The Issues Of Global Human Resource Management Business Essay

Globalization of business is taking place at faster rate which is forcing mangers to tackle with complex issues as they seek to gain or sustain a competitive advantage. Due to unprecedented level of foreign competition at home and abroad, firms are beginning to recognize not only that international business but also finding and nurturing the “Human Resources” required to implement an international or global strategy is of critical importance.

Effective human resource management (HRM) is essential, especially for small and medium firms where international expansion places additional stress on limited resource, particularly people. Internationalization increases the complexity of an organization and of the environment it is concerned with.

Defining Global HRM:

Typically HRM refers to those activities which utilize human resource effectively in an organization. These activities would include the following:

Human resource planning

Staffing

Performance management.

Training and development.

Compensation (remuneration) and benefits.

Industrial relation

This is a typical HRM, but when HRM goes global or international some of the above mention activities changes.

According to P.V.Morgan international or global HRM have three dimension i.e.

Human resource activities.

Types of employees.

Countries.

Human resource activities.

Human resource activities in global HRM are broadly divided into three activities which can be easily expanded into typical six HR activities. These are:

Procurement

Allocation

Utilization

Types of employees.

There are three categories of employee when we look the employee of an organization from global perspectives.

Host-country nationals (HCNs)

Parent -country nationals (PCNs)

Third -country nationals (TCNs)

Countries.

The country categories involved in Global HRM are:

The host country where a subsidiary may be located.

The home country where the firm is headquartered and

Other countries that may be the source of labor, finance and other inputs.

The Need for Global HRM:

Globalization:

Due to globalization business process is expanding which require improvement in temporal and functional flexibility in the business processes and to accomplish this corporate are spreading their recruitment net even beyond their state boundaries.

The search for skills and the competencies at the middle level managers and upwards has today become an international affair. This resulted in greater diversity among the human resource deployed at various workplaces within and outside the nation. A need thus arises to manage these cultural and institutional differences between countries where the business has spread, so as to keep the productivity and profitability on par with global competition.

In the age of globalization, strategic management of human resources is becoming critical for organizational survival. Global business environments demand flexibility and rapid response. There is growing realization that the human dimension provides the key to flexibility and adaptability in organization.

Intercultural management:

Orientation to the organizational culture is a vital for all new joiners. Managers need to understand the dynamics of cross cultural adaptation. Intercultural management requires the ability to get inside the head of people from other to know how and why they view the world with their basic values and beliefs and solve problems.

Intercultural communication and the management skills cannot be learnt by simply gathering information about other cultures. This may reduce some uncertainty and decrease prejudice, but it does not give authentic cross – cultural knowledge. The only way we learn intercultural communication and management is through some sort of experience, coupled with cross-culturally validated management principles.

Shrink in product life cycle:

In a globalized business environment, product life cycle have shrunk to months demanding everything to happen faster. Consumers today want services at the speed of thought. In this fast paced e-world, decisions are required to be made in real time, which means instantaneous communication between businesses located in different countries and also affording accesses to information and knowledge to all associate with decision making.

There is a time to integrate the functionally and geographically separate units by securing the cooperation of the entire workforce through effective communication.

To organize, inspire, deploy, enable, measure, and reward the value-operational work, there must be an effective communication from corporate headquarters to different units located in different countries and cultures and to accomplish this HRM should invariably get internationalized. It is only through a clear understanding of difference between countries in terms of culture diversity and value- system that managers can effectively communicate with the employee pool of international horizon and accomplish business goals.

MECHANISMS OF GLOBAL HRM INTEGRATION

While control has been defined as any process in which a person, group or

organisation determines or intentionally affects what another person, group or

organisation will do , coordination refers to the means through which the different parts of an organisation are integrated or linked together to accomplish a collective goal .

In line with the approach by Kim , the present study views global integration as comprising both the above tools of control and coordination that are used to achieve consistency of business activities overseas. An overview of different mechanisms of HRM integration is now presented.

For the purposes of structure and clarity, Kim et al.’s (2003) classification of four global integration modes –

centralization

formalization

information based

people based

The four categories of integrating mechanisms are conceptually independent, collectively exhaustive, and detailed.

Centralisation-based mechanisms

Centralisation is generally referred to as the most direct form of control and is widespread in classifications of control in the international management literature.

In terms of centralisation as a means to integrate HRM, empirical studies have highlighted the exercise of headquarters authority in determining senior management pay, recruitment and development as well as other financially sensitive HR issues like headcount and salary expenditure. However, in qualitative studies, such direct forms of centralised parent control are found to be rare compared to other more ‘unobtrusive’forms . Case study evidence suggests that rather than being determined in a purely mechanistic way, centralisation should be viewed as an

outcome of the dynamic parent-subsidiary negotiation process whereby the source of centralization may in fact lie at the regional, not the global level .

