The IHRM Challenges and Opportunities of Operating in Australia and China - Case Study Example

THE IHRM CHALLENGES AND OPPORTUNITIES OF OPERATING IN AUSTRALIA AND CHINA By Name Course Instructor Institution City/State Date The IHRM challenges and opportunities of operating in Australia and China Introduction In most organisations, effective HR management has positively influenced performance, mainly because of the increasing international activities that have highlighted the essence of HRM in the multinational companies. Besides, international human resource management (IHRM) is different from domestic HRM; therefore, more challenging than domestic HRM due to political, socioeconomic and cultural factors. According to Eroğlu (2014, p.91), human resources management in different legal systems, economies as well as cultures brings about a number of challenges. In view of this, most HR professionals have established that their experience, training and nationality drive them to make cultural based assumptions. In the last three decades, a substantive growth has been experienced in numerous companies, especially those that have globalised or internationalised their operations. In consequence, this has led to a growing number of contemporary work nomads given that people are moving from one country to another (Kühlmann & Hutchings, 2010, p.2). In view of that, extensive attention has been directed to expatriation by researchers in the field of IHRM. In essence, IHRM is an important component of executing global strategy and is currently considered as key success or failure factor in international business. Expatriate failure may be attributed to poor preparation prior to the assignment, poor selection, laughable compensation package, manager’s inability to familiarize with local environment, lack of programs for career support, and isolation from headquarters (Gupta, 2014, p.83). The essay evaluates the IHRM challenges and opportunities of operating in Australia and China with focus on cultural difference as well as training and development. Body For Australia, it is attractive to assign expatriates to China due to what Kühlmann and Hutchings (2010, p.8) refer as high cultural distance, which intensifies the perceived risk of coordination in giving the Chinese nationals the key positions in the company. Still, the expatriate assignments deficiencies and costs are of essence, particularly in the Chinese case. For this reason, scores of companies have started reducing deployments of expatriate to China in attempt to cut costs. Essentially, localization, which can be described as using locally recruited managers to replace expatriate managers, has turned out to be a key issue for Australian multinational companies in China, despite the fact that training of local recruits may be somewhat costly. Additionally, cross-cultural problems normally surface when training local recruits as inpatriates in the multinational companies’ headquarters. A number of arguments have been presented in attempt to justify whey local Chinese managers are preferred rather than expatriates: one argument is that local managers are rooted in the “guanxi” (social relationships network) that facilitates them to develop trustful and reliable business connections that cannot be achieved easily by expatriates. Another argument according to Kühlmann and Hutchings (2010, p.8) is that Chinese staffs can easily interact with the Chinese managers because of the common cultural background as well as shared language. Therefore, initially employing local managers or localizing managerial positions may result in improved worker effectiveness as well as morale. It has also been argued that, the Chinese employees’ managerial and technical skills have considerably improved in the recent years. This has been attributed mainly by the enormous investment made by the Chinese government on the country’s universities and colleges with the intention of increasing the output. Besides that, many young people have been sent to study overseas in Australia, the United States, and Europe. Therefore, there is no shortage of experienced as well as highly skilled local employees are in the Chinese labour market. Imperatively, localization has increased organizational commitment and work satisfaction amongst the Chinese managers. Still, Chinese employees, especially those who are qualified and highly skilled are more concerned about the lack of visible career paths, and dissatisfaction on the growth and advancement opportunities is amongst the reason why Chinese managers are resigning in numbers. Additionally, most Chinese citizens who have been trained overseas are inclined to become mobile employees; therefore, creating the need for high quality employment in China. Despite the benefits of recruiting local Chinese managers, Kühlmann and Hutchings (2010, p.9) assert that there are still a number of drawbacks of employing local Chinese managers in Australian MNC. Even though, the local managers understand the Chinese business environment and culture, they do not understand Australia’s multinational company’s norms and values. Therefore, relationship frictions between the headquarters and the subsidiary can arise. Besides that, high rate of turnover amongst the local Chinese managers is another localization barrier in China since most Chinese resign from their jobs soon after being hired to join a different company that offers better advancement opportunities or attractive remuneration. Scarcity in qualified management staffs have resulted in a culture of ‘job hopping’. Without doubt, most Australian companies understand the importance of training in IHRM; therefore, they have espoused a number of strategies so as to develop global managers. Some of the strategies include training, creation of diversified teams; international travel; as well as international assignments. Such strategies according to Shen (2005, p.657) are associated with expatriation management, especially integrating management development as well as international training. Training as mentioned by Shen (2005, p.657) intends to advance the present work behaviour and skills, while development intends to improve