Challenges of Human Resources Managers and Specialists in International HRM Activities - Term Paper Example

Challenges of HR managers and specialists in International HRM activities Name of Student Lecturer Date Executive Summary Human Resource Managers and specialist encounter different problems and challenges when performing HR activities in overseas locations, unlike when working in home based country. Globalization has resulted to internalization as well as proliferation of expatriate assignments. HR managers and specialists have to effectively manage this to benefit both the organization and individual employees. This paper is meant to examine the challenges the international HR managers and specialists experience in effort to achieve the objectives of their organization. The challenges discussed include culture, remuneration and compensation, and contracts and agreements as HR managers seek to adjust to the new environment. To develop a comprehensive understanding of the issue of international HRM, Mr. Anderson, the HR manager at Coles Supermarkets was interviewed. The conversation in the interview was recorded as well as converted into a transcribed version for readers’ insight (Appendix 7.1). The author also conducted a critical review based on the questions and answers for the interview as well as scholarly articles. The report finally builds a conclusion based on the entire discussion in the report concerning international HRM. Table of Contents Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Major challenges in international HRM 5 2.1 Cross-cultural management 5 2.2 Difficulties in designing Remuneration and compensation packages 7 2.3 Misperceptions about signing of Contracts and agreements 9 3.0 Interview 10 4.0 Critical Analysis 12 5.0 Conclusion 14 6.0 References 15 7.0 Appendices 18 7.1 Interview Evidence 18 1.0 Introduction Human Resource Management involves a system of activities as well as strategies used in successful management of employees in an organization to meet the objectives of the organization (Byars and Rue, 2006). Employees are organization’s human resources are considered the most valuable resource to an organization. An organization can become successful by making employee productivity a priority. Normally, the level of productivity varies among employees depending on the skills applied on the job as well as employee satisfaction with the job and the organization. Highly performing and effective workforce is developed and maintained in an organization by use of human resource management input in organizational areas of recruitment and selection, job analysis and job design, employee motivation, distribution of employee benefits, strategic planning among others. International human resource management (IHRM) can be defined as how multinational companies (MNCs) manage the competing demands of making sure that international coherence is enhanced and using cost-effective strategies in managing people in all the countries the organization covers, considering the differences in assumptions about best practices in various locations (Brewster et al, 2007). In all the MNCs, human resource management is the key to success. In the modern world, the knowledge and capabilities included in an organization’s human resources determine the level of performance and success. In case of international organizations, the increased complications of handling multicultural assumptions concerning how individuals have to be managed as well as varying institutional constraints are significant contributors to the possibility of that success. There is increased acknowledgement for human resource specialists to consider the increased international course in their functional activities (Mathis and Jackson, 2006). This is important to people working in both large MNCs and small to medium-size enterprises (SMEs). International organizations are not only found in private sectors, but are also found in governments. In fact, governments have staff that work across the world. Not only are other managers, but also Human resource managers and specialists working in international environments are subject to the effect of multi-country, regional as well as global dynamism than those in a single-country operation. In deed, choices and decisions in IHRM have become complex and ambiguous. 2.0 Major challenges in international HRM Human Resource Managers and specialists in international companies encounter various challenges in effort to make Human Resource practices consistent across organization’s locations (Rioux, Bernthal and Wellins, 2000). The three main challenges include differences in political, social, and economic circumstances (cross-cultural management), remuneration and compensation issues, and contracts and agreements. 