Unit-I: Concept of IHRM: Reasons for emergence of IHRM, Difference between IHRM and Domestic

HRM, Organizational dynamics and IHRM: Role of culture in IHRM, Challenges of International
Human Resource Management.

Concept of IHRM

In today's world businesses are in huge number which ranges almost worldwide, like in hotels,
software development institutions, BPO companies, educational institutions, mills, automobile
industry, factories, and man power suppliers. The main motto is to play the business ideas
cautiously and to achieve the target with the given or allocated money. Hence we need to consider
human resource management in a global perspective in-order to provide aid the domestic firms.

International human resource management (IHRM) is the practice of worldwide people

management. The purpose of international HRM is to facilitate the company, multinational
enterprise (MNE), to be unbeaten globally.

This brings about being:

(a) Competitive throughout the world;

(b) Efficient;

(c) Locally responsive;

(d) Flexible and adaptable within the shortest of time periods; and

(e) Capable of transferring learning across their globally dispersed units.

These requirements are significant, for example, large numbers of industries in North America and
Europe were being dominated by the global competitors.

Human resource managers are a business organizations 'people' managers, responsible for
managing a wide range of employee tasks. The general HR responsibilities and added tasks that
are specific to the branch operations of the department should be handled by the HR manager in a
MNC with the support of the branches and subsidiary bodies.

IHRM has grown rapidly among MNC's, which has actually made a difference globally in the
quantity and in the influence in recent year's competitive scenario. The major key to success in the
international context would be being recognized for the effective management. It is clear that the
significance of multinational companies and the impact of globalization on the concept of the

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IHRM are considerable. Also, notable that the reason for the IHRM has gained growing interest
from academics and practitioners, as the field is becoming more complex and global.

Due to increased globalization and easy mobility and communications between countries,
companies operate at international level. Major task for organizations which operate across
international boundaries is to manage the dissimilar stresses of the drive for integration and
differentiation. In broader sense, International human resource management process has same
activities as in Domestic HRM such as planning and staffing however domestic HRM is operated
in one nation And IHRM activities are involved in different countries. International Human
Resource Management is a branch of management studies that examines the design and effects of
organizational human resource practices in cross-cultural contexts. It occupies an exciting position
in the interstices of international business, human resource management and organizational
behaviour, scholarships. Theoretical studied explained that International HRM is the interplay
between three dimensions: HR activities, the types of people being employed in the organisation
and the different countries that an organisation is operating in (Dowling, 1999). Complexities
caused by these last two variables, are what differentiates international HRM from domestic HRM,
as the HR activities themselves are relatively similar.

Broadly defined, International human resource management is the study and application of all
human resource management activities as they impact the process of managing human resources
in enterprises in the global environment. IHRM can be explained as "The set of distinct activities,
functions and processes that are directed at attracting, developing and maintaining an MNC's
human resources. It is the aggregate of the various HRM systems used to manage people in the
MNC, both at home and overseas". An international organization or firm is one in which
operations take place in subsidiaries overseas, which rely on the business expertise or
manufacturing capacity of the parent company. Such companies or organizations bring with them
their own management attitudes and business styles.

Human resource managers of such organizations cannot afford to ignore the international
influences on their work. International human resource management play significant role in
providing solution to global business issues. Theorists explained that International HR
management denotes to an extension of HR that relates to having people working abroad. These
can be either expatriate staff, those who are recruited from or work within their own home
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countries (locally recruited staff), or even third country nationals (individuals from neither the
'parent' nor 'home' country, but rather a third country. The kinds of organizations in which this is
the case can range from those with a small office or subsidiary based abroad, to major
multinational corporations, international public-sector organizations, or international NGOs
(charities) with sites all over the world. It can also encompass an organization working in a joint
partnership with another organization overseas. Alternatively it could be a home based
organization with overseas offices or a company with selected departments which are offshore.

REASONS FOR EMERGENCE OF IHRM

Globalization of Markets: It refers to the merging of national markets into one huge global
marketplace. Now selling internationally is easier due to falling barriers to cross-border trade. A
company doesn‘t have to be the size of these multinational giants to facilitate and benefit from the
globalization of markets. It is important to offer a standard product to the worldwide. But very
significant differences still exist between national markets like consumer tastes, preferences, legal
regulations, cultural systems. These differences require that marketing strategies in order to match
the conditions in a country. To illustrate, Wal-Mart may still need to vary their product from
country depending on local tastes and preferences.

Globalization of Production: It refers to the sourcing of goods and services from locations around
the world to take advantage of national differences in the cost and quality of factors of production.
The idea is to compete more effectively offering a product with good quality and low cost. For
example, Nike is considered as one of the leading marketers of athletic shoes and apparel on the
world. The company has some overseas factories where has achieved a super production with low
cost. Unfortunately Nike has been a target of protest and persistent accusations that its products
are made in sweatshops with poor working conditions. The company has signaled a commitment
to improving working conditions, but in spite of the fact, the attacks continue.

Falling Barriers to Trade and Investment: The falling of barriers to international trade enables
firms to view the world as their market. The lowering of barrier to trade and investments also
allows firms to base production at the optimal location for that activity. Thus, a firm might design
a product in one country, produce a component parts in two other countries, assemble the product
in another country and then export the finished product around the world. The lowering of trade

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barriers has facilitated the globalization of production. The evidence also suggests that foreign
direct investment is playing an increasing role in the global economy.

Technological Innovation: Technological changes have achieved advances in communication,

information processing, and transportation technology, including the Internet and the World Wide
Web (www). The most important innovation has been development in the microprocessors after
that global communications have been revolutionized by developments in satellite, optical fiber,
and wireless technologies, and now the Internet and the www. The rapid growth of the internet
and the associated www is the latest expression of this development. Besides, innovations have
occurred in the field of the transportation technology.

HRM plays a key role in any organisation. It is the core of corporate strategy as HRM could help
company improve their performance, form sustainable competitive advantages, and have a
guiding role in the enterprise management. To quote from Dowling, et al. (2008: p2),

This concludes the first similarities between the two. As basic functions such as procurement,
allocation, utilization and motivation are the same whether they are specific in one country or
several countries. Both domestic and international HRM have same major functions and activities
in HR planning, recruitment, performance management, training and development, compensation,
and industrial relations.

