Introduction
There are two concepts of culture that must be taken into consideration in the study of International Human Resource Management. These are the culture of the organization and the culture of the country to which the organization belongs. These two cultures influence successful management of human resource. Managing an organization of different culture places a big challenge on HRM.
IHRM was an emerging phenomenon in the field of human resource during the 1980s when American firms were facing big challenges from Japanese firms. There is a growing interest now in this field because of the growth of globalization and advancement of technology and communications.
Globalization has revolutionized businesses and organizations. Companies now are expanding abroad, and have to expand both as an organization and as a business. Businesses have to introduce more new products and services. Competition dictates these companies to be always changing.
Because of globalization, the importance of borders between different countries is reduced, and similar events and phenomena in countries throughout the world are more easily linked. The identities of cross-border structures are strengthened, and the power of organizations operating only within the nation state is weakened.
Much is expected of the human resource manager in the new challenges of the twenty first century. But expectations can always be preceded by one thing – superior knowledge.
As what Gupta and Becerra (2003) stated, ‘In many industries characterized by rapid technological development and intense competition, superior knowledge, rather than market power and positioning, is the key to long-term success.’
Purpose of the study
The purpose of this study is to provide an analysis on Human Resource Management on organizations that have become global with employees of a different culture.
This study will focus on the literature available on International Human Resource Management and how companies deal with the challenges of globalization and of managing employees of different culture.
Background
International Human Resource has its origin in the 1980s, as a reaction against the more functional approach embodied in personnel management. During those times, there were clear differences between American and Japanese personnel practices that led to a more integrated, strategically oriented system for managing employees (Cray and Mallory, 1998).
McKern (2003) stated that before this time, during the early years of the post-war development of the modern international corporation, organizational structures evolved slowly in response to geographical and market diversity. It was easy for management to change structures incrementally. But now changes in the organization are based on complex environmental factors. International Human Resource Management has a big role to play in the new global setting.
According to Guest (1990, qtd. in Cray and Mallory), ‘the apparent novelty of HRM lies in the claim that by making full use of its human resources a firm will gain competitive advantage’.
Human Resource Management seems to point its origin to the American concept. Due to rapid growth in industrialization and the emergence of globalization, there’s a renewed interest on this phenomenon. Organizations and businesses have become global as a result of technological innovations, and the introduction of more development in communications and transportation.
Companies need personnel and departments in order to grow in this so-called global village. But companies and organizations also have to belt-tighten, lower operational costs and minimize wanton spending. What they need are more personnel with less costs for the hiring and training of these personnel.
Most of the business functions and responsibilities cannot anymore be performed by existing departments with their limited personnel. Companies have to create more departments, recruit more personnel, and add more duties and responsibilities. They need middle- and low-level managers and staff to answer to customers’ demands.
In the business world today, outsourcing is almost ordinary as any other function of business. Advancement in communication has allowed everyone and every business organization to be connected to the world anytime. The world has never been so tightly interconnected as it is today. These connections have been realized at almost no cost to the customer and at a reasonable cost to the supplier (Sussland IX).
But outsourcing cannot be the last recourse. HRM is continuously challenged with this operational activity of the organization. Firms have to hire and employ personnel with the necessary expertise.
There are changes, paradigm shifts, new industries formed in the process, and more challenges occur as new culture in the workplace is introduced.
Human Resource strategy plays a more significant role in the implementation and control of the international firm.
Literature Review
There are two paradigms focusing on HRM. The universalist paradigm, which is dominant in the United States, is widely used elsewhere. This paradigm assumes that the purpose of the study of HRM, and in particular strategic human resource management, is to improve the way human resources are managed strategically within organizations (Harris et al., 2003).
In contrast, the contextual paradigm searches for an overall understanding of what is contextually unique and why. Many management researchers find the universalist paradigm ironically excludes much of the work of HR specialists in such areas as compliance, equal opportunities, trade union relationships and dealing with local government. This paradigm is not helpful in regions like Europe, where significant HR legislation and policy is enacted at European Union level (e.g. freedom of movement, employment and remuneration, equal treatment) as well as those of particular countries or sectors (Brewster et al, 1996, qtd. in Harris et al, 2003).
