in International Business
Impact of Cultural Differences, Socioeconomic or Political Factors on international HRM
Challenges to HRM posed by growth in International Business
By looking at the changing trends of the world of commerce in recent times, one can significantly notice the fact that this business community is becoming more and more competitive. This clearly signifies the truth that the elevating competition within the community has given rise to international business where enterprises regardless of their size are expanding their operations within the global market. As an outcome of it, an efficient and effective work environment has become the fundamental necessity that can facilitate the organizations in maintaining strong holds in the market place as well as generate profits (Daly, 2011).
Considering the challenge of maintaining an effectual organizational culture, businesses need the asset of human resources, hence, they are considered as the foundation stone for any organization. This means that people are the primary source through which the organizations can develop and grow. Therefore, the competence and effectiveness of human interaction is the prime contributing factor to the success of businesses as better people mean better business (Daly, 2011).
The importance of Human Resource Management over time has escalated to paramount heights. Due to this reason, the role of human resource management has also changed especially when business is operated on a global platform. Initially, HRM was only considered to be a support function for the organizations, but international business reshaped its role into a strategic partner that facilitates the enterprise in achieving its goals in international marketplace (Daly, 2011).
However, the fact has come into limelight that development of effective workforce for international business is rather a more difficult task for the businesses. Therefore, the reality cannot be overlooked that the growth of international business has left an indelible imprint on the field of human resource management. Concerning the impact of international business on Human Resource Management, this thesis paper incorporates comprehensive discussion over various factors that have impacted the field of HRM. Moreover, the challenges faced by human resource management due to growth of internaqtional business have also been included. Based on the facts, few recommendations have also been made that would help the human resource management to prepare and overcome these challenges.
Records and studies have brought the piece of information to the surface that international business is no new phenomenon, as it has been into practice since a very long time. (international business in today’s term) has been implemented since the time of Greeks and Romans. However, the industrial revolution has brought the concept into limelight that reshaped the ways of businesses by application of new techniques and a number of other developments in the international business (Briscoe, Schuler & Tarique, 2012).
Since the new era of international business community is more competitive, thus, organizations have to so that they can remain focused on its competitive strengths in order to survive and sustain its position. This indicates that old practices with time become obsolete and are no longer appropriate to the new surroundings. However, rapid international growth that has evolved as an outcome of utter competition has also brought numerous problems with itself. These problems have gone beyond expatriation and controlling and coordinating has become more and more gargantuan issues (Briscoe, Schuler & Tarique, 2012).
Human resource management on an international platform is not only responsible for recruitment, but also plays immense role in building corporate cohesion and inter-department alliance. On the other hand, the domestic or local human resource management has specific set of duties related to employee management. Therefore, when the businesses are operated internationally, the human resource management policies and responsibilities are doubled, as they have to manage and control workplace diversity (Briscoe, Schuler & Tarique, 2012).
Growth in international business affects the human resource management because HR is all about managing people. However, the term global business associates many terms such as diversity workforce, different cultures, multiple languages, different legal and political systems, diverse economies, and so on. These elements elucidate the fact that human resource management is now full of challenges. These challenges have not only impacted the human resource management, but have also altered its role within the organization (Briscoe, Schuler & Tarique, 2012).
The worldwide competition is escalating to an unprecedented rate, which is making the field of human resource management more and more challenging. Due to this reason the human resource personnel needs to broaden their horizons so that they can develop policies and strategies not domestically but also internationally. If the human resource management is not able to do so, the organizations may fail to succeed. Globalization is one of the prime causes that have given rise to workforce diversity, technological advancements and innovations, changes in the overall environment of the countries individually. As a consequence of these factors, the pressure on HR department has skyrocketed, as the organization demands loyal proficient employees that can bring success to the organization domestically as well as globally (Briscoe, Schuler & Tarique, 2012).
Impact of Cultural Differences, Socioeconomic or Political Factors on international HRM
Working domestically means to govern few aspects, but when international business comes to the forefront, the duties are automatically escalated. This is usually due to the reason that every country has its history, government, laws, traditions, ethnicity, religion, values, and topography that vary from other countries. These are the primary aspects that make them different from one another, which largely contribute to the domestic organizational culture, therefore, become a hindrance to the human resource management when operating internationally (Briscoe & Schuler, 2004).
Considering the aspect of culture, specific distinctive attributes typically based on the cultural characteristic are developed in the human resource practices pertaining to specific countries, thus, indicating the fact that HRM is pervasively affected by cultural values. Moreover, the attitudes of employees at managerial level also vary from culture to culture. These specific cultural attributes come under deep impact when developing policies and strategies for international human resource management (Briscoe & Schuler, 2004).
Secondly the of a country also translates differences in HR practices. Since the socio-economic elements usually represent factors like education, standard of living, health aspects, and so on, thus, it is difficult for the employees to be adaptable to such an environment that is purely the opposite to what they have been living so far. For instance, the socio-economic factor such as workplace diversity in an underdeveloped nation creates the possibility of discrimination and non-acceptance of towards the organizational culture that is open and flexible (Sims, 2007).
The political aspect of a country contributes to the development of HR policies to a large amount. For instance, the underdeveloped country with instable conditions of the politics would lead to different HR policies (related to security incentives, pay incentives and so on) and the country with stable political conditions would not draw its attention to such policies. Therefore, the political conditions while operating internationally have an impact on the development of HR policies within the organization (Punnett, 2012).