abilities with respect to the future managerial job or position. In Australia, the global managers are expected to have context-specific skills and also possess particular attributes like ability to develop subordinates and handle responsibility. Considering that such skills and attributes are seen as crucial international competencies that can be developed by means of successful international training and development. The firm’s resource-based view theory states that the internal competencies and resources of an organisation play a key role as compared to the business environment in the creation of a sustained competitive advantage (Kim & Gray, 2005, p.811). In this case, the competitive advantage can be achieved if such competencies and resources are rare, valuable, inimitable, and imperfectly mobile. In IHRM context, such competencies and resources may be present at both the subsidiary and the parent-company levels. The capabilities and competencies developed by top managers at the parent company level can impact the MNC’s decision on international strategy as well the company’s view on strategic IHRM. Australian MNCs consider the learning and knowledge attained from the company’s global experience as influential in shaping the company’s evolving global strategy. Moreover, the perceptions of top management with regard to the parent HRM competence defines how Australian MNCs manages and configures their IHRM function, like HRM localization as well as international staffing across cultures. Rozkwitalska (2012, p.51) established a number of challenges ensue when Australian MNCs operating in China employ expatriates. For instance, Rozkwitalska (2012, p.51) observed that both local managers employment and expatriates assignments brought about a number of challenges; for instance, expatriates found it challenging to adapt to the Chinese socio-cultural environment because of lack of knowledge. Besides that, there were cross-cultural misunderstandings between the expatriates and the local workers. Another challenge that both Australians and Chinese face is the language barrier, which normally makes the expatriate feel isolated from the local social networks. Another challenge observed by Rozkwitalska (2012, p.51) was the limited proficiency of the foreign language amongst the local mangers as well as poor business skills amongst the Chinese locals. Most Chinese managers exhibit low levels of performance motivation as well as organizational commitment. For this reason, expatriates should staff key positions in the multinational subsidiaries such as managerial positions. Globalization growth has resulted in expansion of cultural sensitivity as well as comprehension in managing global complexities, which is involved in carrying out business in the host countries. Culture according to Khairullah and Khairullah (2014, p.4) is every facet of life: knowledge, technical know-how, language, symbols, state of mind, values, economic as well as socio-political behaviour, traditional way of decision making, among others. There is a clear cultural difference between China and Australia in terms of individualism, cultural orientations as well as power distance. Chinese managers according to Khairullah and Khairullah (2014, p.4) always score high on masculinity as compared to Australian managers. Without a doubt, there are, a number of differences on how Chinese and Australians do business, and such differences are rooted in the following factors: individualism vs. collectivism, perception of time, and responsibility as well as accountability. Evidently, the manner in which responsibilities in the organisation are given or delegated to the workers changes how the workers conduct themselves in the organisation as well as how the organisation performs. In Australia, workers are given tasks that come with designated and clear responsibilities, and they are then held accountable on how they perform the assigned tasks. On the other hand, employees in China have far less responsibilities in the place of work; thus, they are normally not accountable for their assigned tasks, instead, they are judged as part of a group or team. In China, being late is considered disrespect and rude, but even though, punctuality is valued in Australia, being late is normal. Therefore, Chines value punctuality more than Australians. Because of the fact that the Chinese market has significantly opened up in the last few years, a number of western managers’ traits have been taken over by the Chinese managers.  Therefore, individualism which is considered a western value have been internalised by some Chinese managers in addition to other traditional values like responsibility as well as loyalty. On other hand, Australian managers’ focus on individualistic culture, that place emphasis on the individual performance, goals, and tasks. In Australia, success and accomplishments are considered more valuable as compared to seniority or social class. The Chinese emphasise more on benefits as well as maintaining a good relationship with the government bureaus, which reasonably lead to little concern on the process of recruitment and selection. Boontanapibul (2010, p.179) mentions that Chinese companies normally recruit people based on the university that the candidate was trained, rather than the actual skills they have. Therefore, the recruitment and selection process in China is completely different as that of Australia, because the latter focuses on skills while the former focus on the institution that the candidate acquired his/her skills. Therefore, Boontanapibul (2010, p.179) suggests that it is imperative for HR personnel involved in recruitment and selection to be trained on how they should select candidates as well as how to integrate the social aspects of the local hiring process. Normally, selection interviews are utilised by most Chinese companies; therefore, standardized tests utilised in Australia is not recommendable because of what Boontanapibul (2010, p.179) refers as cultural bias. Psychological tests used in Australia so as to predict the candidate’s personality, for instance, cannot be used in China because of the differences in social values as well as