Successful Management of Diversity in International Human Resource Management - Literature review Example

Diversity Leadership in International Human Resource Management (IHRM) Diversity Leadership in InternationalHuman Resource Management (IHRM) Introduction Following globalization, workplaces have been increasingly varied in terms of their composition and arrangement. Many local businesses have also expanded to carry out their operations outside their home country and thus are subject to the external environment characterized by different managerial practices and organizational culture. Traditional human resource management involves human resource planning, recruiting, managing talent, managing performance, planning benefits, and training their employees. However, in the international context the above activities face slight adjustments due to their exposure to the international environment which differs in numerous ways (Dowling, Festing, and Engle 2008: 8). A major managerial dilemma is to manage diversity effectively in order to utilize their talents for greater profitability. According to Mor-Barak (2010: 1), successful management of diversity involves an ethical approach, appreciation of employees, creativity, and ambitious goals. Since workplaces are seeing an increase in project based tasks, it is important to manage diversity for productive teams and coherent team works. However, with the increasing power of economic giants in Europe, there has been a rise in native managerial styles such as the European style of management (Bowden and Mulnix 2005: 123). When operating in a globalized context, it is necessary to have a specific a managerial style which dominates the workplace in its management. To manage human resources in the international setting may well define International Human Resource Management (IHRM) (Schuler, Budhwar, and Florkowski 2002: 41). Another central aspect is that of workplace diversity and leadership as workplace transform their values, culture, and managerial strategies in order to effectively channel the creativity and innovation into productive tasks thereby using the condition as an opportunity for bringing in a competitive advantage (Lockwood 2005). Diversity has attracted great attention among leaders and managers however it should be noted that diversity itself is not a problem but lack of the right managerial ability is (Barak 2010). In a time of globalization where the world is regarded as a global village and workplaces are transforming into a varied community, effective communication plays a pivotal role in enhancing social interactions within the workplace. Most often, communication helps keep the employees motivated and feel satisfied with their jobs as they feel they are being heard (Milhouse, Asante, and Nwosu 2001). The differences in various cultures are an important factor when considering cross-cultural management and communication. Hofstede’s framework classified the different cultures in two categories including individualists and collectivists. While individualists prefer personal autonomy, collectivist cultures value relationships and are more likely to work coherently in teams. Also, individualist cultures encourage the satisfaction of the self and may prioritize personal interests. Another aspect to the different cultures relates to cross-cultural communication. Cultural context and environment play a great role in the way people belonging to different cultural groups communicate. In short, their responsiveness to the environment depends on their cultural background. Hall (1976) proposed two types of cultures: high context (Chinese, Japanese, Arabs and mostly Asian countries) and low context countries (USA, Germany, and other European countries). The difference between the two is that high context cultures rely more on environmental cues and signals and have a sense of implicit hinting as compared to their low context counterparts. The significance is its impact on cross-cultural communication and diverse workplace relationships. Indian Culture In their article, Nigam and Su (2011) examine international human resource management from the Indian perspective specifically focusing on the expansion of Indian industries in developed countries and the change in managerial practice they face as a result of the differences in managerial culture. Nigam and Su (2011) mention the increasing role of Indian companies that have gone international by means of acquisitions, mergers, or otherwise, and the managerial challenges being faced by stepping into the international arena. Indeed, the role of HRM is significant in understanding the strategic challenges faced when deciding between an Indian management style or host country management style (Harzing and Ruysseveldt 2004: 67). Chaudhuri (2007) argues that the failure of various Indian multinational companies lies in the fact that they refused to follow or develop an indigenous management style inspired by their traditional roots. As Indian multinationals have moved their operations overseas, it is important to consider the strategies