Human Resource Management in a Global Economy - Literature review Example

Human Resource Management in a Global Economy Name Institution Course Date Human Resource Management in a Global Economy Introduction As a result of globalisation, companies have entered into trade agreements that have created a platform for growth and expansion (Cheng, et al., 2007). Many companies also recognise the fundamental need to tap into the expertise and skills of a diverse team to succeed in today’s global economy. In the business environment, a knowledgeable international workforce is required in order to be competitive globally (Cheng, et al., 2007). Thus, international human resource management scholars have emphasised the need to develop globally oriented managers (Mazur, 2010). In addition, direction of how companies should enhance their human resources practices and develop an international workforce should be commonly understood and embraced. According to international human resource management literature, companies must embrace organisational diversity in order to be competitive (Cheng, et al., 2007). Cultural diversity can be defined as a person’s or group’s affinity for a specific cultural dimension, including colour, ethnicity and nationality (Holaday, 2007). Increasing globalisation has resulted in greater cross-cultural contact. Multinational companies are made up of an ethnically and culturally diverse workforce, which has led to many benefits as well as challenges (Graham, 2010). Thus, there is a need for Human Resource Management (HRM) to address workforce diversity in order to increase competitive advantages for corporations. When diversity is not managed in international organisations, there is often an increase in absenteeism of the minority group as well as lower returns in terms of productivity (Graham, 2010). This paper will highlight organisational HRM diversity and culture using the Kormarci Aircraft case study. The paper will also examine the international management performance and development programs at Kormarci Aircraft. Organisational HRM, Diversity Management and Culture The concept of HRM has expanded over the years. Moving beyond mere management of human resources, HRM now comprises different elements such as corporate strategy, transnational organisations, cross-cultural management as well as knowledge management (Rosenblatt, 2011). There are a number of factors that affect international HRM. For instance, according to the Universalist point of view, proactive management strategies influence business outcomes in the international market (Hassan et al., 2013). In addition, contingency theory highlights the need for organisations to fit HRM practices to the conditions and culture of the countries in which they are doing business (Crowne, 2008). Therefore, organisations operating internationally should strive to change their HRM to be consistent with different external and internal factors. External factors include national regulations, customer expectations and laws while internal factors include organisational culture and corporate lifecycle (Crowne, 2008). Culture is one major factor that affects the operations of multinational companies. For instance, in Kormarci Aircraft, the CEO is worried about profit maximisation. However, culture has affected the operation of the airline. The Australian workforce is not operating effectively due to communication breakdowns, and the culture at Kormarci Airlines is said to be negative as the employees often resist organisational changes (Andersen, Cooper and Zhu, 2007). The line managers, who are responsible for communication, often receive emails from China, Singapore and Vietnam. However, communication with these countries is difficult, and the line managers must often seek clarification on a number of points. From the case of Kormarci Aircraft, the cultural backgrounds influence the way people think, act and interpret each other’s contributions. For instance, success or failure in communication is highly dependent on communication competence, and cultural skills affect an organisation’s bottom-line. Culture elements such as language, non-verbal behaviour, customs, religion and social institutions are potential sources of differences and conflict (Fernandez, 2006). According to Hofstede cultural dimension theory, national culture has four independent dimensions. The first dimension is power distance, which refers to the extent at which the less powerful parties accept that power is distributed unequally (Crowne, 2007). Power distance suggests that a cultural level of inequality is recognised by employees as much as by their leaders. This means that all societies and countries are unequal. However, some are more unequal that others. Second dimension; individualism versus collectivism is the extent to which people are somehow integrated into groups (Hassan et al., 2013). Concerning individualism, in societies, ties between people are loose, and each person is expected to look after herself or her immediate companions, such as family members. Collectivism, on the other hand, establishes how societies are integrated into strong and cohesive in-groups, where everyone is expected to extend his or her protection to the extended family and display unquestioned loyalty (Crowne, 2008). On third dimension, Masculinity versus femininity refers to the distribution of roles according to gender. In individualistic cultures, people think they should focus on themselves more than on other people (Thomas, 2006). In such a culture, people advance from the notion that values are applicable to everyone. In collectivist cultures, loyalty is in-group, and everybody looks out for other people’s interests; core values only apply in-group while other values apply to outsiders (Andersen, Cooper and Zhu, 2007). In addition, uncertainty avoidance encompasses a society’s degree of tolerance for ambiguity and refers to an individual’s search for truth (Andersen, Cooper and Zhu, 2007). Uncertainty avoidance indicates the extent to which a culture makes its members to be comfortable or uncomfortable in a given unstructured situation. Uncertainty avoiding cultures minimise the occurrence of unstructured situations by enforcing strict security measures, laws and regulations based on a belief in absolute truth (Day, 2007). On the other hand, such cultures are tolerant to new opinions and have few rules, and those they have are relativistic. In Kormarci Aircraft, diversity management supports respect for differences in race, ethnicity, regional beliefs and age. However, in working with a diverse workforce, the company has experienced a strained working environment (Andersen, Cooper and Zhu, 2007). In addition, the company does not recruit people with disabilities in countries such as China. Also, the Human Resources department lacks clear practices to help employees understand each other. Kormarci has a number of performance management challenges. For instance, there is lack of performance reviews in many of its subsidiaries, except for its Australian Human Resources. Generally, HRM in Kormarci Aircraft is faced with numerous cultural challenges and human resources issues. The company must understand that not all HRM practices work well in all countries. Therefore, there are a number of things that should be changed when it comes to Kormarci Aircraft Human Resource Management (Hassan et al., 2013). International Performance Management, Training and Development A performance management system has certain key components, such as goal setting, feedback, performance evaluation and guidelines (Day, 2007). In terms of goal-setting, the supervisor is expected to establish goals. These goals are very important since they assist the employees to understand the parameters of their responsibilities. Goal-setting also makes planning, prioritising and organisation easier (Fenton-O’Creevy, Gooderham and Nordhaug, 2008). However, the goals that are set should be SMART (specific, measurable, attainable, relevant and timely). Performance management programs should offer feedback; regular feedback is critical. Nevertheless, it is a complex process that should be well understood by management (Cavusgil, et al., 2008). Feedback should be offered in a timely manner and should be accurate and reliable. Another key component of a performance measurement system is performance evaluation. A specific method should be chosen for evaluating performance. Moreover, performance evaluations should be carried out continuously (Thomas, 2006). The factors to be evaluated include employee inputs, results and outcomes of a project as well as organisational behaviour. Performance evaluations provide a platform for rewarding or penalising employees according to a measurement system (Pudelko and Harzing, 2007). However, performance measurement systems can be affected by factors such as technology, reward systems, performance standards and supervisor–subordinate relationships (Andersen, et al., 2007). In addition, culture also affects performance measurement in multinational companies. Performance measurement systems differ in different countries due to the factors explained earlier relating to Hosfstede’s cultural dimensions. This means that a company like Kormarci Aircraft should use different performance measurement systems in its different subsidiaries; translating or exporting a system from one country to another will not achieve the desired goals (Shad et al., 2009). Training is the method for affecting people’s attitudes, expertise and skills to enhance individual, team and organisational effectiveness (Thomas, 2006). Development, on the other hand, is the methodical approach used to impact people’s knowledge and skills in order to enhance their growth and future job potential. According to the literature, training and development can result in improved organisational performance, eventually increasing a company’s competitive advantage (Schuler and Tarique, 2007). In addition, training and development of employees have been shown to improve HRM performance since negative attitudes may interfere with an employee’s performance (Lim and Noriega, 2007). Training and development improve and change the attitudes of potential employees in order to match those of the already working employees. Positive employee attitudes, in turn, lead to enhanced performance. There are various ways in which an organisation can train its employees (Chang, et al., 2007). On-the-job-training, programmed self-instruction, web-based learning and systemic job rotations are