2.1 Cross-cultural management Creating a corporate culture is a challenge for HR managers and specialists since in some locations, the local customs and cultures have great influence on how business is conducted (Rioux et al, 2011). An important factor in internalizing employment is the fact that nations have different cultures. Countries are different in national attitudes and values which affect the operation of human resource functions, how people conduct, organize and manage work (Brewster et al, 2007). Therefore, an awareness of cultural differences is an important part of international HR managers and specialists. Normally, HRM activities like training and development, recruitment and selection, reward and performance appraisal are likely to be affected by cultures in respective host countries (Aguilera, 2004). This implies that maximum care must be maintained when considering whether or not to implement standardized HRM practices and policies across the world (Harzing and Ruysseveldt, 2004). Cultural difference among nations, bring about the issue of workforce diversity which include, but not limited to ethnicity, gender, age, race, education, marital status, geographical location, religious beliefs, work experience, ancestry, sexual orientation, and physical abilities (Srivastava and Agarwal, 2012). The success of an organization depends on the ability of the HR managers and specialists to manage a diverse pool of talent to bring innovative perspectives, views and ideas to the work of employees (Caliguiri and Cascio, 2002). The challenges posed by workforce diversity as a result of cultural differences can actually be made a strategic organizational asset if at all the organization’s HR manager can capitalize on this pot of diverse talent (Almond, Clark and Tresgaskis, 2004). MNCs are faced with the challenge of supporting diversity broadly, thus putting the organization at risk of losing talent to competitors. This is because MNCs employ individuals from countries, ethics and cultures. HR managers have to mindful and think global, but also act local approach when performing human resource activities (Brewster et al, 2007). In various ways, for workplace diversity to be effective in global operations, the HR mangers must skillfully balance their actions. The role of IHR managers is manifest in the second phase for internationalization where focus is on local responsiveness as well as transfer of learning (Harzing and Ruysseveldt, 2004). At this phase, various markets need differentiated approach as well as adaptation of business practices to local circumstances. A part from technical competence, HR managers have to consider selection criteria like language skills as well as adaptability and sensitivity to cross-culture. According to Du Pless, Venter and Prabhudev (2007) there is a time when MNCs have to focus not only on local responsiveness, but also on global integration. HR mangers have to focus on recruiting employees on international positions without looking the country of origin. The challenge arises when the HR manager is required to develop a management corps where all members have similar organizational norms and values. Another important issue in international HRM is when an organization has to satisfy the needs of global integration as well as national responsiveness (Carr, 2006). Here, measures of cultural diversity are manifest in the organization’s markets as well as in the organization itself (De Cieri, Wolfram and Fenwick, 2001). HR managers have to view the cultural diversity as a chance and not as a challenge. Though not an easy task, HR mangers have to increase creativity as well as flexibility with the cultural diversity by maintaining various perspectives, establish right approach to problem solving and an environment that encourages innovation (McGraw and Harley, 2003). In addition, HR managers and specialists in international HRM should focus on giving all employees irrespective of cultural orientation the opportunity for growth to promote an environment for learning throughout the organization (Harzing and Ruysseveldt, 2004). 2.2 Difficulties in designing Remuneration and compensation packages According to Lowe et al, (2002) the tradition of comparative HRM is specifically focused on how people work and discover the existing differences between countries in a manageable manner. Generally, comparative HRM tradition considers to a larger extent institutional differences compared to cultural differences (Brewster et al, 2007). Nations may be large or small with a few or many regional difference, comprise of only one of different language groups, or even be less of more developed economically. HR managers in MNCs experience these variations depending of the nations they are working. Also, nations have different employment laws, trade unions, labour markets and systems of education coupled with various cultural expectations as noted earlier Harzing and Ruysseveldt, 2004). It is thus not surprising to see that remuneration and compensation systems vary considerably between nations making management of human resources differ from nation to nation. According to Plessis and Beaver (2008) international HR mangers may find it hard to compile remuneration packages for expatriates. This is because international HRM practices in developing remuneration packages may be different from that of the host country. As mentioned earlier, the differences are caused by various changes in legal-political and socio-economic requirements from nation to nation (Farley, Hoenig and Yang, 2004). Due to differences in socio-cultural, legal and economic value systems for employees across the globe, merit pay policies are likely not to be consistently implemented among countries (Gully, Phillips and Tarique, 2003). This may actually translate to improper payment schemes especially when employees in foreign