Human Resource Management
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1.1 Background information
With the development of economy and society, Human Resource Management (HRM) become more and more important than ever before all over the world. Stone (2012) explains that “HRM focuses on managing people within the employer-employee relationship. Specifically, it involves the productive use of people in achieving the organization’s strategic objectives and the satisfaction of individual employee needs”. In addition, HRM includes four main activities: recruitment and selection, performance management, training and development, and international HRM. In this report, the author will focus on the activities of international HRM.
1.2 International HRM (IHRM)
Stone (2012) argues that “international HRM is defined as practiced by multinational organization. Its focus is the management of people in a multi-country context”. With the formation of global economic integration, the inevitable outcome – multinational corporations or organizations have to face different political systems, legal norms and customs (Chang, Mellahi, & Wilkinson, 2009). Aydinli (2010) states that at the same time, the IHR managers have to work with people who have different nationalities, cultural backgrounds, and languages. This may cause some key cross-culture issues, such as communications, ethics, trust, management style, and Equal employment opportunity. In addition, research indicates that numerous companies are unable to be well prepared for internationalization and these companies are often failed in dealing with international HRM issues (Du Plessis, 2010). As a result, how to solve these cross-cultural problems is very important for multinational corporations to become successful. There are three major challenges in international HRM activities, which are related to the cross-culture issues and will be presented in this report: performance appraisal, training and development, remuneration.
2.0 Three major challenges
2.1 Performance appraisal. The first major challenge for IHR managers is how to appraise the performance of expatriates accurately. As you know, expatriates are very important human resources for multinational corporations. However, Brisco, Schuler, and Tarique argue that multinational firms are often lack of the evaluation of expatriation and it is difficult for them to evaluate accurately the performance of their expatriates (2012). Although expatriates can translate their attributes that gain overseas into comparative advantages for their companies, research indicates that 58% of firms that have participated the survey are unable to measure the performance of their expatriates accurately by using present performance evaluation methods (Short & Callahan, 2005). As a result, performance appraisal of expatriates is the first major challenge for IHR managers. This challenge includes two aspects: performance criteria and performance feedback.
2.11 Performance criteria. The first aspect of this challenge is performance criteria and there are two kind of problems in choosing performance criteria for their expatriates. Firstly, it is very difficult for IHR managers to choose the right performance criteria to measure expatriates in different countries. Chitakornkijsil (2010) explains that this is because that performance evaluation is highly depend on the national culture of the firm. Deloitte (2007) have given some examples, in most of Chinese companies, the performance criteria focus on the personal relationships, political attitudes, the positions and ages. While in the American or Australian firms, the criteria focus on individual performance. As a result, when two or more cultures mix together, how to choose right performance criteria that can satisfy different requirements of expatriates is a challenge for IHR managers.
Secondly, it is also difficult for HR managers to decide the performance criteria that should be based on individual or the group. This is because different cultures have different attitude towards performance criteria (Warner, 2004). Short and Callahan states that in the individualism countries, such as America, Australia, Canada, and England, people have “I” mentality and their identity is based on the individual. Furthermore, they focus on individual initiative and achievement which cause that they value standards apply to all (2005). However, in the collectivism countries, such as China, Egypt, Japan, and India, people have “we” mentality and the identity is based on the group. In addition, their focus is on belonging to an organization, which cause that they value differ according to the group (Budhwar, Schuler, & Sparrow, 2009). As a result, IHR managers also have to face this challenge when the firms send their expatriates to different countries.
2.12 Performance feedback. The second aspect of this challenge is performance feedback. Using a direct or indirect way to give feedback to their expatriates is another difficult decision for IHR managers to make. This is because that different countries have different communication styles in the organizations. Chitakornkijsil (2010) argues that in the high-context countries, such as China, Japan, Korea, and Spain, people prefer to use indirect way to communicate because they often hide their true feeling in order to keep the harmonization of organizations. However, in the low-context countries, such as, Australia, America, Norway, and Sweden, people prefer to use a direct way to express their feelings because they are individualist and target-oriented (Iqbal, Tayyab, Farmanullah, & Khan, 2012). In addition, Deloitte (2007) states that if IHR managers use an unappropriate way, which cannot be accept by expatriates, they will be unsatisfied and have low performance at work. As a result, which style should be used to send feedback to expatriates is a challenge for IHR managers.
