The world is experiencing a very rapid growth in technology. Transport and communication has been improving, making the world one small country. Organizations have also adapted to the increasing changes by diversifying their markets to include other countries and continents. This has forced managements to shift from their conservative management styles to accommodate the differences they find in the new regions that they venture. Human resource management has similarly become a very crucial topic due to the diversity of the people that organizations are forced to deal with. In this light, International Human Resource Management has become more useful, compared to Domestic Human Resource Management, especially when it comes to implementation of strategies in multinational organizations. Different companies venture into other countries for different reasons. However, most of them are usually seeking potential markets to improve their profits, spreading of the risks, following the actions of competitors, taking advantage of government incentives in foreign countries among other reasons. This has made the companies address the issues of a global workforce, making the function of human resource management strategically significant and not just a support tool anymore. There are several differences between the domestic and international human resource management. This paper gives a critical view of those differences as well as the existing similarities. These differences are generally based on the complexity of international human resource management brought about by the increased number of variables that come into play, when a company widens its operations to include foreign countries. The paper also looks deeper into the international human resource management and analyses its role in the success of multinational organizations.
Domestic versus International Human Resource Management
The comparison of domestic and international human resource management gives more differences than commonalities. However, according to Bartlett and Ghoshal (1992, p. 48), a convergence exists, when to take a look at the basic functions as well as the concepts that tend to be universally accepted in Human Resource Management. The basic functions include procurement or acquisition, allocation and utilization of human resources. These functions give rise to a number of human resource management activities that have to be performed irrespective of whether managing a domestic or a global workforce. For example, it is the work of human resource management to recruit the required personnel. Both domestic and international human resource managements follow the universally stipulated procedures of recruiting in order to select the most appropriate persons for every task. The human resource management will also be expected to undertake performance appraisals, employee benefits administration, remuneration, training and development among other human resource activities, whether acting on a domestic capacity or not. None of these basic duties of a human resource manager will be ignored, even when managing domestic manpower.Human resource management has generally evolved to accommodate the diversity of people even from one country. Cultures and lifestyles are so dynamic that no single country can be said to have a uniform culture and lifestyle across the population. Different people view these changes differently with some of them being quick to embrace the changes, while others being a bit slow to accept them and preferring to be conservative in order to preserve what they feel socially right or morally correct. This has made people of a same nation appear more or less like the global humanity. The increasing technology has also made each country be a home for every race on earth (Becker and Gerhart 1996, p. 75). For example, if to take a single state like Illinois, in the United States of America, it would not be surprising to find out that more than 50% of all human races are living there. One can meet whites, blacks, Asians, Chinese among others in the state. Then, human resource managers would ask themselves what difference they have running a company in that state and running a multinational organization, situated in a different part of the world, when it comes to managing the people. Ideally, one country has just become like a small sample of the entire world. This has left the domestic human resource managers with no option but adapt to the changing population just like the international human resource managers.People are also increasingly embracing the global lifestyles and cultures as a result of the improved technology (Berry 1980, p. 62). Some of the foods and drinks are becoming universal as it is possible to export and import or even establish plants in different countries. For example, the jeans pair of trousers was initially not as wide spread as it is today. However, now this piece of clothing is being used worldwide, irrespective of the people’s cultures in different parts of the world. Drinks like soda and wines are now taken almost everywhere. It would not be surprising to find the Coca-Cola beverage in almost all the countries of the world. This shows that the entire humanity is changing towards the same culture and lifestyle. The internet is also enhancing this through the ability to access information on almost everything. People are trying to make their careers universal such that they can work almost in any country. In other words, the human resources in a particular country, as well as the market, are becoming harder to distinguish from the global ones. This has made the function of the human resources management more or less similar for both domestic and international human resource management. Countries are signing agreements to become trading blocs or unions, going to a point of even recommending a common single currency to be used across the union. The European Union is a good example. This is like making a single large country for every bloc and harmonizing policies for better and easier trading among them. It makes the establishment of a multinational company in the bloc relatively similar to operating in a single country.It is true to say that there is significant commonality, shared by both international human resource management and domestic human resource management. However, the strategies of managing the diversity of people in a particular nation may not always be similar to global human resource management. There are numerous differences, as will be analyzed in depth, arising generally from the level of uncertainty and complexity of the activities of managing a global workforce. In addition, other factors are also seen to influence the differences that exist between international human resource management and domestic human resource management, which include the culture of the people in the country of the subsidiary, attitudes and subjective decisions of the senior management, the industry or sector, in which the multinational