International Management of Human Resources
The trend towards globalization engendered in part by the needs to stay competitive and to increase one's market share have brought with them a number of considerations for the development and implementation of fair human resources policies in multinational organizations. Local culture, laws, and political and economic factors are just some of the factors that must be considered at each locality. Although generic human resources policies and practices are of some value, they must be modified at the local level to take into account the particular cultural needs and legal requirements in each country. In addition, the human resources system must take into account the special needs of expatriates — employees working on a long-term or permanent basis in another country.
Keywords Culture; Expatriate; Globalization; Offshoring; Outsourcing; Strategic Planning
International Business: International Management of Human Resources
Although once a historical novelty, globalization (the business practice of extending an organization's sales, ownership, or production to new markets in other countries) has become commonplace. The suit on the rack in the local department store may have been manufactured in China. The "Japanese" automobile one drives to work may have been manufactured in Kentucky. The technician answering the phone on the help line for the software company may be sitting at a desk in India. In some cases, this work has been outsourced — contracted to another organization even though it could have been done in-house. In other cases, the work is offshored — performed by local employees in another country with lower personnel or production costs.
There are many reasons for globalization. Among them is the continuing pressure perceived by some organizations to expand their business markets and customer bases. Also, in order to stay competitive in the global economy, organizations must have their operations performed as economically as possible. These trends continue to grow. It has been estimated, for example, that in the decade between 2005 and 2015, approximately 3,000,000 jobs traditionally done in the US will be moved offshore. This means production jobs won't be the only jobs moving to countries where goods can be manufactured more cheaply; office support, sales, management, and even legal jobs will be moved abroad.
The trend towards globalization has implications for human resources management within the organization. First, this trend means not only that the market for the organization's goods or services is larger; it means that the number of competitors is larger, too. This puts pressure on the organization to be more efficient by producing top-level goods and services at globally competitive costs. As a result, organizations today are seeking more and better ways to increase their performance and lower their costs. Although this can be done partially through automation and other applications of today's technology, it also means that organizations need to encourage high performance from their employees, no matter what country they are working in. An organization's human resources system can contribute to this goal through objectively defining the jobs to be done and establishing hiring, performance appraisal, and other human resources functions. The human resources system can also support high performance in the organization by helping employees to acquire more and better job-related skills and rewarding them financially for contributing to the success of the organization.
Carrying out these functions, however, becomes more complicated when the organization operates across national borders. Differences in culture, political and economic systems, and legal and industrial relations concerns can have a significant impact on the way the organization is allowed to function.
One of the issues with which the human resources system must deal in the multinational organization is differences in culture. Culture comprises the widely-held assumptions of a group of people, and can have a significant impact on how one can effectively do business. Human resources policies and practices that are appropriate in one country may be inappropriate in another country due to the differences in underlying assumptions. This makes development and implementation of consistent, equitable, and fair practices for the entire company an interesting challenge when different branches or operations are located in different countries. For example, US managers tend to be more concerned about productivity than are their counterparts in China, whereas Chinese managers are more concerned about maintaining a harmonious environment than are their American counterparts. Similarly, workers in some countries like Mexico tend to accept an unequal distribution of power, whereas workers in other countries such as Sweden are far less tolerant of inequalities.
Cultural differences can also affect how people communicate, what assumptions they make, and how they perceive the world in general. In Germany, for example, senior people are always addressed formally, a practice that has largely fallen by the wayside in the US. Although this may seem like a little thing, it can potentially influence how management perceives an employee who breaks this unwritten code. This perception, in turn, can have an effect on the opportunities the employee is given because of the manager's perception of the employee as insubordinate or rude. In some Asian cultures, it is important not to "lose face" or cause another to do so. Therefore, it is important to pay attention to the body language of other people as it is more likely to express the real intent of the communication than are placating words. Sending a female representative to negotiate in a male-dominated country may result in the representative not being taken seriously or the prospective client being insulted; at least until the representative's ability was proven. The human resources function in the organization needs to take these considerations into account and provide diversity training to help smooth communications between cultures.
Differences between countries are not only cultural or social. Varying political, economic, and legal systems can also affect the way that an organization is allowed to operate and how it can treat its employees. These matters fall under the purview of the human relations system. Perhaps one of the best known differences between some countries — and one of the reasons that outsourcing is so popular in some countries — is the fact that compensation varies from country to country. For example, the hourly rate of production workers varies widely across the globe; those in Mexico are paid the equivalent of $2.38 per hour while their counterparts in Germany are being paid $25.08, with a range of rates in between.
Legal issues regarding employer/employee relations differ from country to country, too. In France, for example, the employer's right to terminate workers has been severely restricted, as has the number or hours that an employee can legally work per week. In many European countries, work councils rather than labor unions or less formal employee/management teams are involved in mediation. Work councils are formal groups whose representatives are elected by the employees. The councils meet with management on a regular basis to discuss policies affecting workers. In addition, organizations in countries who are members of the European Union (EU) are required to "inform and consult" employees on an on-going basis on various actions that affect them. However, there are still differences between the practices between EU countries, including minimum wage, maximum work hours per week, and minimum number of holidays.
At its most basic, the human resources system relates to everything involving the treatment of the humans in the organization. At a minimum, this typically includes activities such as human resource planning; recruitment, hiring, and placement; training and development; performance appraisal; wages, compensation, and perquisites ("perks"); and employee relations. Although the need for these basic functions is the same no matter where the operation is located, the way that they are implemented may change due to local requirements.
Defining the Human Resources Function in International Organizations
As with any function within a well-run organization, the development of a good human resources system requires planning. The human resources planning process is part of the strategic planning process for the organization. To help ensure the viability of the human resources function within each country in a multinational organization, human resources planning needs to be carried out not only at the corporate level, but also at the local level. This will help ensure that the plans consider local customs, laws, or other requirements that can affect the human resources function. For example, in Germany, employees have the legal right to...
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