Impact of Globalisation on Human Resource Management Practices in International Organizations - Coursework Example

Impact of globalisation on HRM practices in international organizations Table of Contents Introduction 3 HR priorities 3 Consistency of HR practices 5 Challenges to consistency 6 Suitable HR practices in international firms 7 Development of a corporate culture 8 Approach to the management of employees 9 Dynamic impact 9 Subsidiary staff management 9 Recruitment and selection 10 Performance evaluation 10 Conclusion 10 Reference List 12 Introduction Globalization has changed the manner in which people are managed in an international organization. Globalization has facilitated the flow of resources, goods and services between nations across the world. As a result the economies of different nation continuously interact with each other. A business firm which has its units set up in different nations of the world has diversified human resource. As a result organizations which function in a global environment use different approaches for managing their employees. The manner in which such organizations train, recruit, pay and promote employees varies as the cultural dynamics change. International organizations are faced with the challenge of managing employees with equity and at the same ensuring that adequate respect is given to their cultures. As cultural needs across nations differ, the manner in which employees are treated also becomes diverse. This at times may cause adjustment problems for expatriate employees who work outside their home nations. Under such situations organizations are required to provide training so that employees are able to adapt with various cultures. The competition faced by international firms is very stringent. They are required to compete with every firm existing in the industry worldwide. The situation necessitates the development of advanced technology and highly skilled manpower so as to remain ahead at all times (Briscoe and Schuler, 2004). International organizations are required to upgrade themselves with emerging trends and consumer needs. Since they operate on a global level it becomes necessary to cater to the needs of consumers across the world. Managers of global organizations are therefore required to recruit employees who are highly productive and talented. Most international organizations have decentralised HR management system. HR departments are set up across each subsidiary with independent HR staff members. Since the human resource characteristics vary largely across different nations, it is not possible to manage employees using procedures. It becomes necessary to develop specialized HR practices which can successfully meet the needs of individual subsidiaries of the international firm (Edwards and Rees, 2006). HR priorities The primary focus of the human resource department in international organizations is to develop leadership. Multinational organizations are characterized with having employees from different ethnic backgrounds. As a result the manner in which they perform their duties and interact with others may differ. An efficient leadership programme ensures that the diversified needs of the employees are managed effectively. It also helps in guiding and training expatriate employees so that they are able to adapt with new work environments. An efficient leadership program ensures that employees are provided with the right type of work and are able to cope with the needs and the nature of the business. Recruiting employees who are highly talented is also one of the main priorities of the HR departments of the international organization. HR officials are first required to study the nature and characteristics of the employees in the subsidiary market. It s then required to analyze whether the employment needs can be fulfilled by recruiting from within the subsidiary nation or should it be fulfilled by bringing in employees from other countries (Rubery and Grimshaw, 2003). Usually when a large multinational organizational sets up its business in a new nation, they consider bringing in employees from the home nation. Since the employees of the home nation are familiar with the nature and objectives of the business it becomes easy to set up the ground framework of the business in the new nation. The expatriate employees are therefore required to stay till the business is functional and can be carried on well by the domestic employees. Once the business is set up well in the subsidiary nation, the HR officials can consider recruiting employees from within the nation itself. It becomes necessary to train and develop the new employees so that they are able to understand the business operations well. International organizations mainly prefer recruiting individuals who are able to easily and conveniently adapt with different cultures. One of the challenges faced by international organizations is to retain talent. Although globalization has caused economies across the world to have a large number of foreign companies, it is seen that most people prefer to work for domestic companies. Individuals, especially in the developing nations of the world feel that multinational companies do not offer highly secure jobs. They are seen to shift from the multinational companies to the domestic companies when they obtain better opportunities. The common belief is that since multinational companies are mainly set in a different nation, they do not give much importance to the needs of the employees of the subsidiary nation. Hence retention rates of multinational companies are very high. Many such organizations are seen to provide better pay packages and other perquisites so that it becomes possible to retain employees for longer periods. In developing nations such as India, foreign multinational organizations attract a large population by providing better work environments and pay packages than domestic companies (Hill and Jain, 2007). Consistency of HR practices The parent firm of the international organizations ensure that HR practices are consistent across all the subsidiary firms. Majority of the HR policies are formulated in a manner such that they are compliant with most nations across the globe. Changes in HR policies are mainly observed in respect of the cultural diversities. Usually international organizations prefer to develop a common corporate culture across all its units. This facilitates the movement of human resource from one location to the other. Consistency is tried to maintain in respect of the manner in which employees are assigned with different tasks and appraisal techniques. Majority of the difference in HR practices arise in respect of the process of recruitment training and selection. Since the nature of employees vary in different, it is not possible for international organizations to establish similar selection procedures (Bae and Rowley, 2002). One of the key challenges faced by the HR department of the international organizations is to maintain an adequate balance between the requirements of global integration and the adapting locally. Multinational corporations cannot fully ignore the practices of the parent nation. Traces of the regulations and practices of the nation of origin exist in them irrespective of the country in which they are