2.2 Training & development. The second challenge is about training and developing employees in the international situation. When companies operate internationally, training and developing their employees become more complex. This is because IHR managers have to face different issues when they are doing the training and development activities, which are caused by the diversity of the employee, language, and cultural differences (Aydinli, 2010). Du Plessis (2010) states that if IHR managers are unable to solve these issues, the effectiveness of the organization will be decreased. As a result, training and developing the employees has become a challenge for HR managers in multinational corporations. There are three aspects of this challenge: language, training styles, and conflict resolution.
2.21 Language. It is obvious that language problem is the first aspect that HR managers will face when doing the international training and development activities. However, Brisco, Schuler, and Tarique argue that it is still difficult to solve because that different languages may be used by the diversity of the workforce (2012). Although English is often used in international business, some people may still misunderstand because of accents or fluency (Warner, 2004). As a result, how to choose a language that all the employees can understand and accept is a challenge for IHR managers.
2.22 Training styles. The second challenge of training and development is choosing training styles. This is because that different countries have different training styles. Deloitte states that in high-power distance countries, such as China, Japan, Korea, companies have hierarchy in their structure, which lead to inequality in their organizations (2007). As a result, employees respect for authority and HR managers prefer to use a formal style during the training and development activities. However, in low-power distance countries, such as Australia, America, England, companies have a minimum inequality in their organization and superiors and subordinates are all the same (Budhwar, Schuler, & Sparrow, 2009). As a result, individuality is be respected and HR managers often choose a informal way to do the training. Therefore, when people who have different cultural background work together, IHR managers have to face this kind of challenge.
2.23 Conflict resolution. Conflict resolution is the last aspect of this challenge and it is a important part of training and developing their employees. When culture shock occur in the company, conflicts are unavoidable. However, different people have different attitude towards conflict resolution. Aydinli (2010) argues that in low-context cultures, such as Australia, America, England, people have a logic way to think about the questions and they focus on issues instead of people, which cause that people want to solve the conflict very quickly and they often use direct methods and actions. In contrast, in high-context cultures, such as China, Japan, Korea, people are group-oriented and they focus more on people than issues, which means that they try to avoid conflict in the public place and they often use a indirect and inactive way to solve the conflict (Short & Callahan, 2005). As a result, how to choose appropriate ways to solve the conflict is another challenge for IHR managers.
2.3 Remuneration. The final major challenge for IHR managers is remuneration. When the company operate in the multinational level, strategic remuneration become more complicate and it is important for IHR managers to consider different reward systems for their employees and unique remuneration packages for their expatriates due to the cultural differences (Chitakornkijsil, 2010). There two aspects in this challenge: reward systems and remuneration packages.
2.31 Reward systems. The first aspect of this challenge is reward systems. IHR managers will have problems on choosing reward systems because that the reward system is highly rely on the national culture of the company (Du
Plessis, 2010). In the collectivism countries, such as Japan and Korea, rewards of companies are more depend on group performance and the individual position. In contrast, in the individualism countries, such as Australia and the United States, the rewards are more rely on individual performance (Chitakornkijsil, 2010). Furthermore, in the low-power distance countries (for example, Sweden and Australia), employees expect to have a more equal reward system. While in the high-power countries, such as China, Indonesia, and the Philippines, the rewards focus more on promoting differences in positions or status (Chang, Mellahi, & Wilkinson, 2009). In addition, Deloitte (2007) states that in the high uncertainty avoidance countries, such as Korea, Japan, and China, employees expect to have a fixed pay regardless of their performance. While the companies offer more incentive pay to motivate their employees in the low uncertainty countries (for example, America, Canada). As a result, when the company operate internationally, IHR managers will face challenges in choosing the right reward system, which is able to motivate employees from different cultural backgrounds.
