Human Resources in the Global Market

Table of Content

1.  EXECUTIVE SUMMARY  3

2.  STRATEGIC HUMAN RESOURCE MANAGEMENT AND THE INTERNATIONAL MARKETS  5

2.1  Introduction  5

2.2  International Human Resource Management  5

2.3  The importance of HRM for firms operating in international markets  6

3.  RECRUITMENT AND SELECTION  8

3.1  Expatriate failure  8

3.2  Factors in expatriate selection  9

4.  TRAINING AND DEVELOPMENT  11

4.1  Definition and overview of traditional training and development  11

4.2  The effect of Globalisation on Human Resource Management  12

4.3  Training and development and international assignments  12

5.  WORKPLACE CONFLICT AND NEGOTIATIONS  14

5.1  Classifications of conflict and conflict management  14

5.2  How to handle conflict picking the right style:  15

6.  PERFORMANCE MANAGEMENT IN INTERNATIONAL HRM  17

6.1  Multinational Performance Management  17

6.2  International employees and Performance Management  18

6.3  Performance appraisal of international employees  20

6.4  Appraisal of HCN employees  21

7.  INDUSTRIAL RELATIONS AND EMPLOYMENT LAW  22

7.1  International Industrial Relation  22

7.2  Collective Bargaining  23

7.3  Industrial Relation History  23

7.4  International Human Resource Management Strategies for entering into the Global Market  24

8.  REFERENCES  26

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1. Executive Summary

The aim of this paper is to point out the increasing importance of Human Resource Management especially from internationally operating companies’ point of view. Furthermore, it will be pointed out what International Human Resource Management is and why it is necessary for Multi National Companies (MNCs) to concern about this topic. In addition, challenges and requirements of HRM will be illustrated and highlighted.

This work will furthermore portray the recruitment and selection process as well as the necessity of training and development within global companies. It will describe the workplace conflict and deal with subjects such as industrial relations and employment law.

Recruitment and selection in International Human Resource Management is crucial; finding the right people to fill key positions can determine a company’s international operation. Furthermore, it is extremely costly for the company if the expatriate fails. The performance of an expatriate is often determined by factors like (in)ability to adjust to foreign culture, the length of the assignment, willingness to move and work-related factors. What should be considered when selecting an expatriate are therefore criteria like technical ability, cross- cultural suitability, family requirements, country requirements as well as language and company requirements. However, recruitment and selection are only the first step for international Human Resource Management.

Training can be defined as the process of teaching new or present employees the basic skills they need to perform their jobs. Development covers two different perspectives: management development, i.e. any attempt made by a company to improve their current or future management performance by imparting knowledge and organizational development, which can be seen as a way to increase the stock of knowledge, skills and abilities within the organisation.

When one deals with International Human Resource Management, international assignments are seen as the main way of improving management and organizational development as there is a need for the company to train the staff selected to perform the international assignment. When training their staff for international assignments, every company should be aware that the training period should enhance and focus mainly on cultural awareness, as the lack of it is the main reason for the failure of such assignments.

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Conflict presents a major challenge for the International Human Resource Manager. It is crucial that conflicts are managed in such a way that the organisation as a whole can benefit of its resolution. This requires that managers attempt to solve these problems from a macro- point of view and that they are able to identify the right problem before they attempt to solve it. After the manager has identified the causes and origins of the conflict between parties s/he has 5 styles at his/her disposal to solve it. The selection of these styles depends on the situation and the point of view of the manager. Ultimately, the IHR manager tries to create an atmosphere where employees can function optimally and effectively.

Performance management emphasizes the communication of organizational goals by integrating them into departmental and, individual-level goals. Conflicts on the international level might arise when evaluating the different targets and not consider the diverse circumstance variables as the understanding of quality, the political environment or the absence of ‘face-to-face’ contacts. For expatriate managers a cross-cultural training should be provided and the support from headquarters guaranteed. For performance appraisal (a practice used to evaluate an individual employee's past performance) in the international context, the combined use of hard, soft and contextual goals is suggested.

International Industrial Relations are a very important component to International Human Resource Management. This is due to the fact that Industrial Relations are the law behind the main function of Human Resource Management. Industrial Relations are the legal aspect of employing and maintaining an employee or employer. It dictates what an organization can or can not do when employing an employee, maintaining an employee and how to fire an employee. It deals with the contracts, hours, wages, bonuses, terms and conditions. Therefore, for an organization to successfully enter into the global market it is imperative that an organization has a human resource department to ensure that the organization abides by and implements and differences in the legislation of employment law to ensure that they do not get into trouble with the employees, law and commission.