Another similarity is related to the environmental forces that influence the function of HRM. These
external constraints include political, economical, legal, and cultural have significant impact on
how the HR functions are carried both in domestic as well as global environment (Aswathappa
and Dash, 2008).

Finally, both of them have similar basic human resource management objectives. Firstly of all, is to
ensure organization having maximum satisfaction in the human resource demands. Another
objective is to ensure effectiveness in the organisation through interventions. And then is to
promote sustainable development of firms by maximizing the development of internal and
external human resource management. The final similar objective is to maintain and encourage
human resources within the company to upgrade the potential human capital.

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 DIFFERENCES BETWEEN DOMESTIC AND INTERNATIONAL HRM

The differences between domestic and international HRM are more striking than their similarities.
In the context of globalization, HRM activities are differ materially from its domestic operations.
This is because DHRM is only dealing with one national employee while IHRM is operating across
national boundaries. National patterns of HRM are different from country to country due to the
factors of HR roles and competence, culture, institution, and business structure. Thus, differences
are mainly referring to how they complete administrative functions in different environments.

Many literatures about HRM have indicated the differences between domestic and international
HRM. According to Claus (2003), the main differences in HRM essentially come from the
interconnection between culture and structure of a particular society. Bratton and Gold (2007) state
that IHRM distinguished from DHRM in the core activities such as recruitment and selection,
training and development, rewards, performance management and expatriate management
require cultural sensitivity and effectiveness in cross-cultural multinational environment.
However, the work of Dowling, et al. (2008) point out that the key variable that differentiate IHRM
from DHRM is the complexity of operating in different countries and employing different national
categories of employees, rather than any major differences between HRM activities performed.

According to Morgan (1986), the International Human Resources Management is defined as the
interaction among these three dimensions: Human Resource Activities, Type of employees and
Countries of operation.
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It can be clearly seen from the above diagram that the Morgan's model of IHRM indicates
international HRM is more complex than the domestic HRM. It is complicated due to the following
six factors that differentiate domestic and international HRM: more HR activities, the need for a
broader perspective, more involvement in employees' personal lives, changes in emphasis as the
workforce mix of expatriates and locals varies, risk exposure, and broader external influences
(Dowling, 2008).

More HR Activities

IHRM requires a number of additional activities, which are unnecessary in a domestic context.
Typical examples are the consideration of international taxation, relocation and orientation,
administrative services, host-government relations and language translation services (Dowling, et
al., 2008).

Taxation systems differ significantly from different countries. For example, the tax rate in
developed countries such as UK and Australia is up to 25% depending on employee's income level,
which is very high. Conversely, in some developing and less developed countries, the tax rate is
much lower. For domestic HRM, managers only need to consider one national taxation system.
However, in an international environment, expatriates in the MNCs often have tax liabilities both
in home country and host country. Thus, international HR managers have to consider international

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taxation with its complicated tax equalization policies to ensure no tax incentive or disincentives
existed in the international assignment. Meanwhile, IHRM requires attention to resolve potential
problems in the international relocation and orientation activities, such as arranging for pre-
departure training, providing housing, recreation, medical care and immigration information, and
finalizing compensation details. HR department also need to provide administrative services such
as acquisition of visas and work permits for expatriates and maintain the relationship with
relevant government officials. In fact, host-government relations are an important activity in
MNCs, especially in developing countries. For example, it is crucial for people, who doing business
in China, to have a good personal relationship (known as 'Guanxi') with relevant government
departments and multinational managers as it will be really helpful for them to resolve potential
problems. However, US-based multinationals must be careful to cope with such relations to avoid
violate the US Foreign Corrupt Practices Act. Thus, international HR managers have to ensure they
are compliance with the procedures and regulations that mandated by the government of the host
country. Another additional activity in IHRM is providing language translation services for
expatriates whenever they needed.

Need for a Broader Perspective

Due to the diversity of employees in an international environment, HR managers are required to

have broader perspective on all the HR activities to ensure equity of treatment for different groups
(Aswathappa and Dash, 2008). For instance, a broader view that all expatriate employees should
receive special benefits such as health insurance and expatriate premium for taking on
international assignments.

More involvement in employee personal lives

For domestic HRM, involvement with employee's personal lives is only confined to issues such as
providing employee insurance programmes and offering assistance in relocating. However, the
involvement with staff's family member is limited. This is unlikely for firms operating
internationally. IHRM must involve broader compensation, including transportation, recreational
programmes, housing, children education, spouse employment and family healthcare for
expatriate and local staff.

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Effects of Expatriates and Local Workforce Mix

The complex workforce mix is another factor that contributes to the complexity of IHRM. HR
managers in MNCs must deal with the issues of political, economical, cultural, ethical, religious
and legal differences (Alrawi, 2008). Moreover, they are also required to focus on various HR
activities change. For example, since more well trained local staffs and managers available,
companies are encouraged to bring high-potential local workers to corporate headquarters.

Risk Exposure

Expatriate failure is a high-cost problem for MNCs. Due to the changeable foreign exchange rate
and location of assignment, the direct costs such as salary, travel, training and relocation expenses
can be over three times higher than the costs spend in domestic environment. Indirect costs such as
reputation damage and loss of market share are also with high cost risk. Other aspects of risk
exposure are terrorism and political instability. For example, the tragic 9/11 attack in New York,
civil and social upheavals, and military conflicts. In order to ensure physical safety of employees,
HR department also have to consider dynamic political and environmental risk when arranging
international meetings and may design emergency evacuation procedures for highly volatile
working locations.

Broader External Influences

IHRM activities are also influenced by more external forces. For example, government factors such
as Malaysia force HR managers to set affirmative action to provide equal employment opportunity
for the workforce and intend to increase employment and skill level of nationals (Dowling, et al.,
2008). State economy is an important factor for HR department to consider. Issues include
expensive labour cost in developed countries but cheap labour in developing countries. HR
managers operating activities in an international environment also need to concern their ways of
conduct. For instance, they have to understand the local ways of doing business and follow local
government regulations when dealing with the issues regard to labour relations, health and safety,
and taxation.