2.32 Remuneration packages. The second aspect of this challenge is about remuneration package for their expatriates. This is the main challenge in international staffing and how to ensure the equity and fairness of the remuneration package for both local employees and expatriates is a challenge for IHR managers (Aydinli, 2010). Brisco, Schuler, and Tarique (2012) argue that it is obvious that HR managers have to choose a appropriate remuneration package for their expatriates because of the disruption, cost and inconvenience of living in different countries. However, if the remuneration package for their expatriates is significant better than the locals, the performance and motivation of their local employees may be reduced (Du, Plessis, 2010). In addition, Du Plessis also states that standardized pay often cannot be accepted by the expatriates because that the condition and legal-political requirements change form country to country (2010). As a result, IHR managers have to face this challenge when the company send their employees to overseas.
This interview was conducted with Mr Lin, who is an employee of a education consulting company in China but working in a branch office in Perth now. The personal opinions of performance appraisal, training and development, and remuneration were provided by Lin, which offered a better understanding of challenges in the real-world workplace. In addition, Lin is a expatriate, who is from China and use an employee view to think about these three major challenges in international HRM. The questions and answers can be found in the transcribed vision of the interview in Appendix.
4.0 Critical analysis
When the company operate internationally, everything related to HRM becomes different and more complex, especially in three major international HRM activities: performance appraisal, training and development, and remuneration. In this part, the author will analyze the differences between the academic concepts and what has happened in the real-world of these three major challenges, which can help IHR managers to deal with these challenges. In addition, the analysis is based on the questions and answers in the interview.
4.1 Performance appraisal
4.11 Performance criteria. Lin indicated that the HR manager from the host country evaluated the performance of the interviewee and the performance criteria for them were highly depend on the profit, market share, and productivity. “I guess our HR manager evaluate these things, who is in the head office in China. he cares more on the clear things that our work presents, such as profits, market share, and productivity of our work”. Brisco, Schuler, and Tarique (2012) argue that it is common that multinational firms use a home office management to evaluate the performance for their expatriates. When asked if they were satisfy with the performance criteria in the current company, the interviewee stated that “I am not very satisfy because the performance criteria for our expatriates are just numbers and percentages. Although it can assess how successful your work is, I think it is not very fair. Actually, living in Perth, almost everything is different.
Many different things affect the performance but cannot be known by HR manager because of the long geographical distance. Such as, language problem, policy change and something like that”. According to the discussion of the interviewee, who should to evaluate the performance of expatriates is also a challenge for the multinational company, which has not discussed in the theory part. Aldinli states that using the host office management to measure the performance of expatriates may cause some problems because the HR manager does not know what is real happening overseas (2010). As a result, combining the theory and interview, the IHR manager need to not only be aware of the invisible aspects caused by cultural differences, but also choose the right person to evaluate the performance for expatriates to deal with this challenge.
4.12 Performance feedback. When asked which way the HR manager used to send performance feedback, Lin indicated that “I guess he often use the indirect way to give feedback. When something goes wrong, the HR manager will send me a email. For example, our total profit went down last year, then he sent me a email and the email said: I know you all are working hard and try to achieve the objectives of our company, but I believe you can do better and I hope to see the increasing profit next month. I really like this indirect way and I do not accept very direct way”. What the interviewee said has proved that people from China, which belongs to the high-context cultures, prefer to use an indirect way to communicate. Warner states that people from the low-context cultures prefer to use a direct way while people from the high-context cultures often choose an indirect way in both verbal and non-verbal communications (2004). As a result, the IHR manager need to use different ways to send feedback to various employees to deal with this challenge.
