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Proposal: The Effect of Globalisation on International HRM (IHRM) Introduction
The business and market environment had indeed gone through various transitions. The rises of different opportunities as well as innovations enable various companies to extent and expand their operations in the international market. The changes in the external environment of local firms also led to transition in the business approaches and strategies. To be able to adapt to the demands of the global business operations, specifically the diversity of the people, the management of international companies should modify their business approach. Accordingly, this modern management approach is made of approaches which enable industries to gain foreign market entry and operate effectively alongside with other multinational and international industries. One of the most important factors of international management is the human resources.
Various studies have shown that to be able to manage the employees utilising the international strategy, the management of the company must be involved in empowering their culturally diverse human resources. Different human resource management approach is available for international operations. In this regard, businesses must be able to achieve a considerable level of organisational culture, IHRM issues and globalisation effects. The main goal of this paper is to determine how to improve employee hiring, retaining and promotion in the IHRM of international businesses were affected by globalisation.
Background of the Study
Human resource management maybe defined as “the policies and practices involved in carrying out the ‘people’ aspects of a management position including recruiting, screening, training, rewarding and appraising” (Dessler, 2007). The core activities of the human resource function remain the same whether a company is operating in one place or more than one place but the context and scale of the activities change particularly the emergence of globalisation; as a result the role of human resource in international business gives rise to the international human resources management, which is said to be based on three dimensions. The first dimension is related to the distribution and use of human resources, and includes pertinent planning, personnel selection, training and development, performance evaluation, compensation and work relations. The second dimension involves the different groupings of countries which are involved in the international activities of human resources management; the three grouping of the country are host country, parent country and the “third” countries. The last dimension is distinguished by the types of employees working for an international company; these are host-country nationals (HCNs), parent-country nationals (PCNs) and third country nationals (TCNs) (Maksimovic, 2003).
To individuals in a company, the knowledge attained by them is important. Knowledge and skills are important factors in influencing how the employees perform; therefore, the imparting of quality education and training to employees of companies is significant and can guide the way for achieving the corporate aims. Thus by providing a great share of human capital, appropriate knowledge management generates basic conditions needed for adjustment, survival and competitive advantage required by an organisation when confronting a rising number of changes in a new business environment (Stebe & Andolsek, 2006).
Many companies misjudge the complexity of operations involved in international business, and often overlook the mutual infiltration of the above mentioned three dimensions of international human resources management and adopt a lax attitude towards this important department of the organisation. Consequently, business failures at international scale are not just a mere possibility but can often be contributed to poor international human resources management. The fundamental elements of the human resources that have to be adapted to local standards at the international market include culture, language, religion, moral codes and habitual practices. In today’s era of competitive markets, those companies which have decided on globalising their business, have already made their way into the expansion stage and have been mandated to re-engineer the processes in their organisations by means of innovation and by developing new customer relationships (Maksimovic, 2003).
According to Cartwright & Cooper, (cited in Chapman, 2001) HRM plays an important role in decreasing the number of unwanted turnover, distress and loss of productivity associated with cross border alliances. HRM is vital in determining the scale of cultural fit between organisations prior to finalising the potential arrangement. Cultural aspect is important to recognise potential problems that may arise as a result of diverse perceptions, values and practices existing between the involved organisations. In Mergers & Acquisitions (International market expansion), it is likely that almost all aspects of the job will be affected such as job security, workload, work relationships and role identity, therefore HRM is important in formulating a strategy which deals with the reasons of merger stress. After International market expansion, it is likely that only a transactional bond which is based on an exchange of effort for economic reward stays in place whereas relational contracts will be terminated (Chapman, 2001).
In the cases of globalisation, the international market expansion have issues linked to employees like feelings of identity loss, learning new business rules and acquainting and coming to terms with co-workers from different cultures. HR is important in dealing with the differences associated with workplace cultures that may at times otherwise temporarily overshadow the long-term success of the new entity (Numerof & Abrams, 1998).
The involvement of Human Resource department in the earlier phases of the International market expansion increases the possibility of success. According to a study by Schmidt (2001) the top five capabilities provided by an ideal HR includes the capability to analyse other company quickly, possessing basic knowledge of international expansion (and general business) and integration, provision of valuable advices linked with employee sensitivities and attitudes, ability to motivate and retain critically required talent and skills of planning and leading difficult integration projects. International market expansion provides HR with the opportunity to show its strategic importance where the skills of HR professionals can be utilised to demonstrate the difference they can make in success and failure of International market. If HR proves to be of value in International market expansion, not only the entire profession is strengthened but HR professionals have chances of occupying key advisers positions to the people responsible for making the vital decisions. (Schmidt, 2001)
The challenges involved in the implementation differ according to the strategic reasons that underlie the globalisation. With respect to HR issues, an important intervention is stabilising the workforce. The impotent factors for the success of globalisation include a transaction that has been undertaken for strategic reasons, a purchase price of a merger or an acquisition reflecting not only the inherent value of a target business but also its value to the buying or merging firm, and effect implementation. Even if a “reasonable” purchase price and sound strategic reasons are present, International market expansion may not succeed if the merging organisations are not effectively combined in the post-deal phase due to the challenges and difficulties of implementation (Schweiger et al., 1993).