countries receive insufficient pay considering the remuneration systems in those foreign countries. In many cases, standardized pay may not be applicable in international HRM because it could be seen to contradict local practices. International HR managers and specialists have a challenge to develop an equitable pay rate for expatriates before sending employees in foreign countries (Plessis and Beaver, 2008). This has the potential to reduce expatriate frustration, since the foreign terms of payment could be less upon conversion into domestic currency. In deed, inconsistency in policies of pay merits that result from both individual and cultural differences can result to unrealized motivational objectives for merit pay programmes creating problems of perceived inequity among employees (Gully et al, 2003). 2.3 Misperceptions about signing of Contracts and agreements International HR managers often encounter various perceptions in regards to employment contracts and agreements. Different countries understand the signing of contracts and agreement in various perspectives (Plessis and Beaver, 2008). Whereas western countries may think of a contract in absolutely legal terms, thus binding to all parties, other countries like China prefer to establish a relationship with managers upon signing a contract, after knowing them and having a handshake (Bland, 2006 cited in Plessis and Beaver, 2008). Such issues seem to be of less significance, but international HR managers need to be aware of to avoid misperceptions. This implies that International HR managers and specialists have to think in terms of creativity, adaptability as well as receptivity, and not just learning before joining MNCs operations in foreign countries. Joint ventures between foreign nations or MNCs as well as social comparison across national employees are likely, especially in regards to signing of contracts and agreements. The reason is, both locals and expatriates work together, but they are normally employed under different terms of payment (Plessis and Beaver, 2008). Though, some countries may really not use expatriate employees as a referent group to determine whether or not their terms of employment are agreeable. According to Brewster et al (2007) maintaining approaches for expatriate employees as well as third word nationals consistent to the global scale is not only complicated, but also challenging exercise. The ‘one size fits all’ approach to globalization does not satisfy employees since they have various expectations as far as employment relationships are concerned. Contract management plays a key role in international HRM as it determines the general relationship between employees and the HR manager. Thus, individuals need to take charge of the signing of the contract, its implementation, and finally termination of the same so as to guarantee the smooth running of HR assignments (Plessis and Beaver, 2008). Unfortunately, due to different perception about contract signing, some individuals depending on the county of origin may not meet HR expectations concerning contract signing. Due to cultural differences, people find it hard to adapt to existing employment laws concerning signing of a contract (De Cieri, 2003). In many cases, when signing a contract, the problem arises when the two parties fail to agree on some aspects related to the contract (Brewster et al, 2007). For instance, management and professional abilities of people cannot be shaped to meet job requirement during the signing of the contract. Thus, a HR manager may realize later during the implementation of the contract that the employee does not actually possess the necessary skills, which brings about total confusion. 3.0 Interview The interview subject for the report is Mr. Robinson Anderson, the HR manager at Coles Supermarkets located in Perth, Western Australia. The interview was conducted on October 4, 2013 in the company’s boardroom starting from 9.00 hrs to 9.30 hrs. The responses to the following questions were converted into a transcribed version (see Appendix 7.1). 1. What is your name? 2. What is your current job? 3. How different is it from your previous job? 4. What is your experience as a HR manager in a foreign country? 5. Could you explain to me the concept of International HRM? 6. During your employment at Coles Supermarkets, what has been your contribution to the success of the company as a HR manager? 7. What do you think are the main challenges faced by human resource managers and specialists when performing international HR activities? 8. What is cultural diversity in the first place? 9. How was culture in particular, affect your work as a HR manager? 10. How did your try to overcome the challenges you have just mentioned? 11. How does it feel being a HR manager in an international scene? 12. What does it take a HR manager to handle issues concerning international HRM? 13. How do you manage remuneration and compensation as a HRM at Coles Supermarkets? 14. Did the concern of equity in remuneration emerge among the expatriate employees and local employees in your organization? 15. The issue of contract and agreement is common among MNCs, what is your stake on this? 16. Did your go through any training before taking on international HRM role? If yes, what was the experience? 