Globalization brings about the needs of global companies to operate more efficiently with the aim to gain competitive advantages and to face the contemporary issues and challenges in the contemporary world. A critical factor in optimizing organizational efficient operations of these companies is the IHRM (Guest et al., 2000a; Guest et al., 2000b). The HRM operations helps in developing and motivating the workforce of the companies to improve skills, knowledge, and the modernization required for the companies to vie with global firms (Singh 530-543). Various studies show that when the companies operate in a global environment, the efficient IHRM generates efficiency and long-term sustenance (Schuler et al 41-70). Nevertheless, the challenge facing the global firms is how they apply management programs from their headquarters and relate them in the domestic markets. In view of that, various MNCs have approved much freedom to their subsidiaries for outlining of their strategic HR-systems (Kostova and Roth 215-233; Myloni et al 518-534; Noorderhaven and Harzing 47-66). Yet, Taylor et al (1996:959-985) has explained that some HR policies might be quite environment-focused whilst others could generalize and applied them efficiently in various frameworks. However, it is not shown how Human Resources policies should communicate and hence more studies within this domain are needed (Almond et al 587-636).
Therefore, it is necessary to study whether some human resources policies are established by the subsidiary itself or by the headquarters of the company to affect the companies’ performance in a positive way. As well, there is a general disparity in the research regarding IHRM empirically concerning the finances and the companies’ performance in the business entities (Becker et al 2001; Park et al 1391-1406). The analysis of the relationship between subsidiary independence and the headquarters’ policies might give a better understanding how IHRM should organize positively in a free market economy. It may offer a nuanced addition to the major studies performed in the USA (Guest 2001:263-276).
Strategic IHRM
One of the major issues for IHRM is the disagreement between the strategic requirements for both globalization and localization. ‘Globalization’, in this framework, implies that MNCs can at times have benefits for the local companies in their ability to influence resources worldwide, and thus some level of harmonization and incorporation is needed. This is generally realized by means of standardization of human resource policies and practices. Moreover, there is a need for more competition and the organizational milieu should be liberal (Stahl and Björkman, 2006; Beardwell et al, 2004). Accordingly, the HRM in MNCs normally navigates between these two conflicting needs, and can be applied in discrete situations.
IHRM Contingency Model
When the critical strategic IHRM standards are established, they should change into particular IHRM assessments for efficient application. The function of the contingency framework of IHRM consists of the following policies namely selection and recruitment, training & development, spouse and family issues, performance appraisals, compensation, and expatriate career.
More specifically, HR-policies refer to pay & performance policy, training & development policy, employee involvement & communication policy, and policy towards trade unions. Also, autonomy refers to HR-managers perceived autonomy over the determination of the subsidiary’s different HR-polices, and not necessarily implemented autonomy over HR-polices (Stahl and Björkman 2006).
Selection & Recruitment
Possibly, the most important IHRM practice the MNCs performs the selection and recruitment of host country citizens in the overseas operations of the companies. Tung (1981:68-78) suggests the selection process that should incorporate into the contingency model for creating efficient IHRM practices. Though Tung suggests these aspects, mainly in the selection process are normally relevant to all core IHRM operations.
Tung (1981:68-78) observes 5 factors should judge in a selection process, namely 1) the character of the vocation, the level of cultural disparity, skill and keenness of expatriates and their households to work abroad, and issues of hiring host country workers.
The MNCs should: (1) Establish the nature of the job in assessing the scale of cultural relationship needed. For instance, advanced level management positions bring about a significant level of relationship with the host country and require successful cultural, relational capabilities. Other job characteristics should view the level of the position needs, and the companies’ experience, especially in business domains and the level to which the expatriate applicant’s managerial style may correspond with that of the host country. Hays (1974:25-37) classified overseas professions into four kinds all of which need various hierarchies of organizational, cultural, and work experience: management, operational department, and troubleshooting (2) Determine the host country's economic, political, legal, and cultural systems in conflict with those of the US, find out adjustment capabilities in the choice of expatriates (3) Evaluate expatriate applicants’ keenness and skills to work in a foreign country. It is essential to note that the need to work in a foreign country does not always shift the capabilities to adjust in the overseas jobs.
A large number of the workforces do not want to disturb their family and their interests for global jobs and, therefore, their enthusiasm to work in a foreign country must be carefully evaluated. Critical factors to adjust for foreign jobs consist of flexibility, endurance, adaptation to various customs, tolerance, and responsibility. (4) Evaluate the skills and keenness of the contender's spouse and family to think living in a foreign country. The failure of the family units, especially the spouse, to adapt to foreign works is the major cause of the worker’s failure. (5) Reflect on native citizens. Unless legal and other issues exist, Tung (1988) suggests that the multinational companies hire host countries’ citizens with equal skills and competencies. Hiring local citizens are vital to their growing expectations and to stop the bitterness of foreign influence of overseas companies. As well, the lesser salary outlays and cultural understanding are other motives as why the companies hire native citizens. (6) To take full advantage of the impetus of the MNC workforce the companies should also fulfill career and development requirements of the expatriates. In evaluating native citizens and expatriates from other countries, it is also essential to consider how job incentives may differ by the country’s culture.