The strategies of international human resource management are also massively affected by the changes in the economic factors. Many countries are receptive to international business and foreign investment, unfortunately, others do not encourage. The cost of living and cheap labor costs also lead to international expansions, but these countries usually represent unstable economic conditions. Furthermore, the challenges augment when these issues add various other concerns of infrastructures such as roads, electric power, schools, and telecommunications. Therefore, it becomes a challenge for the human resource management to have successful business operations in such countries (Sims, 2007).
All of these factors shed the light on the truth that international business pose impact on the human resource management to a great deal, and hence, demand HRM practices to be flexible and adaptable to the international policies. Indeed, the basic practices of HRM (that include recruitment, training and employee management) are complicated by the cultural variations, socio-economic factors, labor costs and political aspects.
Challenges to HRM posed by growth in International Business
It is prudent to note that when a business expands its operations to international market, they encounter showers of changes at once. In fact, this also increases the number of employees overseas. The changes usually transfer into global challenges that are posed by the growth in international business, which become difficult to adapt and implement. The major challenges that are faced by the human resource management by the growth of international business include: labor laws, cultural shock, lack of training, socio-cultural environment such as language issue, vacation & holidays, religious practices, and so on and political aspects.
The cultural shock usually refers to the different values and norms of culture that emerge when business operations are expanded to international location. These differences create adaptability issue to foreign environment and culture, as the business seeks to transfer its policies and organizational culture that was practiced in the parent country. The labor laws of the international location may involve high salary and transfer costs for employees (relocated and new hired). In addition, personal or family issues amongst many employees have also been observed as one of the concerns of relocations, which eventually impact employee performance and productivity. Lack of training has also come under observation as one of the major contributing factors to expatriate failures (Harris, Brewster & Sparrow, 2003).
Another challenge that the studies has brought to the forefront with respect to international business is the technological advancements and innovations. Human resource management on international platform needs to be updated with the modern technological innovations in order to sustain competitive edge over others. This is due to the reason that information technology always streamlines the processes and facilitates the employees in being updated with the latest technological instruments (Cooke, 2003).
Apart from these widespread issues that human resource management encounters, two more intense-level issues have also emerged as an outcome of growth of international business: deployment of international talent and knowledge dissemination. The growth of international business also complicates the tasks of human resource management where they have to identify skilled and competent workforce with the capabilities to effectively function in a global environment. This is essential as adaptability to the foreign surroundings is imperative in order to have maximum output. In addition, the growth of international business also poses the challenge of distributing state-of — the art knowledge and practices that eventually reflect the original practices of the parent company (Wasbeek, 2004).
Taking into account the challenges encountered by the human resource management as an outcome of growth in international business, special steps (in terms of development of policies and procedures) for the process of recruitment, training and compensation need to be taken in order to deal with these challenges in a better manner. A range of practices and strategies would enable the human resource management to overcome such issues.
One of the practices that the enterprises can implement is to develop an international HR philosophy that particularly focuses and illustrates the corporate values. This international ideology would reflect the broad outline of what is acceptable practice of human resource management for employees of the organization.
As discussed, deployment is one of the issues confronted by human resource management for international assignment, thus, it is recommended for the HR managers to consider specific key traits that include cultural sensitivity, interpersonal skills, flexibility, and so on when considering the employee for relocation or hiring for an international assignment. These attributes are imperative, as it indicates the fact that the employee possessing these qualities would adapt to the new culture and would productively perform its duties.
Addition to compensation and benefits are the primary reason observed amongst employees for relocation to an international assignment. In this regard, the human resource management should be comprehensively briefed about their compensation benefits that they would be entitled to according to the norms and rules of the host country. This would avoid confusions and would lead to enhanced productivity.
Cultural shock is another grave issue identified in the earlier sections, as one of the significant barriers for the human resource management in international business. In order to eliminate this issue, the human resource management should have a cultural orientation program for the expatriates that can assist them with their relocation issues. Additionally, the human resource management should also provide support and assistance to the expats in their housing, automobile, children education related matters. Cross-cultural training is also a practice that can be developed, as it would make the employees cognizant of the living and working conditions of the new environment. Cross-cultural training can adopt various methodologies that include cultural briefings, field experiences and so forth.
It is also recommended to the human resource management that they should not only focus on providing the cultural orientation to the employees, rather, they should also draw attention towards technical and language training, which should be provided to the employees on international assignment. Since the employees are new to the surrounding on international assignment, hence, the human resource management should also inform the expats about the labor laws and rules of the international country to which they are deployed or hired.
The fact has already been revealed that the growth in international business has given rise to competition; therefore, it is recommended that the human resource management should employ a diverse workforce. Diversity is conducive to attracting and sustaining strong clientele. Therefore, it is advisable to recruit employees from diverse background in order to have competitive workforce in an international market, as they are more productive because they are more open in understanding other cultures and have language skills.
To put the entire thesis into a nutshell, it can be well stated that the growth in international in the recent times have revolutionized the workplace in a way that one could ever imagine. This new era of international business community has created a mammoth impact on the field of human resource management.
Since the functions of human resource management is based on the organizational culture of the parent country, thus international expansion impacts the entire field of HRM. This is usually due to the differences that exist within the culture, politics, economy and socio-economic factors that differ from country to country. Due to these critical and fundamental aspects, the human resource management confronts various other challenges that include knowledge dissemination and recruitment. Furthermore, the organization’s strategy developed for international human resource management influences the major functions of it such as recruitment, training, compensation, and labor relations.
However, human resource management can resolve these issues. The cultural shock can be eliminated by the company upon conducting cultural orientation program and training session for the employed deployed at the new international/host location. Additionally, providing support to employees over other issues such as compensation and benefits, labor laws would also prove to be an effective strategy. Diverse workforce is also a measure that needs to be catered by the human resource management in order to have successful and competitive international business expansions.
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