Introduction
Human resource management involves the management of workers or employees in an organization. It depends on the cultural and institutional framework. Human resource management varies from country to country. Good human resource management, is defined differently in different national cultures, and operates differently across the globe. International organizations try to deal with issues created by these differences.
Today the world has become more global in terms of technology, economies and communications. The development of international enterprises has resulted to the decline in traditional business boundaries. This has led to high rates of economic development. It can be noted that multinational companies have dominated the world economy. About 63000 international organizations dominate the world trade (Budwar, 2005).
It accounts about two thirds of the world’s business. According to the recent study, each of the 10 largest multinational corporations has more annual sales than the Australian government tax revenues. Most of international business transactions involve two parts of multinational companies. Multinational companies act as global organizations with employees based in different parts across the globe.
Globalization has been enhanced through fiscal consolidation such mergers and acquisitions (Sisson, 2003). According to the recent statistics, the worldwide foreign direct investment increased from 6500 billion dollars in 2000 to 10000 billion dollars in 2005. Today there is also global transfer of work through the creation of new jobs or global sourcing part of an individual’s work.
The high skill white-collar job is being transferred to different countries. For instance, Bank of America is outsourcing about 1100 jobs, to Indian companies to reduce labor cost. The aim of this report is to explore the main issues and theories of international human resource management and comparative human resource management.
International human resource management
International human resource management is the process of employing and developing people in international organizations. It is the management of people across the globe. It identifies the way in which international companies manage human resources across different countries and different cultures.
It deals with the management of people beyond the national level. An international company is a company by which operations are carried out in subsidiaries overseas which rely on manufacturing capacity of the parent company. Different multinational companies have different magnitude attitudes and business styles (Wood, 2003).
Human resource managers in international companies have to consider the impact of international influences in their work. In all international companies’ human resource management is one the key aspects in the success of the company. In most of these organizations, the cost of managing people is the largest single item of operating costs.
The knowledge and capabilities inculcated in human resource is the key to success of the organization. Human resource management is vital to the survival and success of an organization. The human resource specialists are increasingly becoming internationally oriented in their functional activities.
This is important, for people working in multinational corporations also those in small and medium sized enterprises. In the modern world, there is fee economic environment. Restrictions on labor movements are reduced in areas such as European Community (Sisson, 2003).
The development of new technologies has enabled enterprises to operate internationally as soon as they are established. International corporations are not only in the private sector. Many international corporations, such as those in United Nations, the regional trade bodies, have employees working in different companies across the globe.
Human resource managers working in international corporations are faced with the impact of multi-country, regional and global change. Such managers are supposed to be equipped with interpersonal skills, negotiation skills, strategic thinking, analytical and conceptual abilities.
These managers will require a wide knowledge of knowledge in areas such as international business, international finance, local labor markets, international labor legislation, cultural differences, and international compensation and benefits. International human resource management involves organizations that manage people in different legal, institutional and cultural circumstances.
It should also be aware of cost effective management practices (Budwar, 2005). Companies, which address the issue of international human resource management, have to deal with a range of policy and strategic issues. International human resource management identifies how multinational corporations ensure that organizations have international coherence.
It also explores how organizations apply cost effective approaches to managing people working in different countries across the globe. It ensures that organizations are able to manage those people who have to work in different countries in the world.
International human resource management was believed to have the same main dimensions as human resource management in a national context but to operate on a large scale. It focuses on human resource practices that change when a firm goes international. The recent research on IHRM has pointed out the importance of connect human resource policies and practices with organizational strategies.
International management scholars have done extensive research on how multinational corporations have organized their operations globally. Several issues have been discussed by scholars. The strategy structure configurations of international organizations have been discussed by several authors. It involves changing from hierarchical structures to network structures.
The differences between local and international human resource management are another key issue discussed by authors such as Adler and Bartholomew. It establishes the great complexity and strategic importance of the international role. How multinational corporations approach the staffing and management of their subsidiaries is another key issue explored by researchers.
It provides factors for defining the modern approach to IHRM within an international organization. Organizational factors are considered to be very crucial in determining the extent of internal consistency.
Integrative models have been developed, by scholars to demonstrate the complexity of human resource decisions in the international sphere. However, these models do not provide a solution to criticisms that have been leveled to IHRM.
According to these criticisms the political, economic, social cultural and institutional contexts are described as contingency factors. This is despite the fact that it is known that firm level globalization is a country specific phenomenon.
Most of these models do not differentiate between cross national and cross cultural differences. Cultural relativity has made researchers focus on the hard human resource functional processes. Most of the researchers do not support idealist human resource management systems.
