Moderators of domestic and international HRM
Table of Contents
Domestic Human resource management 3
International Human resource management 3
Introduction
The paper will centralize the differences between domestic and international human resource management with the help of a few variables, which are known moderators. The three variables to be focussed in the paper are complexity, cultural environment, and type of industry. The variables are found to either diminish or accelerate the differences between human resource practices in the domestic and international platforms. In this context, specific theories will be provided for understanding the differences between domestic and IHRM through these variables. All this evidence will be supported by specific theories related to human resource management as followed in organizations.
Discussion
Domestic Human resource management
Domestic human resource management concerns the process by which personnel is procured and allocated the jobs according to their specialization. The personnel belongs to the human resources of the local countries. In a domestic human resource management process, the employees work in organizations that are spread only across a single nation (Reiche et al. 2018). The function of the HR manager is very restricted in the process of domestic human resource management, where the manager is only concerned with the implementation of insurance programs and various transport facilities to the employees. The intensity of risk and cost is quite low in domestic HRM.
In a domestic HRM, the operations take place within the national borders of the organization. As a result, the organization is not much affected by the changing rules and regulations of the government. Operating only in the home country makes the organization less exposed to the fluctuating rules and regulations on the international platform (Dave and Makwana, 2016). Along with this, domestic HRM is also not affected by the external influences of foreign locations. Domestic HRM manages a limited number of human resource practices within the national boundaries of the home country. Overall, domestic HRM rotates around the planning, recruitment, training, motivation, performance management, and career development of the local human resources.
International Human resource management
International human resource management emerged into the picture after the process of globalization when businesses changed their ways of operations. At the onset of globalization, the businesses started expanding in multiple countries all across the globe, while retaining the culture of their home countries (Hjartardóttir and Lundeborg, 2017). International HRM includes the management of human resources beyond the boundaries of the parent country, or the country of operation. These human resources are managed either in the branch of the host country or any other country that will provide cheap labor and finances. HR managers have greater responsibilities in handling the human resources coming from multiple subsidiaries.
All the HR policies and practices of the organizational subsidiaries are required to be integrated by the HR managers. They formulate policies that are flexible enough to handle the differences present in foreign locations. These corporations that diversify their operations into the international platforms are named as Multi-national corporations or MNCs (Budhwar and Mellahi, 2016). These corporations adapt to various changes in the legal, economic, and administrative policies prevalent in the home countries. Along with this, the emigration formalities of employees are also handled by these corporations. Being expatriates, the employees are trained for accommodation suitably in foreign locations.
Complexity
Complexity is a variable which aggravates at the international platform while concerning the human resource practices. International human resource management is far more complicated than domestic human resource management due to its broader perspective. International HRM is concerned with a greater scope of human resource practices and it also comes with greater challenges in the international platform (Trullen et al. 2016). The scope of domestic HRM is narrower than IHRM as IHRM encompasses a multi-dimensional activity which includes taxation, foreign currencies, operational mobilities in foreign locations, training and development of the expatriates, and suitable management of the human resource policies and practices in the foreign subsidiaries.
Along with the basic international activities, IHRM also includes handling of the external factors prevalent in foreign locations such as cultural differences and institutional factors. HR managers are faced with a lot of challenges while handling all the factors concerning international HRM. On the other hand, domestic HRM is less complicated as the influence of the external environment is almost negligible (Kooij and Boon, 2018). The HR managers in domestic HRM administer HR programs that involve employees of a single nation. In IHRM the HR managers create programs concerning the issues of employees in more than one nation, which is a more complicated process.
One of the important theories of human resource management, which can be applicable in the context of international human resource management is Adam’s Equity Theory. This theory takes into account the various subtle and variable factors which influence the performance of the employees and also their relationship with the employer. This theory is based on a motivational technique of the employees. It is seen that employees feel demotivated when their output is less than their input (Jennings et al. 2018). This situation can occur due to multiple factors such as reduced effort, becoming disgruntles, or even disruptive. In the context of IHRM, expatriates might face such kind of mental degradation. Employers need to take care of these mental states of the employees to improvise suitable programs for their empowerment. The HR managers should be responsible for maintaining the balance between inputs and outputs of the employees.
Another important theory of human resource management concerning the complex nature of international HRM is the goal-setting theory. The goal-setting theory talks about the specific goals and objectives of the employees, which can be a major source of motivation for them. Through goals, the HR managers and senior authorities of the organization can provide detailed information to the employees about the goals and objectives of the organization. The tasks and responsibilities of each employee should be informed to them for expecting a higher level of performance out of them (Vasilaki et al. 2016). A goal would act as a roadmap to the employees following which they are going to carry out their specific tasks in the organization. Sometimes, the expatriates get confused about their duties and responsibilities after immigrating to foreign locations. Under such circumstances, the HR managers should clear out the different sets of objectives to them so that they can perform them effectively.