17. What personal competences do you possess that makes you suitable for HR management position? 18. What is your general view as regards international HRM? 19. Are there any other challenges for HR managers and specialists in carrying out IHRM? 20. Lastly, what is you advice to existing and aspiring HR managers and specialists as concerns IHRM? 4.0 Critical Analysis HR mangers and specialists encounter difference challenges in international HRM. While the report has already highlighted the main issues facing HR managers and specialists in performing international HR activities, the attention will be focused on critically reviewing challenges in international HRM based on research articles and questions and answers on the interview found in Appendix 7.1. The main issue to this review is that international HRM is mainly focused on MNCs and associated with several challenges as observed by Mr. Robinson Anderson, “Being a HR manager in a foreign nation is definitely a challenging task given that you work in a different environment away from home country”, (R. Anderson personal communication, October 4, 2013). This assertion by Mr. Robinson Anderson is supported by Srivastava and Agarwal (2012) who argue that HR Managers, face many challenges in current business perspectives such as globalization workforce diversity, political and legal changes which increase HR managers to attract, maintain and nurture a pool of talented employee. However, according to the literature HR managers in MNCs must have a global vision to effectively manage their employees both abroad and at home (Plessis and Beaver, 2008), an aspect anchored by Mr. Robinson Anderson in the interview. Although the interviewee admitted to have not encountered the problem related to contract signing in his company, it remains a challenge to MNCs according to Srivastava and Agarwal (2012). However, literatures on international HRM have not exploited the issue of contacts and agreements in detail. Literature further indicates that when a business expands to the overseas markets as a result of globalization, HR managers and specialists have to utilize existing human resources to be able to conduct the organization’s business efficiently and effectively. However, this is usually underestimated by international HR managers and professionals. In really sense, HR managers should consult local representatives concerning local culture, customs and traditions, and employment aspects so that they can perform HR functions in harmony with the local procedures (Rioux et al, 2011). According to Mr. Anderson (personal communication, October 4, 2013) an international HR manager should understand different cultures to be able to manage workforce diversity by enhancing innovativeness in the workplace. This is in respect to Brewster et al (2007) argument that effective management of international human resources allows an organization to successfully compete in the world market, and can be used as an appropriate development tool for all employees. Mr. Anderson (personal communication, October 4, 2013) also indicated that a part from cultural adaption, HR managers face challenges of compiling remuneration packages for expatriates as well as communication problems. He was categorical that equity has to be maintained to be appeal to the employees from across the countries of operation. The same observations are made by Plessis and Beaver (2008) in the argument concerning remuneration. They belief that managing employees in MNCs is a complex task for HR managers as far as remuneration packages are concerned. Irrespective of the good intentions of HR managers, unless they use the right formula in compiling employees’ remuneration, such that well understood, easily verifiable, and perceived to be equitably fair, it is likely to result to conflict as well as hard feeling among employees (De Cieri, 2003). This means that HR managers and specialists must ensure that terms and conditions of variations in remuneration packages amongst similar positions across countries are clearly stated. Employees should also be made to understand the reasons for the structure of their salary to avoid conflict in future (Plessis and Beaver, 2008). However, as Schmit and Sadowski (2003) argue, failure to standardize pay by international HR managers may result to high cost of differentiation. 5.0 Conclusion Various aspects of international HRM differ from those in domestic human resource management. International HRM is more complex than just HRM because International HRM concerns wider issues to be considered by HR managers and specialists. International HR managers and specialists have to consider different aspects when working with MNCs, such as cultural differences, prevailing laws in a country, salary expectations and terms and conditions of work, and perceptions concerning formation of employment contracts and agreements throughout the global organization. All these should be considered for HR managers to establish the best working conditions with all employees of the organization as they get result from their work. The way HR managers handle the global staff determines the success of the organization. What could be considered as small issues may present a considerable bearing on employees in various countries due to different cultures and priorities. As indicated in the discussion, the issue of cultural differences in very critical in IHRM since adapting to new cultures in foreign counties remains a challenge to HR managers. HR managers are required to manage workforce diversity that emerges due to cultural differences. Also, managing remuneration packages for employees in international assignments is a complex task for HR managers due to differences in employment laws, labour laws and education systems across countries. The issue of employment contacts and agreements can be a challenge to the international HR managers when employees hold different perceptions concerning employment relationships. Thus, effectiveness of HR mangers in conducting global assignments depends on their ability to overcome these challenges. 