The practice of human resources management revolves around managing people within organizations. The practice has evolved enormously from the traditional administrative functions to the more strategic role where the relationship between talent and diligence are closely associated with performance and result orientation. This has continually led to the increase in the importance of human resource management in improving the overall performance of the firm and more importantly, gaining competitive advantage in the industry where the firm’s operations are based. More often than not, human capital is the most important and expensive asset in business. Managing the people mainly encompasses two main aspects. The first is the recruitment process. This involves selecting persons with requisite ability to succeed in their jobs and more importantly, willing to stick to their jobs. Activities in this section include the recruitment process and assimilating new employees in to the organization. Secondly, employees hired have to be continually nurtured and developed to ensure that they perform to the highest level possible given the resources and circumstances prevailing. This is to ensure that the company obtains adequate returns to investments made towards the employees. Critical activities in this section include training, remunerating and performance assessment.
Purpose of the study
In the modern day, businesses have expanded to the international markets. The onset of globalization has enabled a sizeable number of firms to penetrate into foreign countries. The magnitude and growth of such operations necessitate a full understanding of the challenges to be expected in managing human resources across national, regional and even continental boundaries. This study assesses the difficulties encountered in the process of managing human resources for institutions operating on a global scale. It establishes the importance of each of the challenges faced and suggests some solutions applicable in solving the problems.
The research questions are:
- What are the main problems faced in managing human resources on a global scale?
- How important are the challenges and how much weight should be laid on each problem?
- In which ways can the problems be overcome?
The globalization of the world economy and the increasing importance of multinational companies have made an increasing number of researchers to realize that theories and concepts developed in one part of the world might not be applicable across borders. Whether we are talking about the recruitment styles applied or the modes of compensation and the trends in training and management, application is different for the different countries. This is the fundamental principle advocated by human resource management experts.
Global enterprises are characterized by the free flow of human as well as financial resources, especially in trading blocks such as the European Union (EU), the Northern American Free Trade Agreement (NAFTA) as well as other regional blocks such as the Association of South East Asian Nation (ASEAN), and South African Development Corporation. Due to these integrations coupled with other aspects of globalization, the markets are opening up in unprecedented ways. This is continually creating a sense of urgency in managing human resources effectively so as to gain better prominence in the global market place.
Many multinationals thus face the task of identifying areas posing challenges to the practice.
Numerous studies have been conducted in the field of human resource management. Traditionally, concerns were limited to management at the local level and also adopted a narrow view of the relevance of human resource practice in the overall performance of the business.
The dominance of the American theory of management has led many to believe that applying universal management is applicable anywhere. However, it is very clear among social scientists that managerial attitudes, values and behaviors differ across national cultures. This implies that there is no single best way to manage an organization because in most cases, differences in national cultures call for differences in management practices. Management and organization cannot be delinked from the particular cultural environment in which they are found (Terpstra, & Rozell, 1993, p123).
As with most other managerial practices, the practice of HRM is based on the cultural beliefs which reflect the assumptions and values of national culture. This brings the issue of transfer of HRM practices overseas and more so in the context where such practices do not fit with the cultures of the recipient country. Existing research shows evidence where subsidiaries managed consistently with the host country’s national culture perform better in comparison with those with rigid HRM practices imported from the headquarters (Terpstra, & Rozell, 1993, p76).
There are three main motives for the transfer of employees in international offices. The first was to fill vacant positions. This comprised of transfer of technical knowledge from one country to another. The second was for the development of management. This implies making transfers in a bid to ensure that staffs were exposed to international experiences to improve their ability to think broadly and attain further lessons in their practice. Such transfers are carried out regardless of the availability of qualified persons in the host country. The final goal is that of organizational development. Here, transfers are used to change or maintain the decision making processes of the organization and more importantly as a coordination and control strategy (Ulrich, 1996, p9).
Indeed, staffing policies continue to take a prominent place in international human resource management. Some companies have a policy of employing Parent Country Nationals (PCN’s) as top managers. Others go for the Host Country Nationals (HCN’s) as the top managers in the subsidiaries. Regardless of the choice of approach to hiring, there are merits and demerits as explained by experts. However, the larger section of human resource experts approve of the HCN’s approach to the hiring process.