Regrettably, the mainstream US MNCs does not apply the formal selection test criteria for technical, management competence and cultural, relational skills. In view of the fact US companies usually are deficient of prescribed selection programs, they have a tendency to build their decisions on technical competencies, the keenness of the aspirants to go abroad, and short-term tax and monetary issues. A number of applicants’ selection decisions to go overseas are even made as a result of poor US performance is a step for the MNCs to defer or discard the specific person. Moreover, the US MNCs generally applies early phase IHRM practices when they involve in a later phase of corporate business.
In conformity with the contingency model, Pucik (1984) made further proposals for better staffing of the workers in the companies who experience bigger competition and alterations.
First, the US MNCs should use their competitive advantage in accessing many foreign students studying in the US universities and colleges. Secondly, the US companies can take advantage of by carefully assessing their long-term workforce requirements and should fill future vacant positions in the corporation instead of constantly hiring for specific vacancies. Third, more thought should be given in hiring geographic domain professionals and citizens instead of motivating first on technical subjects that are normally the case. Rational considerations of the job should be useful in hiring in US companies. Similarly, true understanding of cultural disparities of the foreign jobs is likely to enhance the selection of candidates. These advanced programs need that the staff with adequate global experience and training be used in the selection procedures of the companies.
The present US MNCs practices show the need of influence HRM executives has on senior level management and a general deficiency of the executive management tendency for IHRM considerations. On the other hand, the primary premise of these suggestions is for the multinational companies to take a longer term and a developmental outlook of the companies working and employment. With the purpose to keep these workforces for long-term following their selection, the MNCs should build effective practice strategies in all fields of IHRM, especially in training and development.
Training & Development
Like selection, Tung (1988) stated that only a small fraction of US MNCs has formal training programs for the expatriate workers, a considerably lower proportion than European and Japanese companies. The data point out that even this US data may, in fact, be higher (Finney and Von Glinow 16-27). Intercultural training is interpreted as any company program which improves the workers’ ability to live and take up the foreign assignments and, therefore, should modify to the particular requirements of the future workers’ jobs and cultural environment.
The selection programs will shape large-scale specific requirements for training programs. Therefore, the selection contingency model should use both training and development in the MNCs. The type of the training programs should be conditional for the host country citizens, namely: (1) job and cross-cultural requirements, (2) disparity in the culture (3) the enthusiasm and skills of the worker to adjust to different cultural circumstances, and (4) the need to view longer term professional and development requirements for the expatriates. Through the assessment process, the expatriates can get training in some aspects of five major types of training programs shown by Tung (1981; 1988) namely area researches, culture acculturation, language training, response to training, and field skills. The supplementary training requirements are affected by the spouse and family issues of the expatriates.
It is generally thought that experiential training methods are more useful than documentary methods. Nevertheless, both the comprehensive documentary method and role- playing applications were additive and nearly identical in usefulness. These two methods were considerably more efficient than a method utilizing only general information on the foreign countries. This study offers some signs of the usefulness of applying multiple training programs and for using programs that consist of data on particular events and general data instead of programs with just general data.
It is significant to consider that cultural adjustment entails various factors, for example, language and communication competencies, relationships, contribution in the host countries’ setup, and showing suitable behaviors. Thus, the training programs in the companies extensively require dealing with the least critical quintessence of these fields. Assisting the expatriates to create a rational view of the foreign workers and the company and traditions is significant for realizing success. These programs also helped the expatriates in creating their own coping methods for living in a foreign country.
Culture
About foreign language skills, there are discords among the analysts on precisely how important or to what extent it is significant for the expatriates and the MNCs create comprehensive foreign language competencies and it continues to be an important issue. It is, however, clear that foreign language competencies are significant and that a reduced US stress in this field is observed.
There are more Europeans who have multilingual skills and put more value on foreign language skills than the Americans. Secondly, a number of US MNCs put too much stress on the English language as the only language which reduces sensitivity to local cultures of the host countries. There is a disparity in the methods to teach a foreign language. The top Japanese companies believe that the command in foreign language necessitates deep perception of the foreign culture.
As regards attitudes towards various cultures there are indications that US expatriates have a better understanding of other cultures, however, are still generally considered as being less lenient to foreign practices than the countries with more overseas skills. The Americans do not have the multi-national skills of various cultures, as well the detailed prescribed training of some cultures, and hence are generally poorly-prepared for overseas operations. Indeed, critical self-assessment and the feedback needed before the US MNCs could outline efficient international training programs.
Besides, the training, expatriates on local countries’ languages and cultures, it is important for the US MNCs to create the corporate course, as well as long-term strategies and global orientation for their managers and workforce. One of the existing culture issues facing US MNCs is that they generate few expatriates with comprehensive global outlooks and are unsuccessful to change the growth of expatriates particularly to the aims of the MNCs.
