International Human Resource Management – IHRM
“With reference to relevant IHRM theoretical and research material, critically analyse ways in which IHRM is shaped by institutional and cultural/societal factors. How can firms balance the need for global integration of HR strategies, policies and practices with the pressures to adapt to host country requirements?”
The rise of globalization has brought in many changes across the world and has significantly impacted how businesses operate on a global level. Globalization is the process for achieving international integration that results from sharing of ideas, products, services and other such areas of culture. With globalization arises many other concepts touching upon various spheres of life and there are no hard and fast rules with regard to globalization. The process of globalization involves economic integration, the sharing of knowledge and information between countries, power discourse and cultural strength. It is looked upon as a platform for global free market that is devoid of any socio-political influence and brings about exchange of cultural and national resources across boundaries (Al-Rodhan, 2006, p. 1).
Globalization has attained its peak over the past few years as it promotes free trade. Exchange of goods and services have been leveraged in many ways and the transportation cost is low. Corporations functioning in developed nations across the world are able to get cheap as well as efficient labours from developing nations. On the other hand, the developing nations are benefitted with the huge surge in job opportunities and infrastructural development. Proponents of globalized business strongly believe that it is a mutually beneficial arrangement and leads to the upliftment of both sides on many fronts (Robertson, 1992).
While the concept of Globalization has turned out to be the best option for organization in many ways, it struggles when it comes to the most important internal function, human resource management. However, globalization has got its pros and cons. Organizations are struggling to create and implements Human Resource Management policies that fits into the global as well as domestic market. Corporations also need to face the pressure of integrating various HR strategies, processes and practices with that of the host country. This paper will analyse the impact that societal, cultural and institutional aspects have over International Human Resource Management and how the firm balances the whole integration process.
As provided in the website Business Dictionary, an Organization can be defined as,
“A social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks.”
In order for a smooth functioning, the different members belonging from different cultural, societal and political background should come together and needs to work towards the common goal of the company. This is possible only with the help of well integrated international human resource strategies.
Institutional impact on IHRM
The institutional factor has a huge impact on the International Human Resource Management and it needs to be understood that the impact can be both external and internal. External institutional sources include the political set up of a country, legislation, national culture and local custom. Internal institutional impact is at the managerial level, corporate culture and strategies. The organization which is doing business with a host country company needs to comply with the rules, laws and regulations region and should set up a HR policy based on this factor. The distinction in the laws could amount to an altogether different approach on rules related to human resource and the main organization located in a different country should set up a code of conduct that is in sync with the host country. By taking an institutional perspective, the organizations need to adapt to HRM rules of the country in which they are doing business with. By standardizing the HR policy and practices according to the host country requirements, organizations are able to operate businesses smoothly (Svendsen, 2011, pg. 3-8).
The political set up of a particular country has got a significant impact on organization and its principles related to human resource management. There are various levels of operation and those countries that support liberal economics are the ones that derive maximum benefit out of it (Crouch and Streeck, 1997). Organizations would go for countries that supports liberal economics as they have the freedom to manage, provided with the option to bring about short term competition, training is considered important, payment could be made as per the performance of the individual and there will be flexibility as to the employment and deployment of staffs. In such an economic set up, the organizations are provided with complete freedom as to the business operation (Scullion, 2007, pg. 309-319).
This is a completely different scenario when it comes to CME countries as such countries give importance to long term performance rather than short term strategies. It ensures to develop product and service innovation and development of skills. Employees are placed in regular training and skill development program so that they achieve the necessary skill sets to meet up with the current day requirements. The Human resource principles are created in such a way that it provides for job security, invests on training the employees and other such areas.
Cultural and Societal impact on IHRM
The cultural impact on IHRM is considerably high. It needs to be understood that both the countries doing business with each other comes with a completely different cultural background and it is important for countries to understand the cultural difference and work towards setting up an IHRM policy that does not disturb the present cultural set up. The ways one dresses to the work ethics they follow are completely different in the two countries and it is necessary that companies be well aware of this before doing business. The cultural impact on an organization can never be ignored and it needs to be looked upon in the initial stage itself in order to prevent any sort of issues in the future. A proper code of conduct developed between the two countries will enable the smooth operation of business (Scholte, 2005).
There are certain practices of an organization are known to be derived heavily based on the culture of the country. The organizational structure that a company goes for is based on the culture of both the countries. It could be consultative set up or that of an authoritative set up and it could be some other structure that is new to the field. The next important area that culture comes into IHRM is recruitment. Recruitment could be done based on recommendations or a series of test, interview process. Gender difference is yet another important area that is touched upon when it comes to cultural impact. Certain countries may restrict certain terms of work condition when it comes to woman and the company needs to go by it. There could be restrictions as to time and the nature of work they carry on.
Based on the culture of a country, individual or collective group, the remuneration part is finalized. From this, it could very well be understood that cultural differences have a significant impact on the International Human Resource Policy and this aspect should never be taken slightly. There need to be a clear distinction with regard to the cultural variations of the two countries so that it becomes easy and simple to form regulated and balanced human resource management principles (Hofstede, 2001).
Having understood the kind of impact that culture has over the framing of human resource principles, the kind of impact that the societal setup of a country has over the IHRM policy should never be underestimated. Society is a collection of people from diverse backgrounds and it is regulated by way of rules and regulations in order to maintain order. The societal set up of the organizational country and host country turns out to be different altogether and it is imperative for the countries to develop an understanding over this area. The societal needs and differences should be brought together and a streamlined human resource management policy should come up. There are some activities and behaviour that accepted in one society whereas it is not taken easy in the case of another society. IHRM areas like long term orientation and continuous skill development is possible in countries that provides for a stable and streamlined society (Jing, 2010, pg. 43).
It is applicable to various areas of life including dress code, working hours and so on. The societal differences touches upon some of the most crucial areas which includes employment training and development, appraisal, working conditions, the right and regulations followed by people who are working in the different country set up. This same principle needs to be followed when it comes to developing an organization human resource policy for the two different countries with different societal set up.
To conclude, we can understand that the institutional, societal and cultural differences has a significant impact on the International Human Resource Management policy developed and practiced by an organization. It needs to be understood that every society has got its own culture which leads to the development of a particular institutional set up. These three main aspects are interlinked and can never be ignored when setting or framing a human resource management policy that works perfectly for the countries. Both the host company and the company that is giving business should be able to work in coordination with each other in order to balance any sort of pressure that may arise from the venture.
Al-Rodhan N (2006) Definitions of Globalization: A Comprehensive Overview and a Proposed Definition, Program on the Geopolitical Implications of Globalization and Transnational Security, pg. 3-12
Robertson R (1992) Globalization: Social Theory and Global Culture, Social Science, pg. 8-23
Scullion H (2007) International Human Resource Management IHRM in the 21st Century: Emerging themes and Contemporary Debates, Human Resource Management Journal, 17(4), pg. 309-319.
Scholte J (2005), Globalization: A Critical Introduction, Political Science, pg. 230-267
Svendsen K (2011) International Human Resource Management IHRM : Drivers of Subsidiary Performance – The Impact of Subsidiaries’ Autonomy in Determining HR Policies, International Business, Copenhagen Business School.
Jing P (2010). Cross Cultural Human Resource Management (IHRM), Business Economics and Tourism, pg. 43-53
Hofstede, G. (2001) Culture’s Consequences: Comparing Values, IHRM Behaviours, Institutions and Organizations Across Nations 2nd edn., Thousand Oaks, CA: Sage Publications
Crouch, C. and Streeck, W. (1997) Political Economy of Modern Capitalism, London: Sage Publications.