International human resource management

Introduction

Increasing competition in global business has created new challenges for multinational corporations (MCs) on how human resources are best managed. Globalisation has also meant that international business has to be managed in a diverse multicultural environment comprised of different infrastructural systems, levels of economic development, religions, values, ideologies, education, and social structures (Hollenbeck & Wright 2007). However, even domestic organisations cannot operate without the influence of globalisation, which calls for an adjustment of ‘the way things are done at home’ in order to remain competitive within a global context. Therefore, international diversity and globalisation are key drivers of international human resource management (IHRM). Schuler (2000) puts it in the right context as he argues that the complexities of operating in different countries and employing different national categories of workers is the key element that distinguishes domestic from international human resource management. This chapter is devoted to addressing human resource management issues at the international level and their influence on the way human resource functions should be handled and their implications in international business competitiveness.

By the end of the chapter, the learner should be able to:

· Distinguish domestic from international human resource management,

· Examine the international environmental factors that affect human resource functions,

· Establish a link between international human resource management and MCs competitiveness and

· Appreciate techniques for handling challenges of managing a multicultural workforce.

The concept and reasons for IHRM

Over the past two decades we have witnessed major organisational changes worldwide such as mergers, acquisitions, and partnerships in order to face the international business environment in a more competitive manner. These changes have led to the opening up of branches abroad where both local people and foreign expatriates work together. These changes have given rise to international human resource management, which entails performing human resource functions by taking international diversity on board in socio economic development, culture, religion, ideologies, values, social structure and expectations in order to gain a competitive advantage. Michael Armstrong looks at IHRM as ‘the process of employing, developing and rewarding people in international or global organisations’ (Armstrong 2006: 99). In this regard, it is observed that there are several factors that have pushed for the need to have IHRM as a distinct field within in HRM. These are:

The increasing globalisation and growth of multinational corporations.

Today, geographical distances between one continent and country and another is no longer a problem. We are virtually living in a global village where improvement in science and technology has drastically reduced market information barriers. Market information from one continent or country to another can be obtained within a minute of clicking a button on a computer connected to the internet. This has immeasurably contributed to increasing awareness of new markets, formation of more MNCs and at the same time stiffer competition at a global level.

Ability to manage multicultural workforce as it influences performance.

Going international also means accepting the rules of the game in international business. Such rules include the ability to manage a workforce with different backgrounds under the same roof through strategies that optimise diversity in order to produce goods and services that can compete both locally and internationally. Studies in large American firms have shown that organisations with a multicultural workforce (Whites, Mexicans, Afro Americans, Indians, and Japanese) were performing far better than those without.

Shortage of managers with competence to manage MNCs.

The demand for knowledge, skills and the right attitude for international jobs has been increasing over the years. International managerial jobs require multiskilled staff. It is difficult to get those people because knowledge and training in international business operations in a multidisciplinary approach is still new relative to the historical traditions of specialised training which focused on specific disciplines and professions.

It is expensive to fail in international business

It is a very expensive and risky endeavour to establish an international business because of the initial and operational capital requirements as well as the possibility of a change in the political or economic environment. Human resources as the manager of other resources can cause the success or failure of a business. For example, unqualified marketing staff can potentially cause the loss of market share and a damage of reputation to overseas customers. This cannot be tolerated. Therefore precautions have to be taken right from recruitment level.

The experience of expatriate failures

Lessons from earlier expatriates who were assigned jobs abroad have also had an impact in the development of IHRM. Frustration due to the inability to cope with the demands of a multicultural workforce and community led to many resignations and pressure for research and training in diversity and coping strategies.

Salient features of IHRM

Torrington (1994 in Armstrong 1997), identified seven features that characterise IHRM.

1. Cosmopolitan nature of the employees. That is, employees tend to be either members of high level elite who work as coordinators or expatriates; they are constantly on the move between one country to another.

2. Culture. There are major differences in their cultural backgrounds.

3. Rewards. There are differences in pay and other benefits between international and local staff.

4. Communication. Effective communication is maintained between the metropolitan and peripheral offices. There is a wide use of multilingual media communication.

5. Consultancy as modus of operandi. In most cases, international staff are brought in to provide local consultancy needs.

6. Focus on competency. There are specific efforts to develop different ranges and levels of competence for staff in order to match global demands.

7. Coordination. There are strategies to bring together and closely manage different functions across borders.