International human resource management due to globalization

As the globalisation trend advanced, IHRM (International Human Resource Management) plays a critical role in helping companies evaluate the human resource skills /capabilities and possibilities involved in moving to different regions of the world (Luthans, Marsnik and Luthans,1997).

The HR (Human Resource) function is to help manage the organisation’s people as effective as possible based on the organisation business objectives for competitive advantage (Porter, 1990).

To be successful in the global marketplace, a need for “global mindset” is the key source for long-term competitive advantage. The current HR issues faced by P&C is illustrated in Appendix A.

The HR management in P&C HQ did not consult the local HR representative information on local culture, employment aspects, safety, customs and traditions in order to operate in harmony with a local company’s procedures which is the root cause of the HR dilemma faced by P&C.

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Looking at the current HR issues that P&C is facing, the complexities of operating in different countries and employing people of different nationalities are challenges arising from the internationalisation of business. Also the challenge P&C requires to undertake its HR strategies, policies, practices to global level for multinational ventures (Scullion & Linehan, 2005).

Company characteristic, business strategy and organisational structure are important elements in policy choice for the Flexibility and HRM strategies (Delery and Doty, 1996; Tsui et al., 1995; Mayne et al., 1996; Doorewaard and Meihuizen, 2000).

According to Philip Condit (Financial Times 1997), as the era move towards globalisation, it is advantageous global companies, workforce, management transform into a global enterprise.

A standardized approach to IHRM may put an organisation to disadvantage because cultural differences are ignored rather than built upon. (Adler,1991).

Competing demands of global integration and local differentiation are important elements which give rise the need to develop human resources as a source of competitive advantage (Caligiuri and Stroh,1995;Schuler et al.,1993;Taylor et al.,1996).

P&C required adopting a geocentric approach to IHRM integration to balance between the conflicting priorities of global integration and local responsiveness (Caligiuri and Stroh (1995). GLOBE research confirmed that selected cultural differences strongly influence important ways in which people think about leaders and norms.

According to Spence Hayden (1990), the most critical HRM issue for going international is to select and train local managers (see Appendix B) as people is the main source for competitive advantage in international business.

It is critical that P&C focus on the first seven points of the HRM issues listed in Appendix B to enhance its current HR issues in Germany, France and India for the business expansion. The overall twelve HRM issues are for P&C to apply for its going international plan to other Asia countries to build long term business success.

The key challenge for P&C is to capitalise on the diversity of global workforce without suppressing each other nation’s desire to maintain their own cultural heritage.

Although it is tough, P&C have to build, maintain and develop its corporate identity by managing its people on a worldwide basis, local responsiveness by adapting and conforming to the norms and customs of different societies in which P&C operate (Laurent, 1986). This will enhance worldwide competitiveness, innovation combined with achievement, consistent across MNE units (Bartlett and Ghoshal, 1989).

According to Schuler and Florkowski (1994), for control purpose, flexible HRM policies and practices at the local level must be balanced with the requirement of MNE to maintain its global set of IHRM policies.

Deeper Analysis-HRM issues

a) Training and Development

As noted in P&C case, there is no formal training to consultants after recruited. Failure to train employees can affect the values, beliefs, and assumptions shared by employees to the organisational culture (Bunch, 2007, p. 157). Au and Chong (1993) conclude that failing to incorporate organisational culture in training programmes might lead to total failure in building a successful organisation.

Listed below are the ways to determine employees taining needs:

In today’s highly competitive global business environment, human resources play an important role in developing and sustaining organisation competitive advantage (Brewster, 2002).

IHRM has enforced common methods of acquisition of knowledge through hiring and training, distribution of knowledge via training and development, and utilization of knowledge via performance management in an organisation.

Training Assessment is used to determine if and what type of training is necessary to acquire skills, knowledge, and improvement in order to perform well for the organisation growth and success. (see Appendix C -General Systems Model of Training and Development). Cross cultural training is also critical for international assignments, for managers to be acculturated to other societies value, norms and behaviour.

Training is also recognised as an important means for socialisation (Child, 1984; De Meyer, 1991; Derr and Oddou, 1993; Ondrack, 1985). Orientation is where new employee learns the organisational goals, corporate culture, job and to develop realistic expectations. Formal training on the other hand promotes shared values and facilitates network building between headquarters and subsidiaries.

Only successful organisation (example: Accenture) will believe/continue to train, develop their employees in order to adapt to the constant change in the dynamic working environment as new technologies develop and emergence of global assignments. (see Appendix D – Diagnostic steps in Development Programmes)

According to Bramley, 2003, extensive training, learning and development are important. Learning organisations (example: Xerox, General Electric) have applied three stages of learning perspective.

P&C needs to ensure that outstanding talent remain at the forefront of its field in terms of professional expertise and product knowledge gained through training which facilitates learning so that employees can become more effective in carrying out their task.

