Globalisation has forced many organisations to rethink their global business strategies. It is now widely recognised that multinational firms in different cultures require effective changes to survive in a different culture (Venkatesh, 2010). Therefore, for the HR function, managing human resources from various cultures presents significant opportunities and challenges, which can ruin or ensure the success of an organisation. In this regard, HR must play a leading role in managing employee recruitment, selection, performance and retention among others. International human resource management (IHRM) focuses on human resource management at the international level in multinational firms (MNCs) (Dowling, Festing, & Engle, 2013). It must show how global firms manage geographically located employees in order to leverage their human resource capabilities for achieving competitive advantage globally.
This research explores opportunities and challenges for an international organisation operating in a different national culture to that of its head office nation culture, specifically in areas of human resource management.
Challenges in International Human Resource Management
The US firms have developed their management practices under capitalism. In China, however, the leadership of 1960s did not allow the country to practice capitalism. Instead, China based its practices on socialism, which affected the development of management talents, according to an article in the Economist (Human resources: China’s people problem, 2005). Today, many Chinese are not ready to adopt Western styles of management (Human resources: China’s people problem, 2005).
Siu and Darby (1999) noted that in China, the management training function is “not only aligned to economic structure and development, but also to political and ideological beliefs and the avoidance by managers of personal responsibility reflected a “collective irresponsibility” which was learned as a form of self-protection under state socialism” (p. 87). According to Roberts, many American firms operating in the country have cited local protectionism, human resources constraints and rising costs as a major impediment to their businesses (Roberts, 2014). Some researchers showed that talent management would be acute in emerging economies (Yeung, Warner, & Rowley, 2008).
Jeff Immelt, the CEO of General Electric notes that China has become hostile to foreign firms (Immelt, 2010). This implies that the political situation may also hamper efforts of American companies in China. In other words, Chinese government may introduce hostile labour laws and policies for foreign firms.
Globalisation has also affected HR practices for American companies in Asia. Specifically, it has created complexity in employee management and new issues in managing a group of employees, who are all over the world (Dowling et al., 2013). Based on such new developments, IHRM must play a significant role in coordinating and controlling human resource practices in Asian subsidiaries and linking them with the parent company cultures in the US. A lack of understanding employment practices in other countries has led to massive failure in some multinational corporations, for example, the failure of eBay in China could have resulted from the inability of the company to understand the Chinese market (Wang, 2010).
For instance, while eBay charged for its services, Alibaba introduced free services to counteract its growth. Socialism promote saving habits rather than spending. Therefore, it is imperative for MNCs to recognise that HR practices that work at the domestic level may not necessarily be applicable in foreign environments. A number of factors have contributed to the complexity of the IHRM practices in China as compared to domestic HRM in the US. IHRM must address all employee related challenges within the international context. HR managers must establish different management channels and practices to cater for such diverse nationalities. The HR managers must understand different issues in different subsidiaries that relate to taxes, compensation, cultures, and work practices among others. For instance, an article in The Economist highlights that there are problems of recruiting and retaining workers, particularly skilled ones, raising the cost of doing business in China (Human resources: China’s people problem, 2005).
Employees, who undertake foreign assignments in China, want their employers to support them with family issues and relocation and provide cross-cultural orientation and training. In addition, employers may also make schooling arrangement for children in both foreign and local schools. These are support services, which some employers may not provide to their local employees. At the same time, these expatriates are not willing to extend their contracts once their contracts have expired in China.
MNCs must also acknowledge that international operations have serious financial and human resource impacts in cases of failures. For instance, it is costly for MNCs to find the right employees for overseas assignments (Human resources: China’s people problem, 2005). This results in high costs of recruitment and training. For instance, General Electric has claimed that the major challenge in China is finding the right middle level and senior level leadership.
The focus of international HRM management is on many external issues as compared to domestic HRM. The US firms must ensure that they comply with diverse government laws, local religious practices, specific codes of conducts, language use, and staffing requirements among others in China (Human resources: China’s people problem, 2005). In most cases, governments would want their citizens to have key positions in multinational firms. In China, this could be a legal obligation, which MNCs must observe.
IHRM focuses on different issues in the HRM practices. On the other hand, domestic management of human resources is simple because of uniformity of issues under the same laws and regulations of the parent country. Overall, IHRM is complex and demands greater attention because of diverse HRM factors.
Opportunities in International Human Resource Management
It is imperative note that Hofstede’s value dimension shows that Chine has a highly collectivist culture in which individuals act “in the interest of the group and not necessarily themselves” (Hofstede, n.d). This tendency “affects hiring and promotions with closer in-groups (such as family) are getting preferential treatment” (Hofstede, n.d). In addition, employee commitment to a company is low while relationship with others outside the group tends to be hostile.
Chinese value personal relationship relative to organisational tasks. Hofstede shows that “China is a masculine society that is success oriented and driven” (Hofstede, n.d). Hence, they tend to focus on their work and not leisure activities as compared to Americans. Communication between Chinese and their Western counterparts could be difficult because of ambiguity in the Chinese communication culture.
At the same time, the number of Chinese receiving American education has increased in the recent past (Perlez and Gao, 2013). Multinational firms from the US operating in China have greater opportunities to gain access to a large, relatively cheap workforce. However, these firms can only achieve it through standardisation of human resource practices. Researchers have demonstrated how multinational organisations should align their decision-making processes with the global talent management (Vaiman, Scullion, & Collings, 2012). It shows that IHRM policies and practices should be different based on the region of operation because of different cultures and geographies of the world (Vaiman et al., 2012).