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In addition to complexity, there are still some additional important considerations in IHRM. As
Dowling, et al. (2008) point out, there are five variables that moderate the differences. The diagram
shown below is a model of five variables that explains such differences between domestic and
international HRM.

Source: Dowling (1999)

Detail explanations of these four additional variables are interpreted below.

Different Cultural Environment

Recruiting workers with different cultural backgrounds requires international HR managers to

coordinate policies and procedures to manage their employees from the firm's parent country as
well as its subsidiaries around the world. Culture is important in HRM as conflict may easily arise.
For example, recruit staffs from family members who may not have required working competence
could be seen as a good example in Indonesia to satisfy local expectations (Dowling, et al., 2008).
However, in the western people's view, this could be seen as nepotism. Another problem may
faced is culture shock such as psychological disorientation and strong desire to return to one's
home country which let expatriate unable to adjust emotionally to a new cultural environment.
Consequently, it will influence the performance of employees. Thus, helping expatriates to prepare
working and living in a new cultural environment become an important activity for HR
department.

Type of Industry

For firms in a multi-domestic industry such as distribution, retailing and insurance, HRM is
basically domestically oriented in structure and orientation as the competition is essentially
national. IHRM services may occasionally require.

For global industries such as aircraft and semi-conductor industries have competition in
multinational environment. Thus, it requires HRM to deliver the international support and takes
more strategic approach to the HRM's roles. HRM in these industries has to reflect both local and
global environments ideally.

Reliance of MNCs on Domestic Market

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The extent of reliance on domestic market may have considerable influence on multinational's
behaviour and HR practices. For example, small countries such as Sweden, Netherlands and
Switzerland may have outward-looking in HR practices. Thus, they are largely reliant on the
foreign markets for their growth. However, MNCs in large domestic markets have quite different
position due to the inwardly-oriented HR practices such as USA often offering the benefits of high
consumer demand. It shows that the size of domestic market is important while large size may
have significant impact on all aspects of MNCs' operation ways in its international activities.

Senior Management Attitudes

The final variable that distinguishes domestic and international HRM is the attitudes of senior
management. Managers are suggested to think globally when operating globally. However,
several reasons such as ethnocentrism, inward-looking, inadequate information and cultural
insensitivity may lead to the failure of develop international orientation among staff managers. In
such situations, managers may tend to minimize the differences between domestic and
international environment and mainly focus on the domestic issues. However, HR managers with
the goal of developing globally oriented staffs may contribute to the internationalization of their
company.

Conclusion

Similarities between DHRM and IHRM are referred to the major functions and activities, which
normally including HR plan, recruitment, people management, performance evaluation,
compensation, training and development, industrial relations and motivation. However,
differences between the two are mainly due to the complexity of operating in several countries and
having different cultural background employees. The complexity involved in more human
resource activities, broader perspective, more involvement of employees' personal lives, workforce
mix, risk exposure and more external influences. Explain the variables that distinguish IHRM from
DHRM by using Dowling's Model could interpret clearly about these differences. In addition to the
complexity of operating in a multinational environment, four other variables also need to consider.
These are cultural environment, industry types, extent of reliance on domestic market, and senior
management attitudes. It is recommended that HR managers in the MNCs have to focus on the

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interaction of different cultural attitudes and social values, concern about the difference between
legal and economic as well as different learning styles due to social and cultural differences.

ORGANIZATIONAL DYNAMICS AND IHRM

Organizational dynamics is defined as the process of continuously strengthening resources and

enhancing employee performances. It can also be described as how an organization manages and
promotes organizational learning, better business practices and strategic management.
Organizational Dynamics means those powers and procedures which facilitate progress, growth,
and alteration in an establishment

The Essential Elements

There are four fundamental business activities that contribute to an organization’s dynamics.

First, Planning requires management to structurally define departments and divisions. Managers
set measurable goals that will define future actions and decisions. Organizational planning may
involve inventory control, production scheduling, revenue forecasts and expense management.
Managers use these plans as the actionable foundation for all their regular duties.

Second, Goal execution involves implementing, evaluating and following up with expected
deliverables. In order to accomplish this, managers must allocate resources and responsibilities to
employees based on skills and schedules.

Third, Leadership involves hands-on, exemplary oversight that drives innovation, knowledge and
performance.

Fourth, Resource control refers to how executives and management establish systems that gather
data which is used to determine if goals are met.

Three Organization Types

Evolving from Static, Dynamic and Adaptive

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Static Organizations: Fixed practices, fixed size. Like static equations, these organizations have no
variables -- time doesn't change them significantly. They persist until some new organization
occupies their niche.

Dynamic Organizations: Fixed practices, variable size. Like dynamic equations, these
organizations vary in size over time, even though their underlying practices don't change much.
They go through a single life cycle, each growing rapidly as it occupies its niche, then declining as
its competitors implement better practices that steal away its clients.

Adaptive Organizations: Variable practices, variable size. Like complex adaptive systems, these
organizations vary their practices, seeking the constant improvement that launches life cycle after
life cycle, creating new products, services, and processes that hold on to clients generation after
generation.

They will soon motivate employees to climb adaptation curves by using ISOPs to fairly share the
wealth that each innovation creates. ISOPs ensure that the innovator, the predecessors, and each
shareholder in the corporation benefits.

They will displace dynamic and static organizations in economic competition, so that within a
generation, most people will have learned to expect continual improvement in their life experience.
The fact that their ancestors once worked at the same job in the same way for an entire lifetime will
seem almost as incredible as the fact that people used to stay at jobs they didn't thoroughly enjoy.

Organization Dynamics is a unique approach to business that motivates and inspires high-
performance cultures by putting people first.

Across all types of industries and at all levels of business, advisor Chris Boyce uses Organization
Dynamics to solve operational challenges, improve relationships and bring people together with
two common goals: Mutual success and people focused results.

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 ROLE OF CULTURE IN IHRM

Cross culture management is all about culture. Basically human races came with different
background. "Cultural background". The way of doing things in one culture may not be the way in
other culture. What is good in one culture may be bad in other culture. Some time the activities are
all the same in two different cultures, but two different meanings, two different interpretations.

When person from one cultural background, meet, interact with, understand and deal with person
from other cultural background. That is cross-cultural management. Some people are in favor of
the world is converging; all things are going to be same. They are right. Some people are arguing
still the world has divergence. They are also right. Don’t fight over this issue. We are smart people.
Learn how to manage both the convergence and divergence. That is the key to success.