For instance, the view of human resource management emphasizes on high performance work systems as a basis of comparisons. The researchers tend to ignore the subtle ways in which cultural and national difference influence the experienced reality of human resource management. Convergence and divergence argument assumes that human resource management system has to converge or remain divergent.
It does not consider the fact that some parts of human resource system might be converging in some areas and converging in other areas (Dickmann, 2008). Analysis of IHRM should consider the range of distinctive national and local solutions to human resource issues in the organization.
Human resource affordability is another key issue in IHRM. The increased interest in metrics indicates the need to deliver proven cost reductions and ensure human resource affordability (Wood, 2003). Most of international organizations committing most of their times to ensuring people are why they can be most cost effective.
Most global human resource functions have undergone recent restricting in order to deliver global business strategies efficiently. Many international organizations are making substantial investments in getting things right. Human resource function is a path of organizational development which was identified in other service and specialist functions.
Physical and cultural differences present barriers to successful knowledge transfer among human resource professionals. Global networking is an important aspect within international human resource management.
However it is considered to be critical because of the identified organizational changes. International human resource professionals, mostly use informal networks, which is one of their main objectives. Networks are mostly applied in decentralized models of international human resource management. Global networks are used to reduce the impacts of bureaucracy and act as important decision making groups.
International human resource management involves a number of key issues, which are supposed to be considered. Culture and environment difference is a key issue in international human resources. The demand of the globalized and liberalized business environment has made researchers pay attention to the study of cultures as an explanatory variable.
Human resources managers across the globe have realized that it is essential to avoid parochial views when doing business across different cultures. Knowledge of cultural differences in different regions and a global focus is crucial for a business to survive in the modern business environment.
Culture is a collective mental programming that people in a certain group have in common. This programming is different from that of other groups, regions or nations. Today human resource managers of multinational corporations frequently encounter cultural differences. This has a negative effect to management practices in international organizations.
Family structures, religious organizations, forms of government, work organizations, law, settlement patterns and buildings are common beliefs that derive from common culture. Competing demands of globalization and local differentiation has led to the need to establish human resources as a source competitive advantage. Globalization process is identified at different levels of industry, firm and functions (Dickmann, 2008).
The impact of national culture on managing people involves the meaning of culture, the literature on cultural differences and identifies the extent to which aspects of work practices are nationally or locally based. Culture and organizational life involve the implications of performing business activities across national cultures for concepts of business management, and human resource management.
Leadership is a major factor that influences the shape of human resource policies and practices. Different national cultures have different leadership styles which influences the human resource management.
Individualism is a national culture attribute adopted by those people who give themselves and their families’ first priority. In this society, the ties between individuals are loose. Every person in this society looks at himself and the immediate family.
Collectivism involves people who give first priority to, and finding protection in, the wider group. In this, people are integrated into strong, cohesive groups which protect them in exchange for loyalty (Sparrow, 2004). Different cultures allow for different sharing of power within the society. The challenge is the level of human inequality that indicates the operation of each particular society.
Power distance is determined by power distance index. A society, which supports high power distance, will accept large separation of power between the rich and the poor in the society. Low power distance society will accept sharing of power where the gap between the top and the bottom is low.
Uncertainty avoidance is the extent to which a society can be able to put up with uncertainty. Low avoidance society will not feel the need to avoid uncertainty. High avoidance society will feel challenged by uncertainty (Dickmann, 2008). Masculinity is the tendency of a nation to prefer assertiveness and materialism.
It involves a community in which men’s roles are clearly defined. Femininity is where the society has a high concern for relationships and welfare of other people. In this case, the gender roles in the society overlap. According to Masculinity Index, Japan tops the list of countries with high gender roles distinction at work.
The low gender roles distinction at work was identified in France, Spain, Salvador and East Africa. It was characterized by cooperation at work and a close relation between employees and the boss. High gender roles were characterized by challenge and recognition in jobs, belief in individual decisions, high stress on the job, and preference for large corporations (Clark, 2000).
International human resource involves international organizational models. The first model is decentralized federation, which is the traditional multinational corporation. In this model, each national organization is managed as a separate company that seeks to optimize its performance in the local environment (Sparrow, 2004).
Coordinated federation is another model which involves the centre developing sophisticated management systems to maintain overall control although the scope is given to local management. Centralized hub is a model, which focuses on the international market rather than local markets. These organizations are global rather than multinational. Transnational is another international organization model.
In this model, the organization establishes multidimensional strategic capacities which help the organization to compete across the globe. It also enables responsiveness to market demands. Another key issue facing international organizations is convergence and divergence. This is the extent to which the international human practices should either converge in the same location or diverge in response to local requirements.