4.2 Training & development
4.21 Language. The interviewee stated that people prefer to speak their mother language when doing the training activities and people will face some problems when they use the second language, such as misunderstanding about the difficult words and different accents. “I prefer to speak mandarin, which is my mother language. But it is different when you are working in different countries. When I was in China, the HR managers speak mandarin to talk with us and to teach us something. This is because almost everyone is Chinese. So, that is great. But when I came to Australia, everything changed. I am working with people from different countries, such as Japan, England, Korea and local people. So, I have to use English to learn something. Although I can speak fluent English in the daily life, I still have some problems, like misunderstanding of professional words and accents of speakers”. The language problem in the multinational company echoes the finding of Du Plessis (2010) who found that almost every employee prefers to speak native language. However, when they are doing a job in a multinational company, they may have to learn the second language, which has a negative influence on their understandings. As a result, IHR managers need to choose a appropriate language and try to help their employees who have the language problem to deal with this challenge.
4.22 Training styles. When asked what styles the HR manager used when doing the training activities, the interviewee indicated that “I think it became different when I came here. When I was in China, we respect for people who have more knowledge than us because of the deep influence of Confucianism. So our HR manager often use a formal way training us. When I came here, I guess because individual is respected, people often use a informal way to talk and to learn. Actually, people can laughing anytime, even employees can play jokes on their boss”. What the interviewee said has proved that the training styles are highly rely on the cultures. Chitakornkijsil (2010) argues that training and developing employees become more and more complex when the company operates in the international level because of different values and expectations of their employees, which are caused by the cultural differences. As a result, IHR managers need to be aware of these difference and try to choose appropriate styles for the training and development activities to deal with this challenge.
4.23 Conflict Resolution. Lin identified that people from different countries have different attitude towards conflict and culture shock is one important reason for a conflict in a multinational company. “Actually, I do not want to have any conflict with others. But after I came here, I have experienced some conflicts due to the culture differences. I can give you an example, when I was doing one project with an England workmate, he did not agree with some opinions of mine. Surprisingly, he chose a higher voice to say: you are totally wrong. At that time, I could not accept that direct way, so I just left the office and said: you are so rude. The next day he came to my office to apologize and explain. He said: Sorry, yesterday, I just want to solve the problem and not focus on you”. Short and Callahan (2005) state that the attitude towards conflict is different from country to country. This is because people from Western cultures often regard conflict as a very useful method to deal with the issues, while people try to avoid conflict in Eastern cultures. As a result, IHR managers should understand this cultural difference and choose appropriate methods when handling conflicts with employees from different countries in the workplace.
4.31 Reward systems. When asked whether it was fair for every employee that the company used a team based reward system, the interviewee presented that “Frankly speaking, although it is suitable for me, I do not think it is very fair for all the employees because people from different countries may prefer a individual based reward system. I know a guy who is from America and he is very aggressive and want to do the work by himself. I guess if he come to our company, he will be disappointed by this kind of reward system”. Deloitte (2007) explains that reward system is a important part of a multinational company because an appropriate reward system can not only motivate their employees, but also help the company to reach their objectives. However, with the integration of different cultures, it becomes more difficult for IHR managers to choose because a large number of different needs meet together. As a result, IHR manager should to identify these different needs and try to find a reward system that can be satisfied by the most employees.
4.32 Remuneration packages. Lin identified that the company need to offer more basic allowances for their expatriates living in another country, which can satisfy their living needs “I am satisfy with the remuneration now because my company help me to pay almost everything, such as rent of the house, the transportation fees, and the insurance fees”. Budhwar, Schuler, and Sparrow (2009) argue that the multinational company need to pay more
attention on remuneration packages for their expatriates because if the remuneration package cannot satisfy basic requirements of their expatriates, they will become disappointed and cannot have a high performance in their work. When asked what was the best remuneration package for a expatriate, the interviewee indicated that “It depends on different locations. But I think three things are very important no matter what the location is.
The first thing is the safety. The second aspect is the different remuneration package for the expatriate and the last thing is the equitable pay rate”. Chang, Mellahi, and Wilkinson (2009) states that it is difficult to design remuneration packages for expatriates because there are a lot of differences between domestic-based HRM and international-based HRM in compiling remuneration packages due to a large number of changes in conditions and living needs from country to country. In addition, according to the opinion of the interviewee, two important aspects also should be considered by the IHR manager for expatriates: safety and equal payment, which has not addressed in the theory section. As a result, IHR managers need to think carefully about the important requirements for expatriates. Further, managers also need to ensure equality and try to design a special remuneration package for them when facing this challenge.