Considering organizational evidence, Accenture provides a suitable example of the human resource practices followed within the organization. Accenture is a leading multinational company, which is based in Dublin, Ireland. One of the fundamental principles followed in Accenture Company is passionate about the work. The company believes in handling the employees according to their passion in work (Farndale et al. 2019). The company feels that each employee is different in terms of skills and interests and should be nurtured according to individual capabilities. Every employee is given multiple strength assessment tests for understanding their passion and aligning it with the goals and priorities of the organization. The company has also prepared HR policies that inculcate the differences between the host country and the foreign subsidiaries (Ahmed and Akram, 2016). The company also takes regular feedback from the employees to develop suitable talent management programs for them. The expatriates are trained suitably and given tasks according to their specialization for getting better outcomes.
On the other hand, companies like Aricom Plc., which have operations in only two locations, that is Russia and the UK, have been observed to follow domestic human resource practices. The company adopts policies favoring the requirements of its business strategy without emphasizing on the global business. The company focusses on the issues belonging to Russia or the UK and all the operations are concerned with the regulations formulated by the government in these two countries (Furusawa et al. 2016). The company is an iron-ore mining company and therefore, it has been impacted slightly by the external factors persisting in the business environment. The two regions of its operations offer a high amount of mineral deposits that provide a strong infrastructure for the assets of the company. Most of the mines are in close distance to the Trans-Siberian and BAM railway. The company gets cheap labor from these regions and therefore, it has limited opportunity to expand its operations to the international platform.
Cultural environment
A culture can be defined as a system by which the organizational members share a common meaning and vision in the organization. The culture followed in an organization makes it different from the rest of the competitors. A corporate culture establishes from a set of moral guidelines and principles as laid down by an organization (Cascio and Boudreau, 2016). Culture provides a normative value to an organization through which all the members understand their do’s and don’ts. In the management of human resources, culture affects various elements of the process. It determines the innovation and risk-taking behaviors of the employees.
Differences and diversification of culture are noticed in both domestic HRM as well as IHRM. A domestic firm might not have a monoculture as it has to take into account the cultural principles and values followed by individuals coming from distinctive cultural backgrounds. In the context of IHRM, cultural backgrounds get more diversified due to operations in multiple nations (Tarique and Schuler, 2018). Global firms are treated as repositories of multiculturalism as people from multiple cultures and countries interact together under the umbrella of international human resource management. The different traits required for coping up with the cultural differences can be openness, confrontation, trust, authenticity, autonomy, collaboration, and proactivity.
The model of Kluchohn, Strodtbeck, and McClelland can be used in the context of societal culture, which shapes up the main aspects of corporate culture in an organization. According to this cultural model, six elements define the culture of an individual in a society or an organization. These six elements are nature, environment, time, collectivism, gender, and power. In the field of nature, two kinds of culture are noticed that is, fatalism and scientism. Fatalism refers to a submissive attitude of events while scientism relates to the rational attitude of events (Santos, 2016). The environment includes ambiguity tolerance, non-tolerance, high contextual, and self-centered attitude towards people. Time includes traditional, existential, and future-oriented attitude of the organization towards its business and people. Collectivism is built up through various attributes of people like collectivistic, inner-directed, particularistic, and role-bound. Gender talks about androgynous or sexist nature of people. Power includes types of expansion like expressive, conservative, or assertive.
Another widely used organizational culture framework has been provided by Edgar Schein in the year 1988. According to this mode, a culture can exist in three levels within an organization. The first level defines artifacts. Artifacts can be organizational attributes that are observed when an individual enters a new culture. These attributes are difficult to measure, and can only be observed, felt, and heard (Farmanesh, 2016). The next part of culture is the value, which is manifested through specific goals, norms, and moral principles of the organization. The next level consists of underlying assumptions. This level deals with the unanswered questions regarding the culture and values of an organisation. Sometimes, many questions are not solved by the insiders and they are assumed according to few criteria. Schein believed that the essence of organisational culture remained in this level as it is seen in many organisations that culture is not represented outwardly through systems and regulations.
A suitable example of human resource practices in an organisation can be observed in Salesforce, which is a software company specialising in customer relationship software (CRM) (Lavelle, 2018). Currently, the organisation has recruited a new wave of employees and has been adaptive about its corporate culture for catering to the needs and demands of these employees. The company has enhanced its morals and strengthened it for retaining the employees. The company has adopted a philanthropic spirit for boosting up the energy and excitement of the employees. Salesforce believes in the flexibility and the mobility of the employees and all the employees are allowed to visit any office of the company located in any place. Ethical behaviour is followed within the employees and a joint collaboration has been observed through which their performances have been upgraded (Reiche et al. 2018). The employee benefits provided by Salesforce company are in tune with the upcoming generation of employees.
