Managing human resource: beyond country boundaries
The reality of modern business strategy increasingly blurs the nationality of multinational enterprises, their products and services, and even their work force. Cross-investments, joint ventures, mergers, acquisitions and a vast array of inter-corporate alliances have mixed and matched business organizations and operations across continents. As such, focus on how different organizations manage their people across national borders is properly in place. It addresses the added complexity created by managing people (the most nationally specific resource) across a diversity of national contexts of operation and the inclusion of different national categories of workers. When businesses internationalize, human resource concerns, such as staffing (finding the best and lowest-cost employees anywhere in the world), executive development (ensuring the management group has the knowledge and ability to operate effectively in the international arena), compensation (being globally competitive), and labor relations (which can vary dramatically from country to country) require globally savvy human resource management (HRM) professionals to facilitate international business success.
Explaining differences in HRM practice is first of all a matter of levels. There is a sense in which all organizations in the world have to recruit, pay and manage people yet there are significant differences between, for example, Japan, the USA and Europe in the way that they do this. There are also differences between countries within Europe and between regions within countries. There is a somewhat sterile debate about the importance of this or that level. The image of a telescope encapsulates the reality (Brawley 21): as the focus is pulled, so some things that were in sharp focus become blurred, but other differences become more noticeable. None is more or less true a view than any other – but some are more useful for some purposes than others.
Managing Human Resources Differently
Cultural Aspect. Value systems, and underlying beliefs, vary significantly between cultural groupings – which often, particularly in the longer established countries – overlap with nationalities. These explain why some societies may be more hierarchical; collectivist; more comfortable with uncertainty; and so on. An awareness of national cultural poses a challenge to management theory in many areas, particularly those where people are concerned, and most directly: in the HRM arena. Culture is a complex concept, open to a variety of definitions and difficult to pin down precisely. Terpstra and David (qtd. in Johnson and Turner 200) refer to ‘a learned, shared, compelling, interrelated set of symbols whose meanings provide a set of orientations for members of a society’.
Variations on values which occur between nations are going to have a substantial effect on such issues as motivation, appraisal, reward systems and careers: the influence of values related to hierarchy, collectivism and achievement, for example, are bound to be strong factors here. These variations also influence selection methods and criteria, training and development and employee relations. For just one example of importance to HRM, when staffing foreign operations, local culture and environment can have a major effect on the definition of jobs and job candidates – and candidates’ qualifications for positions. What appears by name to be a job that is similar to what an IHR manager is familiar with from her or his home country may in fact be a job that requires very different skills in another country or be filled based on entirely different qualifications.
In some locations, such as Africa, for instance, hiring on the basis of being a member of a person’s family group may take precedence over a candidate’s technical expertise or, even, experience (Sparrow, Brewster and Harris 137). And in other locations, such as India, Japan, the Middle East, and Latin America, personal and/or family connections may provide the most important considerations for hiring or job assignments. When a firm enters a new country and performs activities such as hiring, using its home-country practices, it can cause significant lack of trust and alienation in the local country, which can have further ramifications, for example, in attaining a quality workforce.
Globalization adds an extra dimension to cultural issues within the firm. All organizations have their own culture based on common language and terminology, behavioral norms, dominant values, informality/formality, etc. This inevitably becomes more complex when an organization has a presence in more than one country. Culture also operates on markets as well as within organizations. The development of a global culture would facilitate the development of global products, enabling companies to reap economies of scale at all stages of the value chain. Showing respect for local culture, however, does not mean adopting a position of cultural relativism that rejects the possibility for global norms to override local cultural practices if values clash. Ethical dilemmas require careful assessment to decide what cultural components should be respected, and why. Not all cultural practices may merit respect, even when based on asserted religious beliefs. When in Rome, one should not always do as the Romans do (or did).