that apply well, be they host strategies or home strategies. Often the application of home strategies as Chaudhuri (2010) suggests fail to work on the foreign workforce as their composition is heterogeneous. The downside to this is a decrease in organizational performance. Human Resource Management forms an important part of businesses today and if it is not looked upon properly by the stakeholders, it can cause devastating effects. A global strategy is being formed to manage the human resource department so as to minimize the flaws of the whole system (Kramar & Syed 2012). The fact that only one managerial strategy is followed in IHRM is well realized. Also, the differences between Western and Indian management is recognized. Chaudhuri (2007) points out how the Indian system is much more family oriented and thus Indian employees following American principles for management may not prove to be as productive as their international counterparts. He explains the reason to be his detachment with the Indian culture he is used to. This idea reflects that the Indian society and structural arrangement is essentially collectivistic in nature. However, as Elkin and Strach (2006: 4) explain, most industrialized countries are individualistic in nature. That is to say, individuals do not tend to prioritize collective goals or in other words, follow their own goals and aspirations. According to Elkin and Strach (2006) the Indian society considers collectivism as selfish and singularly inconsiderate. Talwar (2006) points out a marked relationship between aggressive pro-target behavior of males, demand for short-term success, and anti-spiritual leadership in Western societies. This reflects the notion that Western societies run after short term results and are driven by dispassionate leadership. Hofstede (2007) has clearly defined how managerial processes and the elements of HRM style vary from country to country based on culture. This concept is evident from challenges which Indian multinationals face when operating abroad. As established earlier, the Indian society is collectivist and this affects their interaction, sense of identity, and their affiliation with groups (Hofstede, 2009). Differences in management culture impact HRM practices and these become significantly important when it comes to survival at such uncertain times. Effective leadership that understands the cultural, social, hierarchal, and economic differences can better cater to the management needs of the organization to help it gain a competitive advantage in the external environment. In India, power distance is high indicating that the leadership style is more autocratic (Rennie and McGee 2012: 9). Rennie and McGee (2012) have used PESTLE analysis to devise an international human resource strategy considering the Indian and American management to act as a foundational framework for operation and implementation. The analysis reveals that the Indian market is emerging in the international economy and due to liberalization is growing as a capitalist economy. The Indian society is collectivist and a high power distance demonstrates unequal distribution of resources: inequality of power and wealth. The differences in culture is highlighted in order to make a case for diversity management strategies in order to apply only those strategies, home or host style, which enhances employee productivity. In case of Indian multinational companies, the main corporate office has a large role in the management however allowing their foreign subsidiaries a little autonomy and freedom on management style would yield great results in terms of cross-cultural IHRM. African Culture As the world economy has progressed into globalization, the participants are experiencing challenges as they adapt to the new global environment in order to capitalize on the development as an opportunity. In particular, management practices have been greatly affected by the changes and a dilemma has risen pertaining to the application of indigenous or foreign IHRM theories (Inyang 2008; Kamoche 2002). The new development has also led to a sharp increase in global competition among the participants (Kiessling and Harvey 2002: 22). According to Wangwe and Rweyemamu (2001: 2), the African continent is one which is the least prepared to face the novel developments due to weak human and institutional capacities it possesses. Research previously focused on the application of Western style theories into African contexts however the role of IHRM in understanding management in different cultural settings is understood. Brewster, Sparrow, Vernon and Houldsworth (2011: 14) explain how one strategy working well in American and British workplaces may not work in other regions. This is because those practices may not apply to the people from other region and hence may inhibit organizational performance. Although for quite a while, attempts focused on generalizing American behavioral theories on local workforces however the cultural differences were soon realized in socio-cultural contexts (Aycan, Kanungo, Mendonca, Yu, Deller, Stahl, and