How Does Successful International Human Resource Management Contribute to Organisational Performance?

ID: 000955125

Introduction

Today, Globalization is a trend all over the world. It requires companies to work in more competitive environment with no borders between countries or regions (Heil, 2016). The international nature of business activities give a lot of requirements to companies, one of which is: International Human Resource Management. Since human is the most competitive factor in business industry (Vargas, 2004), the role of HR department become more important. Individuals are all different, so managing them is not an easy task. To meet the requirements in the context of integration, companies need to change their mindset, perception, and find out how to manage their human resources better. The question is: How human resources are generated enough for all activities in organizations? How to discover, develop, and make use of available human resources? And how to catch up with new trends in today’s HRM field?

Based on the importance of HRM, this study aims to provide further understanding on HRM, HRM’s practices, and International HRM - a new trend in HRM field. Relevant case studies will help to illustrate the contributions of HRM for organizational performance.

HRM definition

Studies have contributed various definitions about HRM so far.

According do Storey (1995), HRM is a distinctive management approach that through which organizations obtain the greatest benefits by deploying long-term strategy based on "cultural, structural and personnel techniques”. Taking the similar perspectives,  (Bratton and Gold, 2007) considered HRM as strategic approach, which employees' capabilities have to be leveraged through "a set of integrated employment policies, programs, and practices”. (Buchanan and Huczynski, 2004) also views HR policies and strategic are essential to support organizational strategy to gain success.

Nevertheless, (Graham, 1978), and George T Milkovich and John W. Boudreau (1997) took a different views. According to Graham (1997), HRM's outcomes are to ensure that employers can achieve largest benefits from their abilities, and employees can obtains not only material but also psychological meaning in their work-life. Similarly, George T Milkovich and John W. Boudreau (1997) also defined HRM as "a series of integrated decisions", which help to form employment relationship (Milkovich & Boudreau, 1997). Decenzo and Robbins (1998) linked HRM with "people dimensions" which organizations concerns with hiring suitable people, training and developing their skills and abilities, rewarding and motivating them to raise them up to higher level. (Decenzo & Robbins, 1998)

The differences in HRM approaches have divided HRM into 2 schools - Soft and Hard HRM (Storey, 1992). While hard HRM focused on strategies, policies, and process, soft HRM concentrated on developing employment relations through HR practices to improve organizational performance. Either way, soft and hard HRM are two inseparable sides of HRM, and they all view employees as crucial resources of organization

IHRM

Today, the number of multi-national companies (MNC) is growing. Internationalization of organizations has processed rapidly as the world has become a shared market for many companies. There are many examples of successful companies that overseas profits accounted for over 60% of total revenue and profits, such as Coca-Cola or Colgate (Cooper, 2015). Globalization has played major impact on HRM, and make the IHRM's importance are awarded more explicitly.

The same as HRM, definitions of IHRM are also multiform in literature. Boxall, P. (1994) defined IHRM simply as problems of multinational corporations in their subsidiaries (Boxall, 1994). These management problems relates to different stages of operational process. Mark Mendenhall (2000) outlined IHRM more specific by adding relevant criteria relating to IHRM’s definition, such as issues of cross national boundaries, relationships between HRM activities of headquarter and subsidiaries, or HRM studies are included in IHRM to comparative (Mendenhall & Stahl, 2000)

Naturally, IHRM is similar as domestic HRM in its practices as HR staffing, T&D, rewards, or employees relation, etc. However, IHRM is actually more complex than HRM (Dowling et al., 2008), lies on the fact that HRM's practices concerns with at least two national categories. The complexities of operating in different countries therefore lead to many challenges. Firstly, cross-culture attract the major concerns in international situations. Cultural differences among members (as language and time barriers, socio-economic and political systems difference, or religious diversity) may create the disconnection between headquarter and subsidiaries (Pahlberg, 1995). Misunderstanding therefore also exists due to the lack of sensitization of local, social structure, and cultural context. To avoid cultural misunderstandings, it's necessary that IHRM management know how to apply suitable strategic HRM, have knowledge, and need the culturally sensitive. Secondly, the problem of resourcing, as mentioned, IHRM deal with many employees from different regions, i.e., the parent country nationals (PCNs) those come from headquarter, the host country nationals (HCNs) those come from where the units is located, and the third country nationals (TCNs) those provided by the third countries. The challenge here is how to select suitable people among this set of people and place them in the right position. Global competitiveness of potential candidates also must me identified. For this reason, knowledge about availability of human resources in different labor markets in the world is necessary to all IHR departments nowadays. Thirdly, IHRM can face the problem of addressing HR issues of expatriates. It is necessary to ensure that Expatriate understands all aspects of their new working environment, as culture, legal systems, compensation package, taxes, costs of living, etc. Besides, IHRM may need to take responsibility for expatriate' family in terms of their children, their life balance, their health and safety, etc. Several MNCs must now consider this factor seriously when deciding to sent their employees abroad due to the its high cost and effectiveness