The varying role of IHRM in different MNCs - Essay Example

? The varying role of IHRM in different MNCs BY YOU YOUR SCHOOL INFO HERE INFO HERE HERE The varying role of IHRM in different MNCs Introduction International human resource management (IHRM) can maintain different policies to that of domestic HRM, due to the differences in overseas business operations, local cultural preferences, propensity for change resistance, and the necessity for a different type of structured training for expatriate leadership. In a situation where an organisation has recently merged with or acquired another company, the methodology involved in managing human resources fluctuates from the home country based on social, cultural or organisational values as they pertain to the overseas environment. Managing international human resources is not an easy task as there are many variables involved that relate to cultural values as well as complications that arise in the development of a practice transfer methodology. The IHRM expert must consider whether policies that work domestically will be as effective in the face of a merger or when assigning expatriate leadership to the new MNC. This paper describes the varying role of IHRM within the multi-national organisation with a specific focus on organisational learning, the management of expatriates, and practice transfer. Salaries, social responsibility, training, knowledge transfer, and cultural awareness/development will be highlighted to determine best practice in international human resources management. IHRM related learning and training “The overall purpose of human resource management is to ensure that the organisation is able to achieve success through people” (Armstrong, 2006, p.14). Human capital development, then, should be the focus of the definition of international human resource management, a difficult objective in a multi-national organisation that deals with customers and employees with varying values and different operational standards in environments that demand different regulatory compliance. Human resources involves maintaining flexibility and focus on the internal dynamics that drive or hinder organisational success as it relates to people development. “It emphasizes teamwork and employee commitment through the development of a strong value system that promotes corporate identity” (Panayotopoulou & Papalexandris, 2004, p.499). The main goal of IHRM is to establish a highly motivational environment and employee support related to merit awards, equal opportunities, involvement, empowerment, communication and individual or group development (Panayotopoulou & Papalexandris). This is especially true in an MNC where cultural values often conflict and a system is required to gain unity and harmony among differing employee attitudes and motivational preferences. It was first necessary to define the objectives of international HRM in order to determine best practice methodology for the MNC as it relates to people development and/or job satisfaction. In relation to organisational learning, especially as it pertains to training, conflict is a major consideration of the HR manager. van Dam, Oreg & Schyns (2008) identify that there are many psychological mechanisms that drive employee attitude as it relates to change leadership. It is leader-member exchanges and the perceived development climate that are the major concerns of IHRM leadership especially in an environment where a merger has just occurred where participation and trust in management require intensive focus (van Dam, et al.).In the MNC, especially a recently merged entity, change is constant and evolution of business practices are on the forefront of business development. Thus, in order to provide training that will be embraced by diverse employee or management groups or ensure organisational learning, removing the barriers to success that are caused by change resistance are of considerable concern. For instance, one of the most fundamental issues arising in a recent merger or acquisition at the MNC is the restructuring of technology either through the blending of two different software package systems or through restructuring of the information technology architecture to adapt to changing market or business objective needs. In the home country, IT projects and the provision of training for these upgrades or improvements is difficult with considerable opportunities for change resistance. Common IT project failure elements include lack of management support, lowered commitment of the project team, ineffective planning, and minimal stakeholder involvement (Kappelman, McKeeman & Zhang, 2009). The multi-national entity provides HR leadership with more difficulty in ensuring non-resistance to these types of IT projects as they are dealing with individuals with varying cultural beliefs and values in an environment that is already perceived to be uncertain and risky after a merger and the business begins to take a new course forward. Why is this such a significant issue for IHRM in the MNC? Change agents who have been assigned to champion a project development in information technology are described as “the undeserving victims of the irrational and dysfunctional responses of change recipients” (Ford, Ford & D’Amelio, 2008, p.362). The main points of this statement are irrational and dysfunctional when it comes to attempting to implement organisational learning related to this software development or ensuring proper training. The psychological mechanisms described by van Dam, Oreg & Schyns (2008) seriously complicate the process of launching a successful information technology support system after a merger or acquisition. IRHM leadership must pay special focus on communications improvement between management and employees who will be end users of this new software package and reduce conflicting opinions or change resistance using appropriate HR policies and procedures. When assembling a project team for information technology support, the HR manager cannot underestimate the complexity of these conversions (Arnold, 2007). In a situation where the business is engaged in a system like the HRIS (human resource information systems) this can typically take two years with a project team of over 30 individuals with another 30 vendor representatives and development consultants (Arnold). An HRIS system, as one example of MNC software development, includes an integration of payroll, self-service systems and benefits that transform the elements of HR management and leadership. Employees, due to their complex resistance psychologies, will complicate this process thus the IHRM leader must develop procedures to remove the pulling forces