Theoretical approaches to studying International Human Resource Management

Module: International Human Resource Management INDU-1130

Assessment 1: Essay
Module Leader: Dr Scott Tindal
Student ID Number: 001190016

Introduction.

This essay studies the opinions surrounding International Human Resource Management (IHRM), the
content of the investigation is clearly expressed through two main parts. Firstly, part one presents the
theory and academic lessons surrounding the three different approaches of IHRM namely the cultural,
institutional, and global approaches - It provides an overview of the theories along with relevant
critiques through supporting empirical evidence. The second part discusses the statement
“globalisation means that eventually HR policy and practice will converge into a single ‘best practice’
everywhere in the world”. The statement suggests the debate between the convergence-divergence
within the IHRM, and this essay will evaluate this statement considering the empirical literature.

Three approaches to studying IHRM.

International Human Resources Management (IHRM) can be understood simply as a collection of

human resource management (HRM) actions of international organizations at the global level.
According to Dickmann (2008), IHRM covers how companies ensure international coherence and how
to optimize the costs of people management activities in all the countries it covers. Furthermore,
Brewster (2011) also asserts that HRM is the key to success for international organizations, especially
for multinational corporations (MNCs) and multinational enterprises (MNEs). Moreover, the way
these companies deal with 'multicultural assumptions' in managing people is an important factor
contributing to that chance of success. From here, Brewster has come up with three IHRM approaches,
including Cultural approaches; Comparative (Institutional) approaches; and Global HRM.

It can be said that culture is one of the most important factors that IHRM needs to approach to achieve
success. From time immemorial, culture has been a notoriously difficult term to define. Culture can
be the material and spiritual values of a collective or according to Masumoto (1996) 'Culture is the set
of attitudes, values, beliefs, and behaviours shared by a group of people, but different for each
individual, communicate from one generation to the next.' Besides, one of the most popular
definitions of culture is stated as 'the collective programming of the mind which distinguishes the
members of one group or category of people from another' by Hofstede (1994). From the above
definitions, it is easy to see that the cultural values of a country affect the way society works, as well
as the way the economy works, the way people work, and the way to manage people. Therefore,
common HRM activities such as recruitment, selection, development, evaluation, and reward will be
strongly inspired by the above cultural factors. To be able to successfully approach the culture of
companies, Hofstede proposed the cultural dimensions theory with four initial elements including:
Power distance - the inequality of society; Uncertainty avoidance - the level of acceptance of ambiguity
of society; Individualism/Collectivism - the level of integration of individuals with the collective and
community; Masculinity/Femininity - the priority of the achievement or material reward of an
individual in society ( a benchmark of success) and the two factors he added later include: Long
term/Short term orientation - the connection between actions between the past and the present and
the future; Indulgence/Restraint - a measure of happiness and satisfaction of the needs of the
individual. Specially, each country has a different stat and will also have a different approach. For
example, the culture in the US is individualist and the culture in China is collectivist, therefore human
resource managers need to take appropriate measures to increase individual responsibilities in the
China company and increasing corporate solidarity in the US company. By using this model, companies
can measure the size and depth of a culture, so that they can come up with an optimal approach for
each different culture. However, the fundamental weakness of this theory is that because Hofstede
only used one organization, IBM in his research, according to Kim (2015), 'Hofstede's model may be
favourable to skew more general'. In addition, organizations should also note that the object of
application of this model is the culture as a whole, not to any particular individual.

Before analysing the influence as well as the institutional approach, we need to understand the theory
of institutions. Institutions are a set of established systems of social rules that directly affect social,
political, and economic relationships (North, 1991). Furthermore, institutional shape society, the legal
system, education system, workforce, and so on, these can directly affect the cost and effectiveness
results of HRM. A specific example that can be seen is the minimum wage requirement in the labour
law and the skill level of the workforce in each country is different, such as the salary of a bartender
at a Starbucks in the US can be up to $11.97 per hour, but the salary of a bartender at a Vietnamese
store is only $1 per hour. Currently, there are two ways to approach the institution include
Universalists and Contextualists, and both have their advantages and disadvantages (Brewster, et al.,
2016). Universalist is dominant in the US and is often American-centred, as it is assumed that
institutions in the US are similar to those in other parts of the world. This model focuses on addressing
a single organization and ignores the vast institution in which the corporation exists. This method will
help HRM have a specific direction for the entire organization, reduce the burden of operating costs
and focus on the goal of improving performance and competitive advantage. About the disadvantages,
it is clear that the US institution is not exactly the same as other institutions worldwide, for example,
gender equality quotas are allowed in the US, but prohibited in Europe, or not clear in Asian countries
where gender inequality in society is still alarming. On the other hand, contextualist approaches focus
on elements of the institutional and cultural environment. These companies try to figure out what
works best for each environment through local circumstances à maintain legitimacy with key
stakeholders. Companies may have disadvantages in terms of complexity, high operating costs, and
time-consuming because the purpose of this approach is to understand messiness (workers, unions,
management, laws, education system, labour market conditions, ownership structure, government
involvement, etc.) but this approach will definitely help them optimize their human resources
effectively.