However, the universalist paradigm has strength – a simple, clear focus, a rigorous methodology, and clear relationships with the needs of industry.
HRM is now considered the determinant factor in the success or failure in international business. The success of global business depends most importantly on the quality of management in the MNC. There is a shortage of international management talent that constrains implementation of global strategies (Scullion and Paauwe, 2004).
There is a lot of challenge placed on the manager in managing an organization of different culture; this puts his expertise to the test. Along with this line of thought is the concept on comparative human resource management that explores the extent to which HRM differs between different countries or between areas within a country or different regions of the world.
International HRM examines the way in which international organizations manage their human resources across these different national contexts. There are complex problems or issues found in international context which are not found in the national setting (Harris et al, 2003).
International HRM handles different institutional, legal, and cultural circumstances which the organization has to face in its operations. Then, it has to look at other management practices like cost-effective ways that can help the organization. Obviously, countries differ in many situations, for example policies, and so forth. A performance appraisal system may work in the United States but not in other countries like the Middle East or other developing countries.
Organizational culture vs. National Culture
International HRM explores how global organizations manage the demands of ensuring that the organization has an international coherence and cost-effective approach to the way it manages its people in all the countries it covers, while at the same time ensuring that it is responsive to the differences in assumptions and in what works from one location to another. This is very relevant to managing an organization of different culture. There are countless other issues that have to be addressed by the assigned senior manager and staffs.
Some of the internal factors that influence decision making within the organization are the senior managers’ psychological make-up, the organizational strategy, resources (financial, plant staff, technology) already secured, organizational history, policies and systems, and organizational culture, among others.
An organization in another environmental setting will create a culture by itself that will have to cope with the existing culture of the country. Organizational culture is different from the existing national culture.
According to Mead (2005, p. 3), ‘national culture influences how managers and employees make decisions and interpret their roles… [and] differences between national cultures create important opportunities for growth and development, but also can cause serious problems if they are not understood.’
The values of the particular group of people are one form of influence on the organizational culture.
Mead (2005) adds that culture is particular to one group and not others; it is learned and is not innate; it is passed down from one generation to the next; and that culture includes systems of values.
Hofstede (1993) argues that the two cultural systems are essentially separate. The national culture is derived from early socialization, while the corporate or organizational culture springs from specific organizational culture mainly through the nationality of the founder.
Cultural differences are a key factor to globalization. National values in other countries are more pronounced in the way people dress, talk, act socially, and in their religious ways. Cultural influences are a major concern. Most low-rank employees can be recruited in the country where business is built. Senior staff and other managerial jobs are from the country of origin. Cross-cultural concerns therefore are inevitable. This makes additional demands on the skills of the managers in handling employees of different orientation and culture.
The point here is that different social groups have different cultures and that different social groups may respond to similar situations in different ways (Mead, 2005).
HR managers working in an international environment are obviously subject to the impact of multi-country, regional and global change and dynamism than managers in a single-country operation (Harris et al., 2003).
Different countries do have different values which affect the way people organize, conduct and manage work. The HR manager is faced with interpreting the actions and attitudes of the employees, negotiate with groups that have not only different goals but different methods of reaching to the company and different expectations of the other employees’ behavior.
Moreover, other normal HR activities such as recruitment and selection, training and development, reward and performance appraisal, may all be affected by cultural values and practices. In other words, the adoption of policies for Human Resource should be given careful study.
The problem on selection of staff depends on different factors, and one of these is the strategic decision coming from the main headquarters, if the organization has a subsidiary or branch in another country. The main office has to decide which principle the branch office, or other branch offices throughout the world, will have to follow.
Organization culture differs among firms and different organization cultures can affect a firm’s performance.
The three elements of managing organization culture, according to Griffin and Moorhead (2007) are:
- Taking advantage of the existing culture;
- Teaching the organization culture;
- Changing the organization culture.