For example: In USA, it is performance that counts. based on that you will be give higher
assignments and promotions will be given. In Indian companies, performance is not the main
criteria. It is "Organizational compatibility" that counts. That is the employee "fit" in to the
organization that counts. India is a High context society. The "fit" in to the organization has to be
interpreted in Indian way.

The business has different interpretation. IN USA, doing business means creating organizations
wealth. In India doing business means "Individual wealth". On recruitment, In USA it is the
process of selection, In India it is the process of rejection. And the difference goes on...

Certainly, the differences are innumerable. Increasing an individual's or an organization's cultural

intelligence is not an easy task.

Importance of Cross culture management:

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Cross Cultural Communication can be challenging yet highly rewarding if one comprehends and
respects the differences among people of diverse culture, and can go beyond the superficial
without any judgment.

With the continuing interest and increase in globalization and the diversity in the workplace, cross
cultural management has today become an important element of organization life and therefore
assumes great relevance. Canada is a fascinating mix of many different sub-cultures and ethnic
groups blending at a rapid pace with the main stream culture. Each groups and sub-group has its
own characteristic style of nonverbal and verbal communication styles offering in its wake both
opportunities for personal and corporate growth and presents challenges relating to
communication.

A key to cross cultural change management is to realize that what was acceptable in the past is not
necessarily relevant today; the world is constantly converging on some issues and continues to be
divergent on many others. Any time a person from one cultural background meets and interacts
with another person from a different culture, the magic of cross cultural communication occurs.
Cross cultural communication therefore is an art of managing the convergences and divergences
that exist in the social, business and cultural fabric of society.

There are myriad of cultures such as national cultures, subcultures (based on regions, tribes and so
on), organizational or corporate cultures, industry cultures, professional or functional cultures to
which each of us belong in some way or another. For that reason, culture can be defined as a
shared system of values, beliefs, and attitudes of people, and because people are most important in
the process they will have different sense of time, of space, of humor, of negotiating, of perceptions
and have different expectations. The way of communicating therefore will not be the same from
one country to another country and it is important to know some values of other cultures to avoid
misunderstandings. Cross Cultural Communication is interactive and calls for reflective listening.
Miscommunication will occur even with all the goodwill if there are significant cultural
differences.

It is also important to accept the logic of time and space where time is seen from different angles by
different people. Time in the West is seen as being quantitative and measurable while in the East it
is taken to be an unlimited continuity always unraveling itself. There appears to be no urgency for

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rushing things through. This difference in time concept can have its effect on negotiations or
conflict resolution process. Cultural approach to time and communication should always be
considered in good faith. A good reading on the subject of Time and Space in Cross Cultural
Communication is Le Baron, Michelle’s, “Bridging Cultural Conflicts: A New Approach for a
Changing World.”

Every organization has its own culture within which it operates and it is only the leading
companies who have mastered their ability to shape the culture to drive their business and create
an environment conducive to achieve excellence. Increasing an individual’s or an organization’s
cultural intelligence is not an easy task.

Culture can be analyzed from a country, language, religion, values and ethical aspects, and will
necessarily include the way people are treated, and managed in the organization, the diversity, the
work values, entrepreneurial business, cross cultural venturing and alliances.

Successful cross cultural communicators need to educate their clients to show respect for the others
point of views, withhold judgment, tolerate ambiguity, recognize one’s own cultural biases, and
differences, learn to be flexible and discover points of references or common grounds from where
to take off. Successful cross cultural communicators must also teach their clients to recognize that
there will always be variations within groups as there will be between them. Knowledge and
information therefore are two vital keys to understanding cross cultural communication. Clients
may also be advised to learn essential vocabulary of foreign languages, learn to understand and
appreciate differences in people, avoid stereotyping people, and essentially look for similarities.
Non-verbal language is very important in face-to-face communications because it conveys feelings,
intentions, and reactions. This is precisely why I believe that non-verbal communications should
never be underestimated because not only are they equally important as verbal communication but
they are the only constant factor across different cultures.

The feelings of anger, joy, sadness, love, pain, rejection, success or failure are all alike in every
culture. The difference however, lies in how these feelings should be exhibited in public and which
ones are considered appropriate or inappropriate. There is always a thin line between what is
considered appropriate in certain cultures. Japanese for instance will often pause during
conversation to think before responding and that does not mean being rude or distant. Likewise

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humor is not always appreciated in a Japanese business conversation. Similarly in Latin America
there is more emphasis on relationship building, timing and social appropriateness. In the
corporate environment in Canada, however, firm handshakes, strong eye contact, and smiles are
encouraged. Business associates who are conversing face-to-face typically stand about a meter
apart. Dress is relatively conservative and formal whereas in Latin America, there is less physical
distance between people, softer handshakes, more touching and abrazos, and greater use of hand
and arm gestures. Business dress tends in Latin America to be more fashionable which is
impressive in a sense.

It is imperative to understand traditions, understand the hierarchy systems and the decision-
making processes in each culture. Understanding the basic facts of culture also requires
understanding its socio-economic business rules because people in foreign lands conduct their
businesses in the manner they think is appropriate. It is also absolutely necessary to understand
how one is being perceived by counterparts from other cultures; this is a challenge of self-
awareness. The other factors that need to be understood are the role between task versus
relationship in different cultures, the interplay of time and space in different cultures stated above,
and learning to overcome the differences.

I would say it is worth noting that most of the time people from different cultures do get on well
with each other. While we may be different people we nevertheless share a common humanity and
the common will to succeed. Knowledge and information, trust and patience go a long way in
bridging the cultural divide; and at the forefront of it all are the Cross Cultural Change Managers
leading the way in Cross Cultural Communications, as Ambassadors and Catalyst of Change.

It is extremely important because of the ethnic and cultural diversity that exists within our
organizations today. In addition, many companies are global with divisions all over the world.
One must understand the cultures involved for the organization to run as proficiently and
efficiently as possible. What works for one group, may not work for another. One critical objective
is to get a culture to mirror organizational culture so that there are no misalignments, gaps, and
disconnects.