The final approach in studying HRM is IHRM or Global HRM. One of the burning problems of
organizations when reaching out to the world market is to protect their employees from labour
exploitation - a form of modern slavery. Victims of labour exploitation can be of any age, sex, race, but
are most commonly seen as children, women, and immigrants. Victims are often forced to do unpaid
labour and work every day, without a labour contract (ILO, 2021). To protect their workers,
organizations often set regulations on age, working hours, and some preferences for women during
maternity. Moreover, there are also global worker protection organizations such as the International
Labour Organization (ILO) in the world. However, in some parts of the world, labour exploitation still
exists today. According to the ILO, currently, 72.1 million African children have to drop out of school
and become child labourers, 31.5 million of whom are engaged in heavy and hazardous work. On the
other hand, in 2020 car manufacturers such as Audi, BMW, Volkswagen also had to launch an
investigation into their supply chains, when Guardians reported that there are more than 20,000 child
labourers at mining Illegal mica mining in India.

The convergence-divergence debate.

The statement that “globalization means that eventually HR policy and practice will converge into a
single 'best practice' everywhere in the world” causes much discussion and controversy about it. The
news flows of the articles both point to this view and examine the opposing view that "cultural,
institutional and other national differences mean there will always remain divergences between
different countries and companies in how they do HR" - Here is a debate about convergence and
divergence. However, these two aspects will always be integrated with the development trend of the
economy. It won't exist "best practice" nor the "big difference". (Horwitz & Budhwar, 2015)

For further analysis, the definitions of "convergence" and "divergence" must be clarified. In terms of
the definition of convergence, this will exist as units, regions or countries become progressively more
similar, reducing differences as much as possible - This is not only the common direction of
development, but also toward an endpoint. However, it is a fact that this last point is not certain to be
will or should be achieved (Mayrhofer, et al., 2011). According to studies on the theory of
multiculturalism, the culture of each region or country will show different values of norms - This makes
the comprehensive convergence to create "best practice" is very (House, et al., 2004). Many
authorities have argued that convergence occurs through reduced linkages or increasing changes in
employment patterns or increased use of Assessment Centres. However, just because countries come
from different places, developing in the same direction as parallel lines, does not mean that they point
towards the same point and that they will end up being more similar. The fact that arguments towards
a broad-based synchronous development increase the likelihood of both converging and diverging
trends (Inkeles, 1998). On the other hand, long-term development in HRM is very rare, most of the
research was done at one time and took place in so-called WEIRD countries (Western, Education,
Industrialization, Wealthy, Democracy) (Henrich, et al., 2010) - It covers only a handful of countries
and does not include emerging economies. There is evidence that in the older countries of Europe,
many aspects of HRM see a directional convergence, i.e. similar development trends. But there is
almost no sign of eventual convergence, i.e. towards the same point. Looking at the directional
convergence will make things more positive and open when looking at the final point of convergence.
‘None of the HRM practices converge’ (Mayrhofer, et al., 2011)

As for the definition of divergence, it refers to the difference between HRM systems in terms of form,
sophistication, or breadth and depth when production systems or workforces differ - Regardless of
the type of product or industry being compared. Divergence is the tendency to create diversity and
difference to accommodate culturally different units, regions or countries. Historically, in Ricardo's
time, cloth was a product produced in large factories with a large number of employees, while alcohol
is a product made in agricultural areas or farms with a small workforce that is family or immigrant.
HRM was a definition that did not exist at the time, but workers still needed to go through the process
of being recruited, trained, paid, and closely supervised - This was done in different ways at textile
mills in England as well as wineries in Portugal. On the other hand, in 1970s China, shoe production
was done in rural areas in factories with poor technology and the workforce is farmers, while the
production of passenger jets in the US is done in high-tech factories with a well-educated, high-quality
workforce and commercial contracts amount of detail. In the same way, Italy today exports to
Germany hand-designed clothing and vice versa, Germany exports to Italy models of high-tech
computer-controlled looms for Italy to Italy make wonderful crafts. Differences and divergences will
help units or countries complement and offset each other in the process of economic development.
(Kaufman, 2016)

Conclusions.

In conclusion, there are three approaches to human resources through culture, institutions and
globally to study IHRM, each method has its own advantages and disadvantages depending on the
way each business operates. Besides, this essay has proved that the trend of convergence and
divergence will develop in parallel and together to keep the balance for the economy, "best practice"
is the definition that is not feasible in all times.

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