Other scholars emphasize on the element of remuneration as a crucial aspect of human resources management in the international arena. Some propagate for the equal approach in all the processes of recruitment, employee management and remuneration. This is based on the argument that all the staff in all the subsidiaries performs tasks of similar nature regardless of the countries in which they reside. This is seen as a fair policy among some remuneration experts. However, a different group looks at the remuneration issue from a totally different angle. The cite differences in economic conditions prevailing in the different nations. The first is the living standards; the argument is that countries with high living standards necessitate a higher remuneration as compared to those with low standards of living. The assumption here is that the high living standards mean that the employees need more money for self sustenance and other activities. This means that special considerations on housing and other allowances have to be put into consideration in determining the pay packages. In other country’s, the cost of living is not as high. The MNC can thus comfortably offer lesser packages and still result in an equal level of productivity as in the other country. Such economic considerations are prudent. Despite the feasibility of such practices, word will always go round on the remuneration offered to colleagues working for subsidiaries in different. The effect of such information may not favor certain subsidiaries (Ulrich, Yeung, 1989).
Harzing (1999) assessed the element of language factor in the choice of employment policy. The study was done against a backdrop of increased local hiring of top managers among the multinationals. In many countries, identifying local talent with adequate knowledge of the language used in the head office may be a challenge. A Spanish company investing in an African country which was a colony of an English speaking nation may have a hard time acquiring local talent and optimally utilizing it to achieve the desired results. This necessitates investments in ways geared towards eradicating the language barrier. The effect of these is to increase the firm’s costs of operation in relation to other firms with no language barriers (77).
Issues of expatriates continue to dominate the practice of human resource management at the international level. Expatriates are special foreign staff members posted to subsidiaries to offer rare expertise in a certain field in a bid to improve the performance of the subsidiary in a certain field. The areas mostly requiring expatriates are finance and technical aspects of business operations. Expatriates come with the extra burden of making their lives as comfortable as possible so as to get the best from them. This may including organizing and paying for their visits back home, relocating their families, paying for some of the services in the foreign country such as schooling and other amenities for the expert’s family. Convincing top managers on the important on such measures in improving the well being of the entire business is never an easy task. The expatriates will also complicate the transfer process by demanding extra allowances which continue to build up the cost of maintaining them in the foreign country (Wright, & McMahan, 1992, p87).
A survey conducted by PricewaterhouseCoopers on behalf of the World Federation of Personnel Management Associations (WFPMA) in the year 2005 put to the picture the challenges facing the practice in the past, today and in the near future. The survey was designed to elicit informative contrasts. Respondents also gave information on the challenges they faced three years before and about what they thought the future could hold three years down the line. It analyses the response of 200 companies in over 35 countries. The key survey questions phrased in the questionnaire were as follows. Is there a major social, economic or political event that has had a significant impact on the work you do? Which of three issues in the area of human resources represent significant challenges for you today? What are the top three issues you faced three years ago?
The study found out that on a global scale, despite national and regional differences, there was remarkable unanimity. The three issues often chosen by the global group to represent the current challenge were elements of change management with a 48% of respondents mentioning it, leadership development (35%) and the measurement of HR effectiveness (27%). The challenges were compounded by the fact that in the international arena, the element of cultural differences sets in. This not only complicates the already existing challenge but also adds to the element of preparedness required in executing human resource management. This is because of the different ways in which different people react to different situations a situation that is aggravated by cultural differences.
Findings and Analysis
As has been explained above, global human resource management has unique challenges. An analysis of the views of the authors quoted above in conjunction with others whose works were used in the study compresses the major challenges faced by the human resource practitioners.
First there is the management of an organization in the face of cross cultural differences. The fact that different countries have different value systems biased by the cultures prevailing in the different country complicates the practice. In some countries, what is believed to be wrong is perfectly okay in another country. This fact not only complicates the recruitment and selection process but also puts challenges to the ability of the firm to employ best employees and retain them. Cultural differences cut across all aspects of HRM (Wagar, 1998, p45).