Everything must work in sync, and in harmony for the organization's stability and survivability.
Demographics continually change; therefore organizations must be flexible and ready to address

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that change. To not address that change would put the organization itself at risk of future failure.
Today, organizations must understand that if there is anything that is stead-fast and unchanging, it
is change itself. Change is inevitable, it will always occur. How organizations deal with that
change can determine success or failure. Cultural management is key to success.

More over if we understand other cultures means better communications between people which
equals better outcomes more productivity

ISSUES IN CROSS CULTURE MANAGEMENT

The large size of organizations today presents employees with an unparalleled opportunity to take
on challenging assignments worldwide, participate in cross-functional teams working across
multiple geographies, and grow their careers in various disciplines of their choice. That same
breadth of the organization presents me with the challenge of successfully navigating cross-
cultural issues to ensure that our employees are satisfied and delivering to the best of their ability
as we work together to meet aggressive corporate goals. Unlike the United States, where many
believe that any child can grow up to be President, we know that Indian culture teaches us to
respect hierarchies. As a result, individuals sometimes respect coworkers more for their title or
position in the company, rather than for their contributions in the workplace.

We should be working as teams and helping our teams – and the individuals within those teams –
to feel comfortable and confident enough to challenge the ways in which we do things and be
brave enough to recommend new tools and methods we should try. The title or geographical
location of the person with whom we are speaking should not discourage the open flow of ideas.
“Respect for the Individual” irrespective of the title is one of the core values companies should
highlight. Helping employees to understand that diversity of thought and action is a beneficial
business tool that is cherished and supported in the organization should be a primary focus. One
of the ways in which we are addressing this challenge is by focusing on accountability and
ownership.

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Of we have very clearly defined our employees’ roles and responsibilities, letting them know what
they are accountable for, what we expect of them, and what they have to achieve to progress in
their careers. For example, if an employee is having difficulty meeting a commitment, he or she
needs to know that it is perfectly acceptable and even necessary to reach out and ask for help early
on. This is part of our overall performance transformation initiative, a disciplined program to
improve individual employee performance through focused business metrics and increased
accountability. In a related initiative, my team is mapping out the many different career paths
available to our employees.

The aim is to create transparency about the promotion and job rotation process and make explicit
what is expected of employees before they can move from one position to the next to help them set
and achieve personal development goals. Regular surveys of employees, and in response to their
feedback, adjustment of office hours, fine-tuning of transport issues, and focus on career
development by providing all the training and development resources people need to ensure that
they have the necessary skills for their roles is vital in the work scenario today.

We should be creating a community environment within the office facility by sponsoring fun
activities such as sporting and cultural events to help employees bond with each other and foster a
positive and collaborative relationship across our workplace. By addressing a critical, cross-
cultural issue, my team and we have to create a vision for our organization that goes beyond
serving as an extension of our offices in the United States and other locations into something
unique and inspiring. As employees grow to believe that the success of the business is something
within their power to influence, individually and in groups, their work reflects their increasing
motivation and enjoyment levels, benefiting us all.

Cross-cultural teams can have their fair share of problems once the novelty of interacting with new
people fades. From simple issues like understanding language idioms to more complex work
culture issues, there is scope for a lot of problems. Global organizations are transferring people
increasingly to other countries which create cultural diversity within work teams. Though teams
are now an accepted form of planning, strategizing and operation, team based management
techniques are still evolving world over and when you introduce the additional element of cultural
diversity, it throws a whole new spanner in the works!

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Potential issues in Cross Cultural Teams:

A) Communication, Language and Expression

The quality of communication is a key concern in cross cultural teams. Everybody could be
speaking English, but certain forms of slang or colloquialisms may not be clearly understood
leading to misinterpretations. Teamwork is a collective effort and all the players have to fully
understand the direction that the discussion is taking. Misinterpretations can be kept to a
minimum if everybody aims for clarity; otherwise team effectiveness is bound to suffer. To prevent
problems associated with miscommunication, team members have to be encouraged check with
each other for clarity either through paraphrasing or by asking questions. Paraphrasing basically
involves restating a point and then asking - "Is that what you meant?"

Communication problems are particularly significant in cross cultural ‘virtual’ teams. Here are an
example of two kinds of virtual teams:

1. The international virtual team that typically interacts across continents and countries, to
collaborate on a common task. This is almost always a cross cultural team.

2. Virtual teams within the same country or city when a part of the team opts for telecommuting
– they use email and other forms of telecommunication technologies to coordinate work.

Both types of teams will work on a project without regular face-to-face interaction, and therefore
have to make their written email communication and telephone conversations as clear as possible.
They also have to develop a work ethic of prompt response to queries, if this is not forthcoming it
can be a little unnerving and there is no chance of you dropping by the office of your team
colleague to discuss the issue.

In the international virtual team with its cross cultural mix of people, it should be expected that
some amount of ambiguity is bound to creep in. Care has to be taken with wordings especially
when there is disagreement on an issue. Even mildly sarcastic comments meant as a joke can be
misinterpreted by a team member in another country and cause a conflict.

The other issue with international virtual teams is decision making. Decision making is a team
activity and given the time zone differences, the team has to find a mutually agreeable time band

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for direct communication through conference calls or video conferencing. If there is a great deal of
divergence and disagreement on the right course of action to be adopted, then a stalemate may be
reached. The team may need to follow up with lots of explanatory emails and calls before they
reach a consensus.

B) Work Style

Work styles and approaches may also vary when a team has a cross-cultural mix of individuals.
Some work cultures foster individual thinking and offer rewards for individual contributions– like
the American’s for instance. In some work cultures people are uncomfortable with independence
on the job and prefer to be tied to the apron strings of the boss in decision making! When your
team has a mix of styles, the individualistic team members may prove to be aggressive team
players while the not-so-individualistic ones may merge into the team and outwardly seem to
contribute very little to the team process. It is important to draw out and get the best out of all the
team members despite the differences in personality types.

C) Dominating Influences

There are concerns that a section of the team that has a certain cultural similarity or homogeneity
may attempt to dominate the team process and overrule the rest of the team. The dominant group
within the team may try to swing decisions towards a direction that they are comfortable with.
This can create a frustrating environment for the rest of the team.

