International Developments That Have Critical Implication for International HRM - Essay Example

International HRM Definition of International HRM International human resource management (IHRM) is defined as the process of allocating, procuring, and effectively using human resources in the multinational corporation (Indian Express Group 2005, par. 2). The multinational company’s (MNC) international human resource management (IHRM) system is defined as the collection of particular activities, processes, and functions that are directed towards attracting, maintaining, and developing the MNC’s human resources. It is therefore the aggregation of a number of a number of HRM systems that are used to control people in the multinational company both overseas and at home (Redman, Snell and Wilkinson 2009, p541). Introduction A number of important international developments are presently taking place that have critical implication for international HRM. They include; (a) the growth of multinationals in the emerging markets, (b) constant increment levels of foreign direct investments, (c) the growing power of cross-border alliances (M&As) that involve companies from the emerging markets, (d) a growing trend in business process outsourcing, and (e) the challenges posed by the current financial crisis and the way to manage effectively in difficult times (Aston Business School 2011, par. 2). The emerging international economic scenario characterized by the rise of economically stronger emerging markets is creating serious challenges for the IHRM policy makers; however, the same scenario lays immense opportunities for the IHRM researchers (Aston Business School 2011, par. 4). IHRM Framework Based On Schuler, Dowling and De Cieri (1993) The model of strategic international HRM (SIHRM) is based on the earliest and most famous article by Schuler, Dowling and De Cieri (1993). The model describes endogenous and exogenous factors, and strategic components that have an effect on SIHRM policies, issues, functions, and practices. They in turn affect the MNC goals such as efficiency, learning, flexibility, effectiveness, responsiveness and transfer. According to the model, the external factors (industry characteristics, country-regional characteristics and inter-organizational networks) have an effect on the internal organizational factors, strategic HRM and MNE (multinational enterprise) concerns and goals. The internal organizational factors, strategic HRM and MNE concerns and goals affect each other (Baruch and Dickmann 2009, p33). The internal organizational factors include; (a) MNE structure – structure of the international operations, intra-organizational networks, mechanisms of coordination, and modes of operations, (b) MNE strategy – corporative level strategy and business level strategy, (c) experience in the management of international operations, and (d) headquarters international orientation. Strategic HRM entails HR function strategy and HR practices. MNE concerns and goals entail competitiveness, efficiency, balance of local responsiveness and international integration, and flexibility (Baruch and Dickmann 2009, p33). Challenges and Opportunities of International HRM for an Organization Operating In Countries of Growth and Recession An important shift is occurring in the international economy. The national economies are progressively moving from the state in which national economies were separated from each other into an independent global economic system. The world is witnessing the quick appreciation and development of all sections that are associated with and affected by the human resource management. The emerging international economy is creating opportunities and at the same time presenting threats and challenges that did not exist before. Management of human resources has become significant to the success of firms (both small and large) regardless of the industry. The success of the company is dependent on how effectively the firm controls its human resource (Nicolaou and Stavrou-Costea 2002, p1). There is a common dilemma facing HR and other functional managers in international corporations; it is the problem of balancing differentiation (that is, practices and policies flexibility at local subsidiary level) and integration (coordination and control from the headquarters [HQ]). Compared with domestic HRM, IHRM (a) entails more functions, (b) possesses more heterogeneous or diverse functions, (c) involves frequently changing perspectives, (d) necessitates more involvement in the employee’s personal live, (e) is influenced by the external sources, and (f) entails a greater degree of risk than the normal domestic HRM (Indian Express Group 2005, par. 3). HRM is becoming important in assisting the globalising companies to deploy talent. HRM policies and practices for positioning expatriate staff are becoming a critical strategic issue. A lot of research is going on in regard to international HRM, for example, “how to select, culturally integrate, remunerate and organizationally integrate expatriate employees into the host country, and then reintegrate them back into the home country and organization” (Horwitz 2008, par. 12). International assignments and work opportunities are more readily accessible in the East Asian markets. HR is supposed to create criteria for selection and recruitment of managerial and professional expatriate employees. A good example is taking into consideration things such as the family situation, the schooling stage of the children, and the partner’s career; these things were not considered before (Horwitz 2008, par. 12). The world is witnessing an important convergence of technological, social, political, and economic practices around the world such as instant communication which is facilitated by global cell phones and Internet. In