International Human Resource Management - Case Study Example

International Human Resource Management Introduction Managing Human Resources is the utmost integral factor for all businesses around the globe, be it a corporate with 10,000 employees or a small-scale organization with 10. They all need to go through recruitment, selection, training and appraisal and for the reason Human Resource Management provides with a design of systems to ensure the human talent is being used both efficiently and effectively for the accomplishment of organizational goals. According to some of the experts, Human Resource Management is about decisions and actions for management of employees in the business at all levels and relates to the execution of strategies aimed at creating and sustaining competitive advantage. (Friel, 2005) It is important for the better operations of HR management that it keeps changing and evolving according to the changing needs of employees and workforce itself. It becomes particularly more central when the organizations operates or intends to operate internationally. Reasons for Going Global Since the past decade, there are a number of factors that are motivating organizations to go global, these includes the Global population Changes, Economic interdependence, Regional and Political Alliance, and rapid advancement of telecommunications and swift transfer of information. 1. Global Population Changes Across the globe, population growth in developed and industrialized countries is decreasing, such as the European Union (EU), the United States and Japan. This decline in birth rates results in more of an aging population and that further results in lesser number of workers as well as consumers. On the other hand, in countries like China, India, Africa, Australia and other regions of the world, the population grows significantly. It is for this reason companies think of going global and have internationally established operations, by exploiting the growing, highly-potential customer base. (Cascio, 2003) 2. Global Economic Interdependence Second reason why companies go global is the increasing economic interdependence. Despite of global recession, the four largest economies of the world are U.S., Japan, China, and Germany. Therefore, organizations in other countries take it as an opportunity and expand. 3. Global Communications Another driving force is the rapid advancement of telecommunications and technology. The worldwide intensification of Internet is making the information flow from one to another easier and quicker. Today, Satellite technology exists in the villages of India, China, Africa and Latin America. U.S. economy would have pulverized without the support of chips, screens and software from Asia. With this turning of world into a global village, students are learning English as their second language, around the globe, not to only to better access this knowledge but also to be able to exploit more opportunities. For example, Telecom Italia offers English courses for their employees. 4. Regional and Political Alliances A number of Regional trade and political alliances develop as these global changes aroused, such as NAFTA (North American Free Trade Agreement) and EU (European Union). This in turn results in the formation of International Strategic Alliances. According to Fortune magazine, some 2000 alliances were formed between European Countries and U.S. companies. A remarkable example of a multicultural alliance is amongst IBM, Toshiba and Siemens, to create sixteen times more powerful memory chips then existing at that time. (Cascio, 2003) International Human Resource Management When growing organizations decides to go global, they may begin by initially getting into importing and exporting goods and services with organizations in other countries. Such situation does not affect most of the HR activities except Travel policies. With more expansion and availability of opportunities in other countries, organizations transform to a Multinational Enterprise. An MNE is in which the organization has operating units in foreign countries and where employees from home country at key management levels perform the foreign operations. As this expands, the hiring widens and then the enterprise includes workers from countries it is having operations. In contrast to an MNE, which operates in different countries with business units working separately, a Global organization has units that integrate to work together as one organization. In such organizations, HR management moves people through out world, especially key managers and professionals. International Human Resource Management is strategic in these corporate settings. Although HR policies and practices are global, there exists decentralization to subsidiary units for the implementation of country-specific adjustments. Transfer of HR policies and procedures Within the last decade, a number of studies explore and present the transfer and management of HR practices from its country of origin to that of destination and its effects. In theory, there are five phases of transferring HR policies and activities in Multinational Enterprises. These are configuration, decision to transfer, negotiation process, implementation and internalizations. The first two and last two phases are primarily done in home country within parent company and in host country within the subsidiary, respectively. The negotiations phase is a transitory phase that begins in home country after its decision to transfer and goes on to the host country until implemented. To better analyze it is important to look on to the matter from two perspectives; i.e. external and internal. External refers to the policies of the MNC within its own corporate culture and country of origin, whereas internal refers to the policies of the destined country. This way a bigger picture of the two countries reveals a better understanding of what policies to transfer and what not as well as how to implement them. External analysis of the contextual factors includes analysis via two approaches, Cultural approach and Institutional comparative approach. On the other, the internal analysis includes Structural, Rational, Micro-political and Knowledge approaches. (Maccoby, 1997) 1. Cultural Approach: Each of these approaches is advantageous for the transfer of policies in one or the other way. Traditionally, experts consider the Cultural approach first. According to some of the scholars, this approach is dependent on the mere coincidence of the Cultural values of parent company to the values of the subsidiary. However, authors like Newman, Nollen, Adler, Jelineck and Schneider believes in the notion of adaptability by the parent company to the values of the subsidiary and develops an identity with their HR Practices. Besides these, there is another group of authors for whom this approach is “a-historic” because of the wideness and vibrant nature of the notion of culture. These include Ferner and Quintanilla, (1998) and Gamble (2003). Moreover, they assert on the unclearness of the concept of culture and suggest the analysis of the institutions that are the source of these values and study their affect on HR policies’ transfer process. 