D) Motivators and Expectations From the Job

Motivators are basically the factors that indicate the things that make a person tick in a business
and team environment. Team leaders who handle cross-cultural teams usually find that the factors
that motivate each team member vary. The motivators for working professionals can range from
tangible rewards such as monetary increments, incentives and career progression, to intangibles
such as job satisfaction, praise and encouragement or recognition from top management. It is
essential to make the effort to gauge individual motivators in order to encourage and motivate
each team member to excel at their roles. In the absence of the right stimulus, the individuals may
lack the enthusiasm and drive necessary to perform their role within the team

Making it Work

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Cross cultural teamwork is going to increase as businesses expand on a more global scalemeaning
that people from diverse backgrounds interact on a regular basis as a team. Many large
corporations have clients with whom they work across multiple countries and these clients look for
integrated global solutions. In such a scenario the cross cultural team has a definite advantage in
being able to understand the needs of their clients better.

The key to making the multi-cultural team work well, is focusing on the objectives of the team. The
objective is the main output that a cross cultural team can potentially deliver. Team output is
usually better when there is diversity of experience among the team players. This applies to any
team output, whether or not multi-cultural. The chances of drawing out innovative thinking gets
amplified when there is diversity. This is the factor that works in favor of cross cultural teams. The
general consensus among experts is that the multi-cultural experiences that individual team
members bring to the discussion tends to lead to superior creative solutions.

The problems and conflicts are certainly going to be there just as one would have conflicts and
problems within teams who belong to the same market. Pre-emptive measures in areas like
communication, information sharing, motivation drivers, and group dynamics are called for to
assist in the cross cultural team process. The goal should be to try and build on the strengths of
such cross cultural teams, minimize conflicts, and diffuse the occasional miscommunication that
diversity creates.

Geert Hofstede’s Dimensions of Culture

Geert Hofstede defined national culture as the set of collective beliefs and values that distinguish
people of one nationality from those of another. In his original work, Hofstede identified four
important dimensions in national culture:

1) Uncertainty Avoidance

2) Power Distance

3) Individualism versus Collectivism

4) Masculinity versus Femininity

5) Confucian dynamism (long-term and short-term orientation)

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1) Uncertainty Avoidance

This dimension refers to the extent to which people feel comfortable when they are exposed to an
ambiguous or uncertain situation. People in a low uncertainty avoidance society are more willing
to take risks and appreciate flexibility and informality in the workplace. On the contrary, people in
a high uncertainty avoidance society tend to be risk averse and favor rigid formal decision-making
processes in the workplace.

Under high uncertainty avoidance:

a) Security is a strong motivator relative to achievement or self-fulfillment.

b) Order and predictability are paramount.

c) Rules are important and must be obeyed to avoid chaos.

d) Communication is direct and unequivocal to avoid confusion (Often this directness in high
uncertainty avoidance countries is mistaken for rudeness).

In low uncertainty avoidance societies, managers are allowed to exercise more latitude and
discretion in their decision making rather than relying on rigid internal rules and regulations.

Countries that exhibits the culture of high uncertainty avoidance: Germany, Spain, Portugal,
Turkey, South Korea, Greece, Portugal, Latin America, Belgium, Japan, France

Countries that exhibits the culture of low uncertainty avoidance: the United States, Malaysia,
India, the United Kingdom, Singapore, Denmark, Sweden, Hong Kong

From Organization’s Perspective –

A) Impact on Manager: A compensation specialist advises a Singapore company to adopt a

different compensation plan for its sales force in Japan. Unlike the home sales force, which has low
base pay and high commissions, the Japanese sales representatives will receive high base pay and
lower commissions.

B) Impact on Managed: Before beginning a project, a French employee of a global non-profit

organization asks copious questions to ensure perfect understanding of the manager’s
expectations.

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Impact on Compensation Policies and Practices –

In countries that are Low on uncertainty avoidance, one can find Performance-based (at risk) pay;
external equity focus; flexibility; broad salary banding (few pay grades). On the other side,
countries that are high on uncertainty avoidance shows limited use of performance-based pay; pay
consistency and predictability.

2) Power Distance

Power distance refers to the extent that people have an equal distribution of power.

In a large power distance culture, power is concentrated at the top in the hands of relatively few
people whereas people at the bottom are subject to decisions and instructions given by superiors.
Conversely, in a small power distance culture, power is equally distributed among the members of
the society. It is important to note that the particular predominant perspective on power distance is
held and reinforced by most members of the society.

Managers in high power distance societies tend to believe in giving subordinates detailed
instructions with little room for interpretation. Subordinates are supposed to respect the authority
and superiority of upper management.

The “mechanistic characteristics” of high power distance cultures, such as

a) Inequality among the members in the society,

b) Lack of free communication across different levels of the hierarchy, and

c) Centralized control

On the contrary, the “organic characteristics” of low power distance cultures, such as

a) Lack of hierarchical authority, and

b) Less centralization

…tends to promote employee interaction, lateral communication and less emphasis on the rules.

Countries that exhibit the culture of high power distance: Malaysia, Latin America, Middle East,
China, Mexico, Panama, Indonesia, and India

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Countries that exhibit the culture of low power distance: Austria, Australia, New Zealand,
Ireland, Denmark, Israel, Scandinavian Countries, the United Kingdom, and the United States

From Organization’s Perspective –

A) Impact on Manager: Two headquarters’ managers demonstrate the effects of their cultures. A
Saudi manager remains aloof from subordinates, tends to retain significant projects rather than
delegating them and expects subordinates to step forward quickly to assume blame when things
go wrong. On the other hand, a Danish manager enjoys sharing assignments and credit with
subordinates but always assumes blame for any problems.

B) Impact on Managed: A British training specialist goes to work for a Malaysian domestic
company. He cannot understand why his attempts to offer suggestions are coldly received and
why he is receiving poor performance reviews.

Impact on Compensation Policies and Practices –

In countries or cultures that emphasizes on low power distance, one can observe employee
participation and involvement in reward determination and distribution techniques; profit
sharing; gain sharing etc. On the other hand, in cultures with where high power distance
dominates, no employee participation/involvement will be noted. One can note status distinctions
reinforced by pay and rewards.

3) Individualism versus collectivism

Individualism means that people seek and protect their own interests over the common goal of the
society and their role in the society.