Formalization-based mechanisms

Formalization-based mechanisms refer to the standardization and thus codification of work procedures and policies on a global basis . Representing a largely impersonal and indirect form of control, formalization-based mechanisms

have been labeled in different ways such as impersonal coordination , often in association with the Weberian notion of ‘bureaucratic’ control that seeks to limit subsidiary management’s role and authority .

The formalisation, or ‘bureaucratisation’ of HRM in MNCs, characterised by attempts to devise and implement common international HR structures and guidelines, has been shown to be commonplace.

While some studies depict global HR policies as a means of creating a common language across countries , others argue that such formalisation efforts are dependenton other less formal ‘social’ control mechanisms for their overall effectiveness . As an extension of centralised control, illustrate how policy creation and implementation are also negotiated processes, reporting increasing subsidiary involvement in the former and some scope for interpretation of the latter.

Information-based mechanisms

This category includes those tools that facilitate the international flow of information whether it is via simple databases or via more complex electronic data interchanges. Information-based integration has been interpreted as a means for headquarters to communicate and regulate information that is central to strategic decision making. Hence this is one of the key areas through which the HR function could position itself is in its role in global HRM.

Information-based integration of HRM was mostly restricted to the use of databases shared internationally (e.g. corporate intranet) or via electronic communication tools. Through these media information was stored on a range of HR-related topics, including employee information, culture surveys, training material and company HR policies.

People-based mechanisms

People-based mechanisms incorporate the transfer of managers and the various forms of committees or taskforces whose mandate is to integrate business operations. While the use of expatriates has traditionally been viewed as a personal form of monitoring and supervision, more recent research suggests that MNCs deploy expatriates for much broader purposes including the fostering of shared values and the transfer of knowledge. While some studies have demonstrated expatriates’ significance in effecting the resemblance between parent and subsidiary HR practices. The integration of HRM in this group format is suggested to be on the increase in connection with the rise of informal networking and knowledge transfer ‘spaces’.

Four major tasks of Global HRM

Staffing policy

Management training and development

Performance appraisal

Compensation policy.

Staffing policy

Staffing policy

Selecting individuals with requisite skills to do a particular job

Tool for developing and promoting corporate culture

View People as Resource ($in profit out)

Types of Staffing Policy

Ethnocentric

Polycentric

Geocentric

Ethnocentric policy

Key management positions filled by parent-country nationals

Advantages:

Overcomes lack of qualified managers in host nation

Unified culture

Helps transfer core competencies (and skills back)

Disadvantages:

Produces resentment in host country

Can lead to cultural myopia.

Polycentric policy

Host-country nationals manage subsidiaries

Parent company nationals hold key headquarter positions

Best suited to multi-domestic businesses

Advantages:

Alleviates cultural myopia.

Inexpensive to implement

Helps transfer core competencies

Disadvantages:

Limits opportunity to gain experience of host-country nationals outside their own country.

Can create gap between home-and host-country operations

Geocentric policy

Seek best people, regardless of nationality

not always possible

Best suited to Global and trans-national businesses

Advantages:

Enables the firm to make best use of its human resources

Equips executives to work in a number of cultures

Helps build strong unifying culture and informal management network

Disadvantages:

National immigration policies may limit implementation

Expensive to implement due to training and relocation

Compensation structure can be a problem.

The expatriate problem

Expatriate: citizens of one country working in another

Expatriate failure: premature return of the expatriate manager to his/her home country

Cost of failure is high: estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)

Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer

Strategic Role of

International HR

Strong fit between HR practices & strategy is required for high profitability

Sustained source of high productivity & competitive advantage in the global economy

HR policies need to be congruent with strategy – 4 Strategies pursued by international business

Multi-domestic = create value by emphasizing local responsiveness

International = transferring core competencies overseas

Global = realizing experience curve & location economies

Transnational = doing all these thing simultaneously

Molex – transnational strategy – building a strong corporate culture & informal management network for transmitting information within the organization.

International Labor Relations

Concern of domestic unions about MNEs

company can counter its bargaining power with the power to move the plant to another country

International business will keep highly skilled tasks in the home country & farm out low-skilled tasks to the foreign plants

International business will attempt to import employment practices & contractual agreements from its home country

Organized labor has responded by

Trying to establish international labor organizations

Lobbying for national legislation to restrict MNEs

Achieve international regulations on MNEs through UN

Not very successful because

Unions want to cooperate but compete with each other for jobs

Wide variation in union structure

Divergent ideologies about role of union in society & class conflict

1.) Lead with Confidence – During these troubling financial times, it’s natural to want to take the backseat until the road ahead becomes clear. However, companies need strong leadership to prosper, now more than ever. Providing direction inspires confidence in your employees and helps build a faithful staff. Businesses that lead effectively now will retain loyal staff to meet their present and future challenges.

2.) Communicate effectively – Making sure people have the information they need is the foundation for any good relationship. Being honest and open with employees is especially important at a time when they may be dealing with serious concerns outside of the office. Present worries might include a laid off spouse, the possibility of their own layoff, fears about not being able to pay the bills, etc. As their leader you have the responsibility to lessen any stress they might be feeling by communicating openly about the outlook for staff members at your company. Don’t forget to communicate frequently because your employees’ financial positions might be changing quickly right now.