Khurshid 2000: 192). Gbadamosi (n.d.: 3) observes that Western theories of human resource management have dominated the African region for quite some time. Less effort has been made to understand the cultural differences or to advance indigenous theories. Inyang (2008) identifies colonialism in Africa to be a major cause of indigenous theories development being inhibited. Kiessling and Harvey (2005: 34) also mention how there has been failure in the transcription of Western methodology of management into African contexts. The reason is evident: culture differences. According to Gbadamosi (n.d.), African managers have their own values that are deep rooted and long lasting and this may be why colonialism and western influence has not been able to overshadow the management style possessed by the home country managers. Academicians on international human resource management stress on the importance of applicable management concepts that despite being influenced by Western theories nevertheless present an understanding of local constraints in African settings (Sparrow 2010: 449). Major organizational transformations in the international environment have intensified global competition. Thus, human resource management has to be adjusted in order to incorporate dimensions of diversity in terms of socio-cultural, economic, and religious values and structure. Recruiting and retaining remains to be one of the most critical challenges in dynamic times so as to maintain the creativity in order to obtain a competitive advantage (KPMG Africa 2013). Researchers of organizational behavior have found out that workplace diversity brings creativity and innovation which is important for organizations in the long run. However, poor diversity management also leads to employee dissatisfaction and a subsequent decline in productivity and organizational performance. These are s few IHRM challenges in the global arena (Itika 2011: 180) In case of Africa, there are various developmental challenges which need attention and positive action by the leadership. The most important resource of an organization, that is human capital in Africa, remains to be affected by poverty, health issues, lack of education, institutional inefficiencies, and political instability. Due to globalization and liberalization, Africa is experiencing great demands for human capacity, a resource which it seriously lacks. Wangwe and Rweyemamu (2001: 15) explains how leadership and management can help trigger a change and development of human capacity in Africa. They explain that insufficiency in African human capital is due to an insufficient leadership and top management in organizations. Hence change in leadership can remedy the shortage of human capacity and may further develop the human resource of Africa. In terms of diversity and multi-cultural management of African multi-nationals, it is beneficial if the top management tries to respond to the cultural differences in order to create an environment that does not impose a single national culture of management. Inyang (2008) argues that colonialism has affected local indigenous management theories in international contexts. He mentions how ancient African civilizations and empires reflect the leadership quality and skills possessed by the people and how the development of African management systems can help enhance the conditions of Arica politically, socially, and economically. The Bantu word Ubuntu which symbolizes a sense of community feeling represents the collectivist values of the African culture. This notion can help understand management in African settings and can provide insight to HR managers involved with African organizations (Inyang 2008: 127). Therefore, organizations should not have a rigid culture dominated by a single nationality which may hurt African organizational performance and IHRM efforts. Instead, the leadership should build an environment that discourages strict compliance and is open to ideas. Many African researchers have made the case that African workforce possesses the required ability and these capabilities along with the reservoir of talent should be constructively managed by the organization. Chinese Culture The end of the twentieth century saw a period of great internationalization and the global markets were dominated by multinational companies operating in various international countries (Kidger 1999). In particular, the Chinese economy experienced a massive boom and its organizations occupied a strong position in international markets. However, the arrival of Chinese local firms into global markets worldwide meant a managerial dilemma pertaining to HRM practice and implementation (Shen and Edwards 2006: 1). The worldwide workforces were extremely diversified and cultural issues sprung up as managers tried to identify the best possible strategies in order to effectively manage varied workforces and to have them exhibit high performance and productivity (Wang, Wang, Ruona, and Rojewski 2005). By the end of the millennium period, a great number of Chinese multinational enterprises