International and Domestic Human Resource Management- Differences and Similarities - Essay Example

HRM in an MNE HRM in an MNE Human Resource Management is the management of employees in an organization aimed at improving their performance. It deals with a variety of factors affecting the employees such as; recruitment, training, rewarding and development among others. Multinational Enterprises (MNE) on the other hand refers to businesses or organizations that operate in various countries other than their mother country. They are categorized as either; global, international or multinational depending on their percentage sales and the number of employees (Dowling, Festing & Engle, 2008). Since different countries have different cultures, labor relations, and different employment policies among other challenges, HRM of MNEs is faced with a lot of difficulties and complications. It is, for this reason, important that HR managers understand these challenges and identify ways to combat them through correct tools and approaches. MNE performance relies majorly on capacity of HR to utilize efficiently and harmoniously the diverse knowledge of their employees for their competitive advantage. Domestic and International Human Resource Management are similar in some ways since they all deal with the issues of employees performance. For instance, they both have the primary function of recruitment, training and development, motivation and performance management among others. They are also affected by the environmental forces such as economic, political and cultural forces. They both have the same objectives and aimed at achieving the same goals, for example, ensuring maximum satisfaction by the organization in the demands of human resource (Stolt, 2010). International Human Resource Management (IHRM) and Domestic Human Resource Management (DHRM) have more striking difference than the similarities mentioned above. One difference arises from the nature of complexity encountered by IHRM in terms of culture business and institutional structure. DHRM deals with employees from one mother country and the regulations and laws are also from the same country making it a little easier. IHRM, on the other hand, operates in various countries with different rules and regulations on issues like taxation and labor policies. It also encounters employees from diverse cultural background as opposed to DHRM. These two broad and complex situations make its operations challenging and complex than DHRM. IHRM deals with different categories of employees from host country nationals and parent country nationals. It also deals with third country nationals making it have a broad perspective, as opposed to DHRM, which deals with workers from only the host country (Stolt, 2010). Due to the challenges faced by NME in their broad operations, global standardization must be adopted to ensure control of cross-border operations is transferred abroad. In so doing, transparency, consistency, ease of administration, equity, efficiency and effectiveness can be achieved (Daniel, 2009). Even though, some techniques might not work effectively for some countries, there is the need to have a system that can operate efficiently in various countries. The system should effectively utilize the local differences as an advantage and still maintain global consistency. Standardization is driven by factors such as organizational structures and strategy, firm size and stage of maturity, and organizational culture. Organizational structures are used to fit subsidiaries together and link other external organizations like partners. For effectiveness, flexibility in decision-making must be ensured. Best ideas also need to be shared across the organization and its subsidiaries to improve the general performance of the MNE. A strategy, on the other hand, provides a plan on how well the organization is to use its primary resources to achieve the desired objectives. These programs should meet certain standards to ensure equity, efficiency, and effectiveness. Firm size and stage of maturity influences the types of strategic plans to be used. As the firm grows, its structures get more complicated causing the need for formal structures; thus the standardization occurs. Some standard rules and regulations are, as a result, developed to provide guidelines on how to deal with particular issues and how to make a decision on challenging matters (Daniel, 2009). These are aimed at ensuring efficient operations of the organization. As an organization gets more mature, the more standardized it becomes. All these factors driving standardization are interconnected with one influencing the other. In MNE, subsidiaries play important roles in achieving the targeted objectives. They usually act as the cross-border connectors linking the central organization with its various branches in different countries. Mostly they operate independently but follow some standard guidelines laid down by the leading organization. In their operation, they contribute diverse knowledge that can be used by the entire MNE. Sometimes they provide innovations that are also necessary for the general performance of the whole organization. The managers of subsidiaries act as bicultural interpreters. They analyze situations at the local levels and inform the headquarters. They also implement the views, strategies, and objectives of the headquarters to the subsidiary, thus, ensuring communication and understanding between the two bodies. Subsidiaries promote respect to the local rules and regulations of operation in those countries to ensure smooth running of MNE services in various countries. As a result, they prevent the implementation of structures and strategies that might not work in their countries as well as violate the rules. They play the role of defending the interest of the locals and still ensure that the MNE achieve its goals. For efficient operation to be achieved, their managers must be in the front line in the implementation of the MNE strategies and convince their employees to commit themselves to what the organization is trying to achieve. Global innovators as subsidiaries are mandated with the role of doing research and developing various products and services offered by the central organization. They should help in improving performance and ensure better product delivery to the market. Their operations are on an extensive scale and are not limited since their services are shared among all the subsidiaries in various countries. Local innovators, on the other hand, operate on a limited geographical scale such as, within a country. Their research and product developments are used in the specified locality. But sometimes