operating. The values and ethics of the nation of origin get transferred to the subsidiary locations through people. Overtime it is observed that the domestic employees working in the international organizations adjust themselves with the cultural practices which are inherited from the parent nation. The U.S. organizations which operate in Japan find it significantly challenging to adapt themselves with the cultural orientations existing in Japan. The HR policies followed in Japan are considerably different from that of the U.S. Japanese firms are characterized of informal centralization and self reliance. On the other hand it is observed that the U.S organizations are seen to have elaborate control systems. They also rely upon standardization of the operations so as to establish coherence. These virtues are almost nonexistent in the Japanese environment. HR officials are required to consider the cultural aspects as well while establishing policies. The culture existing in the eastern nations are considered to be higher and more complex than that in the western nations. Culture is mainly influenced by the traditional beliefs and the values of a particular nation. These traditional values and beliefs cannot be fully kept away from the internal organizational culture. HR managers therefore face the challenge of maintaining a suitable balance between the cultural aspects of the home nation and that of the subsidiary nation. Effective leadership and managing capabilities of the HR team therefore plays a significant role. Many HR departments are seen to conduct workshops for foreign employees so that they can gain information regarding the values and beliefs existing in a nation and how they influence the culture within the organization. The interplay between cultures plays a significant role in international mergers and acquisitions (Harzing and Sorge, 2003). Challenges to consistency Political, legal and economic conditions are some of the major hurdles which international organizations face while managing their human resources across national boundaries. Different nations have different recruitment and selection related rules. HR department require developing policies and procedures in a manner such that the legal requirements of the subsidiary as well as the home nations are met. Political factors of the subsidiary nation also play a significant role in developing the HR framework. These factors may include the development of unions and work commissions within the structure of the firm. Economic hurdles relate to the aspect of the investment required to be made in the work force. If the economy of the subsidiary nation is highly developed, then labour costs remain to be high. In developing nations it is observed that the cost of employment is low. This is one of the chief factors which attract developed nations such as the U.S and the U.K to set up business and invest in developing nations. Social factors such as the availability of labour play an important role in the setting up of the business in foreign nations. Emerging nations such as China and India are characterised with a low education and poor economic development. As a result acquiring highly skilled employees becomes a potentially challenging aspect. Technological aspects play an important role in the availability of skilled workforce. Nations which are characterised with high technology facilitates the availability of skilled workers. Hence HR department is required to take fewer initiatives regarding training and development. The availability of technological support also makes it simpler to carry out business operations. When technological aspects are weakly developed, it becomes essential to bring in technological know-how from the home nation. This induces a rise in the cost of operations. Advanced technical assistance makes it simpler for the HR department to carry out a number of activities such as record keeping, information dissemination and making timely payments of salaries and incentives (Brewster and Suutari, 2005). International organizations are also faced with the challenges of implementing new rules and regulations. Subsidiary organizations are seen to resist change. The employees of the subsidiary units feel that adhering to change may cause them to lose their cultural beliefs. Under such circumstances it becomes essential for the HR managers to inform employees regarding the nature of the change and their impacts. Employees also are required to be provided with adequate training so that they can adapt with the change overtime. One of the significant obstacles faced by international HR managers is in respect of changing existing ways of working and inducing a new ways of performing jobs. The perceived values of the HR functions may also differ from region to region (Sparrow, 2007). Suitable HR practices in international firms International organizations are highly influenced by globalization. Organizations operating in the global economy are seen to get influenced by frequent changes. Accordingly the employees of the international organization must remain flexible towards the acceptance of changes. Changes may occur in respect of technology, development of new products or change in job roles. International organizations are faced with stiffer completion than domestic firms. As a result it becomes essential for international organizations to inherit change so as to maintain their market positions. Managers of the International organizations must therefore undertake imparting training and development as and when there are changes in the operations of the firm. International firms find that developing long term policies and aligning the same with the strategies of the organization is an easier and an effective way of maintaining consistent HR practices across subsidiary locations. The corporate objectives which are laid down by the parent organizations act as the fundamental policies which subsidiary firms are required to follow. The traditional employee management policies state that employees must be managed differently in different nation so that their needs can be met specifically. Modern international organizations deviate themselves from such thinking and focus upon establishing common rules of employee and human resource management. This simplifies the tasks of the managers who are required to mange employees in the subsidiary organizations. They are required to formulate policies which are strategically in alignment with the objectives and goals of the parent nation (Quintanilla and Ferner, 2003). International organizations are seen to follow a centralized system for the reporting of activities. The recruitment and selection process nevertheless may be decentralized, so as to be able to match the environment of the nation where the subsidiary unit is located. The centralization of the reporting of the employee management activities ensures that such deeds are aligned with the corporate objectives. International organizations are also seen to follow the policy of standardization of the activities related to payment of incentives, appraisal and promotion. The level and the scale of payments may vary, but the policies of payment are kept the same across the different subsidiaries. The subsidiaries of the international organizations do