International companies are characterized by many factors among them geographical dispersion, demand for rationalization and differentiation and cultural diversity. These factors pose numerous challenges to international HR managers on how to ensure successful performance of their functions. The paper highlights various challenges the mentioned factors presents to IHRM in their work. It assembles evidence and previous research findings done by other writers. The paper also demonstrates why managing international HR is more difficult than managing HR in a large domestic firm.
Challenges presented by geographical dispersion to international HR directors As employees in an international company come from different backgrounds and possess diverse experience, it’s hard to standardize pay and conditions of work (Briscoe & Schuler, 2009). Doing so is likely to bring conflicts among staff doing similar jobs in different locations. Standardizing working conditions is also tricky because of diverse cultures, rules and laws of different nations. Home working conditions and policies cannot be transferred to another country due to existence of different legislations in host country.
In such a case each host country could have a slightly different working condition (Paik and Vance, 2006). Due also to natural differences in each country, it is hard to standardize business processes and pay in a multinational company. One of challenges faced by international HR managers is dealing with multiple time zones. This time differences bring about difficulties for managers to consult with key decision makers (Herod and Yearn, 2002). These difficulties may result into ramifications on productivity.
Closely associated with this problem is the continued heavy reliance on face to face communications since improvement in technologies has not completely bridged this gap (Punnett, 1989). Rolling out a non conflicting international compensation system is a challenge to international HRM. This is due to the fact that conditions of employment differ among various categories of employees (Mendenhall et al, 1987). In addition, there exist variations among countries on ways of compensating workers. Salary levels for the same job also differ amongst countries.
As a matter of fact compensation packages can be a source of conflict . This is mostly occurs when local employees start comparing their salary to those of expatriates and may conclude that there is no fairness. Expatriates in most of cases have better compensation packages than local employees doing the same job. As a result local employees may feel unappreciated and treated unfairly. Consequently, it may result to resentment and eventually lower employees’ morale and productivity (Roberts et al, 1998).
The process of hiring and placement of different national categories of workers is very complex in global context. International HRM involves movement of people across international boundaries (Briscoe & Schuler, 2009). In such a case staffing becomes very hard as managers face hard choices to make from three pools of employees categories: employees from host country where the company operates (HCN), nationals from home country where the firm has headquarter (PNC) and citizens of other countries that may be sources of labor (TNC). The three types of employee groups have different backgrounds.
This therefore requires the managers to have international mindset and adopt policies that facilitate establishment of internationally oriented staff (Briscoe & Schuler, 2009). Distinct countries have different government policies and ethical requirements which can pose problems to international HR managers. For instance an international company situated in South Africa would have expatriates willing to work there required to undergo a compulsory HIV/AIDS test. This could result to loss of talented employees who may not be willing to comply with the requirement.
It would be therefore a challenge to managers to convince such expatriates to accept the requirement (Roberts et al, 1998). International HR managers also face difficulties determining compensation package among various categories of workers. This is so because of varied nationalities of workers and different levels of economic development in home countries. It therefore becomes hard to determine some form of compensation for instance hardship allowance (Hofstede, 1992). International scene is also more complex due to language differences.
This becomes a challenge in ease of accessing company’s documents such as vision and mission statements, company’s records and procedure manuals. Language barriers could also impede communication and sharing of information among the workers. This can only be solved by language standardization (Laurent, 1986). The nature of employee involvement also varies depending on country and institutional factors. Employee involvement is crucial in any organization and results into enhanced communication, coordination of tasks, enhanced information sharing and reduced turnover.
Employee involvement is however is influenced by organization and national factors such as industrial relations, financial system, social forces and market forces (Petti and Fadel, 1997). Consequently in a global context, the nature of employment will vary due to diverse national forces. Challenges occasioned by need for rationalization and differentiation to international HR directors. Process of rationalization normally involves lowering of organizations operational costs and more improved control (Punnett, 1989). This requires timely provision of information.
On a global context, it is a challenge to HR managers to obtain information quickly and to become proactive in achieving business objectives. Due to the complex nature of international organization, it becomes challenging to ensure faster access to high quality information at a significantly business processing cost . However due to rationalization demands in order for the company to remain competitive, managers have to carry out proper compensation, recruitment and placement (Punnett, 1989). Differentiation is the process of distinguishing firms’ products or services from those offered by competitors (Petti and Fadel, 1997).
This is done by making them unique and more attractive to a particular target market. Differentiation is normally implemented by ensuring differences in functional features, quality, availability and reputation. Formulation of differentiation strategy is vital for making firms’ products more competitive in a competitive market. In global context it poses challenges for managers to adopt proper strategies in recruitment and selection to ensure the products remain unique and reputable (Petti and Fadel, 1997).
Challenges presented by cultural diversity to international HR directors International companies operate in different countries with diverse regulations, standard of living and labor unions (Hofstede, 1992). In some countries, labor unions determine wage policies. In Australia for instance unions negotiate rates of payment on behalf of workers. In other countries like Hong Kong unions have little influence and pay rates are determined by free market. This makes the process of determining pay package very hard to HR managers in global scene (Hofstede, 1992).
International HRM must be aware of cultural differences and develop culturally sensitive attitudes for business to thrive (Laurent, 1986). Majority of HRM functions such as compensation; training, recruitment and selection are done according to cultural practices of host nation. Sometimes adapting to local expectation and customs brings more problems. In Indonesia for instance local employees are obliged to employ members of their family. However, acting in such nepotism way may be detrimental to the company since the best fitted persons will not be hired (Punnett, 1989).
