Human Resource Management Practices
Similarities between the Domestic and International HRM
Human Resource Management, in different kinds of organizations plays a very crucial role (Sims, 2007). As a matter of fact, it is the center of corporate strategy. This is attributed to the fact it helps companies make performance improvements and form sustainable competitive advantages. What is more, it helps organizations have guiding role, especially with enterprise management.
General HRM is a term used to refer to activities undertaken by organizations for purposes of proper utilization of human resources. As such, international and domestic HRM have some similarities in how they function. This means all basic functions of these two are the same, regardless of whether they are definite in one country or in several. Such functions include utilization, motivation, procurement and allocation. What is more, both the domestic and international HRM have some major functions and activities in HR recruitment, performance management, training, industrial relations, development and compensation.
Another similarity is related to environmental forces, which greatly influence functions of HRM. Some of the external constraints include legal, economic, cultural and political. The impact these have on the manner in which HR functions are carried out in both the global and domestic environment (Sims, 2007).
What is more, both the international and domestic HRM have the same objectives. One of these objectives is that of making sure the organization has maximum satisfaction in as far as the demands for human resource are concerned. Another major objective is making sure the organization enjoys the highest level of effectiveness. This can be attained through interventions. The other HRM objective is to promote sustainable development of firms. This can be attained through maximizing development of internal and external human resource management.
Differences between the Domestic and International HRM Practices
Differences between the international and domestic HRM are very striking compared to similarities. So far as globalization goes, HRM activities are quite different from domestic operations. Reason for this is that Domestic HRM deals with employees from one nation only. International HRM on the other hand deals with operations across national boundaries. Due to this, the national patterns of domestic HRM are quite different from one nation to another. This is due to HRM factors coupled by institution, business structure, culture and competence. As such, differences refer to the manner they complete administrative functions in different environments (Sims, 2007).
Literature regarding HRM is plenty and indicated the differences between domestic and international HRM. Among the major distinctions in HRM comes essentially from interconnections among cultures and structure of specific societies.
The distinction between International HRM and domestic HRM is based on core activities. Some of these activities include development and training, recruitment and selection, expatriate management, performance management and rewards. Some of these activities need cultural sensitivity so as to make IHRM effective in cross-cultural management.
So as to understand differences above better, International HRM is defined as interaction to some dimension. These include Countries of Operation, HR Activities and the Type of Employees. Therefore, it can be pointed out the important variable that differentiates international HRM from domestic HRM is mostly the complexity to operate in different countries and employ different national employee’s categories. This is quite different from major differences between HRM activities performed
Standardization of HRM Practices
Standardization of MNE is defined as standardization of overseas subsidiaries’ management practices towards HQ practices. Some of the factors include organizational context, context of host country and strategic issues.
The organizational context includes strategy and firm structure, the size and maturity of firm as well as operation mode that is used. It as well includes relative significance of a particular subsidiary. The size of the firm in relation to MNE has impact on HRM practices. Closely linked to the size of the firm is the level of international experience.
A multinational firm, under strategic issues operates within the framework of worldwide conditions. Some of these conditions include external situations of religion, nation, inter-organizational networks and alliances as well as industry. Apart from the factors that influence international HRM strategy and the practice, they also have great influence on MNE goals.
Usually, factors that drive standardization are related. Mostly, they revolve around the environment host. Therefore, it is crucial to have an understanding of the host’s culture. This, is yet another driving force for standardization. Work behavior as well is culturally determined. It is contained in role definition and the expectations. It is supposed to be clearly stated if corporate culture can supplant or succeed other cultures. This however, is usually a subject that draws great debate. Often, what is meant by corporate culture of often translated to common practices instead of common values.
Three cultures that interact in order to influence standardization and adaptation include national culture in parent company, the national culture in subsidiary unit and corporate culture. The corporate culture serves as the delicate informal control mechanism. Additionally, it also serves as potential unifier. Standardization process can be attained through practices of HR which include staffing procedures and the criteria as well as training and development programs, staff rotation, the appraisal systems and corporate conduct code.
Research shows that cultures and the institutional context have great impact on HRM practices. Existing research presents evidence that MNEs can to a certain degree, adapt to national cultures where they operate. Additionally, subsidiaries that are consistently managed with national cultural experiences have been discovered to perform far better when compared to subsidiaries otherwise management.
The purpose of global standardization of HRM is reaching transparency, consistency and alignment of workforces that are geographically fragmented around common principles and objectives. Therefore, it is advantageous for MNE to adopt global corporate culture for each its subsidiaries. This will make it possible for organizations to realize goals, as it avoids cultural clashes.
The Role of Subsidiaries
In the MNEs subsidiaries plays a very crucial role. Among the major roles of these subsidiaries includes specifying positions of specific units. This can be carried out in accordance to how the units related to the rest of the selected organization (Kretshcmer, 2008). Additionally, they are often expected to perform the contributions. Apart from this, it is crucial to note that subsidiaries vary in the manner they function, power and resource relationships as well as initiative taking. They always carry out their functions in host-country environment. The position that is held by a particular subsidiary in a global family is quite a crucial aspect. This is especially true in the course of discussions on the transfer of work practices (Kretschemer, 2008).
