IHRM
Introduction
Firms that do not have the quality human resource face challenges in managing its operations globally and in attracting quality human resource (Farndale, Scullion, and Sparrow, 2010). Therefore it is critical for firms to manage their human resource. For this reason, the practices of human resource management are decisive in the success of the organization. As firms expand their operations to different countries, organizations have to consider a lot more factors than they have to when they are managing an organization that operates in only one country (Adler, 2002). Therefore, the role of international human resource management practices such as performance management, rewards, recruitment and selection, pay scale, performance evaluation is crucial.
International HRM focuses on improving the productivity of employees internationally. HRM is a significant contributor of organizational success, and when organization operates globally, then International HRM practices are critical for the success of the organization. International human resource managers are responsible for the performance of the employees of the organization in different countries because their position exist fundamentally to attain the strategic organizational goals (Bartlett, and Ghoshal, 2000).
The strategies and policies used by a global firm have a significant role in motivating and influencing the behavior of the employees globally. However, the role of IHRM becomes challenging when the organization has to manage its employees that are working in different countries (Bartlett, and Ghoshal, 2000). IHRM needs to understand the cultural differences of the employees working in the same country as well as in other countries. This allows employees to get harmonized with the other employees of the organization working in other countries. Thus, it helps the organization to achieve its goals internationally (Zając, 2011). Therefore it is critical for the firms to understand the cultural differences and the differences in values of the employees.
This report discusses about important practices of international human resource management. Recruitment and selection are one of the important practices of international human resource management that has been discussed in the paper. The report has also discussed about international staff approaches that organizations use when they expand their operations globally. The impact of political tradition and culture on recruitment and selection has also been discussed in the report. Performance management is another important practice of international human resource management and this report also discusses about performance management. The report talks about pay and reward system implemented at an international organization. Reward system is critical in the success of the organization and the report highlights the importance of properly formulating reward strategies and its implementation. As organizations expand to different countries, they have to manage employees belonging from different culture. Therefore, one cannot neglect the importance of understanding the cultural differences in a global organization. The report discusses about the impact of culture on international human resource management practices. Hofstede analysis is used to analyze the culture of different countries.
Recruitment is a process of searching and hiring the most suitable candidates) for the job either from inside the organization or outside the organization. Internal sources include the filling of vacant positions from inside the organization. According to this method, vacant positions are filled by promotions and transfers of qualified employees (Almond and Tregaskis, 2007). External recruiting is about attracting pool of applicant from outside the organization through advertisement, placing a note at the gate of the factory or office. The sources can be employment exchange, educational institutions casual callers, unsolicited people, and employee contractors (Bose, 2002).
International staffing approaches
In international human resource management, practices of HRM changes because of the complexity involved in staff, recruitment and selection processes. There are three approaches of international staffing and these apaches are ethnocentric staffing approach, polycentric staffing approach, and global staffing approach (Shah et al, 2012).
Ethnocentric approach:
In this approach, firms fill the managerial positions from the parent-country nationals because of the familiarity of the parent company’s policies, goals procedures and technologies. This approach is considered as the most suitable approach when managerial inadequacy exists at the local level. This is centralized approach for globalization. The focus of this approach is on the norms of home country and best for international strategy (Boussebaa and Morgan, 2008).
Polycentric approach:
In Polycentric approach, management fills key positions from the host country nationals. When company wishes to act local, this is the best approach and this approach is accepted and welcomed by most of the employees and stakeholders. This approach is less costly than other approaches, but the problem arise in the coordination of objectives and goals between the regional and main offices (Muratbekova-Touron, 2008).
Geocentric approach:
In this approach, human resource department chooses employees from in and outside the country. When the organization uses this approach, the human resource managers have a greater pool of candidates from which they select the most talented and qualified candidate. The major advantage of this approach is cultural adaptability. Flexibility is a key of this approach, and it is the best approach for transactional and global strategies (Muratbekova-Touron, 2008).
Regiocentric Approach
In this approach, the company divides its business into different geographic regions. Managers from different countries are supposed to manage the business in their specific regions. So when the organization recruits and selects an employee, they hire the most suitable candidates from the region (Shah et al, 2012).