6.0 References Aguilera, RV., (2004). The Role of HRM in Cross-Boarder Mergers and Acquisitions. International Journal of HRM, 15(8), 1355-1370. Almond P, I Clark and O Tresgaskis (2004) ‘HRM in multinationals: a comparative international perspective’ in I Beardwell, L Holden and T Claydon (eds.) Human Resource Management: A Contemporary Approach, Fourth edition, Harlow UK: FT Prentice Hall. Bland, V., 2006. Developing Business Relationships with Asia. Employment Today, 108, 36-38. Brewster, C., Sparrow, P., Vernon, G., & Houldsworth, L. (2007). International human resource management. London: Chartered Institute of Personnel and Development. Byars, L. & Rue, L. (2006). Human Resource Management (Eighth ed.). New York, NY: McGraw-Hill/Irwin, 371-383. Caliguiri, P., & Cascio, W. (2002). Challenges, Myths and Solutions. Worldatwork Journal, 9(2), 128. Carr, D.F. (2006). Gotcha! Deploying a Common Global System. Baseline, 54, 42. De Cieri, H., (2003). International Human Resource Management: Asia Pacific Challenges. Working Paper 7/03. De Cieri, H., Wolfram Cox, J. & Femwick, M. (2001). Think global, act local: Fro naïve comparison to critical participation in the teaching of strategic international human resource management. Tamara. Journal of Critical Postmodern Organization Science. 1(1): 68-78. Du Pless, A.J., Venter. F., Prabhudev, N. (2007). IHRM and HRM: Two Sides of the Same Coin? The International Journal of Knowledge, Culture and Change Management. 7(4): 59-68. Du Plessis, A. J., & Beaver, B. (2008). The changing role of human resource managers for international assignments. International Review of Business Research Papers, 4(5), 166-181. Farley, J.U., Hoenig, S., & Yang, J.Z. (2004). Key Factors Influencing HRM Practices of Overseas Subsidiaries in China’s Transition Economy. International Journal of HRM, 15(4): 688-704. Gully, S.M., Phillips, J. M., & Tarique, I. 2003. Collectivism and goal orientation as mediators of the effect of national identity on merit pay decisions. International Journal of Human Resource Management, 14 (8), 1368-1390. Harzing, A. W., & Van Ruysseveldt, J. (Eds.). (2004). International human resource management. Sage. Lowe, K.B., Milliman, J., DeCeiri, H., & Dowling, P.J. (2002). International Compensation Practices: A Ten Country Comparative Analaysis. HRM Magazine, 41(1): 45-77. Mathis, R. & Jackson, J. (2006). Human Resource Management (11th ed.). Mason, OH: Thomson/Southwestern, 524-565. McGraw, P., & Harley, P. (2003). Industrial Relations & HRM Practices in Australia and Overseas-Owned Workplaces: Global or Local. The Journal of Industrial Relations, 45(1): 1-22. Rioux, S. M., Bernthal, P. R., & Wellins, R. S. (2000). The globalization of human resource practices. Development Dimensions International, Center for Applied Behavioral Research, Bridgeville, PA. Schmitt, M., & Sadowski, D. 2003. A Cost Minimisation Approach to the International Transfer of HRM/IR Practices; Anglo-Saxon Multinationals in the Federation Republic of Germany. International Journal of HRM, 14, 3, 409. Srivastava, M. E., & Agarwal, N. (2012).The Emerging Challenges in HRM. International Journal of Science & Technology Research Volume 1 (6). 7.0 Appendices 7.1 Interview Evidence This interview was conducted on October 4, 2013 at the company’s boardroom. The interview consisted of 20 questions and lasted for 30 minutes. The transcript version of the interview is provided below: Q. First, I would like to welcome you to the interview and thanks for accepting to sit with me on this interview. A. Thanks too and welcome. Q. What is your name? A. My name in Mr. Robinson Anderson Q. What is your current job? A. I’m the HR manager at Coles Supermarket in Perth, Western Australia. Q. How different is it from your previous job? A. There is no difference because am still performing HR roles as the HR Manager, only that it is a different company. Q. What is your experience as a HR manager in a foreign country? A. Being a HR manager in a foreign nation is definitely a challenging task given that you work in a different environment away from home country. Q. Could you explain to me the concept of International HRM? A. International HRM is related to HRM since the role of HR manager applies across. The international aspect of HR implies that you are dealing or managing people from different countries who possess distinct characteristics in terms of culture and behaviour. International HRM is applicable especially in MNCs. Q. Great! During your employment at Coles Supermarkets, what has been your contribution to the success of the company as a HR