that lead to barriers in successful development and launch, which is further complicated with the presence of external consultants who must engage the internal staff. In this type of scenario, such a change project might require the involvement of individuals who were staffed independently in the recently acquired or merged entity, thus creating a sense of membership is the first important step to ensure success and minimal change resistance. According to Bushe & Coetzer (2007), in order for a project team to develop successfully, members need to want to join the team and learn to identify with its values and objectives. “Members enter the team with personal needs and goals, and they implicitly evaluate how this team will aid or get in the way of their personal needs and goals” (Bushe & Coetzer, 2007, p.185). The IHRM leader must gain knowledge of the individual motivations that drive responses to team affiliation and develop appropriate procedures to ensure that members come to identify with the group and develop a more harmonious and unified approach where group needs are placed first over independent objectives and needs. How is this accomplished in the MNC? First, establishing a sense of affiliation is required for all team members and those who are involved in training and new learning methodologies. Establishing a sense of affiliation is a fundamental psychological need of virtually every human being, a motivator, that leads to self-confidence, perceptions of power, control and prestige (Gambrel & Cianci, 2003). One method of establishing this in an MNC with widely-diverse cultural differences in management and subordinates is the development of a feedback system to improve communications and also allow for perceptions of involvement and control. Robbins & Judge (2008) suggest a regular survey provision to identify where areas are open for improvement and as an opportunity to offer a voice about change practices. Since miscommunication can quickly lead to diminished organisational performance (Ventrice, 2009), the survey creates an encouragement of free information flow that moves horizontally and also keeps everyone in the project team informed about issues that will directly impact their job role. This will not only improve training and communications, but establish the culture of trust required for further developments necessary to keep pace with changing internal dynamics associated with mergers and acquisitions. Because of the concentrated volume of psychological responses to different policies, especially those associated with a blending of different cultures from an acquisition, there is another strategy that can reduce change resistance and improve employee/management relationships. Bambacas & Bordia (2009) offer that the provision of training that is perceived to be non-transferrable to another organisation leads to more commitment and involvement by those who would readily resist change. Such training psychology “makes it too costly to leave and the perceived cost of loss mediates the training-continuance commitment” (Bambacas & Bordia, 2009, p.225). Thus, in this multi-national environment, to ensure organisational learning, the IHRM manager must function like a promotional manager in marketing, presenting training as unique and unparalleled as a means to improve employee satisfaction and ensure active participation with minimal resistance. It is not only policy and procedural development that the IHRM must perform, it is the role of MNC strategist that uses psychological advertisement to ensure that training is perceived to be top quality and non-transferrable to another organisation. Offers Alvesson & Willmott (2003, p.6): “If power lies in the strategic coordination of resources, then a strategic conception of power offers the opportunity for subordinate groups to develop coalitions capable of challenging dominant groups and affecting change at the corporate level”. Under this assumption, the precedent set of using psychologically-based tactics to promote training as non-transferrable, as though a form of reward for its ingenuity, then the IHRM leader can avoid the development of resistance coalitions by removing perceptions of power until the special project or specific task has been accomplished as it relates to organisational goals within the MNC. It is necessary, when it comes to organisational learning, for the human resources manager to ensure that authority, or at least the perception of it, remains internalized with the HR manager as a resistance-lessening strategy. IHRM related to culture A recent merger between Air France and KLM airlines shaped a new culture with vastly different social and cultural values from French employees and those from the Netherlands. One is a collectivist culture whilst the other is more individualistic in social and cultural attitudes. Air France and KLM were able to successfully launch joint training programmes and build dialogue between unions and management, however the newly-merged entity found it was necessary to maintain two distinct HR policies and programmes (corporate.airfrance.com, 2010). This is of significant concern for a multi-national that might not have the talent management capacity or the budget capable of supporting dual HR programmes. What, then, would be the solution in a diverse environment created by a clash of cultures after a merger or acquisition? It depends on the culture differences of the host business and its newly-integrated employee population. Blodgett, Bakir & Rose (2008) identify the differences between collectivist and individualistic nations. Collectivists are group oriented, usually valuing family-style business cultures with considerable respect for tradition. Individualistic employees value self-expression, autonomy and usually put individual goals first. This is a considerable concern for the IHRM leader who must come up with policies or methods to ensure that this culture clash does not interrupt work team functioning or organisational learning. There is also a difference between individualistic and collectivist cultures pertaining to their willingness to adopt risk; uncertainty avoidance indices. Cultures that will readily accept risk, such as the UK, have more tolerance in the face of conflicting opinions whilst uncertainty avoiding cultures demand detailed plans and contingencies with less tolerance for conflicting opinion (Donnison, 2008). The IHRM leader might develop a series of preliminary questionnaires or surveys when it is suspected that cultural clashes will impede learning or new project development to understand the foundational values of collectivist versus individualistic employees. Once the IHRM