Human Resource Management in a Global Environment

Globalisation has increased workforce diversity and cultural sensitivity. Recruiting the correct individual for a role is not an easy task. It gets even more complicated when you recruit across a global platform. The primary function of international human resource management is to ensure that the organisation carries local appeal within the host country.

Welcome to Topic 10: Human Resource Management in a Global Environment. In this topic, you will learn about:

• Global human resource management objectives
• Approaches to managing people in a global organisation
• Expatriates
• Compensation, appraisal and retention.

These relate to the Subject Learning Outcomes:

1. Explain the impact of globalisation on the business environment.
2. Describe the fundamental frameworks and strategies for competing successfully in a global economy.
3. Outline how global businesses are affected by the type of environment (legal, political, economic, financial and social-cultural) they operate in.
4. Discuss the ethical impacts for global businesses with reference to sustainable and responsible practices.

Welcome to your pre-seminar learning tasks for this week. Please ensure you complete these prior to attending your scheduled seminar with your lecturer.

Click on each of the following headings to read more about what is required for each of your pre-seminar learning tasks.

Global human resource management objectives

At present, organisations tend to be very resource-centric. It is imperative to put people first as well as ensure management objectives are met to maximise the return on investment. This shift in priority has paved the way towards the human resource management (HRM) function that you see in organisations today. HRM must go a step further from just the administrative task of personnel management.

With globalisation, all organisations have the potential to expand their business into global platforms. This has been a positive change and has brought organisations diversity and talent.

The three (3) main objectives of global HRM are as follows:

1. Create a local appeal in the host country without compromising the global identity and international feel of the organisation.
2. Generate awareness of cross-cultural sensitivities among managers globally and hiring of staff across geographic boundaries.
3. Provide training about the cultures and sensitivities of the host country.

A particular challenge that all human resource managers face in a global environment is to hire the right talent and ensure they will fit the organisation environment. It is also very difficult to develop a tool to promote the global corporate culture (Management study guide 2022).

Approaches to managing people in a global organisation

HRM plays a crucial role in organisations, particularly in multinational organisations. There are many considerations when managing people in organisations where a great diversity of people work together at multiple locations and where people frequently have to move between locations. There are three (3) main approaches to international HRM (Peng & Meyer 2019):

1. Ethnocentric approach
2. Polycentric approach
3. Geocentric approach.

Let us take a more detailed look at each of these three approaches.

Ethnocentric approach

The ethnocentric approach focuses on the norms and practices of the head office in the home country of the multinational organisation. The subsidiaries are run largely using the same structures and processes as in the home country. Most multinational organisations tend to have comprehensive procedures and standards across all their locations, which were developed in the home country and comply with the head office worldwide (Peng & Meyer 2019).

In order to make sure there is consistency in management practices, subsidiaries are led by expatriates – employees who are willing to live and work in a foreign country. In the ethnocentric approach, these expatriates are typically home country nationals who are either existing employees of the parent company and relocated to the host country, or hired specifically to work at the subsidiary. They facilitate control and coordination according to the head office’s standards and contribute specific skills for the job because they were trained in the home country (Peng & Meyer 2019).

Polycentric approach

Peng & Meyers (2019, p. 448) define a polycentric approach as a focus “on the norms and practices of the host country”. Ask yourself, who would be the best managers of an organisation if it with operating in Germany? Most likely, a German manager. Why? Most host country nationals will have no language or cultural barriers in the local environment and hence will better understand local customers, suppliers and government officials. However, sometimes these managers may find it difficult to communicate with the organisation's headquarters. This approach to managing people suggests that placing host country nationals in top management positions may boost morale and bring the local employees together.

Geocentric approach

The geocentric approach “focuses on finding the most suitable managers, who may be parent, host or third-country nationals” (Peng & Meyers 2019). This approach to manager people means that all employees are treated the same. During recruitment, a pool of managers will be identified from a wide range of countries, trained in many locations and serve in management roles across multinational enterprises.

The following table summarises the key characteristics and advantages of the three (3) approaches:

Expatriates

Expatriates can be defined as individual employees that are posted abroad by a multinational organisation. These individuals play a significant role in global organisations and in managing the subsidiaries.

Expatriates can play a number of important roles for organisations, including as:

• Strategists who lead the design and implementation of the subsidiary’s strategies
• Monitors who ensure the parent company’s control over the operations of the subsidiary
• Ambassadors who represent HQ’s interests and build relationships with the host country
• Daily managers who run the operations and lead the local workforce
• Trainers for local staff, including their own replacements, thus transferring knowledge from the parent company to the subsidiaries (Peng & Meyer 2019).