In an individualist culture, people are comfortable with having the authority to make a decision
based on what the individual thinks is best. On the other hand, in collectivistic culture, people tend
to belong to groups and look after each other in exchange for loyalty.

a) In individualistic societies, employees are provided with a great deal of personal freedom and
autonomy. On the other hand, collective cultures do not usually allow the same amount of
freedom and independence necessary for organizational members to think creatively and thereby,
fail to cultivate an environment that fosters an innovative spirit.

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b) While an individualist culture tends to emphasize individual merit or achievement, collectivistic
culture measures contributions to teamwork and group achievement.

c) Collective cultures put a great deal of pressure on their members to conform to one another
without their being aware of it. The overwhelming and unconscious pressure for conformity and
uniformity in collective cultures does not cultivate an environment for diversity and provides less
room for people to deviate from established norms, thus impeding the innovation process.

Countries that exhibit individualism culture: Sweden, the United States, Canada, the United
Kingdom, Australia, France, Italy, Netherlands, Italy, Belgium

Countries that exhibit collectivism culture: Ecuador, Colombia, Hong Kong, Latin America,
Taiwan, Pakistan, Indonesia, South Korea, China,

From Organization’s Perspective –

A) Impact on Manager: A U.S. manager in a Latin American country plans to promote an

individual based on her work on an important project. Other managers explain that they use a
broader range of factors in this decision, including evidence of loyalty.
B) Impact on Managed: The performance of a South Korean sales force improves dramatically
when incentives are changed from individual rewards to team bonuses.

Impact on Compensation Policies and Practices –

In collectivism cultures, companies should emphasize on group-based contingent rewards; non-

economic rewards that satisfy recognition needs with minimal individual distinction. In
individualistic cultures, companies pay more attention on individual-based contingent rewards;
individual praise and recognition.

4) Masculinity versus Femininity

Masculine Culture

Characteristics of masculine culture:

a) A masculine culture is basically a performance-driven society where rewards and recognition

for performance are the primary motivational factors for achievement.

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b) In masculine cultures some major innovations are simply the outcome of financial rewards,
prestige and a sense of accomplishment.

c) In societies that are dominated by masculine culture, people are supposed to be competitive,
ambitious, and assertive and risk taking, in order to achieve their goals. This type of culture tends
to give the utmost respect and admiration to the successful achiever who fulfills his or her
ambition and demonstrates assertiveness and willingness to take risks in order to achieve goals.

Feminine Culture

Characteristics of feminine culture:

a) In feminine cultures, people tend to emphasize the quality of the “whole” life rather than
money, success and social status, which are easier to quantify.

b) Organizations with a feminine culture are not as competitive as those with a masculine culture,
because the former places higher priority on concern for others and little distinction is made
between men and women in the same position.

Countries that exhibit Masculine culture: Switzerland, the United States, the United Kingdom,
Mexico, Germany, Japan, Slovakia, Hungary, Austria, Venezuela, Italy

Countries that exhibit Feminine culture: Denmark, Finland, Norway, Sweden, Scandinavian
Countries, Netherlands, Chile, Thailand

From Organization’s Perspective –

A) Impact on Manager: A Swedish company promotes employee development practices such as

coaching and mentoring that emphasize providing empathy and support. A manager in Japan has
trouble performing this part of job.

B) Impact on Managed: An HR department in Austria has been instructed by its Danish

headquarters to implement a new work-life balance program. They try, but the program is not well
accepted or implemented locally.

Impact on Compensation Policies and Practices –

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In companies that exhibit feminine culture, one can note that strong emphasis being placed on
social benefits; quality of work life; work-life balance; job security; emphasis on sharing versus
competing for rewards. Masculine cultures emphasizes on performance-based pay; competition in
pay, promotion and recognition.

5) Confucian Dynamism (or long-term versus short-term orientation)

Using a different survey instrument called the “Chinese Value Survey (CVS), Hofstede and Bond
identified a new cultural dimension, “long-term verses short-term orientation”. In their analysis
they found that societies with long-term orientation show following characteristics:

a) Adaption of tradition to the modern context

b) High savings ratio driven by thrift

c) Patience and perseverance toward slow results and

d) Concern with respecting the demand of virtue

On the other hand, societies with short-term orientations exhibit the following characteristics:

a) Respect for traditions

b) Lower savings rates

c) Quick result orientation, and

d) Concern with possessing the truth

Confucian dynamism may reflect a society’s search for virtue rather than truth. Along with the
different proclivity toward uncertainty avoidance, short-term versus long-term orientation also has
been identified as a main source of conflict resulting in decreased performance in international
joint-ventures.

Countries that exhibit long-term orientation: China, Japan, South Korea, Brazil, India

Countries that exhibit short-term orientation: West Africa, Philippines, Norway, the United
Kingdom, the United States

From Organization’s Perspective –

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A) Impact on Manager: A Chinese manager faced with promoting one of two Nigerian supervisors
chooses the one with the most tenure and best work attendance.

B) Impact on Managed: A Nigerian supervisor cannot understand why he’s been passed over for
promotion in his Chinese-owned company, though he is well placed in this community and has
given his manager appropriate gifts.

CHALLENGES OF INTERNATIONAL HRM

Human Resource Management used to be considered as other conventional administrative jobs.

But over a period of time, it has evolved as a strategic function to improve working environment,
plan out human resources needs and strike a balance between the organization and employers in
order to increase organizational productivity and meet organizational goals. Not to exaggerate but
in today’s highly competitive world it has gradually become one of the most important functions
of an organization. It is really a huge challenge to understand the psychology of workforce, retain
the best talents of the industry, motivate them to perform better and handle diversity while
maintaining unity simultaneously, especially in countries like India, where it is still evolving.
Globalization has resulted in many positive developments but it has left many concerns for HR
managers. In today’s tough world and tight job market, coordinating a multicultural or diverse
workforce is a real challenge for HR department.

Human resource managers are on their toes to strike a balance between employer and employees
keeping in mind the recent trends in the market. They may find themselves in dire consequences if
they are not able to handle the human resource challenges efficiently.