In conclusion, many important and difficult challenges occur in the international human resource management because of the unawareness of cultural differences. As a result, when the company operate internationally, IHR manager in that company has to face various challenges in the activities of international HRM. This report has presented three major challenges that are caused by the cross-culture issues: performance appraisal, training and development, and remuneration. Furthermore, the author has compared the theory and the practices of three challenges to offer a better and future understanding of them. In addition, this author has also indicated some possible solutions for IHR managers to consider when they face these challenges. In the future, IHR managers need to not only understand and respect for these cultural differences, but also be sensitive with the real requirements of their local employees and expatriates to deal with various challenges in order to achieve the objectives of the company.
I chose international HRM to write this report because I am very interested in cultural differences and I found that many international HRM issues are related to them. In addition, I used different methods to search for this topic, such as reading books, finding the journal articles online, and discussing with classmates. However, I met some problems when I was doing my report. For example, it was very difficult to identify three challenges at the beginning. In addition, after the interview, I realized that there were still some aspects in these three challenges that I had not discussed. Interpret
Because international HRM is linked to my another major: international business, I want to combine two kinds of knowledge together to have a better understanding of what I have learned in each unit. In addition, because international HRM is a very big topic and the challenges are also various, it was not easy for me to make the decision quickly at the beginning. After enough reading for this topic, I chose these three challenges because I found that 70 percent of IHRM articles has discussed them.
After finishing this report, I have a broader understanding about different activities in the international HRM. Furthermore, I learn some research skills from librarians, which is very useful for my future study. In addition, I have learned some possible solutions for these three challenges, which may be useful for my future career. Moreover, I found it is useful to discuss with your classmates or friends, which can help you to find some mistakes quickly. Plan
In the future, if I am able to become a IHR manager in a large multinational company, I will be well prepared for these three challenges because it is more complicate than the challenges based on the domestic level. Firstly, I will identify the key cultural differences, which was often presented by the employees. Secondly, I will go to countries where expatriates are living to know what is real happening to identify their needs.
Aydinli, F. (2010). ‘Converging human resource management: a comparative analysis of Hungary and Turkey’. The International Journal of Human Resource Management, 21(7), 1490-1511. Briscoe, D., Schuler, R., & Tarique, I. (2012). International human resource management (4th, ed.). Taylor and Francis, London. Budhwar, P. S., Schuler, R. S., & Sparrow, P. R., eds. (2009) International Human Resource Management. Cross-cultural HRM Sage, London. Chang, Y., Mellahi, K., & Wilkinson, A. (2009). ‘Control of subsidiaries of MNCs from emerging economies’. The International Journal of Human Resource Management, 20(1), 75-95. Chitakornkijsil, P. (2010). The internationalization of human resource management in the host nation context & strategic approach of IHRM. International Journal of Organizational Innovation (Online), 3(2), 379-400. Deloitte, T. T. (2007). Deloitte National Remuneration Guide. ‘Connecting People to What Matters Most’, and ‘Aligned at the Top’ Surveys, South Africa. Du Plessis, A., J. (2010). International human resource management: An overview of its effect on managers in global organisations. Interdisciplinary Journal of Contemporary Research in Business, 2(4), 178-192. Iqbal, J., Tayyab, F., Farmanullah, S., & Khan, N. Y. (2012). Contemporary issues in HRM: A review from 2007-2011 in HRM review. Interdisciplinary Journal of Contemporary Research in Business, 4(3), 678-691. Short, D.C., & Callahan, J.L., (2005). Would I Work for a Global Corporation? And Other Ethical Questions for HRD. HR Development International, 8(1), 121-128. Stone, R. J. (2012). Managing human resource (3rd, ed.). Milton, Qld. : John Wiley & Sons Australia. Warner, M. (2004).