Another important evidence of culture with respect to IHRM has been provided by Sony Company, which has diversified business all around the world. The company follows ethnocentrism cultural policy for managing the human resources. The company maintains a strong unified corporate culture among all the offices belonging to both the parent country as well as foreign locations. The company teleports its domestic HR practices into the foreign subsidiaries and all the expatriate managers are required to follow the same practices. Some of these expatriate managers might not be well-trained to handle tasks (Dias et al. 2020). However, an extent of flexibility and freedom is provided to the respective HR personnel for making changes based on the conditions of the surrounding environment. The company fosters open-mindedness and transparent communication among all the employees of the hierarchy for creating value within the workplace. Mixed reviews have been collected from the employees regarding the corporate culture followed by Sony Company.
Industry type
Some of the human resource practices are common to all the organisations regardless of the type of industry or size of the firm. This is because each enterprise is responsible for the safety, security and development of the employees. However, few HR practices vary from one kind of industry to another, irrespective of MNC or a non-MNC. The three kinds of industries differing in HR approaches are government-based organisations, IT industry and Non-profit organisations (Chandrakumara, 2018). In government organisations especially for government contractors, the HR practices are controlled by the Office of Federal Compliance Programs (OFCCP). The entire organisation adheres to clear communication and understanding maintaining the requirements of the program.
In IT companies, talent management is an important element of the HR practices of the organisation. This is because the two fundamentals of this business are product development and innovation. This is applicable for both domestic HR practices as well as international HR practices. On the other hand, non-profit organisations aim to build a solid workforce within the workplace as entire success of the organisation lies behind the people running the organisation (Farndale et al. 2017). At international platforms these organisations should bind the human resources under a common policy as management of personnel dictates the success of these organisations.
Considering the HR practices followed in IT companies, talent management is an important strategy adopted by these organisations. According to many authors, talent management can occur through two kinds of approaches, that is, inclusive or egalitarian approach and exclusive or elitist approach. Egalitarian perspective talks about the management of the talent of all the employees (Glaister et al. 2018). On the other hand, elitist approach talks about the management of the talent of only high-potential employees. However, some of the authors argued that elitist approach can bring about partiality within the organisation as all employees are not granted as talents of the organisation. According to some other authors like Hoglund, elitist theory is important for developing and sharpening the skills of the employees. At the global level, talent management can be explained by the balance between the organisation-assigned and self-assigned assignments of the expatriates. Social exchange theory states that investments made for an employee should be treated as a positive investment of a company.
Another important theory related to the HR practices as followed in the non-profit organisations can be theories of performance. This theory talks about two primary outcomes, that is, effective job performance and enhanced motivation and commitment among the workers. As people are the driving forces of the non-profit based organisations, therefore, performance is a very important factor in the HR practices of these organisations. Commitment among the workers towards their jobs is a very important criteria in these organisations (Habraken and Bondarouk, 2017). Henri Fayol through his principles of management had set up a foundation for the management of employees. The four functions are planning, organising, leading and controlling of the functions of the human resources of the organisations. All these practices are observed in the non-profit based organisations both in the national and international levels. These organisations also believe in the unity of people for carrying out the tasks which is the utmost requirement of a teamwork.
A suitable evidence of talent management can be provided through the example of Microsoft company. The company follows a standard talent management framework for the parent company as well as its subsidiaries. The company follows as elitist talent management method by which it believes in keeping the potential and capable employees in the organisation. The company reviews performance of the employees and assigns them responsibilities according to their skills and expertise (Dash et al. 2019). Assessments are given to the employees and targets are set. 360-degree feedback method is used in the organisation through which employees can provide their valuable feedbacks from various directions and aspects of the business. Microsoft company excels in planning, redeployment, utilisation of analytics and leveraging the internet. This is because talent management is very crucial for the IT companies like Microsoft for bringing out product development and innovation into the market.
CARE International is an example of a global non-profit based organisation. The organisation delivers emergency relief and long-term international development projects to various American remittances. HR managers in these organisations take the initiative for formulating a linkage between the community and the industry. Strategic relationship management skills are followed in the organisation through which better rapport could be developed among the people (Kazlienė, 2020). Over the last two decades the company has been evolving its relationships with various states, donors and employees of the organisation to expand internationally in most of the markets. New policies and agendas of economic liberalisation as well as political channelling have been favoured in the organisation for building up a good HR practices within the organisation. The other activities carried out in the organisation are assessment, recruitment, screening, selection, hiring and orienting employees.
Conclusion
From the above discussion, it can be inferred that the internationalisation of HRM practices in the organisations have increased complexity. It has also posed many challenges in the cultural environment of the organisation. However, international HRM is preferred over domestic HRM as it helps organisations to formulate effective HR policies and practices before making a global footprint.
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