not operate in similar manner everywhere. The policies of managing employees differ greatly. The difference arises out of different economic, social and cultural factors, as discussed earlier. It therefore becomes essential that subsidiary organizations are provided with sufficient amount of autonomy to take and implement decisions independent of the consent of the parent organizations. Parent organizations are not always aware of the amount of circumstances existing in the subsidiary nations. Hence if the parent organizations are entrusted with the task of taking important decisions related to employee management, it may become faulty and ineffective. As a result the parent organizations are required to delegate certain authorities to the management of the subsidiary organization (McDougall and Oviatt, 2000). Development of a corporate culture International organizations are required to develop common cultural practices so as maintain a unity of direction in respect of the goals and mission of the organization. However, most international organizations find it extremely difficult to develop a common corporate culture as the influence of local cultures cannot be fully avoided. Considering such aspects, international organizations consider to develop a culture which has strikes a balance between the cultures of both home and parent nations. It has been observed that since majority of the subsidiary organizations are based upon cultures which support the vision and mission of the company. As a result the fundamental employee management operations are seen to be similar in many ways. The commonness is transferred by way of common technology, systems of accounting and record keeping. Considering the locations when the international business is spread, certain international organizations are seen to develop mission statements which have inputs from all its locations (Aycan, et al., 2000). Approach to the management of employees Dynamic impact International organizations are required to take decisions considering the economic condition of all subsidiary locations. As a result the process of employee management becomes dynamic. International organizations are influenced by the industrialization and the economic changes which occur in respective nations. In case of an organization which has its production unit located in china and an assembling unit located in India, then if there are any operational issues in China it may affect the manner in which work is conducted in India. In this manner the operational inadequacy gets transferred from one nation to the other. Such incidents may cause a negative influence upon the goodwill of the organization. In order to avoid such situations, organizations are required to keep track regarding how operations are being carried on across different locations. Therefore keeping track of employee performance and productivity becomes adequately important (Brewster, Sparrow and Harris, 2005). Subsidiary staff management International organizations are usually seen to follow three different approaches in respect of managing their employees namely, ethnocentric, polycentric and geocentric. In the ethnocentric approach the policies of the home nation prevails in all the subsidiary nations as well. In the polycentric approach the subsidiary units are given the rights to take decisions by themselves. Hence the recruitment and staffing decision are taken by the subsidiary firms considering the local situations. The geocentric approach refers to the process of following a single suitable strategy across all the units. This system facilitates the exchange of employees from one subsidiary to the other (Dowling, Festing and Engle Sr, 2008). Recruitment and selection Recruitment and selection are elaborate processes through which the global organization recruits new members. The recruitment and selection processes can be done on the basis of the parental organization where the nationality of the parent organization is same as the nationality of the employee. An American employee who works for an American company in the U.K. is an example of a parental recruitment style. In host country recruitment process the nationality of the employee is the same as the nation in which the organization is located, for instance a Chinese employee working in China for an American company. In third country recruitment, the nationality of the employee is different from both the host nation as well as the parent nation (Friedman, 2007). Performance evaluation The performance evaluation is an important function of the HR department. International organizations find it extremely complex to conduct employee appraisals as employees as are spread across different nations. In many international organizations, which have a diverse workforce, the ethnicities of the employees are taken as an important factor when the appraisals are conducted. A firm which adopts the ethnocentric approach is likely to follow the appraisal technique which is followed by the parent organizations. Therefore it can be stated that the approach followed by the international organizations in respect of performance evaluation depends upon its strategic management style (Schuler and Jackson, 2008). Conclusion The study conducted in respect of the manner in which employees are managed in an international organization reveals that international human resources practices are highly complex. An organizations approach towards globalization strongly affects the manner in which employees are managed. It has been identified that the approach adopted by international organizations in respect of employee management depends on the core strategies of the firm, its characteristics and the ultimate objectives of business. International organizations are characterized with the frequent exchange of employees from one location to the other. As a result establishing a similar corporate culture becomes highly essential. The study has also highlighted the perspective that it is difficult to evade the impact of local cultures of the host nation, upon the international subsidiary. Hence HR managers are required to develop a culture which strikes a balance between the cultures of the host and the parent nation. International organizations are also required to provide training and development to expatriate employees who travel to other nations so that they can adapt with the cultural and environmental changes. International organizations are also required considering the economical, political, social and technological aspects in respect of taking decisions relating to employee management across different host nations. Reference List 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. Bae, J. and Rowley, C., 2002. The impact of globalization on HRM: The case of South Korea. Journal of World Business, 36(4), pp. 402-428. Brewster, C. and Suutari, V., 2005. Global HRM: aspects of a research agenda. Personnel Review, 34(1), pp. 5-21. Brewster, C., Sparrow, P. and Harris, H., 2005. Towards a new model of globalizing HRM. The International Journal of Human Resource Management Group, 16(6), pp. 949-970. Briscoe, D. R. and Schuler, R. S., 2004. International human resource management: policy and practice for the global enterprise. 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