Poor mergers are often a result of HRM and organisational problems. The most common problems are linked with the difficulty in integrating cultures and systems, fall-off in quality, poor motivation, loss of key personnel and customers, and reduced focus on long term objectives. In absence of positive input from employees, mergers cannot realise their full potential; therefore, maintaining the workforce stability throughout a merger is important. Other factors include job security, pay and benefits, work autonomy, and performance feedback. Communicating with the staff frequently and honestly has a stabilising effect on the workforce. (Bryson, 14, 2003)
According to Schuler et al. (cited in Edwards, 94, 2004), over the last few years, an increasing number of cross border alliances has been one of primary feature of the internationalisation of economic activity and cover both international joint ventures (IJVs) and international mergers and acquisitions (International market expansion).
Most of the mergers and acquisitions are based on the belief that greater value will be derived from the companies combined together rather than a single one but the eventual success of a global strategy often depends on the management of human resource as the human resource development professionals can help in improving not only the integration of the two firms but also in finding a solution to interpersonal conflicts that often arise as a result of misfit in terms of organisation and culture between two companies (Legare, 32, 1998).
According to Friedman, (2007) model, HRM has four means of adding value to an organisation; the first is as a strategic partner in which HR managers have to bring HR initiatives in line with strategic goals of the organisation. The second role is of a change agent, where the purpose is to deliver a renewed competitive organisation. The third role is as administrative expert where latest technologies and improved methods are utilised to deliver efficient processes like recruitment, training, benefits, and performance management. The final role is called the employee champion, in which employee contribution and commitment are maximised by listening and responding to the needs of employees with available resources and by increasing employees’ knowledge, skill and ability so they may result in increased organisation effectiveness. HRM is important in implementing the best practices that are acceptable in local and foreign situations while creating alignment in the environments across different culture and businesses. (Friedman, 2007)
The intended research is basically an exploratory study and aims to organise the data into a cohesive whole that addresses the issues concerning globalisation and IHRM. Basing on its basic aim, the research aims to answer the following research questions:
· What are the important aspects of operating a business internationally regarding HRM?
· What is the significant effect of globalisation to the HRM practices of International Businesses?
· What are the driving forces of IHRM processes and strategies and the obstacles and problems encountered by the international business?
Statement of the Approach to Research
The intended research aims to explore, examine, and analyse a diverse number of aspects with relation to globalisation effects and human resource management in the context of international business, its growth, important issues related to its stable productivity, and effective management of its human capital with regard to issues that address different aspects like culture, economic underpinnings, and so forth. Hence, this paper will also intend to keep in view the secondary sources by which existing research can be organised in a way in which these issues are highlighted and an addition to quality reference work is made by this document.
In order to complete the objectives of the study, the qualitative research approach will be applied. Qualitative research methods in comparison with quantitative research methods are more diverse. According to Myers (1997), this kind of research process was “designed to help researchers understand people and the social and cultural contexts within which they live”. Mays & Pope (2000), on the other hand indicate that qualitative research approach is most appropriate when conducting descriptive and exploratory study for the purpose of quantifying data that seem immeasurable, such as feelings, beliefs, and thoughts. Meanwhile, Collis and Hussey (2003) defined qualitative research as “a subjective approach which includes examining and reflecting on perceptions in order to gain an understanding of social and human activities” (p. 353).
The researcher decided to use the descriptive research method, which is mainly concerned with recounting the nature or conditions of the existing situation point by point (Creswell, 1994). In this research technique, the focus is apparently on describing rather than judging. This type of research will particularly utilise case study as a type of descriptive-qualitative method. The purpose of adopting this method is to describe the nature of a situation, as it exists at the time of the study and likewise investigate the cause/s of particular phenomenon. Punch (1996, p. 150) states that case studies involve looking one or more cases, which are “studied in detail, using whatever (research) method seems appropriate”. It aims to develop full understanding of the case as possible and is not linked with any particular research technique. This method involves the researcher to inquire deeper and examine thorough behaviours of a person or a circumstance. It is also noted how these behaviours change as the individual or circumstance adapts and reacts to the environment. Furthermore, it includes the discovery and identification of all the important variables which have contributed to the history or development of the chosen subject. This means that the researcher is going to gather data which include the past experiences and present condition of the subject as well as the environment. It will attempt to find out how these factors relate to one another and how they have affected the subject.