some of the methods that organisations use to train and develop their human resources (Gooderham, Parry and Ringdal, 2008). Different countries require different means of training and developing employees; a training technique may work in one country but fail in another. The success of training and development may be highly influenced by cultural and institutional values, which vary in different countries. Multinational companies invest heavily in training and development due to the skill gaps and skill requirements needed in different regions around the globe (Thomas, 2006). For such companies, it is important to train and develop employees who work in foreign countries. Expatriates need to undergo training and development that will enable them to overcome challenges in their country of operation (Thomas, 2006). Cross-cultural training and development is used to help expatriates learn effective methods for acquiring information regarding foreign cultures. To live and work in the global world, one is required to be innovative, an ‘outsider’ with the ability to see a particular thing in different ways (Thomas, 2006). Being an expatriate manager can be both a challenge and a competitive advantage. Expatriate managers that see and think differently about a need, problem or niche have a better chance of developing an innovative approach that is unique and competitive. Therefore, they require a certain level of cross-cultural intelligence (Andersen, et al., 2007). We can define cultural intelligence as the ability to link and benefit from the cultural complexity of individuals with differing nationalities, personalities, backgrounds and organisational cultures. It combines the emotional, practical and cognitive concepts of cross-cultural encounters and guarantees more efficient and effective cross-cultural collaboration (Thomas, 2006). Expatriates must be skilled and flexible to understand a different culture. They should acquire an understanding based on frequent interactions, eventually reshaping their thinking and behaviour to be more sympathetic to the culture and more skilled when they interact with people from that culture. Cultural intelligence is acquired through training and development (Thomas, 2006). Expatriate development is also important since it is a way of overcoming difficulties that can hinder effectiveness in a new culture (Graham, 2010). Training and development supports positive relationships between expatriates and host nationals and employees. Expatriates acquire a number of technical skills from cross-cultural training that may work well in another country. This is important as expatriates are often stressed when allocated to work in another country (Rosenblatt, 2011). Training and development of these expatriates may enable them to overcome this stress so they can contribute their full potential to organisational success. The development of managers is a source of competitive advantage for international companies. In the case of Kormarci Aircraft, the current training and development of expatriates is minimal, and there is no avenue for workers to comment on the success of the training and development program. This might be the reason that the company in facing difficulties in regard to cultural issues. Conclusion and Recommendations Due to globalisation, modern companies are faced with diversity and cultural challenges. Expatriates who are relocated to other countries are faced with challenges since every country has its own culture. As discussed by Hosfstede, there are some dimensions of culture that influence performance measurements and training and development. These dimensions include uncertainty avoidance, power distance, individualism versus collectivism and femininity versus masculinity. In order to overcome these culture and diversity challenges, organisations should implement training and development programs for expatriates to promote a competitive advantage (Andersen, et al., 2007). Operating in a manner that that is harmonious with everyone’s cultural contexts improves business performance. It is wrong to ignore the cultural differences that beset organisations. Managing adaptation to cultural differences should involve limiting the need for variation. One way of reducing the poor performance resulting from cultural variations is to focus on similarities between cultures (Andersen, et al., 2007). Another method for reducing cultural differences is to cultivate a group of employees that are drawn to organisational culture. Investing in cross-cultural training supports people from different cultures to be flexible and understand and respect each other. As seen earlier, international companies should implement performance measurement programs. To ensure their success, companies such as Kormarci should develop, conceive and publicise the evaluation process clearly, taking into consideration the time factor. In addition, the connection between performance measurement and the rating process should be clearly established. References Andersen, K. K., Cooper, B. and Zhu, C. 2007, The effect of SHRM practices on perceived financial performance: some initial evidence from Australia, Asia Pacific Journal of Human Resources, 45(2), pp. 168-179. 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