Human Resource Management Practices
Similarities between the Domestic and International HRM
Human Resource Management plays a very important role in any forms of organizations (Sims, 2007). In fact, it is the hub of the corporate strategy. This is because HRM can help the company in improving their performance and in the formation of sustainable competitive advantages. Moreover, it helps the organization to have a guiding role, especially within the enterprise management.
General HRM is used to refer to the activities, which are undertaken by organizations in effective utilization of their human resources. Therefore, the domestic and international HRM have similarities in their functions. This means that all the basic functions of the two are the same, whether they are definite in one country or in several countries. These functions include procurement, utilization, allocation, and motivation. Moreover, both domestic as well as international HRM have similar major activities and functions in HR recruitment, planning, performance management, development and training, industrial relations, and compensation.
Another similarity relates to the environmental forces, which influence the functions of the HRM. The external constraints usually include economical, political, cultural, and legal. These have significant impacts on the way the HR functions are executed in both domestic and the global environment (Sims, 2007).
Moreover, both the domestic and international HRM have similar basic objectives. One of the objectives is ensuring that the organization has maximum satisfaction as far as the human resource demands are concerned. Another objective is ensuring that there is effectiveness in the organization. This is achieved through interventions. The other objective is promoting sustainable developments of the firms. This is achieved through maximization of the development of internal as well as external human resource management.
Differences Between Domestic and International HRM
The differences between the domestic and the international HRM are more striking compared to their similarities. In the context of globalization, HRM activities are materially different from its domestic operations. This is because the Domestic HRM is only dealing with one national employee while the International HRM is operating across national boundaries. In fact, the national patterns of HRM are very different from country to country. This is due to the factors of HR roles and competence, culture, institution, and business structure. Therefore, differences are mainly referring to the way they complete the administrative functions within the different environments (Sims, 2007).
There are many literatures about HRM, which indicates the differences between the international and the domestic HRM. One of the main differences in HRM essentially comes from the interconnection between culture and structure of a particular society.
The International HRM is distinguished from the domestic HRM basing on the core activities. These activities include training and development, recruitment and selection, performance management, rewards, and expatriate management. These activities require cultural sensitivity in order for IHRM is effective in the cross-cultural multinational environment.
In order to understand the above differences better, the International Human Resources Management may be defined as an interaction among some dimension. These include Human Resource Activities, and Countries of operation, and Type of employees. It can, therefore, be pointed out that the important variable, which differentiate the international HRM from the Domestic HRM is mainly the complexity of operating in different countries as well as employing different national categories of employees. This is as opposed to the major differences between HRM activities performed.
Standardization of HRM Practices
Standardization of MNE can be defined as the standardization of the overseas subsidiaries’ management practices towards the HQ practices. There are a number of factors, which drives the standardization of the HRM practices. Some of these factors include organizational context, the strategic issues, and the host country context.
The organizational context includes the strategy as well as the structure of the firm, the size, and maturity of the firm and the mode of operation that is employed. It also includes the relative significance of the particular subsidiary. The size of the firm in relation to the MNE has impact of the HRM practices. Closely linked to the size of the firm is the degree of the international experience.
Under the strategic issues, a multinational firm operates in the framework of worldwide conditions. These conditions include the external situations of industry, religion, nation, and inter-organizational alliances and networks. Apart from these factors influencing the international HRM strategy as well as the practice, they also have an influence on the MNE goals.
The factors driving standardization are usually related. They mainly revolve around the environment of the host. It is therefore crucial to understand the culture of the host. This is thus another driving factor for standardization. The work behavior is culturally determined. It is contained in role definition as well as the expectations. It is required to clearly state whether corporate culture would supersede or supplant the other cultures. However, this is usually a subject of much debate. Often, what is meant by corporate culture translates into common practices rather than common values.
The three cultures that interact to influence standardization as well as adaptation include the national culture of the parent company, the national culture of the subsidiary unit, and the corporate culture. The corporate culture acts as a subtle informal control mechanism. It also acts as a potential unifier. Standardization can be achieved through HR practices such as staffing procedure and criteria, appraisal system, training and development programs, staff rotation, and corporate code of conduct.
Research has shown that the cultures as well as the institutional context have significant effects on the human resource management practices. Existing research provides evidence that MNEs adapt to a certain degree to national cultures in which they operate. In addition, subsidiaries that are managed consistently with national cultural expectations have been found to perform better compared to subsidiaries that are managed otherwise.
The aim of the global standardization of the HRM practices is reaching transparency, consistency, and an alignment of the geographically fragmented workforces around the common principles as well as objectives. It is therefore advantageous for an MNE to adopt a worldwide corporate culture for each of its subsidiaries. This will enable the firm to realize its goals, because it will avoid cultural clashes.
The Role of Subsidiaries
Subsidiaries play a very important role in the MNEs. One of the major roles of the Subsidiaries includes specifying the positions of particular units in relation to the rest of the given organization (Kretschmer, 2008). In addition, they are usually expected to perform the contributions. Apart from this, it is important to note that subsidiaries vary in their function, power as well as resource relationships, and initiative taking. They always execute their functions in the host-country environment. The position held by a certain subsidiary within a given global family is a vital aspect. This is especially when discussing the transfers of work practices (Kretschmer, 2008).