were operating and investing abroad (Rowley and Warner 2012: 157). According to Kidger (1999) the multinationals played a key role in developing the norms of international human resource management. China has made a great transition in its economy during the recent years and its expansions into foreign markets have called for attention for human resource practices. Like any participant in the international arena, Chinese multinational companies also face the challenge of surviving in the uncertain external environment (Zheng 2012) and managerial issues including staffing, recruitment, employment opportunities and regulations (Cooke 2013). Crawley, Swailes, David Walsh (2013) also point out an important issue pertaining to the Chinese grey market selling counterfeited products including bogus CDs, DVDs, electronic appliances, softwares, and basically any product which can be copied. This violates international law however the market is quite strong in China. This may prove to be an important aspect in terms of international human resource management as it demonstrates the local behavioral mechanism. The Chinese economy has grown sharply in recent and it has distinct institutions, employment policies, regulations and cultural environments. In order for Chinese multinational corporations to carry out successful operations abroad, Fan, Zhang, and Zhu (2013: 526) mention the need to have strategically effective IHRM strategies that will help them foster. Each Chinese MNC operating overseas must develop an international HRM strategy which reflects its goal in the global market and the first step must be organizational transformation. Rovai and d’Oria (n.d.) explains the issues faced by Chinese MNCs as they go about adopting an HRM strategy for their international operations. She mentions how the educational system has produced an inadequate pool of talent and how this poses a problem for staffing, recruitment, and retention of talented employees. Zhang and Edwards (2003) argue how subsidiaries of Chinese MNCs operating abroad are influenced in HR practice by the managerial strategies of its country of origin. However, the culture and institutions of the host country may inhibit the application of home HR policies and strategies as they may differ in their structure and composition. Recommendations As Mor-Barak (2010) suggests the management should avoid the development of any rigid policies but should allow a little flexibility in the procedural tasks. Also, the domination of a single national managerial culture may hurt performance hence foreign subsidiaries should be given autonomy to respond to the heterogeneous composition of the workforce in order to create a positive environment where employees remain satisfies and work to their full potential. Today, most organizations are paying close attention to diversity however effective diversity management requires ethical approach, consideration of cultural differences, and skilful solutions. An important aspect is that of cross-cultural communication as this may have several unforeseen impacts. While the Americans rely more on explicit and overt codes of messages, their Chinese or Arab counterparts may view this as abrupt and harsh. The tone of communication also varies across culture and may impact successful workplace relationships leading to inefficient harnessing of the human resource capacity. An understanding of cross-cultural differences in communication and management styles may help the organization harbor a positive working environment which is essential in its pursuit for a competitive advantage. However, poor management may lead to low productivity and high turnover rates. Ethics form an integral part of the businesses too and problems related to ethics should also be covered by the human resource management. The covert ethical problems should primarily be dealt by the human resource management as they pose a grave threat to the functional businesses (Varinder Kumar, 2011). Conclusion Workplace diversity and differences in culture and institution play a central role in international human resource management. Many home companies operating abroad often have to face a dilemma pertaining to the adoption of home HR policy or the host HR policy. The different settings also present an issue in terms of human resource strategy and talent management. Globalization and liberalization has enabled organizations to operate overseas but has presented challenges that threaten their competitive scope. In order for organizations to utilize globalization as an opportunity, they need to employ their IHRM strategies carefully considering the international setting in order to succeed in global environments. Bibliography Aycan, Z., Kanungo, R., Mendonca, M., Yu, K., Deller, J., Stahl, G. and Kurshid, A. (2000). Impact of culture on human resource management practices: A 10-country comparison. Applied Psychology, 49 (1), pp. 192-221. Bowden, R. and Mulnix, M. W. (2005). Business education: A view of US and European management styles. Problems and Perspectives in Management, 2 pp. 