particular, human resources and international management is witnessing an increased adoption and sharing of worldwide recognized best practices that make contributions to the global competitive advantage (Paik and Vance 2010, p30). The local, regional, global, and national economic strength can have a great influence on the business activities. Economic conditions can also have a great influence on the workforce decisions in carrying out the business activities. For example, in an economy in which it is perceived to be weak, the firm’s growth may be stagnated, a hiring freeze established, and emphasis is put on the use of temporary employees. In situations where the regional economic favourability differs, the multinational corporations change their business activities focus to take advantage of the great benefit for the firm (Paik and Vance 2010, p6). Effective management of the human resources is significant to the organizational effectiveness or success. The HRM function is the firm’s most important source of information about the labour relations, employee practices, employee behaviour and the effective control of all the components of human resources. The on-going opportunity and challenge for HRM is to integrate all the programs that involve human resources with the strategic organizational objectives. The firms are placed under constant tremendous competitive pressure from other international organizations (Sims 2007, p33). The HRM personnel are supposed to develop effective or successful international programs that will meet this challenge. Challenges, opportunities, and issues facing the HRM today and in the future center on the changing workforce diversity and demographics, competing in the global environment, “technological changes, eliminating the employee skills gap, developing human capital-lifelong learning and organizational learning, and achieving societal goals through organizations” (Sims 2007, p33). HRM is supposed to work as a strategic partner with the rest of the individuals in the organization in order to make their firms faster, better, and more competitive. The trend will constantly expect a results oriented HRM function that fulfils the following requirements; (a) the requirement to contribute and understand business strategies, (b) the requirement to yield business results, (c) the requirement to demonstrate and add value to the HRM professionalism, and (d) the requirement to be capable of turning strategy into reality (Sims 2007, p34). There are a variety of practices that are available to the HRM professionals and the rest of the organizational leaders for the management of the firm’s most valuable resources – the people who are working in that organization (Sims 2007, p104). The present and the future global organizations will continue taking one of the different approaches to HRM and the choice will depend on the legal and political regulations, educational, technology, and managerial development in the host nation; and the differences between the host and home cultures. This will require the HRM professionals to increase their competence and skills in working together with the rest of the organizational members in order to effectively coordinate the HRM operations in a number of countries (each with its own unique local culture, traditional and legal influences) (Sims 2007, p105). In conclusion, human resource (HR) managers in international firms must accomplish two conflicting strategic objectives. First, they ought to integrate the human resource practices and policies across various subsidiaries in a number of different countries so that corporate objectives can be accomplished. HRM (human resource management) approach must be adequately flexible to permit significant differences in the form of HR practices and policies that are effective in a variety of cultural and business settings (Indian Express Group 2005, par. 2). Second, the HQ based manager must deal with employee groups who come from and have different cultural backgrounds. The HQ manager is supposed to coordinate procedures and policies to control expatriates from the company’s home country, the host country national, and the third country nationals in the subsidiaries around the world (Indian Express Group 2005, par. 6). The practices and policies are supposed to balance effectively the requirements and desires of the local employees, parent country nationals and third country nationals (Indian Express Group 2005, par. 7). The IHRM activities are also controlled by the external forces more than the domestic HR activities (Indian Express Group 2005, par. 9). References Aston Business School. (2011) 11th international human resource management conference [Online], Aston Business School. Available from: [Accessed on 23 Aug. 2011]. Baruch, Y. & Dickmann, M. (2009) Global careers. New York, NY: Taylor & Francis. Horwitz, F. (2008) Key issues facing human resources management [Online], Leader. Available from: < http://www.leader.co.za/article.aspx?s=1&f=1&a=393> [Accessed on 23 Aug. 2011]. Indian Express Group. (2005) International human resource management [Online], Express Computer. Available from: [Accessed on 23 Aug. 2011]. Nicolaou, N. & Stavrou-Costea, E. (2002) Human resource management challenges towards organizational effectiveness within an international context: A comparative study in southern Europe, University of Cyprus. Paik, Y. & Vance, C. M. (2010) Managing a global workforce: Challenges and opportunities in international human resource management. Armonk, NY: M. E. Sharpe, Inc. Redman, T., Snell, S. & Wilkinson, A. (2009) The SAGE handbook of human resource management. Thousand Oaks, CA: Sage Publications, Inc. Sims, R. R. (2007) Human resource management: Contemporary issues, challenges, and opportunities. Charlotte, NC: IAP. Read More