The Global Innovators
The Global Innovator (GI) subsidiary is fountainhead of knowledge for other units (Morgan, Kristensen, & Whitley, 2001). The role of the subsidiary has become quite important as the MNCs move towards transnational model through which individual subsidiaries act as the center-of-excellence for specific product lines.
The Integrated Player
Integrated Players (IP) also take part in transfer of knowledge to other organization units but at some point they are at receiving end of knowledge flow from other units. Consequently, this kind of subsidiary is a crucial node in MNC network.
Subsidiaries with an implementer (IM) role do not engage in extensive creation of knowledge and as such, they provide little knowledge to other organizational units. They are also heavily dependent on knowledge inflows from either headquarters or other subsidiaries.
The Local Innovators
Local innovators (LI) are subsidiaries that are self-standing, they do not engage in creation of knowledge, but they never transfer the knowledge to other units in the organization nor do they receive knowledge from them. Typically, this state of affair occurs whenever knowledge is seen as idiosyncratic to be of any use in other units of the organization.
Every company has its own role to play. This, however, will depend on the company status among other factors. The best role any company can play that is starting to expand internationally is that of Local Innovators. This is attributed to the fact they have great knowledge regarding the local. The fact they do not need to transfer the knowledge to other units is an advantage in this instance.
Localization of HRM Practices
Expatriates localization has become increasingly familiar in recent days. This has proven too much as the companies need to reduce the number of assignees and control costs as well. There are a couple of factors that drive localization of HRM practices. These include factors of institutional environment, subsidiary roles, mode of operation abroad and cultural environment (Kretschemer, 2008). Majorly, localization is based on culture of the region where the subsidiary company is situated. This is attributed to culture of that specific region which always defines activities of the individuals concerned. As such, it is crucial to consider the expected role of the subsidiaries before settling on localization.
Localization appears to be the appropriate answer to majority of problems that are associated with HRM practices. Majority of people have great belief in localization as compared to standardization. As a matter of fact, the future of multinational companies is currently based on staffing at different levels with local employees. This is attribute to the fact localization is always based on equality motions in opportunity and fairness.
The prime reason behind why most companies prefer to move towards localization is cost savings. Though cost savings are a result, they typically other reasons as to why companies should consider localization in the first place. Often, it aligns the terms of employment with business purpose.
Another reason companies prefer localization is to improve equity among peers in the country of assignment. This is especially applicable when temporary assignees have the same role as local employees. Integration with the local culture and the business practices, along these line can be the reason for and result for localization and can be beneficial to a company in the face of globalization.
The Impact of the Culture and Institutional Context
HRM practices, just as majority of management practices are based on cultural beliefs, which are a reflection of the basic assumptions and the values of national culture in which organizations are embedded. This then leads to the question of what takes place in case the MNEs are interested in transferring some of their HRM practices overseas, especially in instances when assumptions underlying such practices do not fit with cultures of recipient-host countries. Failing to adapt HR practices to the host-country culture leads to negative results that can hinder performance of the subsidiary.
Some of the effects are as explained below:
Impact on the Recruitment and Selection
Always, recruitment plays a crucial role in HRM. In the environment, the importance of finding the appropriate individual for a job cannot be overly emphasized. This is due to the fact the decision of appointing an individual is one of the most crucial decisions employers make (Morgan, Kristensen & Whitley, 2001). Selections decisions while dealing with MNE should not be based on ethnic or tribal lines. The new environment challenges traditional approach to selection and recruitment.
Impact on Training and Development
There is a need to continually develop and train the workforce. This is meant for purposes of achieving competitive advantage. Training makes sure the employees develop appropriate skills, knowledge and attitudes that make it possible for them to carry out their jobs efficiently and effectively. Employees from varying cultures require a different kind of training. As such, the HRM is supposed to come up with programs that suit their employees best in their specific culture and environments. In turn, this will raise the costs involved.
Impact on Compensation
Wages do provide sources of motivation for different employees. In turn, this makes it possible for them to effectively perform. The amount and the nature of compensation is greatly determined by the culture and the environment of the employees. Globalization results to free labor mobility. Due to this, people from different culture interact freely. This however has great impact on HRM, especially when it comes to matters of compensation. International companies as well can advertise through the Internet as well as recruit employees from across borders.
Impact on Task Distribution
The participation of employees tends to enhance their contributions despite their environment or culture. As a matter of fact, there are different techniques of employee involvement. These might include joint consultation, suggestion schemes and quality circles (Morgan, Kristensen &Whitley, 2001).
Managers as well are supposed to have a vision. They are supposed to always have an understanding of what’s expected of them. Due to their Cultural Differences and complexity, the managers are supposed to be trained in a manner that enables them to think in a global manner but act locally. Additionally, there is supposed to be people succession for management. The ability of any organization to attain its business strategies in light of critical factors of success for the business are dependent largely on capability of the managers as developed in an organization in order to meet specific circumstances and demands. Some of these include quality leadership and innovation etc.
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Kretschmer, K. (2008). Performance evaluation of foreign subsidiaries (1. Aufl. ed.). Wiesbaden: Gabler Edition Wissenschaft.
Morgan, G., Kristensen, P. H., & Whitley, R. (2001). The multinational firm: organizing across institutional and national divides. Oxford: Oxford University Press.
Sims, R. R. (2007). Human resource management: contemporary issues, challenges, and opportunities. Charlotte, N.C.: Information Age Pub..