Selection of employees internationally
In international human resource management, the organization recruits and selects employees from different countries (Tayeb, 2005). Although these organizations select and recruits employees from different countries and different cultures, but organizations look to analyze some of the following skills and behavior in the personality of the candidates:
- Whether the candidate would be able to adapt to the different culture
- Strong communication skills
- Whether the candidate has sufficient technical skills and expertise
- Whether the candidate has global experience or experience of working in MNCs.
- Whether the candidate has experience of working in the same country
- Whether the candidate has sufficient language skills
- Whether the person is flexible and ready to relocate (Tayeb, 2005)
These are some of the aspects that the employers or international human resource managers are looking for when they are hiring and selecting an employee. International human resource managers also analyze the following features:
- Tolerance level towards other culture, and people of other language and other races and other values.
- Communication and presentation skills
- Goal oriented behavior.
- Stress management and stress resistance (Tayeb, 2005)
Political Traditional and Cultural Effect On Uniform Staffing Approach
Diversity has become the need of today’s organizations. However, some organizations still follow the same style and approach and do not focus on diversity. This is one of the internal factors that influence the staffing. However, there are external factors as well that impact the staffing approaches of an organization. These factors include political pressure, skilled labor available, and others. There are also legal laws that influence the staffing approach of an organization such as employment exchange (Sparrow and Braun, 2008). Cultural factors also have an impact of staffing like child labor is strictly prohibited on the international level but accepted in countries like Pakistan, China and India.
The company has to understand the political traditions and cultural differences in the country in which it is operating. Company can formulate its policies and practices after understanding the cultural values and political differences of the country. If the organization does not understand these values and laws, then it may have to pay the price (Sparrow and Braun, 2008). Therefore, some of the important concepts that the organization has to understand are discussed below:
Employment Law:
Employment laws are proposed by the government to protect an employee from any exploitation. These laws vary from one country to another. However, some laws are applicable and are considered as international laws. All countries follow these laws such as overworking of employee, placement of the employee cannot be done at unhealthy and dangerous environment, appropriate compensations must be given, and child labor is not allowed and others (Dowling and Welch, 2005). It is critical for organizations to understand the employment laws in the country. For instance, if a company is operating as LLC in UAE then it has to hire employees for a period of 2 years and before this duration; the company cannot dismiss the employee. However, if the company is operating as a Freezone company in UAE, then it can dismiss employee anytime. Therefore, it is important for the company to understand these laws in order to manage its human resource practices.
Discrimination
Organizations demote and discourage to discriminate employees on the basis of their race, cultural values, religious differences, color, disability, language and other discriminating factors. Organizations operating internationally need to formulate specific policies to manage employees considering the cultural values, religious background, and other discriminating factors.
Recruitment and selection of employees is one aspect. However, it is critical for the management to recruit quality and talented employees but it is also important to analyze and evaluate their performances. Therefore the role of performance management is significant in the success of the organization globally. The next part of the report discusses about the performance management and its importance in international human resource management practices.
Performance Management
Performance management is an important task of international human resource management and refers to the evaluation of employees and their performances. Evaluation is a requirement to eliminate the deficiencies and for making improvements in the performance of an employee. Organization has difficulties in the evaluation of host and home country’s employees and in this regard international performance management helps them through determining the increase in payment, development planning, training requirement, and individual job assignments. International performance management does evaluation by taking the abilities of expatriates into consideration. Management of the workforce is necessary with sharp difference of culture, understanding of international business complexities, and understanding of reciprocal association among foreign and local company’s operation is also essential (Durai, 2010).
The purpose of performance appraisal is the development of employees. In past, performance appraisal was studied on the basis of rater error, and it was found that the behavior of rater has an impact of organizational background. The performance appraisal rating is not easy in the dynamic or vibrant environment. There are many factors that influence the rating of performances of employees like self efficacy and trust of rater, self monitoring and confidence over appraisal system. Self-efficacy refers to the belief that a rater has on his skills (Dowling, Festing, and Engle, 2008).