2. Institutional comparative approach: Authors like Hall and Soskice (2001) and Whitley (1999) belong to the group that says that this approach refers to the comparative study of the country-specific corporate systems and institutions that administer the markets of the subsidiary country, be it labor, financial or product and their interactions as well. (McCourt, 2003) Advantageous is this approach because it aids in filling up the gap that occurs because of mere application of the cultural approach. It asserts that since the subsidiaries grow within their own contextual national business systems, as coined by ‘Whitely’ (1991), study of the institutional characteristics that makes up the national business system is rather more preferable than the study of the cultural values of the state itself. While transferring policies the characteristics belonging to the national business system of the parent company are definitely present to a greater or lesser degree. The more integral institutional force it possess, the more dominant will be its effect, such as the national systems of Japan and America. Japan with its idea of “lean production” also known as Toyota Production System, is having a highly dominating effect globally. The Toyota production plant first introduced and implemented this strategy in Japan World War II. Authors like Womack et al (1990) and Liker (1998, 2004) find this system as highly integrated, although complex, yet very effective manufacturing process. Lean production is an approach that requires the full involvement of management at all levels. This approach with its profound impact gave birth to the term “Lean thinking” defined as a holistic management approach that integrate lean polices and procedures. Today, Germany and U.S. are moving towards lean thinking in their wood manufacturing processes. This competitive edge of the car manufactures of Japan is diffusing and dwelling so much into this global village, that even automotive, aerospace and pharmaceutical industries are using it to advance upon their competitive positions. According to Edwards (2006), there are two more influencing sources from the national business system of the parent company. One of them is the qualitative make-up of Board of directors. Their educational level and their competencies will have an undoubted effect on the transfer of policies. Moreover, the financial market of the parent company will also determine the potentiality of the business in terms of capital. 3. Structural Approach This approach refers to the interdependency of the subsidiary company on to the MNC. If it is highly integrated in to it, it is more likely at a highly receptive to the policies from parent company. The model by Rosenzweig and Nohria studies these four structural factors effecting the transference and receptiveness of HR Policies, way of entering the market, their age, size and dependence on the local inputs. (McCourt, 2003) 4. Micro-political Approach Micro-political approach refers to the powerful possession of resources by subsidiaries and the probable conflict that may result between the parent company and the subsidiary. Subsidiaries are more receptive to the policies when provision of resources turn out to be a competitive edge for them, however if it is not the case, the two may have to enter a negotiation phase to bridge the gap. It is likely that a resistance may also emerge from their sides resulting into either non-acceptance or modification of the policies. 5. Rational Approach There exists competitiveness over the individual “best practices” resulting in a resistance from both sides to share. This approach suggests the licensing or franchising of the competitive edges before sharing it with the other parent or subsidiary. However, there are significant costs attached. In such situations, the subsidiary is receptive to policies if they see it to be an international competitive edge. Advantageous is this approach because with this, there emerges a need for both parties to come up with an international competitive edge that benefits them globally in their goodwill as well as financials. 6. Knowledge Approach It is the most recent of all in this study and depends upon the knowledge of the managers and workers of the subsidiaries. This approach says that receptiveness of a subsidiary to HR policies depends upon their knowledge and understanding of the HR Practices. According to some other experts, the underlying factor affecting the transfer of HR policies is the difference between the natures of knowledge and HR practices. (Czabke et. al, 2008) Difficulties through Transfer Process Apart from all the difficulties discussed in the six approach eclectic model, few other challenges that being faced through transfer process are Deployment, Knowledge dissemination and Identification as well as Development of global talent on a global platform. Deployment is getting right skills at right time at right place regardless of geographic locations. Knowledge and innovation dissemination is the widening of state-of-the-art knowledge and practices through the organizations regardless of its origination. Lastly identifying work force that can work efficiently in a ‘global’ organization and develop them to better adapt is the biggest challenge. Global staffing is quite complex, involving addressing globally and having activities such as selection, assignment terms, documentation, relocation processes, immigration, training, compensation, pay roll processing, tax administration, career planning and development and even handling of spouse and dependents. (Edwards, 2006) Cross-cultural differences – a Challenge Some experts present a 10-factor systematic framework as a possible initiative for better understanding of a culture. These factors are, Sense of self and space, dress and appearance, Food and eating habits, communication both verbal and nonverbal, time, relationships, norms and values, Beliefs, Work practices and motivational drives, Learning and mental processes. It is important to work for the cross-cultural differences. Do not think that only the HR managers of the headquarters’’ country can work best, think global in terms of both material and human resource and also appreciate that no country can have all answers to complex problems. Conclusion Conclusively there can be many ways for the study of novel field of international human resource management, however this six-approach model presents a comprehensive analysis of all the ways different writers and analysts study. Therefore, the most integral to globalization is the qualitative study of the subsidiary and the host country, before going global, whether by six- approach eclectic model or by any other model that opens ways and help bridging gap for the benefit of both, globally. References Cascio, Wayne F. (2003). Managing Human Resources; Sixth Edition. University of Michigan Press. Czabke, Jochen; Hansen, Eric N; Doolen, Toni L. (2008). A multisite field study of lean thinking in U.S. and German secondary wood products manufacturers, Forest Products Journal. Gale Group, Michigan. Edwards, Tony. (2006). International Human Resource Management. Financial Times Prentice Hall. Friel, D. (2005). ‘Transferring a lean production concept from German to the United States: the impact of labour laws and training systems’, Academy of Management Executive, 19, 2: 50-58. Maccoby, M. (1997) ‘Is there a best way to build a car?’ Harvard Business Review, November-December 1997: 161-171. McCourt, Willy. (2003). Global Human Resource Management. Edward Elgar Publishing. Read More