The four major orientations of IHRM include polycentric, geocentric, ethnocentric, and regiocentric (Aswathappa, 2007). In Polycentric orientation, there is a limitation of recruitment, especially for the citizens of the host country. All managerial positions are mainly reserved for the nationals of the local countryside (host). The assumption is that citizens of the host nation have a comprehensive understanding of the political scenario, legal requirements, local market conditions, and cultural aspects. Hence, if recruited at the managerial level, they will run the business better and assist in the success of the multinational corporations. In geocentric orientation, the company does not take into consideration nationality. Instead, the company recruits based on merit and suitability for the job. This supports the multinational strategy by ensuring that the company has a pool of skilled and talented employees. In ethnocentric orientation, the HR recruits citizens from the parent country to operate in the host country. The idea is that these employees will perpetuate and instill the predetermined interest for the parent country (Rees, & Smith, 2017). The regiocentric orientation is where managers are recruited from various countries in the same geographic region. The rationality is that people who originate from the same region share aspects such as culture and language with the parent country. Such individuals will be in a position to understand problems prevailing in that region better, concerning their foreign counterparts.
Importance of Adaptation and Knowledge of Foreign Cultures to IHRM
In a situation where an expatriate is transferred to a different nation, that has different cultural values and culture, cultural awareness and understanding are paramount. Adaptation and knowledge of the foreign culture will make it possible for the expatriate to get accustomed to the work and navigate personal life quickly. Besides, an understanding of the foreign culture will make it simple for the company to adapt and show respect to cultural beliefs and practices. To ascertain success, IHRM ought to provide a sense of identity to employees. It assists in reflecting on personal and organizational behavior.
According to arguments forwarded by Brewster et al. (2002), the success of global HRM is influenced by the organization’s capacity to either diverge or converge internationally. Understanding of foreign culture, therefore, assists multinational corporations to gain local autonomy while maintaining global consistency. The local culture determines a decision on how far HR policies should diverge or converge.
To determine the correct product and motivational factors to implement in a subsidiary company, it is advisable to have a comprehensive understanding of the foreign culture. Adapting to the foreign culture helps to determine essential benefits and effective recompenses that are bound to ascertain IHRM success.
Differences in HRM
The process of recruitment tends to be almost similar across the world. However, an employer may put more consideration on a particular factor while selecting the best candidate to fill a job vacancy. For instance, in Latin America and Australia, employers usually place more emphasis on cultural differences. Meanwhile, in Mexico, an individual needs to have the right connections to get a job. Other countries such as Indonesia, Korea, and China take into consideration employee tests. In Japan and Taiwan, a person’s ability to effectively get along with others is considered as among the three most important factors to take into account while looking for the best candidate. Performance appraisal also differs across the world. Each nation has a different way of conducting appraisals, providing incentives, and compensating employees.
Apart from complexity, four primary national context characteristics affect IHRM, which include cultural environment, home-country domestic market, the industry, and attitudes held by senior management. Differences in culture tend to change work environments, such as the achievement culture and ascription culture inherent in different countries. The industry in which a multinational organization operates might differ in terms of government involvement and other agencies. For instance, trade unions in China are relatively weak as compared to Germany. Reliance on the domestic market can affect the success of a multinational organization. Sometimes, managers can focus their energies on local issues with the aim of reducing the discrepancies inherent between domestic and international environment.
Expatriate compensation is usually a challenge for many international companies across the world. An expatriate (expat) is a person who has relocated to another country either for work-related reasons or temporary. In a situation where an employer decides to transfer an employee, it is a requirement for the employee to be provided with housing allowance and relocation assistance. The primary objective of an international compensation program is to ensure that the employee is not adversely affected economically and financially after relocation. An employee ought to take into consideration factors such as the nature of the contract or termination notice, jurisdiction and law, and the nature of the employment before signing the expat contract. There are three primary options for the expatriate compensation; home-based approach, host-based approach, and global market approach.
There are many ways in which these options can be used for a transnational and multi-domestic company. They are essential in calculating both net assignment salary (host package) and net home salary (national home salary). The initial stage of developing a fair compensation package is to determine a gross hypothetical wage from which social security fee and tax fee are deducted. The effect of using these options for a transnational and a multi-domestic company is to ensure fairness, promote mobility and ensure easy re-integration.
Aswathappa, K. (2007). International Hrm. Tata McGraw-Hill Education.
Brewster, C (2004) European perspectives of human resource management, Human Resource Management Review, 14 (4), pp 365–82Rees, G., & Smith, P. (Eds.). (2017). Strategic human resource management: An international perspective. Sage.
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