The major decisions are made by the parent company, but there is a need to much local autonomy as possible in order to ensure that local demands are taken into account (Dowling, 2008).
There are several factors that enhance increase in convergence, the power of markets, and the importance of cost, quality and productivity pressures benchmarking best practice. The idea of best practice theory recommends the implementation of best practices in human resource management, which will improve the performance of the organization.
There are several best practices for achieving competitive advantages through putting people first. These best practices include selective hiring, providing employment security, extensive training, sharing information, high payment based on companies’ performance among others. However, it is difficult to draw a generalized conclusion about which is the best human resource management practice.
Best fit or the contingency approach to human resource management is another approach of academic theory. It argues that human resource management may improve performance of an organization when there is a close relationship between the practices and company’s strategy.
This ensures that there is a close relationship between the human resource policies and the external market or business strategy (Guest, 2007). The life cycle model assumes that human resource policies can be based on the levels of organization development. Competitive advantage models assume that human resource policies are based on competitive strategy adopted by the organization.
Configuration models recommend for an organization to close examine its strategy in order to determine the best human resource policies and practices (Sparrow, 2004). This argument states that, the organization’s strategy can be highlighted, but many organizations thrive in a state of flux and growth. The resource based view is considered as the foundation of modern human resource management.
It concentrates on the internal human resources of the company, and how they contribute to competitive advantage. This model argues that human resource management plays a significant role in establishing human resources that are important and effectively organized.
The theory of human resource management assumes that the objective of human resource management is to enable a company to achieve it strategic objectives through attracting and maintaining employees. Human resource management approach attempts to ensure a close relationship organization’s employees and the overall strategic objective of the company (Brewster, 2002).
In the view of academic theory of human resource management, human beings are not robots, thus this call for the Importance of an interdisciplinary evaluation of staff in the work place. Academic fields such as economics, psychology, industrial relations and sociology play a vital role in enhancing the academic theory of human resource management.
Critical theories such as postmodernism and post-structuralism also play a very significant role in ensuring that people are treated well in the work place. International human resource management involves various processes, which enables achievement of established goals and objectives (Adler, 2000).
Comparative human resource
Comparative human resource management explains the way human resource management differs between different regions and countries across the globe. Most countries have more or less regional differences which includes one or many language groups.
Countries have different economic and political system, education, employment laws all these factors should be considered in order to understand and apply effective human resource management policies. Most nations have various cultures that have implications to human resource management (Clark, 2000).
Most organizations face challenges of adapting their human resource management practices to the new set of cultures. In the process of globalization, organizations begin to do business in different areas.During this process the number and variety of cultures changes. Organizations are supposed to adapt new human resource policies in order to curb these challenges.
As cultures increase and organizations try to treat each different culture with respect, several practical issues may come up making business operation more difficult. For instance, the case of religious and secular holidays to be honored based on the cultural representation in the work place. The official language spoken in the work place is another cultural issue influencing human resource management.
Many countries differ in terms of legal, political labor market, and economic conditions. These are critical issues affecting comparative human resource management. Comparative human resource management indicates how human resource practices are affected by different cultures.
Cultural perspective on comparative human resource management is based on Hofstede’s (1980). He identified four distinct cultural value dimensions. The four dimensions include power distance, uncertainty avoidance, masculinity/femininity, and individualism/collectivism.
According to him cultural differences are embedded to human resource manager’s way of thinking, which guides managerial actions and choices (Clark, 2000). Different cultures in different regions affect the human resource manager’s decision making and job performance. The effect of cultures on human resource management helps in understanding managerial behavior and reactions.
This notion has been highly criticized due to the limited number of dimensions, which do not capture the richness of the cultural environment. Effect of culture on human resource management is also challenged because of his insistence that national features persist over time. The four dimensions are statistical constructs developed on responses without a deep understanding of the underlying processes.
The issue of cultural differences indicates the differences between low context and high context societies. Context is described as the information that surrounds a certain event. In high context societies, the external environment and non verbal cues are very influential factors in the communication process (Clark, 2000).
High context cultures include countries such as Japan, Arab and southern European societies. Low context cultures involve clear and written forms of communication. Examples of low context societies are Anglo-Saxon and northern European. Culture is viewed as important values regarding relationships among people and their environment. Kluckhohn developed four basic value orientations.
He later subdivided these orientations into dimensions to determine cultural variations across different societies. These cultural orientations have been used, by researchers to explain significant differences of human resource management practices across different nations in the world. However, these orientations are rarely applied to human resource management research because of the complexity.