In using the qualitative research approach, data is collected by such methods as watching, asking questions, and examining documents. The research variables, on the other hand, were first analysed to provide descriptions of the factors that were relevant to the topic. The variables of the study were researched qualitatively whereas the data, situations, or facts collected were explained or correlated with other information. In sum, qualitative research methods in this study were used because the researcher attempted to construct theories that would explain the relationship of one variable to another. With this method, non-standard elements such as behaviour, attitudes, opinions, and beliefs were closely examined.
The analysis of data will be done systematically. Every piece of information will be read carefully, and the text was sub-divided into meaningful units. Then, information will be condensed to formulate answers to the researcher’s identified questions. Once the data was collected and collated, the final task was the interpretation of the results. The study emphasises that a great deal of caution was exercised in drawing conclusions from the data
Primary data are the result of interview, observations and website analyses. Secondary data, on the other hand are based on the literatures related to the case. Myers (1997) enumerated sources of written data which include published and unpublished documents, company reports, memos, letters, reports, email messages, faxes, newspaper articles and so forth. There are no statistical tools to be used in this study as it is qualitative in nature. It is argued that researches using qualitative techniques can be fully considered legitimate or valid. In the broadest sense, legitimacy or validity addresses the quality of the data and the appropriateness of the methods used in carrying out the whole research process. While reliability and validity apply mostly to research results and conclusions, these issues were well thought-out when the research plan was premeditated (i.e. in the earliest stages of the process). The validity and reliability of the study, and the methodology used, were based on previously conducted and published studies. Thus, it is recommended that further researches focusing in quantitative approaches are necessary.
Bryson, J. (2003). ‘Managing HRM risk in a merger’. Employee Relations 25, no. 1/2 (January 1): 14-30. Retrieved October 11, 2010 from http://www.proquest.com.library.capella.edu/
Chapman, J. A. (2001). ‘HR Know-how in mergers and Acquisitions’. Leadership & Organisation Development Journal 22, no. 7/8 (January 1): 346-347. Retrieved October 11, 2010 from http://www.proquest.com.library.capella.edu/
Creswell, J. W. (1994). Research design: Qualitative and quantitative approaches. Thousand Oaks, CA: Sage.
Dessler, G. (2007). Human Resource Management, 11th Edition, Prentice Hall, p.2
Friedman, B.A. (2007). ‘Globalisation Implications for Human Resource Management Roles’. Employee Responsibilities and Rights journal 19, no. 3: 157. Retrieved October 11, 2010 from http://www.proquest.com.library.capella.edu/
Legare, T.L. (1998). ‘The human side of mergers and acquisitions’. HR. Human Resource Planning 21, no. 1 (January 1): 32-41. Retrieved October 11, 2010 from http://www.proquest.com.library.capella.edu/
Maksimović, M. (2003). Strategic human resources management in international management, Strategijski menadzment, Vol. 7, No. 1-2/2003. September, Faculty of Economics Subotica, Subotica, YU ISSN 0354-8414, pp. 160 – 162;
Mays, N. & Pope, C. (2000). “Qualitative Research in Health Care,” BMJ Bookshop. Retrieved October 11, 2010 from http://www.bmjpg.com/qrhc/chapter1.html
Myers, M. D. Ed. (1997). Qualitative Research in Information Systems. ISWORLD NET. Retrieved October 11, 2010 from http://www.misq.org/discovery/MISQD_isworld/
Numerof, R.E. & Abrams, M.N. (1998). ‘Integrating corporate culture from international M&As’. HR Focus, June 1, 11-12. Retrieved October 11, 2010 from http://www.proquest.com.library.capella.edu/
Punch, K. F. (1998). Introduction to Social Research: Quantitative and Qualitative Approaches. London: Sage.
Schmidt, J. A. (2001). ‘The correct spelling of M&A begins with HR’. HR Magazine, June 1, 102-108. Retrieved October 11, 2010 from http://www.proquest.com.library.capella.edu/
Schweiger, D.M., Csiszar, E.N. & Napier, N.K. (1993). ‘Implementing international mergers and acquisitions’. HR. Human Resource Planning 16, no. 1 (January 1): 53. Retrieved October 11, 2010 from http://www.proquest.com.library.capella.edu/
Stebe, J. & Andolsek, D.M. (2006). Knowledge Management and Human Resource Management in Organisations: A Comparative View [online]. Ljubljana: University of Ljubljana. Retrieved October 11, 2010 from www.cbs.dk/content/download/48792/703550/file/StebeMesner.pdf
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