It is essential as people, technology, jobs, and organisations are always evolving. Technology is advancing at a staggering pace. Therefore, it is vital that employees be trained and developed to utilise the latest technology so as to attain the highest levels of productivity.

b) International Managers

As International business continues to grow intensely, P&C must understand the need for highly qualified international managers, a crucial factor in implementing global strategies for business success (Gregersen, Morrison, & Black, 1998).

Overall International managers need to have effective cross cultural communication, non-judgemental capability, flexibility, empathy (Berrell et al.2002:92).

Expatriates

A successful expatriate manager must have sound knowledge of technical, functional, cultural, social, and political skills (Bartlett, 1986; Bartlett & Ghoshal, 1994; Ghoshal & Barlett,1997).

The most common factors that determine the expatriates’ success or failure is illustrated in Appendix E. Expatriate managers that possess an “acculturation” characteristic will be able to adapt/adopt themselves to any region for international assignment.

The key point for international transfer is to initiate, expand and control international operations to ensure various organisational units strive towards achieving organisation common goals which is linked to HQ control aspects. (Edström and Galbraith,1977). Appendix F described why transfer of international managers happen.

According to Roessel (1988), the benefits of various functions of international transfers can enhance internationalisation of the MNE, which make it more sustainable in international market.

Inpatriates

The value of managers with unique local market knowledge can develop a dynamic capability for global assignments. In this manner, inpatriate manager is another option envisioned to build managerial talents which organisations can develop distinct competitive advantage in the market they entered.

The inpatriation process is positively related to the global HRM for organisations’ development of organisational capabilities: quality, low-cost operations, speed learning, innovation and customer focus (Lawler, 1996; Urlich & Lake, 1990).

The criteria and characteristic of the right candidate for inpatriate managers are similar to the expatriate factors which illustrated in Appendix D.

Although HQ prefers the expatriate managers contribution in multicultural management on the stabilisation control aspect for competitive advantage (Dadfer & Gustavsson, 1992; Granstrand, Hakanson, & Sjolander, 1993), inpatriate managers do play an important part in the bridging role between HQ and the emerging market that the organisation wish to penetrate (Harvey et al., 1999b,c,d).

Inpatriate managers, as substitutes and complements of expatriates, can provide accurate advice on adaptation of technical dimensions of HR processes (recruitment criteria, compensation, appraisals, training and development of host country nationals).

Inpatriate managers also act as a mentor to calibre managers from host country nations to insure a succession plan when new inpatriate managers are moved into the home country organisation.

If P&C would to consider inpatriate manager option, it has undertaken the step in developing a multicultural strategic leadership capability, developing a global learning organisation to compete effectively in a globalised world (Aguirre, 1997; Hofstede, 1980, 1984; McBride, 1992; McMillen, Baker, & White, 1997; Nemetz & Christensen, 1996; Reynolds, 1997).

Statement to the Board of Paine & Co (P&C)

– Core Components of HR Strategy

IHRM policies and practices are influenced by the organisation’s structure, strategy, its institutional and cultural environments (Ngo et al., 1998; Schuler and Rogovsky, 1998; Schuler et al., 2002; Sparrow et al., 2004).

For management consulting multinationals, definition of HRM policies at international level should be followed by a more standardised local implementation (Boxall and Steeneveld (1999).

At the same time, applying the right kind of policies and practices was a condition of ongoing viability, the success to implement HR policies and practices synergistically constitute the basis for competitive advantage.

IT consultancy firm, like P&C depends highly on qualified and specialised professionals to offer services based on their creativity and intellectual work. This profession requires versatility, adaptability and constant learning due to its ever evolving job nature (Starbuck, 1992; Ram, 1999; Ka¨rreman, 2002).

In this case, P&C should look at the need for highly qualified multicultural workforce as a means to build managerial talents, develop organisations competitiveness in the market it enter. Furthermore, global competition has caused organisations to be more conscious of cost and productivity.

Therefore, HRM strategies must reflect clearly the organisation’s strategy – people, profit and overall effectiveness in managing an increasing diverse workforce to compete in an increasingly complex, competitive world. (see Appendix G -Important Factors /Requirement in HRM).

According to Sparrow 1998, recognising organisations’ need for multiple and parallel flexibilities especially in a time of increasing international competition and technological change is vital (Atkinson, 1987; Tsui et al., 1995).

The proposed core components of HR strategy that P&C should apply is highlighted in Appendix H, taking into consideration the difference in nationality, culture and institutional factors, to enhance its organisation performance and build long-term competitive advantage.

– Notes to the Core Components

Based on “Best Practice” HRM, staffing need to be highly selective, performance regularly and systematically assessed, teamwork orientated, autonomy and responsibility were encouraged (Huselid, 1995; MacDuffie, 1995; Delery and Doty, 1996).