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2. Strategic Human Resource Management and the International

Markets

2.1 Introduction

Today people, employees, are the most valuable asset for a majority of companies. It is not the machinery or computers, but people and knowledge that create competitive advantages. Markets are global and competitive and the number of companies doing business abroad increases every day. So does the need for international Human Resource Management. While on the one hand, technological improvements in some industries increase the threat for workers that their human working power becomes replaced by new and effectively working machines, the far-reaching and non-stoppable rise of the Information and Communication Technology requires well educated and developed labour on a large scale all over the world. Therefore, the level of interest in International Human Resource Management issues has risen remarkable during the past decades. The increasing need of globally acting companies for high qualified working power is furthermore demonstrated by the improvement of the spread of international business. “According to the United Nations Conference on Trade and Development there were 65.000 multinational operating companies with 850.000 subsidiaries worldwide in 2003” 1 .

2.2 International Human Resource Management

Simply expressed, the goal of Human Resource Management (HRM) is to deploy the right person in the right place inside the company. However, HRM includes much more than just selecting the best potential employee to fill a job vacancy. Managing human resources also implies to analyse job requirements and to plan the changes in the company’s workforce as well as to estimate such changes well in advance, to help prevent future layoffs and to decrease affiliated costs. Of course, one of the main duties of Human Resource Managers is to recruit and select job candidates and to introduce them to the firm’s corporate culture. Here it is important to familiarize the new employee with the company’s goals, to help find his/her role within the corporation and to define the individual’s function as clearly as possible. There

1 Dowling, P. and Welch D., International HRM, 2004, p. ix)

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should be a growing commitment between the employee and the firm, and the members of staff should identify themselves with the firm, they are working in. Furthermore, strategic Human Resource Management includes the training and developing of current and new employees, the organization of wages and salaries and the regulation of incentives and benefits.

In short, the responsibility of a company’s Human Resource Management department is to search and find the most appropriate employees, to help them improve, to make sure that they stay inside the company and to bring out the best in them.

International Human Resource Management, moreover, faces the challenge of handling all the mentioned functions within a global scope. It has to deal with the three categories of employees of an international firm 2 :

host-country nationals

parent-country nationals and Third-country nationals.

This requires an overall understanding and tolerance of different cultures and the competency to allocate human resources strategically within global regions. The International Human Resource Manager additionally has to know how to go about adapting management practices to circumstances abroad. Furthermore, s/he must be familiar with the changing nature of management and organisations when operating in the global market.

2.3 The importance of HRM for firms operating in international markets

When a company decides to extend its business into other countries, it will face an integrated system of behaviour patterns that are characteristic to the members of a given society, which is new for the company. It has to deal with unaccustomed systems of attitudes and feelings as well as with foreign customs and languages. Besides that, the company will be confronted with attitudes towards entrepreneurship, consumption, social organisation etc., which are different than the ones in the home country. All these facts make it particularly important for a multinational company to operate with proper human resources, with employees who understand the markets and fields in which they work. As Dessler points out in his book

2 Morgan, P.V., International HRM, 1986, p. 44

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“Essentials of HRM”, many managers have been successful even with inadequate plans, organisations or controls because they were able to hire the right people for the right jobs 3 .

An additional decision of the IHRM department in choosing a multinational manager is whether to send him/her over from the home country (expatriate managers), or to hire a manager in the host country. This is especially important, as implementing such a decision successfully will decrease the relatively high risk of expatriate failure. Expatriate failure is the untimely return of the expatriate manager to his/her home country. The costs of such failures are huge. According to Mc. Graw Hill Companies Inc., estimates in this field have shown that such costs are three times the expatriate’s annual salary plus the cost of relocation 4 .

Even though subsidiaries are often managed by nationals of the foreign countries, key positions are usually held by managers from the home country and strategic decisions are usually made at the headquarters. It is therefore a task for each multinational company to decide to which extent the subsidiary should obtain autonomy. After this decision is made, it is the IHRM’s challenge to decide which positions and to which proportions these positions should be occupied by local nationals or by expatriates.

International HRM, moreover, helps a firm to improve its cross-cultural communication skills, as one of the duties of IHRM is to provide the employees with the process skills to work effectively across cultural and communication boundaries. Additionally, the IHRM department maintains host-government relations. While developing and implementing corporate strategies was traditionally the role of the company’s operating managers, the Human Resource managers nowadays become more and more involved in this section of corporate decisions, especially in multinational companies. A reason for this development is that when entering new markets, a firm has to build committed, international work teams to strengthen organizational competitiveness in the new target markets. The formation of such teams is the international human resources department’s duty.

3 Dessler, G., Essentials of HRM, 1999, pp. 2

4 http://www.cis.wayne.edu/cibs/MKT7460/Chpt18.ppt, downloaded 26 th Oct 2004