Most managers have to choose the first one, i.e. take advantage of the existing culture or that they work in organizations that already have cultural values. They just have to deal with the existing cultural values, and the problem now is how to manage the existing culture. For them, altering behaviors within the existing culture is much easier and faster than changing the history, traditions, and values that already exist. (Griffin and Moorhead, 2007)
Managers should be fully aware of the culture’s values and what behaviors or actions those values support in order to take advantage of an existing cultural system. The manager can do it by reading the company journals that contain the information about the people in the organization. Managers should develop a deep understanding of how organizational values operate in the firm. This can be done by being with the low-rank employees and experiencing with them their common values and experiences. After this, the manager can use the knowledge and understanding in evaluating the performances of others in the firm.
According Griffin and Moorhead (2007, p. 484), ‘articulating organizational values can be useful in managing other’s behaviors.’
The second element of managing organizational culture is socialization which is ‘the process through which individuals become social beings’ (Griffin and Moorhead, 2005).
In this process, children learn to become adults in a society, i.e., as Griffin and Moorhead (2005) stated, how they learn what acceptable and polite behavior is and what is not, how they learn to communicate, how they learn to interact with others, and so on. This process takes many years.
On the other hand, organizational socialization is the process through which employees learn about their firm’s culture and pass their knowledge and understanding on to others. Employees are socialized into organizations.
Changing a firm’s culture requires a lot of time. Sometimes in the process of introducing change in the culture, managers tend to go back or revert to the old pattern of behavior.
Change is also concerned with customer satisfaction, or that which focuses on competitive edge, the means by which it is attained is the efficient use of the labor force. This is the change that involves the quality of the work force. It is important that firms should ensure that the selection, appraisal, training, and reward systems are the best possible, so that they are able to attract and retain a high-quality labor force (Molander and Winterton, 1994).
The problem of integration
One of the key issues for managers in international organizations is the problem of integrating employees from several cultures. At one level the problem is the familiar one of overcoming value and behavioral differences that arises when employees from different cultures must work together (Cray & Mallory, 1998).
The senior manager and staff may face the problem of integration as the manager comes from the United States and the middle- and lower-level managers and staffs are from another country. This becomes more pressing as the organization is more geographically diverse and culturally complex. This requires a higher level of integration to make culturally induced problems more noticeable. When organizations adapt systems to increase integration, other complications arise.
In this case, the senior managers and staff should know how to be flexible in answering to the needs of the middle- and lower-level staffs of the organization. The branch office should be designed to accommodate different levels of tolerance for ambiguity and complexity.
The problem of integration across geographic distance and cultural diversity is one that can be expected to become more prominent and more intricate as organizations grow to reflect the larger number of countries with developed markets (Cray & Mallory, 1998).
There must be training and integration practices for both managers and employees. Pressing issues on culture can be addressed with training and motivation of employees.
Creating and maintaining a well-motivated sales force is a challenging task. The confidence and motivation of salespeople are being constantly worn down by the inevitable rejections they suffer from customers. Employees should be trained in the art of selling with motivation.
Motivation has been researched by psychologists and others for many years. A number of theories have evolved for motivating sales people and employees in the workplace.
Cultural aspects should be given due attention when training and motivating employees. When training salespeople and employees who are from the Middle East, the culture of the people in those countries must be taken into consideration, including their way of dressing and fashion. The employees should receive on-the-job training in the branch store they are supposed to serve or sell. They have to receive the necessary motivation, constructive criticism, and other methods that are in line with their cultural values. Some selling approaches may not be applicable in certain cultures. For example, problem solving techniques may not be suitable for Middle East nationals and salespeople but are applicable in the United States. Training must include product knowledge and an appreciation of the company, its history and philosophies.
Managers should have a formidable set of skills in order to perform their jobs efficiently, including teaching skills, analytical skills, ability to motivate others, communication skills, and the ability to organize and plan.