According to Bernardin and Villanova (2005), self-efficacy increases the capability of an individual to do performance appraisals and raters with high self-efficacy performs the appraisal activities more carefully and accurately than those who have low self-efficacy. However, sometimes this factor plays a negative role in performance appraisal (Bernardin and Villanova, 2005). Competencies differ from skills and knowledge and increased global competition force the organization to be more competent in appraisal. According to Smith, Harrington, and Houghton (2000), it has been found that appraiser discomfort leads him towards lenient rating and less able to distinguish among subordinates. The style of communication, age experience, beliefs and relationship of raters make the employees uncomfortable in different cultures (Smith, Harrington, and Houghton, 2000). Good performance appraisal competencies lead the organization to the development of professionals. It is also helpful in strengthening the skills of the employees and in improving the relationship between the employer and subordinates. It has other benefits as well such as:
- Clearly define and clarify the responsibilities of the employees
- Establish the mutual standard for the measurement of performance
- Provide aid in making salary decision,
- Retention and promotion of employees (Smith, Harrington, and Houghton, 2000)
Headquarters or the head office of a global firm faces problem in evaluating the performances of employees in other countries particularly the performances of expatriates. Evaluation of expatriates is a challenge for multinationals and these challenges are beyond the normal employee evaluation because they are far from being the best. There are three factors that influence the performance of expatriates within domestic, organization and international context. These factors are; previous overseas experience, ability to work in cross-cultural teams, flexibility to work in another environment or country. Standardize performance can deal with these problems because comparison among emigrant at diverse level become easy (Shih, Chiang and Kim, 2004). The evaluation minimizes the risk factor of selecting the wrong expatriate because if the person is well qualified and well professional but culturally illiterate should not be appointed. Therefore, the post evaluation assignment is necessary; it also reduce the turnover of emigrants (Collings, Scullion and Morley, 2007). It is critical for the organization to manage these challenges in order to properly evaluate the performances of employees working in different countries. If the company is not able to overcome and manage these challenges appropriately, then the employees may not enjoy working at the organization and their motivation level would also be down (Collings, Scullion and Morley, 2007).
One of the main reasons for evaluating the performances of the employees is to formulate a reward system and to define the pay scale of the employees. Therefore, the next part of the report discusses about the payment and reward system in international human resource management.
Payment And Rewards System
Payment and rewards are the tools that are helpful in employee motivation (Pratheepkanth, 2011). Issues regarding payment and reward system include pay freeze, benefit reduction, incentive reduction, lack of pay increase, and pay cut, lower pays than market, lower development and training opportunities. Regardless of these issues favoritism, miscommunications, unfair allocation of bonuses; and inconsistent treatment is another issue of pay and reward fairness (Bakhshi, Kumar, and Rani, 2009).
Motivation is a key factor in achieving the organizational goals. Therefore, an organization needs to formulate human resource strategies particularly formulate a reward system which motivates the employees. Therefore, the fair pay and reward system is vital; the pay system must be consistent, transparent, fair, simple and equitable. Increase in pay of fair payment system also protects the organization from high turnover (Tekleab, Bartol and Liu, 2005).
Reward system and pays are influenced from internal and external factors. Managing the pay and reward system is a frustrating task for human resource management at the international level. Culture has a significant influence on country's law, and organization with diverse people has difficulty to find out the accurate reward system due to the cultural differences (diversity) in the organization (Edwards and Rees, 2010). Moreover, the organization has to manage different factors while formulating a motivating reward system. It is important for international organizations or MNCs to offer comparable pay scale and the salary should be linked with the currency and other economic factors of the country. If the company does not consider the economic environment such as inflation, cost of living, cost of maintaining a lifestyle and others then it could hurt the company in maintaining and managing its human resource (Ozbilgin, 2005).
There are different factors that influence the pay and its calculations. Some of these factors are that the organization has to consider before the calculation of pay includes; fair labor act, issues of pay equity, salary survey, determining the job’s worth, industry comparison. Before calculating the pay, human resource department must do the job analysis. Moreover, the HR department should evaluate the job and conduct a survey to identify and analyze the average pay for the job (Karadjova-Stoev and Mujtaba, 2009). After the collection of this data, the organization should design the pay structure accordingly. Placement of individuals at the right jobs at appropriate pay should be performed. At the end, pay system should be updated and monitored for further improvements (Burke, 2008).
