The Management of Human Resources Is the Same in Either a Domestic or International Context - Essay Example

INTERNATIONAL STRATEGIC HUMAN RESOURCE MANAGEMENT by BA (Hons) Hospitality Leadership and Management Module International Strategic Human Resource Name of Instructor Name of Institution Location (City, Country) Date Abbreviations HR Human Resources HRM Human Resource Management IHRM International Human Resource Management PM Personnel Management MNC Multi-national Companies International Strategic Human Resource Management As the world is becoming increasingly globalised, more and more companies and businesses are rising up from their domestic status and moving to an international horizon. For this reason there is an acute need of understanding the dynamics of the global market and how to tackle the various issues that might become an obstacle in the way of international success for a company. One of these issues is the human resource management in an international context (Schuler, et al., 1993: 419). One of the key factors which enable a multinational to have a competitive advantage over its peers is how they handle their human resources in international business. Although HR management is a key factor in the success for a domestic company, the issue is deemed all the more important when considered globally, and requires an increased level of quality in HRM. Various researches have been conducted to investigate whether the HR strategies implemented on a domestic level can be translated into an international context (Poole, et al., 2007). This paper will critically evaluate the concept of Human Resource Management (HRM), its various aspects and specifically the similarities and differences in HRM when viewed in local and international perspectives. Human Resource Management Definitions According to Torrington & Taylor (2009), the domain of human resource management encompasses all activities regarding the availing of human resources in the most effective way possible. These activities include, but not limited to, the recruitment, selection and training of employees, motivation and rewarding the people so as to maximise their performances, HR planning, development, compensation and managing employee relations. There are two important ways to define HRM; one point of view is to define HRM as collective managerial activities, also known as Personnel Management (PM); the other way is to depict HRM as a distinctive approach to managing people. Over the decade, the concept of HRM has evolved from the first point of view to the second. Thus, it can be stated that personnel management has laid the foundation of the modern human resource management system. Distinctive Elements of HRM According to Storey (1991), there are at least four elements which differentiate HRM and PM. The first element is the differences in viewing the process of employment, its rules, the procedure followed, and the attitude of the management. HRM system finds ways to incorporate a sense of commitment in the employees. The second distinction is about the primary focus of the two management approaches. While the personnel management solely work around the relationship between the employees and the management, without giving any weight to the strategic orientation of the business, the central focus of HRM system is the corporate plan and gives more weight to the relationship between business and the customer. The third difference is that HRM demands that the employment issues should be handled by all the managers, rather than the specialised personnel management body. HRM is comprised of line managers rather than specialists, this helps to achieve integration within the organisation. Fourth distinction is the way in which employee commitment is obtained, that is through an integrated approach to human resource policies (for example, reward, appraisal, selection and training). Domestic vs. International HRM Certain areas and activities of HRM are modified when it is put into an international perspective. In order to identify those areas, one needs to delve deeper into the understanding of International Human Resource Management (IHRM) first. According to Tarique and Schuler (2007: 717), “…the field of IHRM is about understanding, researching, applying and revising all human resource activities in their internal and external contexts as they impact the processes of managing human resources in organisations throughout the global environment to enhance the experience of multiple stakeholders.” As the business are expanding far and wide across border, it is becoming more and more crucial to find ways to successfully implement HRM on an international level. As Wildish (1991) claimed more than two decades ago that IHRM will replace all HRM, with the sprouting internationalization of domestic firms. It should be clear here there that the definition of a true multinational is not based solely on whether the company is generating sales overseas or not (Perlmutter 1969). IHRM is applicable for those companies, which have actual offices/sites/factories in different geographical locations. Categorization of IHRM Several attempts have been made to fit IHRM into the established moulds of the domestic HRM. Sparrow et al., (2004) has suggested IHRM to be divided into the following two categories: Comparative HRM: Deals with the relative differences and similarities in practices of human resource management in different cultures. International HRM: Focuses on the technical aspects of difficulties arising due to management of people who are thousands of miles apart. The two domains intersect at various places. Using these two definitions, parallels will be drawn between domestic aspect of HRM and IHRM. Critical Evaluation Domestic and International aspects of human resource management have more differences than similarities. Although there are some similarities but these are purely methodical. For example, the activities that define the process of HRM are similar in both domestic and international contexts. Companies working in either environment undergo the same basic process of recruitment, selection, training, compensation, planning and motivation (Aswathappa & Dash, 2007: 66). Another similarity is the way in which the management system is affected by external factors. Political, legal, environmental, economic and cultural constraints influence both kinds of system in a similar fashion. The final similarity is in terms of the objectives. HRM systems operating in domestic or international contexts have similar aims; those are, to maximise the HR satisfaction, and to help the company grow by the implementation of effective HR strategies and policies (Aswathappa & Dash, 2007). Harzing (2004) has identified two major differences between companies functioning in domestic and international environments. Firstly, as international firms accommodate people hailing from various cultures and backgrounds, the managing body should be able to connect with them in different ways. The