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International Human Resource Management and Its Challenges

International human resource management (IHRM) is how MNCs


[Multinational Corporations] manage the competing demand of ensuring that
the organization has an international coherence in and cost effective
approach to the way it managers its people in all the countries it covers, while
also ensuring that it can be responsive to the differences in assumptions
about what works from one location to another. (Dickmann et al, 2008,p.7)
According to (Sparrow and Braun, 2008,p.96) IHRM is the way in which the
HRM function contributes to the process of globalization within multinational
firms.(Snell,Bohlander and Vohra,2010,p.506) Explains managing human
resource functions such as recruitment, selection, development, and
compensation of employees effectively and integrating those activities to
achieve global advantage in an international setting is as a challenge to the
management of the multination firms.

In general although it is considered as any firm that conduct business outside


its home country as an international business (Snell, Bohlander and Vohra,
2010) indicates four types of organizations. Firms that use its existing
capabilities to move into overseas market are known as International
Corporation such as Honda, Tata. Firms with independent business units
operating in multiple countries are known as Multination Corporation such as
Samsung, Philips. Firms that have integrated worldwide operations though a
centralized home office are known as Global Corporations such as
Matsushita, Nec. Finally, firms that attempt to balance local responsiveness
and global scale via a network of specialized operating units are known as
Transnational Corporation. When International firms manage their activities
and people across the borders global environment influence to a greater
extent, hence International firms hugely consider economic factors, political-
legal factors and cultural environment of countries before they selecting a
country to operate their business. According to (Snell, Bohlander and Vohra,
2010,p.510 ) Many countries, particularly those in Africa, property rights are
poorly protected by governments. Whoever has the political power or authority
can seize others’ property with few or no repercussions. Civil unrest can also
lead to the poor enforcement of property rights. This gives companies less
incentive to locate factories or invest there. Another issue relates to
intellectual property rights – rights related to patent, trademarks, and so forth.
Thus it is mentioned that environment restrictions also make some countries
more attractive to do business in than others. Beyond the economic and
political-legal issues we discussed above, a country’s cultural environment
such as communication, religion, values and ideologies, education and social
structure also has important implications when it comes to a company’s
decision about when and how to do business there. For example US
companies are finding Canada, Ireland, and United Kingdom as attractive
places to locate their facilities because of language and culture similarities.
IHRM differs from domestic HRM in several ways. It necessarily places a
greater emphasis on functions and activities such as relocation, orientation,
and translation services to help employees adapt to new and different
environments outside their own countries and to help newly hired employees
in foreign countries adapt to working for companies headquartered outside
their borders. Human resource managers in international firms have to stay
updated on international concerns , policies, and programs. They have the
challenge of managing operations and people in many different countries.
Even seemingly small cultural differences can create major headaches for the
international HR manager. For example When Lucent fist rolled out a
PeopleSoft System to more than 90 countries, the company’s managers
found that the order of employees’ name was so important and so varied that
it took two months to settle on a name format allowing employees to be
entered into the system.

When a company expands globally, HR managers are generally responsible


for ensuring that operations are staffed. (Snell, Bohlander and Vohra,2010,
p.513) explain three main ways of staffing a new international operation. First,
the company can send people from its home country. These employees are
often referred to as expatriates, or home country nationals. Second, it can hire
natives of the country which an international cooperation operates. These
employees are refereed as host country nationals. Third, it can hire third
country nationals, natives of a country other than the home country or the host
country. The authors also state that each of these three sources of overseas
workers provide certain advantages and certain disadvantages. However
while top managers may prefer one source of employees over another, the
host country may place pressures on them that restrict their choices, such
pressure takes the form of sophisticated government persuasion through
administrative or legislative decrees designed to employ host country
individuals. Tax incentives, tariffs, and quotas are frequently implemented by
the host country to encourage local hiring. Recruiting is the process of
locating potential individuals who might join an organization and encouraging
them to apply for existing or anticipated job openings. (Snell, Bohlander and
Vohra,2010, p.147) Most common methods of attracting applicants in HRM is
through Advertisements, Internet Recruiting, Employee Referrals, Educational
Institutions, Professional Associations , Labor Unions, Public Employment
Agencies, Private Employment and Temporary Agencies and Employee
Leasing. Human Resource departments of international firms must be
particularly responsive to the cultural, political, and legal environments both
domestically and abroad when recruiting internationally. Although improved
telecommunications and travel have made it easier to match up employers
and employees of all kinds worldwide recruitment of skilled workers may be
more difficult. In the recruiting process, which is designed to increase the
number of applicants whose qualifications meet job requirements and the
needs of the organization selection is the process of reducing that number
and choosing from among those individuals who have the relevant
qualifications. By identifying competencies through job analysis, managers
can then use selection methods such as interviews, references, psychological
tests, and the like to measure applicant’s knowledge, skills, abilities and other
factors against the competencies required for the job. (Snell, Bohlander and
Vohra,2010, pp.201-203) In international selection the magnitude of
differences between the political, legal, socioeconomic and cultural systems of
the host country and those of the home country should also be assessed.