their activities can be integrated into the global scale when they prove to be unique and efficient. The integrated player is aimed at creating knowledge that can be applied to other units. It enhances integration and harmonization of various diverse activities and practices that are proposed by the headquarters to fit various situations in different countries and environments. They analyze the proposed strategies from the headquarters and harmonize them with the local conditions and requirements in the host country. Implementer, on the other hand, utilizes the little part of knowledge they generated as a subsidiary and supplement most of it with knowledge from other subsidiaries. To perform its tasks, it relies on networking and efficient communication. Its primary aim is to help in local adoption of global products by the local market. Global integration of various subsidiaries, on the contrary, has resulted to it functions being limited. For a company at its initial stage of expanding internationally, its best role should be to act as a subsidiary of another company operating in the same line. Collaboration with other firms can help it to avoid competition and expand its operations to various local markets. By interacting with the local environment, the company will gain more information and experiences on the necessary approaches to expanding it cross-border boundaries. Networking is critical in expanding internationally, thus, collaborating with other firms is important in promoting network to various countries. Localization is important in dealing with complexities brought by cultural diversity. It helps in improving HR operations in various subsidiaries in different countries with diverse cultures. Its aims are to ensure that local cultures and traditions are respected. It also ensures that various subsidiaries adopt requirements such as government policies and regulations in their countries of operation. Localization is driven by different factors such as; cultural environment, mode of operation, size and maturity of the firm and relative importance of the subsidiary (Dowling, Festing & Engle, 2008). Different countries have different cultures. To ensure respect for these cultures and traditions, localization of HR is important since foreign policies might not understand them leading to their violation. Culture determines work behavior and expectations of various employees. For instance, different employees from various cultural backgrounds are motivated by different factors that might be different from those of the host country. There is a need, as a result, for localization to ensure that all those factors are considered by various subsidiaries for efficient performance. Some global structures might also not perform well in certain areas causing the subsidiaries to adopt new strategies that fit the environment there. Despite corporate culture being necessary in the general performance and standardization of MNE, other cultures from various countries where MNE operates are also important. Importance of subsidiary is also a driver of localization. For an MNE to operate in various countries, it must use subsidiaries to conquer the local markets. These subsidiaries usually operate in contrast to the local rules and regulations. In so doing, they are localized to fit the local requirements and adapt to the local environments. Some MNE rules usually contradict the host country laws such as labor regulations and taxation. To overcome such challenges, the subsidiary in that country should always adopt new rules and regulations by localizing their operations. Localization of the human resources is, for this reason, advantageous since it help the subsidiary prevail in the local market smoothly by preventing conflicts with the host country. It ensures efficient and effective performance of subsidiaries. It also enhances efficient utilization of the local resources in achieving the general objective of the organization. Local managers have the freedom to make their decisions to ensure competitive advantage of the subsidiary, thus, promoting performance and achievement of the organization goals. Culture and institutional contexts have different impacts on recruitment and selection, compensation, training and development, and task distribution. Culture affects recruitment and selection in societies with little in- group collectivism in that achievement of the individuals being recruited are considered the most important factor. But in those societies with high in-group collectivism, skills of the team are considered more than competency level of an individual. Environment, on the other hand, affects recruitment in that reputation of the institution where an individual studied is considered in the process. On training and development, societies sensitive on gender balance women and men are given equal chances to advance their careers. Those societies with little or no concern about gender equality female are denied opportunities to advance their careers leading to few female managers. Institutional context considers the educational system is varying between countries resulting in different training needs. MNEs, for this reason, consider this in offering training of employees and staff members. On compensation, employees averse to taking risk and show a preference for fixed compensation packages in cultures with high levels of uncertainty avoidance. In societies with low uncertainty avoidance, employees prefer high income based on performance pay Industrial relations usually propose regulations and legislation controlling the minimum wedges and compensation. These legislation and regulations are agreed upon by respective unions and are also adopted by various firms during times of compensation to their employees. On tax distribution, cultures embracing high level of collectivism usually put more emphasis on group work. That embracing individualism promotes individual obligations within the work system and environment. Institutional context impacts on tax distribution through legislation and norms. For instance, there are some legislation supporting division of labor based on gender, and they vary from country to country. In some countries, women are not commonly found on managerial posts. Reference Daniel, A. (2009). Perception Gaps Between Headquarters and Subsidiary Managers: Differing Perspectives on Subsidiary Roles and Their Implications. Wiesbaden: Gabler. Dowling, P., Festing, M., & Engle, A. D. (2008). International Human Resource Management: Managing People In A Multinational Context. London: Thomson Learning. Stolt, R. (2010). Differences and Similarities Between Domestic and International HRM. München: GRI Read More