organisation should be able to identify and accept different behaviours, and must cater to their expectations and needs differently (Harzing 2004). The second difference arises due to the geographical dispersion of sub-units of a firm operating internationally. The HRM system of such firm has to deal with the complexities arising due to long-distance operation and synchronisation of different units in different parts of the world. Not only do such firms have to manage their assets remotely, they also have to deal with different legal and economic systems and different set of cultural norms (Harzing 2004). Adding to the differences pointed out by Harzing (2004) a company working internationally has to decide whether it will be using an integrated approach or a differentiating approach in handling its human resources. These approaches are used to create a link between geographically dispersed subunits of an organisation. The integrated approach also known as ethnocentric approach is used by companies aiming to achieve consistency (Taylor et al., 1996). By using this mind-set the company exercises the superiority of the home country over its local subsidiaries. All the strategies and policies are made using the norms followed in the parent country and are integrated into the foreign subunits. Although believed to be more stable, this approach causes the suppression of local responsiveness. The orders are enforced by the headquarters and a centralised system is established. The workforce might be recruited from the local regions but the managers are recruited and trained in the home country and then sent to the foreign subunits. This step ensures that the specific corporate culture of the home region is exercised successfully. In contrast to the integrated approach, the differentiating approach, also known as poly-centric orientation gives more room to the local culture (Rosenzweig 2006). In this approach the regulations of the local subsidiaries are allowed to be absorbed in the corporate culture of the home country rather than enforcing the management practices on the host. This modus operandi is more flexible and allows local employees to grow in a more familiar environment. The locals are also entrusted with key positions within the organisations under the context that “locals know best” (Rosenzweig 2006). These management techniques can generate more employee satisfaction (the benefits of which are beyond the scope of this paper) with a trade-off of the original essence of the home region. Geocentric approach combines the qualities of the above two methods, by not strictly confining their managerial pool to either the home or the local host countries (Nickson, 2013). The companies pursuing this approach aim for a truly global setting for their organisation no matter where they are located. The individuals are selected for a job on the basis of their talent and suitability for a certain region, and not on the basis of their nationality. This approach is thought to give a competitive advantage to the organisations as they incorporate various flavours within them (Pieters, 2014). That being said, no multinational can be pin-pointed which strictly follows only one of these approaches. They incorporate a little bit of all suiting to their needs (Perlmutter, 1969). The above approaches mark a major difference between domestic and international companies and their human resource management practices. IHRM practices also give birth to certain cults of employees, which are non-existent in companies operating in domestic backgrounds (Torrington, 2009). Expatriates for example, is a term coined for employees who have to work overseas for a certain period of time. Although they are stationed at the home country permanently, they may be sent overseas for a rather elongated period of time (Rachet, 2014). Cosmopolitans are comprised of individuals who are vigorously trained to adapt to different environments. They understand and are comfortable with cultural norms of different regions. They are sent to different countries for short periods of time (Tung, 1998). Then, there are occasional parachutists, who are based in one country but are sent to other places occasionally. The management of the above discussed groups of employees is a tedious task, and require specialised managerial methods. This problem is certainly not faced by domestic organisations and is a characteristic of multinationals only. There is a greater degree of risk exposure for MNCs than their domestic counterparts. In financial terms, the costs of travelling, training, salaries and relocation expenses are higher than domestic companies (Downling, 2008). Foreign exchange rate and other volatile economic conditions add to the risk faced by MCNs. IHRM in Hospitality Industries A recurring issue in tourism and hospitality companies operating on an international scale is the choice of internalisation approach to be used. Usually they employ locals for non-managerial jobs and hire international managers. This give rise to the issue of management of expatriate managers, for example, the difficulty of first-world managers in coping up with the cultural context of a third-world country. The economic situation of the host country is very likely to influence the financial conditions in the subunits located in other countries. Thus, maintaining the synchronisation between units is a task that IHRM has to deal with. Conclusion In my opinion, the notion that human resource management is essentially the same in either domestic or in an international context is somewhat faulty. While IHRM is based on the foundation of HRM in domestic settings; it cannot be deemed similar. The similarities occur mainly in the way both DHRM and IHRM function. The activities are similar. However, the working of IHRM is much more complex; firstly, due to the geographical distances, and secondly due to differences in culture. The overall strategic disposition of a MNC will also impact on how they develop their international staffing. In addressing issues of this nature MNCs may seek to utilise practices only from its home country, imitate practices typical of other countries or increasingly utilise an amalgam of HRM practices drawn from many other companies and countries. The paper concludes with the result that DHRM and IHRM are not similar. Reference List Aswathappa, K., Dash, S., 2007. International Human Resource Management, Tata McGraw-Hill Education. Dowling, P., Festing, M., & Engle Sr, A. D., 2008. International human resource management: Managing people in a multinational context, Cengage Learning. Harzing, A. & Van Ruysseveldt, J., 2004. International Human Resource Management, 2nd edition, London, Sage. Nickson, D., 2013. Human Resource Management for Hospitality, Tourism and Events, Routledge. Perlmutter, H. V., 1969. The tortuous evolution of the multinational corporation. Columbia journal of world business, 4(1), 9-18. Pieters, C., 2014. 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