123-134. Chaudhuri, A. (2007). YES: Indian Style of Management -Theory i Management. [online] Available at: http: //greathumancapital.wordpress.com/2007/01/31/yes-indian-style-of-management-theory-i-management/ [Accessed: 25 Jan 2014]. Cooke, F.L. (2013). Human Resource Management in China: New Trends and Practices. Human Resource Management International Digest, 21(1). Crawley, E., Swailes, S. and Walsh, D. (2013). Introduction to International Human Resource Management. Oxford: Oxford University Press. Dowling, P., Festing, M., and Engle, A. (2008). International human resource management. South Melbourne, Victoria: Cengage Learning. Elkin, G. and Strach, P. (2006). Lessons from the indigenous east for western organisations? Mechanistic and organic approaches to organization and management. University of Otago. Fan, D., Zhang, M. M. and Zhu, C. J. (2013). International human resource management strategies of Chinese multinationals operating abroad. Asia Pacific Business Review, 19 (4), pp. 526-541. Gbadamosi, G. (2003). HRM and the commitment rhetoric: challenges for Africa. Management Decision, 41 (3), pp. 274--280. Hall, E. T. (1976). Beyond culture. Garden City, N.Y.: Anchor Press. Harzing, A. and Ruysseveldt, J. V. (2004). International Human Resource Management. London: Sage Publications. Hofstede, G. (2007). Asian management in the 21st century. Asia pacific journal of management, 24 (4), pp. 411--420. Hofstede, G.J. (2009). Research on cultures: how to use it in training? European Journal of Cross-Cultural Competence and Management, 1(1), pp.14-21. Inyang, B. J. (2008). The challenges of evolving and developing management indigenous theories and practices in Africa. International Journal of Business and Management, 3 (12): 122. Itika, J. (2011). Fundamentals of human resource management: emerging experiences from Africa. African Public Administration and Management series, vol. 2. Kamoche, K. (2002). Introduction: human resource management in Africa. International Journal of Human Resource Management, 13 (7), pp. 993-997. Kidger: J. K. (1999). Human resource management in multinational enterprises. [online] Available at: http: //usir.salford.ac.uk/14789/1/DX211818.pdf [Accessed: 25 Jan 2014]. Kiessling, T. and Harvey, M. (2005). Strategic global human resource management research in the twenty-first century: an endorsement of the mixed-method research methodology. The International Journal of Human Resource Management, 16 (1), pp. 22-45. KPMG Africa. (2013). Rethinking human resources in a changing Africa. [online] Available at: http: //www.howwemadeitinafrica.com/rethinking-human-resources-in-a-changing-africa/31996/ [Accessed: 25 Jan 2014]. Kramar, R and Syed, J. (2012) Human Resource Management In A Global Context. London: Palgrave Macmillan (658.3KRA) Kumar, Varinder 2011. "Business ethics and spirituality at work place." Slide Share. N.p., n.d. Web. 11 Feb. 2014. . Milhouse, V. H., Asante, M. K. and Nwosu, P. (2001). Transcultural realities. Thousand Oaks: Sage Publications. Mor-Barak, Michàlle E. (2005). Managing diversity. Thousand Oaks, Calif.: Sage Publications. Print. Lockwood, N. (2005). Workplace Diversity: Leveraging the Power of Difference for Competitive Advantage. Alexandria, Va.: Society for Human Resource Management. Nigam, R. and Su, Z. (2011). Management in Emerging versus Developed Countries: A Comparative Study from an Indian Perspective. Journal of CENTRUM Cathedra, 4 (1), pp. 121-133. Rennie, A. and McGee, R. (2012). International Human Resource Management. London: Chartered Institute of Personnel and Development. Rovai, S. and D’Oria, S. (n.d.). HRM practices in foreign MNCs (multinationals) operating in the PRC: an institutional perspective. [online] Available at: http: //www.iese.edu/en/files_html/p23.pdf [Accessed: 25 Jan 2014]. Rowley, C. and Warner, M. (2008). Globalizing international human resource management. London: Routledge. Schuler, R.S., Budhwar P.S., and Florkowski, G.W. (2002). International human resource management: review and critique. International Journal of Management Reviews, 4(1), pp. 41–70. Shen, J. and Edwards, V. (2006). Human Resource Management in Chinese Multinational. New York: Routledge. Sparrow, P. (2010). Handbook of international human resource management. Chichester, U.K.: Wiley. Talwar, C. (2006). Love and spirituality in business and management. [online] Available at: http: //www.businessballs.com/love.htm [Accessed: 25 Jan 2014]. Wang, J., Wang, G. G., Ruona, W. E., & Rojewski, J. W. (2005). Confucian Values and The Implications For International HRD. Human Resource Development International, 8(3), pp. 311-326. Wangwe, S., Rweyemamu, D. and Es Salaam, D. (2001). Human Resource and Institutional Development in Africa: an overview. Economic and Social Research Foundation (ESRF), pp. 22--24. Zhang, M. and Edwards, C. (2003). HRM Practice and the Influence of “the Country of Origin” in Chinese MNCs operating in the UK. IIRA-13th World Congress, Berlin, pp. 1-26. Zheng, Y. (2013). Managing human resources in China. Cambridge: Cambridge University Press. Read More