Again, identifying fair and equitable remuneration programs remains a key concern for human resource managers with responsibilities on a global scale. Finding a formula for use in developing packages which not only suite the different circumstances which face workers in different countries but also motivates and retains the different personalities holding office in the different countries.
Thirdly, there are major differences in the laws which govern different countries as concerns issues of human resource management. In some countries the laws are more stringent while in others they are more reluctant. This implies that there has to be deliberate efforts in learning intricate details of the labor laws applying in all the countries of operation and developing unique employment policies which are in line with the requirements of each country of operation (Ulrich, & Yeung, 1989, p45).
There is also a great challenge in defining which posts are best suited for the nationals of the horst country and which are beat handled by employees from headquarters. This is bearing in mind the need for competency in executing the tasks related to the post and the need to maintain a face which appeals to the local citizens. This is a basic prerequisite for the success of a business enterprise due the fact that the people are able to better identify with the company hence be willing to accept the products offered (Ulrich, Brockbank, Yeung, & Lake, 1995, p34).
Conclusion and recommendations
Despite the enormity of the challenges facing the practice of human resource management on a global scale, there still exist viable action plans to face and successfully surmount the challenges facing the practice. Issues of cultural differences are best look at in the context of diversification. This is whereby the employees hired in the various countries are well acquainted with the cultures faced in the country of operation. There should be a comprehensive classification of the various jobs in the business. The intention is to help identify jobs which require local staff members to ensure the business is well received locally while on the other hand bringing in foreign expertise in running the business local. Cultural differences should be acknowledged in the practice of assimilating new employees in the organization, performing interviews and even in issues of performance management as well as the development of the workforce (Ulrich, Brockbank, Yeung, & Lake, 1995, p98).
As concerns the remuneration practices. There are possibilities of develop basic benchmarks on which to base decisions on how much should be paid out to certain positions based on the common need to motivate and retain employees in all the subsidiaries. A good approach to this would be identifying which portion of remuneration package should be based on established global standards and which should be based on the domestic factors of the home country. Working out such a formula and explaining it to all the concerned parties would not only make the various staff members content but also improve transparency in the remuneration process of the global firm (Hofstede, 1980, p5).
Differences in the legal stipulations which guide the employment process in all the horst countries should be internalized by the senior management. Such information should be collected and relayed to the head office where the decision on any on the policies is justified. This reduces conflict between the head office and the subsidiaries. The most important part is the understanding that the laws differ and thus there is need to be flexible even while applying stipulated policies from the head office (Harzing, 2001, p66).
Leadership development is also a big challenge. Even in ordinary local human resource management, HR professionals are constantly wrestling with finding ways of developing adequate leadership skills for future succession planning. They are expected to provide the essential frameworks, processes, tools as well as viewpoints needed in selecting future leaders. Globally, leadership development has been identified as critical strategic initiative in ensuring that the right employees are retained and that the culture of the organization supports improvement of internal efficiencies in a bid to gain market position required for optimal performance (Chan, 2010, Par3).
They also have to ensure that managers are well equipped to take leadership roles of the future in a way that ensures that the organization is viable in the long-term. On the global scale, the challenge is compounded by the fact that different countries require different leadership elements for effective leadership to be realized. HR professionals have to be well equipped with not only the elements of leadership development but also adequate understanding of the leadership requirements of the specific countries of operation (Singh, 1995, p78).
In conclusion, the most outstanding element of global HRM is the difference in the cultural as well as socio-economic conditions. Finding out the unique circumstances faced in each specific country is always the starting point. This ranges from the cultural to the socio-economic conditions. Once the issues are accurately understood, the professionals can then devise the best ways possible to solve the problem uniquely and in the best way possible. This is necessitated by the fact that problems will be different for the different countries. All that is required is a common understanding of the basic human resource practice and a thorough knowledge of the application when faced with various challenges.
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