16 – International HRM

Introduction

Human resource management on a global scale is called international human resource management (IHRM). The goal of international human resource management is to help multinational businesses (MNCs) succeed worldwide. IHRM’s major goals include (a) keeping competitive internationally, (b) being efficient, (c) being locally responsive, (d) being flexible and adaptive, and (e) being able to transfer learning across their globally scattered units.

IHRM is the most critical success component for many organisations. Even the most typical HR functions require a considerably broader perspective.

Even when working with a single HR function area, such as compensation, international HR managers face various national and international pay concerns. For example, when dealing with pay difficulties, the HQ-based HR manager must coordinate pay systems in many countries using multiple currencies that may alter relative value over time. Some exciting problems may develop in the case of fringe benefits granted to host firm employees. Finally, the HQ-based manager interacts with employee groups from various cultural backgrounds, which is part of the greater scope of IHRM. The HQ manager is responsible for coordinating policies and procedures for managing expatriates from the company’s home country (parent country nationals, PNCs), host-country nationals (HCNs), and third-country nationals (TCNs, such as an Indian manager working for a German MNC in the company’s Mexican subsidiary).

Although such difficulties are significant for an HQ-based manager, they are also important for a subsidiary’s HR manager. This manager must develop HR systems appropriate for the host nation and in line with those that his or her HQ-based counterpart is developing for the entire company. These policies and practices must all meet the needs and wishes of local employees, PCNs, and TCNs.

16.1 Domestic HRM vs. International HRM

IHRM and domestic HRM procedures share some similarities, notably in areas such as HR planning and staffing, recruiting and selection, evaluation and development, rewards, etc. The key distinction is that domestic HRM concerns employees within a single national boundary, whereas international HRM concerns employees across several national boundaries. IHRM is concerned with three national or country categories: the parent country, where the company was founded and is based; the host country, where the subsidiary is located; and other nations, from which the company may obtain labour, funding, or R&D. This is because, in an international organisation, there are three sorts of employees: parent-country nationals (PCNs), host-country nationals (HCNs), and third-country nationals (TCNs) (TCNs). As a result, two primary criteria distinguish domestic HRM from IHRM. First, there is the complexity of operating in multiple nations (and hence in different cultures), and second, there are the complexities of hiring various national types of people. This implies that international HRM is concerned with recognising and comprehending how multinational corporations manage their globally dispersed workforces to maximise their HR resources for local and global competitive advantage (Schuler et al., 2002). New obstacles and greater complexity have arisen due to globalisation, such as handling novel types of network structure. In light of these developments, new IHRM criteria are being developed to help companies balance the need for foreign subsidiary control and coordination and adapt to local settings.

16.2 Managing HR Activities on a Global Scale

The HR activities listed here are related to, are associated with, and have an impact on those mentioned above organisational and individual/group human resource concerns. These policies and practices include those relating to:

1. Examine the environment
2. The structure, design, strategy, values, mission, and culture of the organisation
3. Human resource management
4. Job analysis and design
5. Recruiting, selecting, and orienting new employees
6. Assimilation, socialisation, and training
7. Career and performance management
8. Compensation (compensation)
9. Employee well-being

16.3 The Expatriate Problem and Cultural Diversity

As a result of global business alignment, building an organisational culture with some distinct characteristics is necessary. Culture refers to a social group’s beliefs, values, and conventions that are unique to that country and shared by its members (Lytle, Brett, and Shapiro 1999). Economic, political, social structures, religion, education, and language are all aspects of culture. “…the extent to which members of a social system share particular symbols, meanings, pictures, rule structures, habits, values, and information processing and transformational patterns, they can be considered to share a common culture,” according to Ruben (1983). “The core of culture is the collective programming of the mind,” Hofstede (1980) says, reinforcing this concept of the community. Many scholars support this dynamic of sharing as a vital feature of culture (Kroeber & Kluckhohn, 1963; Munter, 1993; Porter & Samovar, 1994; Ronen, 1986). As a result, the broad definition of culture provides a framework for studying cultural differences in organisations and civilizations.

Country—and organization-specific cultures necessitate close attention from international HR specialists, which would otherwise jeopardise efficient international operations management. Some company examples can help clarify this concept.

Hewlett-Packard (HP) has succeeded in establishing a purposeful corporate culture known as ‘The HP Way.’ HP’s corporate culture is built on three principles: (1) respect for others, (2) a sense of belonging, and (3) hard work (Fortune Magazine, May 15, 1995). This mindful culture has been formed and maintained through rigorous training of managers and staff from all levels. Today, HP’s international development and success can be attributed to its deliberate corporate culture.

Southwest Airlines is another example of business culture. It is one of the most profitable airlines in the United States of America. Southwest’s CEO, Herb Kelleher, describes its culture: “First and foremost, it begins with hiring. Starting with the type of person you want to hire, you should be able to create a workforce that is ready for the culture you want. Spending a lot of time with your team and communicating with them in several ways is also crucial. The way you look and act communicates something about you. We want our employees to feel pleased, and we want our management to demonstrate that we are proud of our employees and care about them as individuals and outside the workplace, both the good and bad things that happen to them.”

Advanced Micro Devices is the most important example from a global standpoint (AMD). AMD is a hybrid of three cultures: American, West German, and East German, and is based in Dresden, East Germany. The Americans are “go-getters,” believing that shooting first and targeting afterwards is the best strategy. West Germans are analytical, meticulous, and exact, whereas East Germans have mastered the art of creativity while working with restricted resources. After the Berlin Wall broke, AMD became an excellent convergent site for Americans and West Germans to develop computer chips.