MNC Exide Technologies
Exide Technologies is an MNC that supplies lead-acid batteries to giant car automakers DaimlerChrysler, Fiat, Ford, Motorola and the navies of Norway, Spain, Sweden, and the US. Its brands include Champion, Prestolite, Sonnak, Pacific Choloride, Exide, PCA, and Emisa.
In 1988 Oxide was accused of selling used and defective batteries as if they were new. The company pleaded guilty, but it also sued its own executives responsible for the fraud. The cost for Exide was $50 million, prompting it to file a bankruptcy to protect itself from creditors. These led to internal adjustment within the company, adjustments on people, processes, and structures. The company hired CEO Arthur Hawkins to rebuild Exide.
Hawkins’s efforts mainly revolved around acquisitions from around the globe that put Exide into 89 countries, managing employees of different cultures. With each new acquisition, the CEO required a structural adjustment to coordinate among existing and new companies. Exide’s structure changed with geographic divisions for markets it supplied with batteries. This meant there were country managers for each nation or region served. (Parker, 2005)
The advantages for the globalized structure of Exide were that there was a streamlining of local decision-making, increased pricing flexibility, and access information to tailor products to specific countries or regions of different cultures.
Findings and Analysis
The apparent novelty of HRM is its full use of human resources.
International Human Resource originated from stiff competitions of American and Japanese firms.
An organization in another environmental setting will create a culture by itself that will have to cope with the existing culture of the country. Organizational culture is different from the existing national culture.
Organizational and national cultures play a role in the success of an effective human resource management. A culture is particular to one group and not to others. But the two cultures are essentially separate.
One of the best solutions for managing an organization of different culture is experiencing what the ordinary employees feel and experience in the workplace. The manager has to let himself or herself feel what is going inside the organization so that he/she can know what are the values that need to be changed.
Conclusion
Cultural influences are a key factor in the effective implementation of International HRM. Much focus and study should be afforded on cultural factors to include organizational and national culture.
Organizational and national cultures are different from each other and therefore should be handled differently but with broad understanding on the part of the human resource manager. The HR Manager has to be knowledgeable and well equipped in handling people.
References
Cray, D. and Mallory, G. (1998). Making sense of managing culture. London: International London Business Press Inc.
Franke, R., Hofstede, G., and Bond, M. H. (2002). National culture and economic growth. In M. Gannon and Newman, K. (eds.) Handbook of cross-cultural management. Oxford, UK: Blackwell Publishers Ltd.
Griffin, R. W. and Moorhead, G. (2007). Organizational behavior: Managing people and organizations. OH, USA: Cengage Learning.
Gupta, A. K. and Becerra, M. (2003). Impact of strategic context and inter-unit trust on knowledge flows within the multinational corporation. In B. McKern (Ed.), Managing the Global Network Corporation. New York: Routledge.
Harris, H., Brewster, C., and Sparrow, P. (2003). International Human Resource Management. London: Chartered Institute of Personnel and Development.
Harzing, A. (2004). Composing an international staff. In A. Harzing and Ruysseveldt, J. V. (eds.) International human resource management (2nd ed.). London: Sage Publications Ltd.
Hofstede, G. (1993). The interaction between national and organizational value systems. In G. Hudland and Dunning, J. (eds.) Transnational corporations: transfer pricing and taxation. London: Routledge.
McKern, B. (Ed.) (2003). Managing the Global Network Corporation. New York: Routledge.
Mead, R. (2005). International management: cross-cultural dimensions. Oxford, UK: Blackwell Publishing.
Molander, C. and Winterton, J. (1994). Managing human resources. New York: Routledge.
Parker, B. (2005). Introduction to Globalization and Business: Relationships and Responsibilities. London: Sage Publications.
Scullion, H. and Paauwe, J. (2004). Management: recent developments in theory and empirical research. In A. Harzing and Ruysseveldt, J. V. (eds.) International human resource management (2nd ed.). London: Sage Publications Ltd.
Sussland, W. A. (2000). A Global Approach to Managing Complexity. London: Thomson Learning.