates therefore have to be carefully made since the message might not be there while the words are present. Bradhan (2006) suggests that the language barrier is particularly strong for organisations which have production and industrial setups where the labour may not be fluent in English in opposition to the individuals holding management positions. Another significant cultural difference which is important for managers to understand is the difference in the standard of living to which people living in lesser developed countries could be used to (Bean, 1994). Workers in Britain as well as many other western countries tend to place great value on their leisure time and have enjoyed a relatively high standard of life in the past while the majority of workers in places like China have lived in comparative poverty (Clark, 1996). Being sensitive to this difference is important because it can certainly affect the way individual salaries, increments and time based bonuses are handled by a company (Kidger, 1991). At the same time, it must be noted that such situations may not remain true in the long term. Even in China, the trends of living with less could be on a downward slope as the population gets used to having more than their predecessors. A twenty year differential study for the economy of china shows that between 1981 and 2001 the percentage of working class individuals living on less than one US dollar per day decreased from almost eighty percent to less than thirty percent (Bardhan, 2006). Therefore, a company which is based in England would have to carefully evaluate the cultural basis of salary structures along with the relative implications for HRM, when they wish to work in nations where the social setup is similar to China. International HRM will become even more important in the future as companies become more diversified and things like outsourcing and off shore operations become the norm rather than the exception, a global corporate culture could develop with time. However, such a state is still far off in the future since societal norms and personal cultural backgrounds still have a greater influence than HR policies established by an organisation (Laurent, 1986). A simple comparison between China and the UK shows that even on the organisational level, China has only recently developed a culture of increased importance to the HR functions of a company. On the other hand, countries like the UK have been focused on the value of Human Resources for many years (Bardhan, 2006). With the development of a global culture, the differences may not remain that important but as long as they are present they have to be taken into account. Hall and David (2001) place the HRM system in a given firm at the centre of international expansion since good management of human resources will result in improved values for human assets. Business related activities like training and education of labour, bargaining with unions, capital and asset acquisitions, even interactions with other companies are connected with the HRM when a company is expanding internationally. The British neo-liberal viewpoint that there is only one system of HRM in the world is put in doubt when examples are seen from China, Germany or Japan. One can see unionists sitting on the corporate labour boards of German companies and Japanese companies tend to focus more on stakeholders and the HRM of employees rather than shareholders and clients. On the other hand, many Chinese firms could be concerned more with profits and the input being made to the economy by the company to the exclusion of other irrelevances such as good HRM practices (Block, 1999). Clearly, with all these factors that put companies into danger while they seek international expansion, it is easy to see why international HRM has become important for the companies of the world today. Companies need to operate in several different countries and possibly have different setups for different countries where production or development is most economically feasible. However, since the cultures and economic systems of these countries may be on conflicting terms, HRM has to ensure that different cultures and national influences can work together by focusing on commonalities rather than the differences between locations. Managing International Expansion with HRM The primary method for a company to control cultural conflict between the home office and other locations is the establishment of proper HR policies which take into account cultural differences and remain sensitive to them (Hollinshead and Leat, 1995). However, the effective positioning of IHRM policies is a difficult thing to manage and a company can choose to take several different paths depending on its present situation. For example, GE is one such company which went all the way and summarily dismissed all individuals from service who were seen to have a cultural mismatch with the company (Welch, 2005). While that is one way to handle cultural differences, a company may not be in the position or have the ability to fire a significant number of workers at once. Understanding Cultural Needs To make a single HR policy to manage all departments in all locations of a company would be more or less impossible. Managers who are situated in the company head office can not effectively translate their HR management policies for global locations without understanding and appreciating local cultures and customs. Strategic HR decisions should not be made in isolation since it would be difficult to implement these decisions with offices abroad (Edwards & Kuruvilla, 2005). In effect, the cultural differences between nations create a cultural need for international HRM which makes a company run better. Other than the national culture, there is also the concept of an organisational culture which has a definite impact on how things are run within a company. Laurent (1986) suggests that the organisational culture which is created within a company will take several cues from the national culture since the majority of individuals working for the company would be residents of the same location. For a brief time or in times of stress, the culture of the organization can be more powerful that the national culture but Laurent believes that the effect will be temporary and can be detrimental to the enforcement of HR policies. Therefore, a unified global HR policy and a single source for international human resource management can not easily exist. Nationalised or localised policies would certainly be more affective and productive since they can take into account the local culture. With a unified policy, there is an additional danger of company politics which may play out on a global scale if the company operates in several countries (Edwards & Kuruvilla, 2005). In terms of HRM, formal authority coming from the home office can always remain the source of power in a multi-national company but some levels of authority and local policy decision making powers may have to be given to the local employees who are already working in regional offices (Beardwell & Holden, 2004). Such distribution of power can only be handled where HRM systems are in place and the division of power is also connected to the control of resources within an organisation. In case the home office wishes to retain power; resource allocation should remain with the home office. Edwards & Kuruvilla (2005) also warn managers who plan on doing so that such situation could create a feeling of resentment towards the policies of the home office and make the process of international HR management dependant on internal politics rather than the principles of good management. Taken to the extreme, the condition of the company may get to the point that local managers may seek to go against the HR policies coming from the home office managers. Local managers can create problems or managerial issues when the policy is being enacting and not even enforce the policy at all. Such situations can happen very easily when local managers see that their power is being taken away or their influence within the company is simply negated by mangers in the home office (Edwards & Kuruvilla, 2005). However, by sharing power and using their input in the creation of HRM policies made for the region, a company can go a long way towards avoiding conflict and getting better returns on their investment in the international arena. Conclusion In the present day and age, there are significant cultural differences when it comes to international business and international operations. However, mangers who understand and appreciate these differences should not find the international HRM process very hard. I personally feel that these differences are not necessarily bad because they can be used for the benefit of the company rather than to create problems between home and branch offices. It seems that it is always up to the individual managers who take up international HR positions in a company to come up with unique solutions depending on the problems being faced by the company which can then be applied depending on conditions and situations. Armed with both the management skills required for the process as well as the cultural understanding which is needed for working on the international level, I feel that future manager should have little problems in international HRM but the role of international HRM will surely continue to appreciate in value. Word Count: 2,281 Works Cited Bardhan, P. 2006, ‘Does Globalization Help OR Hurt the Worlds Poor?’, Scientific American, vol. 294 no. 4, pp84-91. Bartlett, C. & Ghoshal, S. 1998. Managing Across Borders: The Transnational Solution to Managing Across Borders, 2nd ed. Hutchinson, London. Bean, R. 1994, Comparative Industrial Relations: an introduction to cross-national perspectives, Thomson Business Press. Beardwell, I. and Holden, L. 2004, Human Resource Management: a contemporary approach 4th edition, FT Prentice Hall. Block, F. 1999, ‘New Thinking About Capitalism’, Dollars & Sense, vol. 12, no. 226, pp 19-25. 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