On the other hand, cultural disputes quickly became apparent as a barrier to success. The Americans felt everyone would want to emulate their finest methods, which the Germans deemed patronising. The facility was seen as a way for West Germans to help their East German neighbours. East Germans believed that their particular abilities for creative problem-solving were being overlooked. These emotions were reflected in everything, including how meetings were run. American executives preferred free-form brainstorming sessions in English where ideas could emerge spontaneously. The Germans did not want to propose their ideas without doing their homework. The Dresden start-up team devised a meeting format that began with brainstorming sessions in the American style. Between sessions, however, a formal reflective process took place, and language barriers were broken down when members were given the option of presenting their views in either English or German, depending on their comfort level. The Americans learned the skill of deliberation, while the Germans learned off-the-cuff dynamism during this dilemma.

As a result, AMD gained a much-needed competitive advantage thanks to its multicultural approach. In less than two years, AMD’s Dresden factory surpassed production speed records and moved through three generations of chip redesign without significant problems. The AMD issue shows that success is contingent on employees’ willingness to lower their barriers and discuss ethnic and national personalities, as well as how they learn from one another. The case of AMD has given rise to the Dilemma Theory (Trompenaars, F., Hampden-Turner, C., 1998), a much-debated theory now known as THT Theory. According to this viewpoint, the human propensity to view life in terms of all-or-nothing options causes insidious cultural disputes and most management issues. It’s always about winning vs. losing methods, correct vs. incorrect replies, and good vs. terrible values. If business challenges are viewed as a battle between good and evil, the potential benefits of “bad” may be overlooked. It is preferable to view conflicts as a solvable problem.

The world’s second-largest retail business, Sears, is an example of a more grounded corporate culture. Sears highlight three Cs. Work in a fascinating environment, shop in a compelling environment and invest in a captivating environment. Sears believes that when these cultures are followed, they contribute to the company’s overall growth and profitability. In addition, they have three Cs in their performance management system. Similarly, Wal-Mart, the world’s largest retailer, considers all of its employees to be Associates, and as a matter of corporate culture and procedures, Wal-Mart shares all strategic information with staff to empower and motivate them. Every year, Wal-Mart expands at a tremendous rate.

Consequently, all of these worldwide examples demonstrate how an organization’s culture may be successfully managed while conducting international operations.

Some of the Indian instances will also help validate the international experiences. We have the most successful organisational transformation tales, such as the Aditya Birla Group. Under Kumar Mangalam Birla’s leadership, the company has transformed into a modern multi-cultural transnational company with over 72,000 employees from 20 countries. In his opinion, transformation is about bringing ambitions into reality and turning failures into opportunities. It’s all about conviction and guts. It’s about “creating new alchemists from everyday people,” as Charles Handy puts it. The end outcome of a highly energised process that combines human brilliance with its indomitable spirit to make new things happen and produce value is transformation.

Consequently, all of these instances show how cultivating and maintaining a mindful workplace culture may contribute to a worldwide organization’s growth and profitability. Globalization has emphasized work culture as a distinct branch.

We can use the example of Jack Welch, the CEO of General Electric, who established a new corporate culture to accomplish the company’s goals. The following are some of the most important aspects of GE’s corporate culture:

1. Rethinking the leader’s position in the new economy: attracting followers by communicating a vision and cultivating open, caring relationships with all employees.
2. Creating an open, collaborative workplace that values everyone’s input.
3. Giving senior executives the authority to handle far-flung firms in an entrepreneurial manner.
4. Employee empowerment and improved vertical communication will liberate the workforce, making everyone a participant.

As the examples above show, managing culture is an essential IHRM concern. For foreign HR managers, the following corporate examples provide some guidelines:.

Changes in training requirements have emerged from the global restructuring of businesses. Multinational corporations demand cost-effective, adaptable, and culturally relevant HRD training. Training must be offered in a variety of time zones and in vastly diverse cultural situations. E-learning, or online learning, appears to be a natural alternative for delivering this type of training. While online learning is effective and convenient, it may not meet all training requirements. It may not build the social learning communities that work teams require to start and maintain effective learning.

Many programmes teach employees about the history, politics, business norms, education system, and demographics of the host nation, as well as cultural values, communication, and how to function in a foreign place. On the other hand, do these cross-cultural training programmes adequately equip people to work in a foreign environment? The necessity for expatriates to learn cross-cultural abilities is significantly stronger where the cultural divide is significant (Forster, 2000).

Expatriate personnel unprepared to face the challenges of working in a foreign nation frequently fail to complete their objective, which is costly to any company. As a result, it is critical to train expatriates to perform well in overseas assignments appropriately; this will benefit the company and boost staff morale.

Some expatriates succeed, while others fail in their overseas occupations. Failure of an expatriate has a high cost (Bennet et al., 2000). According to research, having appropriate expectations helps in cross-cultural assimilation (Caligiuri et al., 2001). In addition, adequate training decreases assignment failure (Marquards & Engel, 1993). According to studies, just 30% of multinational corporations in the United States provide cross-cultural training to their personnel (Bhagat & Prien, 1996; Black, 1988; Deshpande & Viswesvaran, 1992). One explanation is that the body of knowledge in cross-cultural training has yet to have an impact on the field owing to a lack of agreement among academics on how to put their results into practice (Brewster, 1995; Selmer, Torbiorn, & de Leon, 1998; Selmer, 2001). Litterell et al. (2006) published a comprehensive evaluation of the literature on expatriate preparedness over the previous 25 years.