Many US HR managers in China face a serious challenge related to managing their globally diverse employees. They are unable to develop a system that enhances efficiency in MNCs by combining local and international diversities for sustainable global practices. Hence, MNCs seek to standardise HR practices to streamline operations.
American parent companies’ cultures guide standardisation of HR practices in Asian subsidiaries. HR managers want to create uniformity in pay systems, training and development, recruitment and selection and performance management. These are IHRM practices, which they have used to ensure similar practices for establishing certain cultures in their organisations. HR managers believe that uniform corporate cultures help their organisations to develop high performance environments, which support overall strategic objectives of organisations across various regions. American firms believe that culture is critical in their overall success. As a result, they focus on human resources to enhance efficiency and improve corporate culture in their subsidiaries. HR managers want to describe their cultures and provide insightful messages to employees in different regions.
One must recognise that different aspects also affect, shape, reinforce, and change organisational cultures in Asia. Culture has a direct contribution to the overall performance and survival of a company. Given the significant of culture on organisational success, it is imperative for HR managers to standardise it globally in order to enhance planning of HR roles. HR managers can enhance standardisation of culture in their global operations by using different HR practices. Hence, it is advantageous for HR managers to adopt a worldwide corporate culture for all its subsidiaries to support business objectives.
Organisational strategy and structure also enhance the need to standardise HR practices globally. American firms that operate in China and other parts of the world with many employees require uniformity in their strategies and structures. While HR practices could be segmented and different across different countries, HR managers must provide standard processes that account for different laws, cultural, economic and other differences across the globe. As a result, many HR managers aim to develop and implement a single HR system that manages diverse structures, critical processes and practices across the world rather than using segmented approaches.
A parent company and its subsidiaries can share knowledge on best practices. Researchers have focused on knowledge sharing across subsidiaries and parent company in MNCs, particularly in their global, domestic and regional business strategies (Ambos, Ambos, & Schlegelmilch, 2006). Kasper, Lehrer, Mühlbacher and Müller (2009) highlighted that “considerable polarisation in knowledge-sharing practices between multinational firms implementing transnational and global strategies, with cross-site knowledge sharing being of very high intensity among the former and quite minimal among the latter” (p. 300). In addition, a multinational company that focuses on improving global, domestic and transnational strategies have different ways of sharing knowledge with subsidiaries. The relationship aims to promote integration of diverse factors across subsidiaries and MNCs. On the other hand, if American companies in Asia only concentrate on a mere sharing of information, then they cannot promote relevant development of strategic business objectives (Kasper et al., 2009).
Human resource management consideration in different cultures
American firms that operate in Asia must focus on impacts of employee recruitment and selection on its operations. Organisational culture influences acquisition of the right talent for multinational firms. It determines training, skills and attitudes of employees, at the same time, Beechler and Woodward (2009) show that complexity of global operations complicates talent management. IHRM should focus on factors beyond employees’ qualifications.
Multinational firms must determine if new recruits will be better cultural fits in their organisations. On this basis, HR managers must ensure that all employees have abilities to fit within the cultural context of a firm when hiring procedures. According to some studies, emerging markets have also affected decision-making on the global talent management (Bhatnagar, 2007). Li and Scullion (2010) have noted that multinational firms must seek for competent teams who can manage operations in geographically and culturally diverse regions globally.
Olian et al. (1998) highlighted the need to develop training and development programmes that support continuous learning in organisations. Organisational cultures influence training and development practices as HR managers seek to instil skills that would ensure that employees believe, work and conduct themselves in certain ways. As a result, they ensure that training programmes show only preferred contents, which would ensure that employees adopt corporate culture. Employees, who have demonstrated competencies in corporate cultures, may also earn reputation and assume higher positions with greater responsibilities in organisations. Hence, corporate culture could influence HR training and development, as well as promotion.
Compensation and reward structures in organisations are strategic HR practices that motivate workforce to improve their performances (Dowling et al., 2013). On this note, IHRM policies should encourage a culture based on performance and rewards. Nevertheless, an organisation should not reward any poor performance.
Performance management and task distribution should reflect global statues of the company because it can create other issues (Gartside, Griccioli, & Richburg, 2011). Corporate culture defines expectations from employees in terms of performances and feedback, which an organisation expects from them. HR managers must ensure that task distribution reflects employees’ capabilities, competency levels and subsequent performances.
The HR department has a significant role in determining and promoting corporate culture in an organisation (Dowling et al., 2013). Hence, the existing corporate culture could influence most practices in the HR department. One must recognise that culture plays a significant role in employees’ contribution to the company and its continued existence. Hence, HR managers must enhance the development of corporate culture among employees in the parent company and its subsidiaries.
IHRM practices must focus on various issues for effective decision-making in their global operations. Therefore, multinational organisations must coordinate and integrate IHRM practices and policies relating to recruitment, selection, transfer and retention of employees. However, this process may not be easy for such organisations.
Overall, as many organisations seek global opportunities and new markets, they must focus on effective management of workforce and develop appropriate human resource management strategies to ensure consistency at both the global and local levels to ensure their success.
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