With the growth of P&C business internationally, P&C needs appropriate information to develop its HRM policies and practices through comparing cross-national dimension on an international perspective (Brewster et al., 1996; Clark et al., 1999; Kochan, Dyer, & Batt, 1992), a business strategy to develop bigger market share one step ahead of its competitors.

Cross-national HRM policies and practices are also influenced by both culture-bound variables such as national and organisational culture, institutions, industrial sector dynamics and ”culture-free” variables such as age, size, nature, and life cycle stages of organisation (Brewster, 1995; Hofstede, 1993; Jackson & Schuler, 1995; Sparrow, 1995). The degree and direction of influence of these factors varies from region to region (Jackson & Schuler, 1995; Locke & Thelen, 1995).

Creating a global corporate culture requires a geocentric mindset, drawing upon cultural capabilities that exist across the global operations and incorporating diverse cultural values and practices. Understanding HRM roles/strategies requires a contextual approach, underlining the importance of taking the institutional context into account (Paauwe, 2004). The table below shows the factors determining cross culture HRM practices.

A detailed list of the subcomponents factors/variables in determining cross-national HRM is listed in Appendix I.

The strategic importance of a unique, specific and valuable human capital for knowledge-intensive firm like P&C would suggest a preference for employment internalisation (Matusik and Hill, 1998; Lepak and Snell, 1999).

P&C must actively seek creative destruction of its existing competencies to retain competitive advantage in the marketplace (Schumpter, 1934,1942) via an adequate HRM policies and practices.

The organisational competitiveness of P&C will depends on its strength/capacity to shape a unique set of resources where competitors find it hard to copy, which mobilized with the help of developed organisational and managerial systems that provide the organisation with a series of distinctive capacities that allow to generate long-term sustainable income (Fernández Rodríguez, 1995).

The process of continuous learning and modification of resource bundles for efficiency and effectiveness of strategies contribute to development of the organisation’s dynamic capabilities (global management capabilities difficult to imitate) to gain/sustain competitive advantage. (Teece,1988; Teece, Pisano & Shuen, 1997).

According to Barney (1991), if resources meet the following elements, the firm earns a unique strategy profile which assist for international expansion.

On the other hand, Behavioural Theory is based on the assumption that different strategies require different behaviours, attitudes and capabilities in workers (Schuler, 1987).

According to this theory, HR practices do influence workers behaviour which results in improvements of organisational performance (Lawler,1986; Huselid, 1995; Becker, Huselid, Pickus & Spratt, 1997; Guest, 1997;Appelbaum et al., 2000; Takeuchi, 2003). This implies P&C must implement a set of personnel practices consistent with

the organisations’ business strategy to build its international presence successfully (see below).

When workers have positive perceptions, this will increase their work commitment with the organisation, degree of involvement and their level of working satisfaction, which results in better performance for P&C and talented workers can be retained for future prospect.

Developing a systematic approach of HR policies and practices consistent with business strategy can assist in the integration of business competitive advantage, where every possible source of competitive advantage need to be identified/utilised in facilitating the learning and knowledge transfer processes across units (Schuler et al. (1993:427).

A high performance work system (HPWS) practices is perceived by employees as organisation’s commitment (Batt, 2002). [see Appendix J]

Definitely with HPWS implemented in P&C, it will be able to develop talented, motivated employees to meet organisation’s objective to achieve competitive advantage in the international arena (McDuffie (1995). By developing the necessary skills, knowledge and increasing motivation of employee contribution, P&C can reflect the opportunities to realize economies of scale at the international level. With the rapid evolving technologies, this encourages P&C to engage in innovation and continuous learning across its operation.

According to Wright & Snell (1991), a successful organisation should have motivated workers who are involved in the achievement of organisational objectives.

Managers are responsible to create a more positive working environment where employees can flourish and increase their feelings of wellbeing at work (Tehrani et al., 2007). Line managers are also responsible to deliver the HR practices and to ensure that the perception of support, trust, fairness and consistency are maintained amongst employees.

The biggest mistake unsuccessful global organisations make is to assume that there is “one best way” to structure HRM policies and practices. Trying to apply HRM principles that work well in one environment may not lead to the same level of degree of success in another.

Challenges

Globalisation competition has become so intensify, HRM professionals require to optimise the skills, talent, creativity of every employee more effectively. Failure to do so will probably mean the organisation cannot compete in the flat world.

Every aspect of HRM strategic can be influenced by cultural differences in one or more dimensions. Therefore, P&C needs to understand the cultural differences and ensuring HRM and cultural orientation of workers are coincide with one another without sacrificing efficiency.

Conclusion

To be successful in the international marketplace, P&C must ensure HR policies are “fit” with strategic international plan of the organisation and with the work-related values of foreign culture due to cross-national interaction.

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