norms. Lack of training and development programs has made it challenging for Chinese MNCs to consistently recruit and retain skilled workers. According to Wang et al. (2007, p.684), China has a turnover rate of between 12% and 17% while the ratio of management positions to qualified Chinese applicants is ten to one. For this reason, most Chinese HR managers are struggling to attract as well as retain skilled personnel. Wang et al. (2007, p.685) suggest that can be solved if Chinese companies introduce high-performance HR practices, especially training and development. Without a doubt, HR professionals training and development varies across countries. In this case, most Australian MNCs have training and development programs, which are integrated with the programs run at the headquarters and subsidiaries. Entry-level development programs have been adopted by many of Australian multinational companies for the purpose of making the new recruits understand the important HRM aspects like organizational development, compensation practices, and the like. Evidently, training and development programs are important tools for retention. Many MNCs are hiring locals because hiring the expatriates has become more expensive; therefore, to retain key talent and facilitate employee engagement, most companies have laid down career paths. Since the Chinese domestic market is becoming more and more important to the world economy, many international companies have expanded to China. However, due to the shortage of experienced as well as trained technical experts and managers in China, the number of expatriates in the foreign-invested enterprises such as JVs, subsidiaries as well as branch offices is very high. Still, the expatriates face a number of challenges in terms of economics, politics and Chinese culture. Still, in spite of these challenges that expatriate managers face while operating in different cultures, only a few MNCs seem to provide cross-cultural training. According to Goodall et al. (2007, p.2), of all expatriate managers between 16% and 40% terminate their assignments prematurely due to either failure to adjust to social-economic environment in the foreign country or poor performance. Besides that, almost half of the remaining expatriates have low effectiveness level because of incongruity. Goodall et al. (2007, p.2) argue that cultural difference may directly affect effectiveness of an expatriate manager; it may as well negatively affect satisfaction as well as motivation of both the expatriate manager and the local employees. Besides that, cultural difference as evidenced in China can affect key organizational systems’ effectiveness, particularly training, recruitment, rewards as well as performance appraisal. Conclusion In conclusion, the essay has evaluated the IHRM challenges and opportunities of operating in Australia and China with focus on cultural difference as well as training and development. As evidenced in the essay, Australia provides more IHRM opportunities to multinational companies than China. In China, MNCs must continue depending on expatriates to staff key positions, mainly because of high rate of turnover and shortage of skilled employees. As mentioned in the essay, expatriates are continuously experiencing a high rate of failure in the foreign assignments because of challenges such as language barriers and cultural differences. Clearly, it is very difficult for an expatriate to adjust to foreign work as well as the social-economic and political environment in a country like China that has a high cultural, legal, and economic distance as compared to Australia. In spite of such challenges, a number of companies have realised that hiring the expatriates is becoming more and more costly; therefore, expatriate assignments into foreign countries have started reducing. IHRM has continued developing in the wake of increase globalization, particularly when considering huge countries economic growth such as China. Therefore, IHRM offers an outstanding opportunity for HR professionals to help expatriates, especially those engulfed by the challenges as well as paradoxes of working in a culture that very different from their own. As mentioned in the essay, managers’ effectiveness at overseas is important to the realisation of the company’s operations, especially due to the large distance between them and the headquarters executives. Imperatively, the expatriates’ ability to start and maintain accommodating relationships while in the foreign country defines the viability as well as the success of the operation. When MNCs adopt IHRM practices they can easily realise successful management of their foreign operation; thus, promoting careers of the expatriates, and eventually leading to high productivity. Therefore, as argued in the essay, localization can be realised easily in Australia because of high number of skilled workers, but this is difficult in China because of lack of skilled workers, language barrier, cultural differences, and lack of training and development programs. References Boontanapibul, C., 2010. Doing Business in China: Cultural Factors, Start-up Concerns, and Professional Development. Executive Journal, vol. 1, no. 1, pp.170-82. Eroğlu, O., 2014. International Human Resource Management And National Cultural Challenges. Pamukkale University Journal of Social Sciences Institute, vol. 19, pp.91-102. Goodall, K., Li, N. & Warner, M., 2007. Expatriate managers in China: the influence of Chinese culture on cross-cultural management. Working Paper Series. Cambridge: Judge Business School University of Cambridge. Gupta, A., 2014. Challenges and Opportunities in International Human Resource Management within Multinational Enterprises. Global Journal of Commerce & Management Perspective, vol. 3, no. 2, pp.83-86. Khairullah, D.H.Z. & Khairullah, Z.Y., 2014. Cultural Values and Decision-Making in China. International Journal of Business, Humanities and Technology, vol. 3, no. 2, pp.1-12. Kim, Y. & Gray, S.J., 2005. Strategic factors influencing international human resource management practices: an empirical study of Australian multinational corporations. 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