Performance Management (PM)
Neely, Gregory and Plats (1995:80-116) defined PM as the procedure of quantifying efficiency and usefulness of corporate activities. Yet another definition of PM procedure compares the results against expectations, with the aim to stimulate, direct and enhance the decision-making process (Lardenoije et al 687-697). The PM measures are applicable, and focus on monetary and non-monetary indicators, and internal as well as external stakeholders. These steps should associate directly with the companies’ mission and aims as to show the external challenging milieu, clients’ needs and internal aims (Kennerley and Neely 1222-1245). Moreover, the PM is a vital factor in the management compensation process (Berber et al 414-424).
For IHRM it is important to see that though the most expensive workforce in each company are the expatriates (Brewster and Scullion 32-41; Lee and Liu 302-311), however there exists a scanty knowledge to measure their performance and contributions to the companies. In fact, a complex system was outlined for the PM of expatriates. However, these systems are not worldwide, thus it is important to understand the particular variables that impact the success or failure of an emigrant in the foreign country (Brewster et al, 2007). The universal system of workers’ PM was outlined and executed by the MNCs with the aims to assess PM of international labor force, to help accomplishing the global strategic aims and outcomes of MNCs (Briscoe et al, 2009). The universal PM steps focus on commercial values and objectives, modified for the various countries, and are conditional on cultural responsiveness and data on the process of the direct response (Engle et al 153-169; Festing and Eidems 162-173).
In a study, the researchers Festing et al (2012: 825-843), showed key characteristics of the PM of workers that organize the theoretical and empirical debate (Festing et al., 2012). The application the PM system necessitates both, international standardization and local awareness. In describing and testing the necessary balance between standardization and localization, Vance (2006:37–56) differentiates two major aspects of the PM process: strategic upstream processes outlined by the headquarters and the downstream processes that are more adapted to local requirements.
While upstream considerations are characterized by harmony, knowledge management, and organizational learning, downstream activities include sensitivity to cross-cultural differences such as the choice between the individuals versus groups during the assessment (Vance 37–56). Evans, Pucik and Bjorkman stated that although multinational companies need to have a global template for the assessment process, they must allow the local business units of a certain level of freedom to customize the template to local conditions (Evans et al., 2011).
The contemporary companies create PM systems for various reasons, though the prime aims of these systems are related to the appraisal and development (Cascio 176-196).
Compensation & Reward Systems
Appraisal systems play a vital part in creating the compensation in US MNCs and should guarantee that performance relates to business strategy so that the workers get suitable levels of rewards. Complex and difficult financial compensation and reward packages for the expatriates are created by various MNCs.
The key factors which play a critical part in creating a compensation scheme consisting of the expatriate's job duties, how diverse the host country’s cultural values are, and salary standards of local citizens. The important issue is to create a compensation system which is fair to the local citizens, expatriates, and parent country workers, and should have plenty of incentives to attract, motivate, and keep workers for foreign assignments. In general, a central compensation management is more successful in creating a fair and reliable system, whilst a decentralized program is more probable being responsive to domestic conditions.
It is noted that the mainstream US MNCs applies a central compensation administration formation for internal policies, processes and control. Nevertheless, the compensation management is normally responsive to the overseas offices. Moreover, some features of compensation that is more sensitive to domestic settings have to be assigned to a foreign subsidiary. There is generally a tendency towards more centralization of compensation programs in the MNCs headquarters.
Conclusions & Recommendations
This paper delved into various challenges being faced by IHRM practices for 1) Human Resource Management 2) Selection, Recruitment, & Placement 3). Training & Development 4) Culture 5) Performance Management and 6) Compensation & Reward Systems.
The generation of a global vision for the companies necessitates the growth of more efficient IHRM practices in this challenging world. Strategic IHRM ensures that the right blend of skills with the right orientation is available that can be realized through scrupulous planning. The success of IHRM strategies entails following core principles of best practices in IHRM. A good strategy requires recognition and application of the values of ownership, internal, external factors in creating strategic IHRM plans.
The primary strategy of IHRM involves short and long-term planning as well as the need for integration and differentiation. The working contingency model entails transforming the strategic IHRM aims into particular decisions.
The senior executives of US MNCs should remove ambiguities with the outcomes of the existing system. There must be a sufficient workforce that has minimum levels of global experience and skills. The US MNCs should develop better cross-cultural clients, operations, and output, and hence requires a more culturally varied workforce. This may cause a basic model shift to run successfully human resources and to understand the role and significance of their global operations.
With the necessary skills of US MNCs managers’ skills and experience, more emphasis must be paid on IHRM and the growth of business from a global perspective. With this outlook starts to emerge, the MNCs management should generate more long-term and efficient IHRM practices. Such a global perspective will help the companies retaining various groups of productive expatriate managers. A group of skilled managers can help the MNCs to successfully face the global threats and opportunities and formulating suitable global long-term business strategies.
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