International Human Resource Management

Introduction

International human resource management (IHRM) focuses on management of employees in organisations that are in different countries. Due to the fast growth of the global marketplace, the roles of employees are vital in the capacity building of a company. The primary aim of IHRM is to discriminate the varying roles and functions of the various activities within the human resource management in the international context. IHRM considers the challenges of managing expatriates in their country and other foreign countries within the multinational, transnational corporations and other types of international organisations (Merlot, Fenwick & Cieri, 2006). Through this, there is a well understanding of the human resource management, comparative management and organisational behaviour. The objective of the IHRM is to maintain competition throughout the world, efficiency, local, responsive, and flexibility and adaptively of the company (Lee Jungah & Chunsu Lee, 2013). This paper attempts to address the key issues involved in the international human resource management (IHRM).

There are three main issues in IHRM. The first issue is the expatriate management and development that involves selection, compensation and repatriation of the failures of the expatriate. For example, the case study of Drill Bits an Australian company, Jason Goldthorpe, a manager in the company Andrew Sculzinski is a principal mining engineer. Goldthorpe discussed briefly with Sculzinski on the operational matter in the USA. After the discussion, Sculzinski was offered an expatriate assignment to Chile. He was selected to take the international assignment due to his vast technical knowledge and was willing to learn.  Goldthorpe asked Caroline the company’s human resource manager to prepare a compensation package for Sculzinksi.

The second issue is the internalisation of management throughout the organisation, i.e., the host country, parent country and other third countries. The case study for Drill Bits Company has subsequently secured contracts with almost all major mining ventures in Australia for the past 20 years. The company has earned an extensive reputation in the mining industry due to its commitment to manufacturing quality products and offering timely site services. Drill Bits had been persuaded severally by high profile local companies to start exporting the products to the offshore mining sites in USA as well offer site services. The company started exporting while under enormous management pressure that resulted in Marcus Goldthorpe appointing his son Jason Goldthorpe to oversee the company’s internalisation.   

            The third issue in the IHRM is the need to internalize the whole organization. It is due to the increasing interactions of cross-cultural in doing business at home and abroad that are mainly cultural communication, as well as language and communication (Lee Jungah & Chunsu Lee, 2013). As the business of the Drill Bits Company with international market continued to strengthen, Jason Goldthorpe travelled to USA. While in the USA, he contracted with two local agents to manage the USA drill bits importation. The arrangements that he had with the clients began to fail as the customers were complaining of the availability of agents at critical times. Jason Goldthorpe was appointed to the managerial position when he had no skills in management. These skills are vital in internalizing organizations in the international context.

Another issue is communication between the members of an organization. The local knowledge is meant precisely to a host country in its economy, socio-cultural factors or language. In the case study, there were five members of Scultizising’s team that was feeling uncomfortable with their quality controller Gavin. It could result in a lack of cohesion between all members. On one occasion, the lack of cohesion within Sculzinksi’s team resulted in an unfortunate communication situation. It led to delayed deliveries to a client that saw Drill Bits accepting the contract penalty costs.  In order for corporations to operate strategically, they need to link foreign assignments more closely according to the requirements of the strategic operations (Dickmann, 2015). A careful assessment is conducted to determine whether an expatriate is the best choice in the global sourcing decisions. It implies a need to assess the expatriate in terms of cost effectiveness.

For effective management of expatriates, organisations need to focus on issues that are essential to ensure effective expatriate management. A strategic approach is required to account for the whole process of the expatriate cycle. The planning stage is the start of the period. , expatriates are sent abroad due to the following reasons: controlling and coordinating operations, transfer of skills and knowledge as well as managerial development (Harris, 2015). As in the case study of Andrew Sculzinksi’s assignment to Chile, Sculzinksi is a principal mining engineer with Goldthorpe Drill Bits Pty Ltd (Drill Bits), and Jason Goldthorpe is the manager of the organisation. Goldthorpe and Sculzinksi discussed the operational matter in the USA briefly. The discussion resulted in Goldthorpe offering Sculzinski a 3-4 year expatriate assignment to Chile. Goldthorpe failed to employ a strategic approach that is a requirement in the expatriate cycle. A strategic plan is a vital aspect in managing expatriates.

Analysis

The studies of the IHRM theory focused on the western expatriates assigned offshore for a period of 5-10 years to the foreign operations of multinational corporations (MNCs). The earlier studies suggested that expatriates were home country employees that consisted of usually managers and technical staff. Their MNCs assigned them to overseas that were culturally different locations for an extended period. Some of the studies implied that the expatriate process was inherently involving hardship for the expatriates as well as their families. The earlier perspective of the theory of IHRM and expatriate include a series of underlying assumptions that are not easy to sustain in the newly adopted business environment that is globalised (Harzing & Ruysseveldt, 2004).

