Global Issues in Human Resource Management

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

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

Defining Global HRM:

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

Human resource planning

Staffing

Performance management

Training and development

Compensation (remuneration) and benefits

Industrial relation

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

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

Human resource activities

Types of employees.Countries

Human resource activities

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

Allocation

Utilization

Types of employees-

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

Host-country nationals (HCNs)

Parent -country nationals (PCNs)

Third -country nationals (TCNs)

Countries

The country categories involved in Global HRM are:

The host country where a subsidiary may be located

The home country where the firm is headquartered and

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

The Need for Global HRM:

Globalization:

Due to globalization business process is expanding which require improvement in temporal

and functional flexibility in the business processes and to accomplish this corporate are
spreading their recruitment net even beyond their state boundaries

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

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

Intercultural management:

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

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

Shrink in product life cycle:

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

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

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

MECHANISMS OF GLOBAL HRM INTEGRATION

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

organisation determines or intentionally affects what another person, group or

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

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

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

centralization

formalization
information based

people based

The four categories of integrating mechanisms are conceptually independent, collectively

exhaustive, and detailed

Centralisation-based mechanisms

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

In terms of centralisation as a means to integrate HRM, empirical studies have highlighted

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

outcome of the dynamic parent-subsidiary negotiation process whereby the source of

centralization may in fact lie at the regional, not the global level

Formalization-based mechanisms

Formalization-based mechanisms refer to the standardization and thus codification of work

procedures and policies on a global basis . Representing a largely impersonal and indirect
form of control, formalization-based mechanisms

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

The formalisation, or 'bureaucratisation' of HRM in MNCs, characterised by attempts to

devise and implement common international HR structures and guidelines, has been shown to
be commonplace

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

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

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

People-based mechanisms

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

Four major tasks of Global HRM

Staffing policy

Management training and development

Performance appraisal

Compensation policy

Staffing policy

Selecting individuals with requisite skills to do a particular job

Tool for developing and promoting corporate culture

View People as Resource ($in profit out)

Types of Staffing Policy

Ethnocentric

Polycentric
Geocentric

Ethnocentric policy

Key management positions filled by parent-country nationals

Advantages:

Overcomes lack of qualified managers in host nation

Unified culture

Helps transfer core competencies (and skills back)

Disadvantages:

Produces resentment in host country

Can lead to cultural myopia

Polycentric policy

Host-country nationals manage subsidiaries

Parent company nationals hold key headquarter positions

Best suited to multi-domestic businesses

Advantages:

Alleviates cultural myopia

Inexpensive to implement

Helps transfer core competencies

Disadvantages:

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

Can create gap between home-and host-country operations

Geocentric policy

Seek best people, regardless of nationality

not always possible

Best suited to Global and trans-national businesses

Advantages:

Enables the firm to make best use of its human resources

Equips executives to work in a number of cultures

Helps build strong unifying culture and informal management network

Disadvantages:

National immigration policies may limit implementation

Expensive to implement due to training and relocation

Compensation structure can be a problem.

The expatriate problem

Expatriate: citizens of one country working in another

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

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

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

Strategic Role of

International HR

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

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

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

business

Multi-domestic = create value by emphasizing local responsiveness

International = transferring core competencies overseas

Global = realizing experience curve & location economies

Transnational = doing all these thing simultaneously

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

International Labor Relations

Concern of domestic unions about MNEs

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

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

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

Organized labor has responded by

Trying to establish international labor organizations

Lobbying for national legislation to restrict MNEs

Achieve international regulations on MNEs through UN

Not very successful because

Unions want to cooperate but compete with each other for jobs

Wide variation in union structure

Divergent ideologies about role of union in society & class conflict

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

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

3.) Recruit purposefully - The anticipated global shortage of workers has not gone away: it
has just been postponed. The reason ? Baby boomers are choosing to work a little longer
because their retirement savings have been deflated. Once the market comes back fully, you
should expect a mass exodus as the boomers leave the workforce. Companies who make
severe staffing cuts and don't keep their HR people connected to potential hires will be caught
severely short staffed. Savvy companies have a great opportunity right now to hire talented
people who have been down-sized by other organizations
4.) Make cuts strategically - Consider outsourcing the functions you can to help reduce costs,
but don't forget to take good care of any employees you might eliminate. Generous packages
create goodwill and increase loyalty from those who remain. What's more, the departing
employees just might be more willing to return to work when times are better and your
company faces the global staffing shortages that the recession postponed. Generous packages
might seem out of the question in tight times but you should give serious consideration to
offering the maximum that you can. Your company will be better able to recruit new staff in
the future if its reputation is bolstered by how it treated people during the 2009 recession

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

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

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

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

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

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

Problem faced in Global HRM:

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

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

Recruitment and selection:

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

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

Career planning and management :

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

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

Compensation and benefits policies:

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

Domestic HRM Vs Global HRM:

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

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

Global HRM involves more functions and activities

It has broader scope and a global view of issues

Employees' lives are more involved i.e. employees' family lives are also taken into
consideration in the international relocation and training decisions.It involves change in
emphasis as the domestic business evolves to become global firm

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

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

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