The job of an expatriate employee can be demanding. The selection of individuals for such ‘expat assignments’ can be crucial. Apart from personal preferences, the requirements of both the head office and the relevant subsidiary have to be considered (Toh & DeNisi 2005):

1. Personal considerations include:
   • Opportunities for career progression
   • Remuneration package
   • Possible impacts on spouse and/or family.
2. Parent company considerations include the candidate’s:
   • Functional skills
   • Knowledge of the parent company policies and procedures
   • Loyalty to the parent company.
3. Subsidiary preferences may include the candidate’s:
   • Knowledge of host country
   • Knowledge of local customs and culture
   • Relevant language skills
   • Cultural sensitivity.

Compensation, appraisal and retention

The the field of HRM, compensation refers to the salary and benefits an employee incurs. ‘Blue-collar’ workers tend to have relatively little bargaining power. They may be migrant workers who left their home country to earn better pay in industries such as textile or electronic assembly plants for a few years before returning home. However, once trained, global organisations like to keep international employees for a number of years. As a result, global organisations not only typically pay higher wages relative to similar positions in local firms, but also support the families and communities of their international employees (Chang 2006).

Pay increases and promotions, however, depend on performance. Therefore, most organisations conduct some form of performance appraisal – evaluation of employee performance – for promotion, retention or termination purposes. Even though compensation is negotiated upon entering on organisation, follow-up compensation usually depends on performance appraisal. This appraisal often takes place annually (Chang 2006).

For any global organisation, it is important to retain their employees. Employee retention can be quite challenging in locations where staff frequently jump from one employer to another when better compensation packages are offered. To help retain employees, organisations have to create attractive career prospects, including training, travel and leadership positions (Peng & Meyer 2019).

Human resource management from a global perspective can be complex and it is important to understand that managing people from a global perspective brings about challenges such as language barriers, cultural barriers, policy and legal differences and much more. The ‘rules of the game’ are different in each country and managers need to be curious and open to understanding these rules (Peng & Meyers 2019). Global businesses need to have a global mindset and invest in technical expertise, cross-cultural adaptability and language training. Employees wanting to work internationally need to make themselves ‘expat ready’ and start building the relevant skills now. Are you ready to take the next steps to be part of this global economy?

Welcome to your seminar for this topic. Your lecturer will start a video stream during your scheduled class time, you can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then click 'Join' to enter the class.

Click here to access your seminar.

The learning tasks are listed below, these will be completed during the seminar with your lecturer. Should you be unable to attend, you will be able to watch the recording which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

In-seminar learning tasks

The in-seminar learning tasks identified below will be completed during the scheduled seminar. Your lecturer will guide you through these tasks. Click on each of the following headings to read more about the requirements for each of your in-seminar learning tasks.

Welcome to your post-seminar learning tasks for this week. Please ensure you complete these after attending your scheduled seminar with your lecturer. Your lecturer will advise you if any of these are to be completed during your consultation session. Click on each of the following headings to read more about the requirements for each of your post-seminar learning tasks.

Each week you will have a consultation session which will be facilitated by your lecturer. You can join in and work with your peers on activities relating to this subject. These session times and activities will be communicated to you by your lecturer each week. Your lecturer will start a video stream during your scheduled class time, you can access your scheduled class by clicking on ‘Live Sessions’ found within your navigation bar and locating the relevant day/class or by clicking on the following link and then click 'Join' to enter the class.

Click here to access your seminar.

Should you be unable to attend, you will be able to watch the recording which can be found via the following link or by navigating to the class through ‘Live Sessions’ via your navigation bar.

Click here to access the recording. (Please note: this will be available shortly after the live session has ended.)

• Chapter 10: Caldwell, C & Anderson, V 2018, Human resource management – A transformative approach, NOVA Publishing.
• Chapter 12: Carpenter, MA & Dunung, SP 2011, International business, Saylor Foundation.

References

• Chang, E 2006, ‘Individual pay for performance and commitment HR practices in South Korea’, Journal of World Business, 41(4):368-381.
• Peng, M & Meyer, K 2019, International business, 3rd edn., Cengage Learning EMEA.
• Toh, SM & DeNisi, AS 2005, ‘A local perspective to expatriate success’, Academy of Management Perspectives, 19(1):132-146.