3.) Recruit purposefully – The anticipated global shortage of workers has not gone away: it has just been postponed. The reason ? Baby boomers are choosing to work a little longer because their retirement savings have been deflated. Once the market comes back fully, you should expect a mass exodus as the boomers leave the workforce. Companies who make severe staffing cuts and don’t keep their HR people connected to potential hires will be caught severely short staffed. Savvy companies have a great opportunity right now to hire talented people who have been down-sized by other organizations.

4.) Make cuts strategically – Consider outsourcing the functions you can to help reduce costs, but don’t forget to take good care of any employees you might eliminate. Generous packages create goodwill and increase loyalty from those who remain. What’s more, the departing employees just might be more willing to return to work when times are better and your company faces the global staffing shortages that the recession postponed. Generous packages might seem out of the question in tight times but you should give serious consideration to offering the maximum that you can. Your company will be better able to recruit new staff in the future if its reputation is bolstered by how it treated people during the 2009 recession.

5.) Be strategic about delivering PD – Use your slower times to sharpen the skills, technical and personal, of your employees. This will help keep staff members engaged and equip them to provide the exceptional service that can sustain your company now and contribute to its prosperity later (see 6).

6.) Take great care of your customers – Remember the days when you attended networking events to stay connected, while secretly hoping you would not get too many new engagements because you did not know where you would find the staff, time or energy to provide the service? It all seems like a distant memory but it was probably less than 12 months ago.

What most business owners wouldn’t do if they could just have that problem again!

Instead you’re seeing business decline and you’re wondering how to regain it. Part of the answer is in training your people to be customer service specialists. Step back to the times when you only hired people who would go the extra mile to give your customers exceptional experiences with your company. Re-new your company’s customer focus now!

7.) Avoid layoffs with creative strategies – Before you cut staff, consider alternative ways to save money while still saving jobs. A day off without pay, work sharing arrangements, worker sharing with other companies, salary cut-backs, government assistance programs – these are only a few of the numerous possibilities that may work for you and your employees. Get creative!

Whether you consider yourself to have moxie or not, the current recession calls for courageous and inventive thinking. Implementing ideas like the seven above can not only help your company weather this global storm, but position it for full sail ahead when the storm has passed.

Problem faced in Global HRM:

Almost in every field of HRM, there is one or two problems occurs when domestic HRM goes globally. Some of them are as follow:

Training and Development:

The transfer of training techniques across cultures is fraught with difficulties for both trainers and trainee. Trainers working within multicultural setting need to be especially sensitive to their trainees’ needs and socio-cultural learning backgrounds. Both trainers and participants in the workplace bring to training courses a baggage of past and present educational experience that impact their reaction to organizational learning approaches.

Recruitment and selection:

Due to globalization many organization begin with the simple but difficult situation of having multiple candidates for each international position instead of a single choice. International human resource professionals often report that it is difficult enough to identify one employee, who can perform the international job, will accept the assignment.

Most international selections are still being made almost exclusively by line management, who do not share this decision – making process with IHR. This can mean that IHR is seen only as policy implementers and not as strategic business partners. Best practice here is for IHR to employ a value-added assessment selection system, to be consulted reviewed and included in these decisions.

Career planning and management :

In these days of globalization, rapid change, mergers and acquisitions is very difficult to accomplish career planning and management.

In fact, many excellent international assignment candidates are demanding to know what is next for them if they accept the international assignment. They want to ensure the company will value their international experience and, to the extent possible, help them with next steps in their career.

Compensation and benefits policies:

International assignment compensation and benefit policies vary widely across organizations. Many of them offer very lucrative packages; apparently making the assumption that financial incentive leads to superior international performance. The risk here is that this type of policy may attract those who see the financial reward as the single or most important motivation for the international assignment. The best practice is to seek candidates who see the financial reward as the single or most important motivation for the international assignment. The best practice is to seek candidates who balance financial motives with those of career development and international experience.

Domestic HRM Vs Global HRM:

Managing people globally is not the same as managing people in the domestic context. Though there is no difference between domestic and global HRM in terms of functions such as human resource planning, staffing, performance evaluation, training and development, compensation, industrial relation. Bit global HRM is more diverse, complex to practice than domestic HRM. Moreover, global HRM is highly susceptible to change.

Dowling et al (1993) suggest that global HRM differs from domestic HRM in the following factor:

Global HRM involves more functions and activities.

It has broader scope and a global view of issues.

Employees’ lives are more involved i.e. employees’ family lives are also taken into consideration in the international relocation and training decisions.

It involves change in emphasis as the domestic business evolves to become global firm.

It involves exposures to risk that arise out of different political, socio-economic, cultural environments.

It is subject to more external influence in the form of state actions, ideological, cultural difference across the nations.