According to (Snell, Bohlander and Vohra,2010, pp.522-533) although


companies try to recruit and select the very best people to send abroad, once
they are selected it is often necessary to provide them with some type of
training . Not only is this type of training important for expatriate managers, it
is also important for the foreign employees they will ultimately supervise. The
biggest mistake managers can make is to assume that people are the same
everywhere. The authors further indicate lack of training as one of the
principal causes of failure among employees working internationally.
Specially, sensitivity training can help expatriates overcome ethnic prejudices
they might harbor. Communication with individuals who have a different
language and a different cultural orientation is extremely difficult. English is
usually the designated language for meetings and formal discourse. Learning
the language is only part of communicating in another culture, there are
complexities of the communication process in international business. For
example in most foreign countries, expressions of anger are unacceptable in
some places public display of anger is taboo, in Japan there are 16 ways to
avoid saying no , In the US, a common way to call a waiter is to point upward
with the forefinger. In Asia, a raised forefinger is used to call a dog or other
animal. Cross cultural differences represent one of the most elusive aspects
of international business. Brazilians tend to perceive Americans as always in
hurry, serious, reserved, and methodical. Whereas the Japanese view
Americans as relaxed friendly and impulsive. Studying cultural differences can
help managers identify and understand work attitudes and motivation in other
cultures. Latin Amercians tend to view themselves as working not only for
particular company, but also for an individual manager. Thus, managers in
Latin American countries can encourage performance only by using personal
influence and working through individual members of a group. International
assignments provide some definite developmental and career advantages.
Working abroad tends to increase a person’s responsibilities and influence
within the corporation. In addition, it provides a person with a set of
experiences that are uniquely beneficial to both the individual and the firm.
One of the most frequent causes of an employee’s failure to complete an
international assignment is personal and family stress. To improve the
success of expatriate assignment one important step is to involve spouses
early on in the process in addition, training and development for both
expatriates and their spouses can have a big impact .Repatriation is the
process of employee transition back home. Repatriation programs should
have designed to prepare employees for adjusting to life at home. The
authors confirm even when employees are successfully repatriated, their
companies often do not fully utilize the knowledge, understanding, and skills
developed on their assignments. This hurts the employee, of course, but it
also hurts the firms chances of utilizing the employee’s expertise to gain a
competitive advantage.

Compensation is one of the most complex areas in IHRM as different


countries have different norms for employee compensation. For Americans,
while nonfinancial incentives such as US , pay plans often focus on individual
performance and achievement. However in collectively oriented cultures such
as Japan and Taiwan , pay plans focus more on international equity and
personal needs. (Snell, Bohlander and Vohra,2010, pp.534-541) stats that
when companies commence operation in a foreign county, they usually set
their wage rates at or slightly higher that the prevailing wage for local
companies. The authors also indicate if a assignment in another country to be
successful, the expatriate’s compensation plan must be competitive, cost
effective, motivating, fair, easy to understand, consistent with international
finance management, relatively easy to administer and simple to
communicate. As expatriate assignments are so costly , many HR managers
are increasingly under pressure to calculate the return on investment of these
assignments, the goals and responsibilities inherent in the job assignment are
among the most important criteria used to evaluate an individual’s
performance and different goals necessitate measuring different criteria.

To conclude author believes, Firms can get competitive advantage over its
domestic firms and firms’ market share will not be stagnated to one country if
they move on to international markets. It will also help the firms position in the
long run. For example Sidhalepa is a product which available in allover Sri
Lanka but now it is not only available in Sri Lanka it also available in 35 other
country of the world, hence even Sidhalepa was refused by Sri Lankan market
it could be sustained in its business. Operating in other countries would be
beneficial for firms to exchange technology and access to each other
strengths. Sometimes for firms, to operate in another country would be cost
effective than operating in it’s home country because of cheap labor and
availability of raw materials. When operating in another country biggest
challenge is to operate firm’s activities and people in an international level.
Though, firms tend to staff it’s host country firm with expatriates Initially it
costs for the firm. In order to minimize the cost and to transform the firm in to
localization, firms got to staff the host country firm with host country people or
third county people. This creates diversity among the work force. Instead of
working and managing people in one country HR managers have to provide
solutions which satisfy most of the individuals in the global territory. There is
no argument that diversified workforce benefited firms in many ways, specially
if the managers can get diversified workforce involved to make suggestion
and in the process of making dictions, it will help the management to look at a
issue in different angles and make correct dictions which will answer to the
problems of the majority. Finally I think firms should operate in international
level to take the competitive advantage but firms internal strengths should be
there to face the challengers which exist in the global environment otherwise
firms could get in to huge trouble.
Notes and References

Scott Sell, George Bohlander and Veena Vohra, “ Human Resources


Management ,2010

Donald E. Klinger ,Work Force Diversity,1994

http://smallbusiness.chron.com/manage-diversity-workplace-3038.html

www.businesstoday.lk

www.utebox.com