Recently additional cultural dimensions have been developed to identify the effect of culture on the design and implementation of human resource management policies and practices. For instance, development of the paternalism dimension is one of the significant cultural dimensions.
It involves the extent to which a society encourages and accepts that, people with authority provide care, guidance and protection to their subordinates. Subordinates in paternalistic societies are respect and loyalty to their superiors. Another recent cultural dimension is fatalism which is the belief of societal members that the results of their actions are not totally controlled.
Managers who take on managerial posts in a certain culture are socialized along similar values and beliefs. The character of culture helps to socialize new generations of members and reinforce the predominant cultural values and norms. According to social cognition theory, a person’s cognition is greatly influenced by ones cultural background.
Culture usually affect the way in which individuals choose, interpret and validate information in order to identify and categorize issues (Adler, 2000). It is a powerful determinant in how human performance problems are viewed and how their solutions in the form of employee development.
Cultural values normally influence how human resource management practices such as recruitment, selection, promotion, performance appraisal are designed and implemented. (Begin 377)
Different cultures are adopted by different social groups (Dickmann, 2008). These social groups may make the adoption of certain human resource management policies politically and socially unacceptable. The impact of culture on human resource policies through impact on institutions is an important mechanism. Cultural differences influence the key comparative human resource management practices.
For instance, recruitment, selection and retention practices differ across different cultures. Recruitment and selection in cultures of high performance orientation are based job related knowledge and technical skills. Collectivist cultures prefer the use of internal labor markets to promote loyalty.
The externally recruited candidates find it difficult to enter the strong social networks within the organization. High on uncertainty avoidance cultures use a lot of selection tests, and conduct more interviews (Tayeb, 2005). This shows that there is a great desire to collect objective data for making selection decisions.
Cultures high on performance orientation use standardized and job specific selection methods. Compensation and benefit schemes are designed according to different cultural settings. Compensation systems in universalistic cultures are based on formal, objective and systematic in relation to the value of a job within the organization. High power distance and fatalistic cultures have low performance reward contingencies.
Uncertainty avoidance cultures prefer skilled based reward systems (Dickmann, 2008). Low uncertainty avoidance cultures focus on individual performance based pay. Individualistic societies put a lot of emphasis on personal achievement in performance appraisal.
On the other hand, collectivist cultures concentrate on group based achievements. Issues discussed during the performance appraisal vary according to different cultures. For instance, individualistic cultures concentrate on discussing employee’s potential for future promotion based on task performance. Collectivist societies focus mostly on seniority based promotion decisions (Dowling, 2008).
Cultural variations have great influence on training and development. Fatalistic cultures don not recognize the importance of training and development. High power distance cultures employ senior managers instead of external trainers as instructors in order to ensure a high level of credibility and trust.
Comparative human resource management provides, managers working in multinational corporations with guidelines on how to design and implement an effective human resource management system in different cultural contexts.
Criticism of comparative human resource management is seen in the debate on localization versus standardization and in the process of transferring human resource management policies across countries (Briscoe & Schuler, 2008). Comparative cross cultural research is faced with a lot of methodological problems, which limit the researchers in making valid conclusions.
Dimensional approaches of culture on human resource management may have a weakness if culture is not measured directly. If cultural scores are disrupted, the analysis using these scores may also be disrupted making the conclusions suspicious. The issue of culture in comparative human management may also be affected by the original cultural models (Harzing, 2004).
Conclusion
Human resource management is a very important subject in the portfolio of management activities. International human resource management and comparative management have developed in the process of globalization. Managing international HRM explores the critical elements of effectiveness for HR on global (Tayeb, 2005).
There are several key issues and theories developed in the context of international human resource management and comparative human resource management. International human resource management explores the way in which international companies manage their human resources across different regions and countries across the globe.
It also explores how multinational corporations ensure that organizations use cost effective approach in managing people in all countries across the globe. In all the multinational corporations and international organizations, human resource management plays a vital role in enhancing success (Scullion, 2006).
On the other hand, comparative human resource management explores the differences of human resource management in various areas, regions, and countries in the world. Countries have different language groups, different labor markets, education systems and employment laws. This makes human resource management vary from country to country.
Cultural differences between regions and nations are a major factor in the increasing internationalization of employment. The knowledge of cultural differences is a significant part of an international manager’s brief. The human resource activities such as selection, recruitment, training and development, reward and performance appraisal among others are greatly affected by cultural values and practices.
Great care should be taken in considering whether to adopt standardized human resource policies and practices throughout in the whole world. Finally, international human resource management and comparative human resource management are major concerns of multinational corporations and even medium companies across the globe (Harzing, 2004).
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