The Global Innovators
The Global Innovator (GI) subsidiary is a fountainhead of knowledge for other units (Morgan, Kristensen, & Whitley, 2001). This subsidiary role has become more important as MNCs move toward a transnational model in which individual subsidiaries can act as a center-of-excellence for specific product lines.
The Integrated Player
Integrated Players (IP) also engage in knowledge transfer to other organizational units, but at the same time they are at the receiving end of knowledge flows from other units. As such, this type of subsidiary is a very important node in the MNC network.
Subsidiaries with an Implementer (IM) role do not typically engage in extensive knowledge creation and hence provide little knowledge to other organizational units. They are heavily dependent on knowledge inflows from either HQ or other subsidiaries though.
The Local Innovators
Local innovators (LI) are self-standing subsidiaries, who do engage in knowledge creation, but do not transfer this knowledge to other organizational units, nor receive knowledge from them. Typically, this situation occurs when local knowledge is seen as too idiosyncratic to be of much use in other organizational units.
Every company will have its role to play. However, this will depend mainly on the status of the company, among other factor. The best role that can be played by a company, which is just begging to expand internationally, is the Local Innovators. This is because they have much knowledge about the local. The fact that they need not to transfer their knowledge to other organization is also advantageous in this regard.
Localization of HRM Practices
There are a number of factors, which drives the localization of the HRM practices. Some of these factors include cultural environment, the institutional environment, the mode of operation abroad, as well as the subsidiary roles (Kretschmer, 2008).
The primary reason most companies move to localization is the cost savings. Cendant Mobility’s study underscores this expectation. In all three regions, more than 50 percent of companies listed cost maintenance as the primary benefit of localized transfers. Though the exact savings vary greatly depending on location and extent of localization, it is reasonable to expect that the costs to maintain an employee on a local compensation and benefits package vs. an expatriate package will results in savings of at least 50 percent. Even though cost savings are a result, there are typically other reasons why companies consider localization in the first place. Often, it is to align the terms of the employment with the business purpose.
The Impact of the Culture and Institutional Context
Just like most management practices, the HRM practices are also based on cultural beliefs, which reflect the basic assumptions as well as the values of the national culture in which the organizations are embedded. This leads to the question of what happens in case MNEs want to transfer some of their HRM practices overseas, especially in cases when the assumptions that underlie such practices do not fit with the cultures of the recipient host-countries. Failure to adapt HRM practices to the culture of the host-country can lead to negative results, which may inhibit the performance of the subsidiary.
Some of the effects have been explained below.
Impact on Recruitment and Selection
Recruitment is always an important part in the HRM. In this environment, the importance of finding the right person for the job cannot be over emphasized. This is because the decision of appointing an individual is one of the most critical decisions an employer will ever take (Morgan, Kristensen, & Whitley, 2001). When dealing with a MNE, the selection decisions should no longer be based on ethnic backgrounds or tribal lines. This new environment challenges the traditional approach to recruitment and selection.
Impact on Training and Development
There is also a need to continuously train and develop the workforce. This is meant to achieve competitive advantage. Training will ensure that the employees develop the right skills, attitudes, and knowledge that will enable them to perform their jobs effectively and efficiently. Employees from different cultures will need different type of training. Therefore, the HRM should come up with programs that best fits the employees in their specific environments and culture. This will in turn raise the costs involved.
Impact on Compensation
Wages do provide sources of motivation for various employees. This in turn enables them to perform effectively. The amount as well as nature of compensation is highly determined by the culture as well as the environment of these employees. Globalization has resulted to free mobility of labor. Because of this, people from different cultures have interacted freely. However, this has had a great impact on the HRM, especially when it comes to compensation matters. International companies can advertise through the Internet and recruit employees from across borders.
Impact on Task Distribution
Employee participation will tend to enhance their contribution despite of their culture or environment. In fact, there are various methods of employee involvement. These may include quality circles, joint consultation, and suggestion schemes (Morgan, Kristensen, & Whitley, 2001).
In addition, managers should have a vision. They should always understand what is expected of them. Because of Cultural Differences and complexity, managers should be trained in a way that will enable them to think globally but act locally. In addition, there should be people succession plans for management. The capabilities of any organization to achieve its business strategies in the light of critical success factors for the business depend largely on the capability of its managers as developed within the organization to meet its particular demands and circumstances. These include innovation, quality leadership, etc.
Kretschmer, K. (2008). Performance evaluation of foreign subsidiaries (1. Aufl. ed.). Wiesbaden: Gabler Edition Wissenschaft.
Morgan, G., Kristensen, P. H., & Whitley, R. (2001). The multinational firm: organizing across institutional and national divides. Oxford: Oxford University Press.
Sims, R. R. (2007). Human resource management: contemporary issues, challenges, and opportunities. Charlotte, N.C.: Information Age Pub..
HUMAN RESOURCE MANAGEMENT PRACTICES 7
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