The first assumption of the theory was IHRM concerned the management of long term expatriates employed by multinational companies. The assumption focused on expatriates who spent 5-10 years working for European or US companies in foreign locations. The expatriates characterised senior managers that represented their organisations as general managers, accounting executives, marketing or auditors (Merlot, Fenwick & Cieri, 2006). These expatriates often acted as conduits for the transference of the culture and business practises of their company to their overseas subsidiaries. Some of the few studies had centred on professionals being involved in the short-term international assignments. Such assignments were like those undertaken by the management and engineering consultants or executives seeking to develop new business in the global market. In the Drill Bits case study, Sculzinski was offered an expatriate assignment that was to last for 3-4 years. The case study is significantly showing the reduced expatriate assignment period to less than five years. 

The second assumption of the theory was the failure rates for expatriates were extremely high. It suggested that the expatriates’ failures were extremely high hence implied that the costs of international business operations were prohibitive. The studies of IHRM research established that the main reason for failure with expatriates was the inability of the expatriate themselves and their families to adjust to the demands of the cross-cultural. Also, the different environment in the host country was another reason. It indicated that few corporations had taken adequate preparatory steps like selection based on cross-cultural adaptability, language training and pre-departure in the preparation of their staff for overseas assignments.

The third assumption was the demands of the hardship of international location that considered compensation mainly financial with the aim of encouraging expatriates to accept the jobs. The theory assumed that the relocation in the overseas was always inherently problematic. It did not matter the involved country host or the similarity in culture and socioeconomic practices were to the home country. For instance, American expatriate assigned to the South Pacific, the South America or South Australia may have been assumed to have an equal level of hardship and alienation. Therefore, it implies a similar compensation payment for relocation. The traditional approach supported substantial nexus between international assignments, financial compensation and difficulty despite evidence to the contrary and the realities on the contemporary of business in several host countries.

Increased use of expatriates was as a result of globalisation was the fourth assumption of the IHRM theory. The assumption was challenged both empirically and logically in changing the nature of the global business and the economic realities of globalisation. Greater cost effective emphasis was as a result of ever increasing global competition hence leading to failure rate that was less likely to be accepted. Globalisation trends have also meant that locally engaged staffs are now at a position of acquiring requisite knowledge, as well as the required skills. The focus on cost reduction and increased productivity in the international business has suggested that there may be a possible decrease in the deployment of expatriates. Development of new perspectives is a requirement in the activities of globalisation in the regional and international economic levels. It will inform contemporary issues related to IRHM in the international business (Ashamalla, 1998).

Global corporations have increased the use of the alternative forms of organisations in different countries. A good example is the airline industry, many of the international airline companies belong to the strategic alliances so as to obtain the market share. It also enables for technology transfer as well as facility sharing and to benefit from economies of scale. The business environment that is highly competitive will require new approaches that are non-traditional to the staffing of the international operations primarily due to the increased demand for flexibility and differential employee conditions. These include the IHRM techniques as the global sourcing and outsourcing, short-term contracts and “single status” expatriates. It is with the aim of avoiding the persistence of trailing partner syndrome. There is another emerging preference for recruitment from career expatriates that are already available in the host country as well as the residents and the third country citizens.

There is a debate on localisation that that prefers the employment of host country citizen to the employment of expatriates. It looks at the nature of the comparative employment conditions in the system of remuneration. Localisation is fundamental concerns the issues of effectiveness, equity in both internal and external business environment as well as trust and the aspects of control. In the case of Asia-Pacific region, due to the 1997-1998 Asian Economic Crisis, it appeared that the expatriates managers deployed would decrease in numbers as a result of the sharp focus on cost minimisation. There are significantly reduced numbers in the deployment of expatriates especially in the Australian and the United States companies. It is due to the response to cost-reduction imperatives and the impact of fluctuations of currency in the Asian region (Ashamalla, 1998). Some of the Japanese companies are also reducing their expatriate employees to respond to kerb the problem of employee relocation resistance. They also have a growing recognition of the available skilled local staff.

Solution

The IHRM theory has emphasised the importance of expatriates to possess personal qualities, skills, cross-cultural attitudes, and specific competence in managerial for the designation of specific overseas deployment. The characteristics of a successful international manager need to have a drive to communicate, cultural flexibility, broad-based sociability, a collaborative negotiation style, and a cosmopolitan orientation. Approaches like this reinforce the active need for international personnel so as to demonstrate different skills and competencies in foreign business environments. According to Ashamalla (1998), international business requires skills and a series of perspectives that are highly developed. The selection of international staff should account for their socio-biographical identity (for example gender, age, ethnicity, and religion) to ensure easy transition and acceptability in the foreign overseas location.