Reward plan is designed to enhance the capabilities of employees and motivate them so they can better meet the organizational goals. Before presenting the reward plans, human resource department should consider the following aspects (Hollinshead, 2010):
- Develop clear expectations
- Produce a clear line of view
- Sett achievable goals
- Establishment of commendable measurement scheme
- Empowering employees
- Making rewards significant
- Immediately making the payout
When organizations operate in different countries they have to manage their operations according to the cultural differences. Therefore IHRM gives a lot of importance to the cultural values and culture of the employees. The next part of the report discusses about the culture and its impact on IHRM practices.
Culture
The local and national culture has a significant influence on the international human resource practices. Culture has an impact on the practices of managing people and cultural differences drive differences in the practices of management (Dalal, 2005). Cultural values also impact how the employees behave, act and communicate with each other in the organization (Janssens, 2002).
Perception of the individuals differ due to the cultural differences, and these perceptions shapes the organizational environment that includes work orientation, work motivation, conflict, communication, goals of the organization, appraisal system, reward plan and decision making style (Milikic, and Janicijevic, 2009). Therefore, it is critical for the organization to understand the cultural differences of the employees working in different countries. In International Human Resource Management, the HR department not only has to understand the cultural background and cultural values, but they have to understand and manage their vacations, holidays and other policies according to the culture of the region and the religion practiced in the country (Kramar, and Syed, 2012). For instance, MNCs operating in UAE or Saudi Arabia would offer its weekend holidays on Friday and Saturday. On the other hand, the same company operating in UK would offer weekend holidays on Saturday and Sunday.
Hofstede Cultural Dimensions
Hofstede has presented different cultural dimensions to differentiate cultures. These dimensions are; individualism vs collectivism, power distance, uncertainty avoidance and masculinity vs femininity (Soares, Farhangmehr, and Shoham, 2006). The four dimensions of culture are presented in the following figure:
(Hosftede, 2014)
Power Distance:
High power societies accept the unequal distribution of power. In such culture, organizations do not focus on equality of employment structure. People accept that the power and show proper respect for those who have power. Examples of these countries are China and UAE. In contrast; low power distance society such as UK, employees are not afraid of their bosses and organization focus on fair power distribution (Soares, Farhangmehr, and Shoham, 2006).
Individualism vs. Collectivism:
Societies in which people are tied with individualism always prefer to make the decision alone such as United Kingdom. In contrast; where ties are tight on individualism and people up-bring in collectivities in such culture organization prefer to make collective decisions such as China and UAE (Soares, Farhangmehr, and Shoham, 2006).
Uncertainty avoidance:
Societies with low uncertainty avoidance have the organizational culture in which organization prefer to take the risk and also tolerate behaviors and opinions that are different from their own. China and UK are examples of countries with low uncertainty avoidance. On the other hand; high uncertainty avoidance culture such as UAE support the frightening from uncertainty; in such culture organizations faces high level anxiety and ambiguity (Soares, Farhangmehr, and Shoham, 2006).
Masculinity vs. femininity:
In masculine societies importance is given to show-off, people are eager to achieve something that is visible, prefer to make money (Soares, Farhangmehr, and Shoham, 2006, p. 277-284). However, in a different culture, feminine society’s organizations have dominant value for both women and men. In these societies, organizations prefer people than money; try to make comfortable environment, and supportive culture. The focus is on small goals that lead to high achievement (Milikic, 2009).
Hofstede cultural analysis and its impact on IHRM practices
It has been encountered that individualism and collectivism have a significant impact on performance evaluation system. Individual culture prefers payment structure that is based on the performance of individuals. In low uncertainty avoidance culture, performance evaluation system is highly formalized and structured. In masculinity culture performance evaluation is based on the individual’s performance but in feminist culture individual personality is more imperative that individual’s performance (Dixon et al., 2010; Johns, 2006).
CONCLUSION
International human resource management has become an integral part for the success of the organizations that are operating globally. International human Resource management practices help the organization in motivating the employees as well as in attracting quality employees. As organizations have been expanding their services to more and more countries, international human resource management practices have a critical role in the success of the organization at the international level, and if these practices are not managed properly then it could hurt the company in managing the human resource. The report has presented the importance of different international human resource management practices, and how different factors influence the success of the organization globally.
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