leader understands the basis of social and cultural principles that guide attitude and willingness to adopt change or participate in group projects, they can better establish methods to improve communication and empower individuals to attain affiliation within the newly-merged organisation. There is a common management and change model referred to as the McKinsey 7-S model that identifies the key areas of business that require alignment in an MNC in order to launch any successful programme or objective. These areas are systems, shared values, style, staff, skills, strategy and structure (Cellars, 2007). When considered collectively, these are predictors of whether or not the MNC will operate effectively after a merger or acquisition and a blending of cross-cultural staff has occurred. The IHRM manager must be aware of the inter-linked functioning of these business elements and then develop appropriate HR policy to improve communication and teamworking for all of these areas of business, especially when the multi-national operates differently in the home country as compared to abroad. IHRM and the expatriate Managing expatriates in the MNC is also complex and requires demanding effort on behalf of the human resource manager. There are safety concerns associated with expatriate staff, the level of which depends on the political or social systems that drive relationships between the foreign operations and the local culture. Liability is a major concern for the IHRM leader, as identified by the Health and Safety Executive. The HSE identifies, in the face of potential safety issues: “juries many consider whether a company or organisation has taken account of any appropriate health and safety guidance and the extent to which the evidence shows that there were attitudes, policies, systems or accepted practices within the organisation that were likely to have encouraged serious management failure or have produced tolerance of it” (Martin, 2011, p.32). Because of the seriousness associated with business liability and expatriate safety, the IHRM leader must assess the external environment as it relates to political stability and socially-based safety concerns and develop procedures and training to ensure protectionism for the organisation. This not only satisfies corporate social responsibility within the MNC, but also ensures that expatriates are well-versed in their role in a foreign and unfamiliar culture so that they are prepared with identification of the potential risks before accepting assignment. Salary management is another major concern for the IHRM leader. A 2009 survey of 200 companies headquartered in Asia, covered the salary packages of over 8,000 different expatriate employees. The survey results indicated that 54.2 percent of companies used the home country-based approach to salary generation, which is establishing a base similar to the remuneration received in their home country (Chan, 2010). Only 11 percent of companies used a local market approach by comparing market rates of the foreign base of operations (Chan). The IHRM leader must be concerned with how the salary will be interpreted by the expatriate, along with the additional allowances for housing or education that are typically provided to expatriates on long-term assignments in a foreign business division. There might be demand for higher supplementary benefits in order to gain commitment which will require consultation with executive leadership and the expatriate assignee as well to determine an equitable salary foundation. Further, the IHRM manager must develop a better system of management between the host operations and the foreign operations to ensure the expatriate manager is able to adapt to their new role working with foreign cultures. “Among local employees overseas, there may be fear or suspicion regarding an expatriate, lack of understanding of his role, or a lack of trust” (Plotkin, 2009, p.20). This can lead to social isolation and an urgency about wanting to return to the home country of operations before completing the assignment. It is suggested that in order to avoid these conflicts, the IHRM leader should adequately prepare the expatriate with cross-cultural training packages, providing cultural sensitivity training, and provide literature about the foreign culture for assessment to prepare for the assignment (Plotkin). Cole (2010) also suggests that spouses should be involved in considerations to provide job-search assistance, a list of expatriate networking services, lists of schools with English-speaking dimensions, or even career counselling. Spouses have a difficult time, sometimes, adjusting to new long-term expatriate assignments and can complicate the process of ensuring compliance and satisfaction by the expatriate manager. A survey of 238 expatriate spouses indicated that only 18 percent had received employment assistance or other support from the expatriate employer (Cole). If the expatriate family or spouse is going to have a difficult time establishing an adequate career, providing for education, or developing a social network this can impede progress for the expatriate leader and thus this should be of consideration to include spouse and family issues in training and support when overseas assignments are necessary for MNC success and operational management. Conclusion It has been identified that the IHRM manager must consider elements of cultural diversity, especially after a recent merger or acquisition in order to gain commitment, improve communications, and avoid change resistance. Additionally, training provision related to special projects and team development is necessary in order to gain commitment, both through psychologically-based tactics, training promotion, and to build more motivation to achieving MNC long-term goals. The needs of expatriate managers related to salary, safety and family support are considerable job obligations for the IHRM leader and must be addressed to gain commitment and operational success. The literature provided shows a complex web of activities for the international human resource manager related to an environment with merged cultures and values. Since the purpose of human resources is to create success through people, human capital development both in the home operations and overseas are primary concerns by appealing to emotional needs and attempting to build an environment of unity and affiliation. Adjustment to expatriate assignments or internally at the home operations after a merger or acquisition are necessary, based on the research findings, in order for the MNC to function competitively and meet long-term goals. 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