Institutional Aspect. A cultural explanation does not provide a complete explanation of the differences between HRM in different nations. Institutional factors can be seen as the main explanation of differences. Drawing in particular on the industrial relations and political economy traditions, differences in economics, governance, the legislative system and the trade unions, for example, shape what is seen in HRM. Firms cannot be immune from the institutional context in which they are embedded and the differences between countries and their political, social and legal institutions create differences in their strategies. For this discussion’s purposes, they are more likely to show differences in their HRM. The differences in ruling parties, employment legislation, education, labor markets and trade unionism have a direct effect on HRM within employing organizations.
In most countries, Held observed that employment is protected by a contract that defines the terms and conditions of employment and that cannot be ended unilaterally by the employer (95). The concept of ‘employment at will’, as practiced in the U.S. (where the employer, with a few exceptions, has the right to terminate an employee for any, or no, excuse) does not exist in most countries. Therefore, in most countries, an employer’s rights to terminate, layoff, reduce, restructure, move, outsource, or subcontract work (and, therefore, workers) is highly constrained. In most countries, even the US, employees (or work) cannot be terminated on grounds of health and safety, pregnancy or maternity, asserting a statutory right, union activity, or on the basis of gender, race, religion, or disability (Yan 490).
Different Strategies for Different Purposes
Although it is fair to say there is a degree of cultural convergence, global culture is more ephemeral and deeply embedded than national cultures and localization of output is likely to remain the norm in many sectors for many years. Ethical issues inevitably have a cultural dimension, although there are many practices that are unacceptable in all cultures. Ethics and corporate social responsibility are closely related. Debates about corporate social responsibility have been dominated by labor and environmental issues but a growing number of corporate governance scandals involving multinationals are increasing pressure for stricter regulation. In the long run, corporate commitment to sound ethical principles and socially responsible behavior is good for business. Indeed, dealing with these differences may well provide the most important variable in whether or not their international ventures succeed or fail.
Contemporary businesses do not exist in a vacuum. They are based in the social, cultural, political and economic conditions of a country were the said organization operates or do business. Furthermore, despite the trends of globalization, trade liberalization and closer economic integration making the world a mere global village, culture-specific organizational and managerial differences still persist ( Briscoe and Schuler 94). Hence, companies, especially those operating in various countries, should ensure that the mentioned differences are factored or considered in their planning, operations and activities. It is not enough for the human resource department to fulfill a generic profit-seeking and performance-enhancing strategy. It must also pursue a strategy that is politically and socially adaptive and considers the historical and cultural context in which human resource practices are embedded.
This notion is entirely consistent with recent work in international human resource management that highlights the need to understand the field in the context of various cultural and country situations. Given this context, understanding and solving HR challenges requires using a broad strategic HR framework that encompasses the various institutions involved in employment relations. A thorough consideration of all the issues pointed in this paper could constitute a whole book of discussion and would draw upon a vast range of international HRM literature. It also raises the difficult issue of the extent to which corporate behavior should respect the employment norms of the host country, even when they are contrary to home country norms.
The added value of the HR function in an international organization lies in its ability to manage the delicate balance between overall coordinated systems and sensitivity to local needs, including cultural differences, in a way that aligns with both business needs and senior management philosophy. The differences between the cultural and the institutional explanations for national differences HRM may be bridgeable. It is to a considerable extent a question of definition. Whilst many of the ‘cultural’ writers see institutions as being key artifacts of culture reflecting deep underlying variations in values that they see between societies, many ‘institutional’ writers include culture simply as one of the institutions they are addressing.
Brawley, Mark. The Politics of Globalization: Gaining Perspective, Assessing Consequences. Peterborough, Ontario: Broadview Press, 2003.
Briscoe, D. & Randall S. Schuler. International Human Resource Management: Policies & Practices for the Global Enterprise. New York: Routledge, 2004.
Held, David. A Globalising World? Culture, Economics, Politics. London: Routledge, 2000.
Johnson, Debra. & Colin Turner. International Business: Themes and Issues in the Modern Global Economy. London: Routledge, 2003.
Sparrow, Paul, Chris Brewster & Hilary Harris. Globalizing Human Resource Management. New York: Routledge, 2004.
Yan, Yanni. “A comparative study of human resource management practices in international joint ventures: the impact of national origin.” International Journal of Human Resource Management. 14.4 (2003): 487-510.