The early IHRM theory emphasised on the additional cross-cultural and personal attitudes and skills which required effective management in the international environment. There is empirical evidence suggesting that few foreign companies have provided preparations for their expatriates employees prior to their assignments (Ashamalla, 1998). The assertations are that the IHRM theory needs to cater for a staged approach to the appropriate selection and preparedness of international staff to levels of interaction with the cultures, customs and business culture of host-country. The staged approach to enculturation bases foreign employees needs to know distinct forms of adjustment, work adjustment, required different forms of preparedness, interactive adjustment and general adjustment. The trainee analysis would result in diverse information and training responses.

It is becoming apparent that the nexus that is between the international assignments, failure, hardship and highly inflated compensation packages is a change in the global structure. The brief business visits from the parent company and the short-term international assignments, franchise arrangements, joint venture and increased employment of local expatriates has eliminated the justification for expatriate compensation. In the coming future, foreign level managers will have to acquire different skills that are best obtained through practical experience rather than by means of structured training programmes. The new competencies include international, transformational, transnational communication and skills in the foreign language. 

The theory of IHRM has reinforced the relationship between exploration and inequitable salaries on the basis of hardship compensation. The argument on compensation is not easy to sustain as there is contemporary evidence that indicate moves towards flex patriate payment system and away from fixed expatriate packages dependent on adjustments of salaries and allowances. A recent case study reported that 34% of their respondents had their expatriate payment reduced. Also, another case study found out that 31% of the 351 multinational companies did not provide Foreign Service premium to their expatriates. Cost concern converges with claims of inequality in payment between expatriates and their home and host country employees (Harzing & Ruysseveldt, 2004). In the recent years, localisation campaigns are in countries like Hong Kong, Malaysia and Singapore.

The 1997-1998 Asian economic crises provided an opportunity for several multinational corporations to review the number of their expatriates as well as their remuneration packages. A company like Motorola found out that the payroll of its 140 expatriates working in China exceeded the salary for 5,600 local employees. It may have reflected the need for Motorola to maintain control of its burgeoning operations in China. The issue comes up that a company could have a potential of benefiting from a re-assessment of the overall balance between the expatriate and local employees in its short and longer terms in a host country. Other authors have suggested that a revision of the expatriate remuneration system is needed as it merely reflects the broader aspirations of international companies to cut cost in all their areas of operations (Dickmann, 2015). It will result in the companies maximising their competitiveness in the international markets.

In conclusion, for development to be positive, IHRM requires a closer integration of planning strategically between domestic and international HRM and practice. It will allow a careful involvement of the considerations of the precise nature of their assignments in the particular host-country between the expatriate employees and management staff in disparate location. Other considerations are level and depth of interaction required as well as comprehensive selection methods. It will help to get the right applicants and families in the joint decision to relocate and lastly, the pre-departure information and training programmes that are appropriate to the nature of the assignment. The contemporary practices of the IHRM imply that the international business practice pace is challenging the theory of the IHRM and its assumptions in various ways. The projections are that MNCS will employ expatriates that are middle and senior level managers to oversee the operations in foreign locations at the international levels. The long-term expatriates as a cost effective option will have a decline in its importance as there are many alternatives available in the restructured international operations.

The recommendations are that new approaches to the international business should be adopted to achieve the innovative approaches to global staffing. It includes understanding the role of international manager and professionalism, their selection and employment conditions that are strategically innovative. Also the recognition of their relationship with their parent company that is more holistic, and carefully calculated flexible payments that coincide with their particular skills and their identified competencies. There is a need for implementation of research programmes that focus on non-multinational companies engaged in a joint venture or strategic alliances. More research on the links in practices, as well as strategies of domestic and international HRM, should be conducted. Primarily, the new approach of the IHRM should imply that globalisation results in international assignments to be standard, short-term in duration and more frequent. It will also focus on the future understanding of the employees of the foreign corporations will be recruited from a wide varying labour market that is offshore. It implies that the traditional expatriate assignment is seemingly declining. The academics challenges must develop new frameworks generated from activities that are research-based. The human resource practitioners are challenged in testing and shaping the solutions so as to fit particular global business contexts.

References

Ashamalla, M. (1998). INTERNATIONAL HUMAN RESOURCE MANAGEMENT PRACTICES: THE CHALLENGE OF EXPATRIATION. Competitiveness Review, 8(2), 54-65. Doi: 10.1108/eb046368

Dickmann, m. (2015). Assessment of strategies, structures and processes of international HRM (1st ed.).

Harris, h. (2015). The role of international human resource management (1st ed.).

Harzing, A., & Ruysseveldt, J. (2004). International human resource management. London: Sage Publications.

Lee Jungah, & Chunsu Lee, (2013). A Study on the Effect of IHRM to Firm’s Competitive Advantage. International Commerce and Information Review, 15(1), 135-159. Doi:10.15798/kaici.15.1.201303.135

Merlot, E., Fenwick, M., & Cieri, H. (2006). Applying a strategic international human resource management framework to international non-governmental organisations. International Journal of Human Resources Development and Management, 6(2/3/4), 313. doi:10.1504/ijhrdm.2006.010402