Diverse norms on methods of motivating employees amongst countries are a key challenge. The use of incentives and gifts for instance may have varied results. In cultures such as America money may be a good motivator. In other cultures such as Japan, non financial incentives for instance job security, social acceptance and promotions may motivate employees better (Mendenhall et al, 1987). The international HR managers are hence challenged to match the motivators with cultural values. International businesses also operate in countries with different cultural differences amongst groups of people in the same country.
This ultimately translates into different HRM policies procedures and system. The work of IHRM is therefore determined by cultural aspects of the host country (Petti and Fadel, 1997). This places a challenge to IHRM managers to reconsider each strategy in terms of the country’s cultural condition. Some strategies may work in some country but fail in others. A Hong Kong company dealing with dental services for instance decided to offer a ‘use it or lose it’ policy worth $1000 a year. Initially the company had a high staff turnover of 24%.
After a short time, the company’s turnover dropped significantly to 4%. The strategy could not just work in that context (Petti and Fadel, 1997). As the case illustrates, research is required to be conducted amongst employees to establish the kind of strategies which are workable. People also have varied takes and attitudes with regard to contracts. People from western countries think of it just like a contract and will follow it after it’s signed. The Chinese however take it different and prefer continued relationship with their manager.
So they will sign it, have a handshake and get to know their manager (Laurent, 1986). Therefore the IHRM has to consider acceptability and adaptability. Diversity management is also a challenge especially managing varying expectations in workplace. Some countries emphasize on gender equity and affirmative action while others do no (Hofstede, 1992)t. In such a case organizations with such policies face difficulties implementing them in some countries. In some parts of the world woman expatriates may experience difficulties in gaining acceptance (Hofstede, 1992).
Culture is also a significant constraint in employee performance appraisals and feedback process. Western counties have been found to have different styles of performance appraisals which are difficult to transfer to non western countries (Briscoe & Schuler, 2009). The purpose of appraisal, acceptance of its result and the mode of conduct of the feedback process are also different amongst countries. In some cultures for instance Japan performance appraisal are not acceptable and are normally interpreted as sign of distrust.
In other cultures such as Chinese performance appraisals are used to determine pay (Briscoe & Schuler, 2009). Why managing International HR is inherently more difficult than managing HR in a large domestic firm. Unlike domestic firm, international HR involves moving staff across many countries with diverse cultural and economic aspects. As such international HRM is more complex as it deals with different categories of workers from different countries. There are also many aspects and a broad range of issues o take into consideration (Paik and Vance, 2006).
To begin with, there are more HR activities to deal with in an international environment. Foreign employees are normally subjected to both domestic and international tax liabilities. This necessitates need to design tax equalization policies to bridge this gap. There are also a lot of international relocation and orientation activities. This may take the shape of arranging pre departure training and providing information such travel details, shopping and schooling. Foreign employees must also be provided with housing, medical care and recreation services.
The expatriates also require to be provided by administrative services within which the host country operates. In addition the international HR must provide language translation services (Mendenhall et al, 1987). The international HR manager is also required to take a broad view of issues. This is particularly due to the fact that the managers deal with more than one national group of employees all working together. One such broader perspective would be to ensure that employees working in foreign locations receive foreign premium regardless of their nationality.
Such a policy should be implemented without showing preferential treatment to only employees working on overseas assignment but even to foreigners assigned to firm’s home country (Chan, 1994). The IHRM thus has to deal with equity issues with regard to compensation. International HR managers are also required to get more involved in employees personal lives (Herod and Yearn, 2002). The HRM needs to ensure that expatriate employees comprehends compensation package such as cost of living allowances, premium taxes among others. He also needs to ensure they understand housing arrangements and health care.
This creates need for establishment of a section that provides services such as handling of employees’ investments, banking and coordinating home visits. If for instance there is to be a relocation or transfer, the HR department will need to know the employees personal life in order to provide the level of support required. This is particularly due to some governments requirements like marriage certificate in order to stay in some locations. In addition the HR managers may want to assist the family left behind at home country (Herod and Yearn, 2002).
In the international context, there is always need to change emphasis in HR operations as workforce varies. This mostly occurs when more trained locals become available and hence the need of foreign employees decline. Resources which had previously allocated to allocated to expatriate issues have thus to be transferred to local stuff training and development. This broadens HR activities such as training, planning and compensation (Chan, 1994). International assignments increase exposure to risks that HRM has to deal with.
There are more severe consequences resulting from expatriate failure and underperformance. Such a failure may be too costly to the company in terms of salary, relocation expenses and travel costs. There could also be loss of foreign share, market share and breakdown of foreign relations. The HR department must also consider possible acts of terrorism. On top of that the HR must put in place emergency evacuation procedures for assignments in locations susceptible to epidemic crises (Roberts et al, 1998). International HRM also has to deal with more and complex external factors.
The company must comply with government’s requirements about staffing in foreign locations. Moreover, local codes of conduct and religious groups’ regulations must be obeyed (Roberts et al, 1998). Conclusion The research and evidence presented in the paper demonstrates that managing HR in global context is more challenging and complex than in domestic scene. There are many issues which constrain international HR managers and which are unique to each country. The managers are therefore required to be flexible and adopt a local responsive strategy in order to have successful and sustainable businesses.