The Challenges of Workplace Diversity: The future success of any organizations relies on the
ability to manage a diverse body of talent that can bring innovative ideas, perspectives and views
to their work. The challenge and problems faced of workplace diversity can be turned into a
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strategic organizational asset if an organization is able to capitalize on this melting pot of diverse
talents. With the mixture of talents of diverse cultural backgrounds, genders, ages and lifestyles, an
organization can respond to business opportunities more rapidly and creatively, especially in the
global arena (Cox, 1993), which must be one of the important organizational goals to be attained.
More importantly, if the organizational environment does not support diversity broadly, one risks
losing talent to competitors.

This is especially true for multinational companies (MNCs) who have operations on a global scale
and employ people of different countries, ethical and cultural backgrounds. Thus, a HR manager
needs to be mindful and may employ a Think Global, Act Local approach in most circumstances.
The challenge of workplace diversity is also prevalent amongst Singapore’s Small and Medium
Enterprises (SMEs). With a population of only four million people and the nations strive towards
high technology and knowledge-based economy; foreign talents are lured to share their expertise
in these areas. Thus, many local HR managers have to undergo cultural-based Human Resource
Management training to further their abilities to motivate a group of professional that are highly
qualified but culturally diverse. Furthermore, the HR professional must assure the local
professionals that these foreign talents are not a threat to their career advancement (Toh, 1993). In
many ways, the effectiveness of workplace diversity management is dependent on the skilful
balancing act of the HR manager.

Managing Change: Who wants to change their ideology or way of working? Neither you nor I.
How can we expect others to change then? Bringing change in organizational processes and
procedures, implementing it and then managing it is one of the biggest concerns of HR managers.
Business environment is so volatile. Technology keeps changing every now and then. All thanks to
globalization. Upgrading the existing technology and training people for them is a real headache
for HR department. The success rate of technology change depends how well HRD can handle the
change and manage people issues in the process.

Retaining the Talents: Globalization has given freedom to working professionals to work
anywhere in the world. Now that they have endless lucrative opportunities to work, hiring and
retaining the best industry talent is no joke. Maintaining harmonious relations with them,
providing excellent work environment and offering more remuneration and perks than your
competitors can retain and motivate them.
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Conflict Management: HR managers should know how to handle employee-employer and
employee-employee conflicts without hurting their feelings. Although it is almost impossible to
avoid conflicts among people still handling them tactfully can help HR managers to resolve the
issues. They should be able to listen to each party, decide and communicate to them in a
convincing manner in order to avoid future conflicts.

Planning a Mentoring Program: One of the best ways to handle workplace diversity issues is
through initiating a Diversity Mentoring Program. This could entail involving different
departmental managers in a mentoring program to coach and provide feedback to employees who
are different from them. In order for the program to run successfully, it is wise to provide practical
training for these managers or seek help from consultants and experts in this field. Usually, such a
program will encourage organizations members to air their opinions and learn how to resolve
conflicts due to their diversity. More importantly, the purpose of a Diversity Mentoring Program
seeks to encourage members to move beyond their own cultural frame of reference to recognize
and take full advantage of the productivity potential inherent in a diverse population.

Organizing Talents Strategically: Many companies are now realizing the advantages of a diverse
workplace. As more and more companies are going global in their market expansions either
physically or virtually (for example, E-commerce-related companies), there is a necessity to employ
diverse talents to understand the various niches of the market. For example, when China was
opening up its markets and exporting their products globally in the late 1980s, the Chinese
companies (such as Chinas electronic giants such as Haier) were seeking the marketing expertise of
Singaporeans. This is because Singapore’s marketing talents were able to understand the local
China markets relatively well (almost 75% of Singaporeans are of Chinese descent) and as well as
being attuned to the markets in the West due to Singapore’s open economic policies and English
language abilities.

With this trend in place, a HR Manager must be able to organize the pool of diverse talents
strategically for the organization. He/She must consider how a diverse workforce can enable the
company to attain new markets and other organizational goals in order to harness the full potential
of workplace diversity.

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Leading the Talk: A HR Manager needs to advocate a diverse workforce by making diversity
evident at all organizational levels. Otherwise, some employees will quickly conclude that there is
no future for them in the company. As the HR Manager, it is pertinent to show respect for diversity
issues and promote clear and positive responses to them. He/She must also show a high level of
commitment and be able to resolve issues of workplace diversity in an ethical and responsible
manner.

Control and Measure Results: A HR Manager must conduct regular organizational assessments
on issues like pay, benefits, work environment, management and promotional opportunities to
assess the progress over the long term. There is also a need to develop appropriate measuring tools
to measure the impact of diversity initiatives at the organization through organization-wide
feedback surveys and other methods. Without proper control and evaluation, some of these
diversity initiatives may just fizzle out, without resolving any real problems that may surface due
to workplace diversity.

Motivational Approaches: Workplace motivation can be defined as the influence that makes us do
things to achieve organizational goals: this is a result of our individual needs being satisfied (or
met) so that we are motivated to complete organizational tasks effectively. As these needs vary
from person to person, an organization must be able to utilize different motivational tools to
encourage their employees to put in the required effort and increase productivity for the company.

In our changing workplace and competitive market environments, motivated employees and their
contributions are the necessary currency for an organizations survival and success. Motivational
factors in an organizational context include working environment, job characteristics, appropriate
organizational reward system and so on.

The development of an appropriate organizational reward system is probably one of the strongest
motivational factors. This can influence both job satisfaction and employee motivation. The reward
system affects job satisfaction by making the employee more comfortable and contented as a result
of the rewards received. To be effective, an organizational reward system should be based on
sound understanding of the motivation of people at work.

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Gain-sharing: Gain-sharing programs generally refer to incentive plans that involve employees in
a common effort to improve organizational performance, and are based on the concept that the
resulting incremental economic gains are shared among employees and the company.

Conclusion

The role of the HR manager must parallel the needs of the changing organization. Successful
organizations are becoming more adaptable, resilient, quick to change directions, and customer-
centered. Within this environment, the HR professional must learn how to manage effectively
through planning, organizing, leading and controlling the human resource and be knowledgeable
of emerging trends in training and employee development. HR professional must be proactive
with all strategies and action plans in order to meet the changing needs of the organization. They
must be thorough with the basic functions of HR including planning, organizing, leading and
controlling human resources.

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