manager? A. despite the challenges encountered, the greatest contribution I belief to Coles Supermarkets has been being able to meet the needs of all employees, both local and expatriates, in regards to remuneration and compensation, absorbing different cultures and more importantly establishing a motivated team of employees. The success of any organization depends on employees’ performance. Q. You have just mentioned challenges. What do you think are the main challenges faced by human resource managers and specialists when performing international HR activities? A. There are definitely many! The most significant ones include difficulties in adopting the existing culture due to cultural diversity, establishing standardized pay merit packages for all employees and perceptions about contracts and agreements. Q. What is cultural diversity in the first place? A. Cultural diversity is experienced when dealing with people from different countries. Countries differ in national values and attitudes that determine how people behave and mange work. In fact, cultural differences result to workforce diversity where an international HRM deals with people with different geographical locations, ethnicity, and religious beliefs among others that have to be accommodated in the HR practices. Q. How does culture in particular, affect your work as a HR manager? A. Cultural differences requires establishment of standardized HRM policies and practices to effectively manage all employees, both expatriates and local. Sometimes meeting this requirement is difficulty. Thus, it becomes a challenge to conduct HRM activities like recruitment and selection, reward and performance appraisal as well as training and development. In deed, this puts the company at risk of losing employees to competitors. Q. How did your try to overcome the challenges you have just mentioned? A. Since this is an international company, we try to ensure that we meet the international standards when dealing with employees. As a HR manager, I also try to learn the cultures of the people the company deals with so that I can observe equity in treatment. Q. How does it feel being a HR manager in an international scene? A. What an interesting question! It feels good, but one must be prepared to encounter some of the challenges I have just mentioned to you. Q. What does it take a HR manager to handle issues concerning international HRM? A. Most importantly, he or she should be ready to develop an understanding of different cultures because it involves working with people from different countries. An international HR manager must also be able to manage workforce diversity to bring innovative perspectives and ideas to employees’ work. Q. How do you manage remuneration and compensation as a HR manager at Coles Supermarkets? A. Although countries in which we operate have different employment laws, trade unions accompanied by different cultural expectations that probably does not fit into the company’s standards, the company tries to harmonize the remuneration and compensation packages across all the countries of operation. Q. Did the concern of equity in remuneration emerge among the expatriate employees and local employees in your organization? A. Equality in remuneration is an issue in international operations, but fortunately it has emerged under my leadership as a HR manager since it is efficiently catered for. At Coles Supermarkets, equity is a priority in all operations of the company. Q. The issue of contract and agreement is common among MNCs, what is your stake on this? A. I understand that different countries view the issue of contracts and agreements differently, but I have not experienced such contradiction at Coles Supermarkets. Q. Did your go through any training before taking on international HRM role? If yes, what was the experience? A. Not really, but as I continued to interact with people from different countries, I leant most of their behaviours and this males me fit in well for international HRM assignments. However, training may be necessary for new HR managers. Q. What personal competences do you possess that makes you suitable for HR management position? A. I have been in the field of HRM for the past fifteen years and worked in different international companies. I have masters in HRM and a PHD in International business. So, I have vast experience in international issues. Q. What is your general view as regards international HRM? A. It is an interesting experience to be an International HR manager, despite the challenges. With an internationally focused mind, HR managers can do well. I like the job very much since it has exposed me to different culture of various countries. Q. Are there any other challenges for HR managers and specialists in carrying out IHRM? A. Most of the challenges result from cultural differences such as communication problems. Q. Lastly, what is you advice to existing and aspiring HR managers and specialists as concerns IHRM? A. They should work on the knowledge on skills to learn different cultures. They should also be flexible when dealing with international assignments more so when handling expatriates. All in all, they should not be discouraged by the challenges, but try to overcome them through appropriate HR practices. Q. Thanks very much for your cooperation. A. Welcome Read More