company is operating as well as the level of reliance of the organization to the domestic market (Cavusgil 1993, p. 44). In most cases, organizations tend to expand their operations into countries that share cultural values and norms with the host country almost in the same manner. It is in those countries that markets would easily be found as the products will not be seen as strange. In such expansions, the human resource management will significantly change due to the expansion of the company. However, venturing into a region with unique cultural values to the host country calls for a lot of adjustments in the human resource management styles. In other situation, the highest level management may still have the control; though to a limited extend on how to manage the people in subsidiary, based in a foreign country. This may greatly influence the style, used in international human resource management. The management may also tend to ignore the values of the foreign countries, especially where the multinational organization over-relies on the domestic market, and therefore, treating those foreign countries just like the host country without paying attention to the unique human resource requirements of the subsidiaries. The industry, in which the organization is operating, can also significantly moderate the difference between international and domestic human resource management (Dowling & Schuler 1990, p. 51). This is because some industries tend to be tailored to perfectly fit the requirements of the domestic markets. For example, the services of retailing chain stores and insurances companies will not be easily exported without investigation of the foreign countries requirements. A multinational organization, positioned in these industries, will have no choice but invest extensively in the modern international human resource management and shifting largely from the conservative domestic human resource management. However, there are other global industries, for instance, commercial aircrafts, semiconductors and the like, that do not exhibit much distinctions in varied countries, and therefore, reducing the difference in handling human resources from the host country. All in all, differences between domestic and international human resource management will always be there since not all the environmental factors are within the control of the management. Some external environmental issues like the government policy will have a great influence on the international human resource management.One of the most common differences between domestic and international human resource management is the linguistic plurality that comes with managing human resource across borders, (Kuhn 1962, p. 13). In most countries, there is always one official language that makes it very easy for corporations, when it comes to communication. Communication is a very important function of management since without it organizations will not even transact or do business. Organizations, based in one country, will always pass information in one language. However, considering a multinational company, different languages may be involved. This imposes communication complexities for international human resource management. When multinational corporations are faced with such heterogeneity in languages, they are forced to engage in specific situation solution or case by case actions, which is not always the case with domestic management of human resources. These management styles diminish the relations, existing between the parent company and the subsidiaries. Such a drawback can really affect the performance of the organization as a whole. International human resource management unlike domestic human resource management steps in to harmonize this problem, making the work of the department even more involving.Currency difference is another unique issue that international human resource management has to deal with. The host country will have a different currency from the subsidiary countries. Owing to the fact that foreign exchange rates keep on fluctuating from time to time, international human resource management suffers a blow, when it comes to employee compensation. There are also risks, involved with foreign exchange. This means that the multinational organization’s overall risk is higher and the international human resource management should take the responsibility of hedging against the risk (Desatnick and Bennett 1978, p. 58). The fluctuations may also affect adversely the motivation of employees and it is upon the management to ensure that the workforce is positively motivated and productive. Risk mitigation is also extended to the general working conditions of the multinational corporation. Working in foreign countries is known to be risky as foreigners are always prone to kidnappings, terrorism and attack by foreign illnesses. International human resource management should be able to identify all these risks and take actions to reduce them. International human resource management is also faced with the challenge of varied labor laws (Phatak 1995, p. 20). The management should ensure that all the necessary laws and regulations are adhered to since failure to observe them may constitute a crime or make the multinational company liable for fines or penalties. The managers may be forced to hire legal advice to ensure that the organization is always updated on the changes in the labor laws. This is an issue that domestic human resource managers do not take very heavily since their staff work only within the boundaries of the country. The rules and regulations are also not as numerous and, in most cases, the company would not need a lot of legal assistance from professionals. International human resource management is also involved in employee personal life, creating a closer relationship with employees than it is the case with domestic human resource management (Torrington, Hall and Taylor 2008, p. 63). This is necessitated by the volume of employee issues that the department needs to handle in order to make them comfortable though away from home. These are issues like voter registration, personal taxation, health, housing, employment of the spouse and so forth. This close relationship may give the employer a strategic advantage, when it comes to human resource utilization.International human resource management plays a very key role in the success of organizations. It helps organizations to achieve their long term and short term goals and more importantly, achieve effectiveness and efficiency in all the countries they do business, and therefore, creating a widespread reputation and corporate identity (Child 1981, p. 21). This reputation is very vital, as it becomes a strategic advantage in case of competition. The organizations also tend to become very effective in coordination and control of the resources, irrespective of their location, and hence, putting them into the most productive uses. This attribute is needed by all businesses since resources are scarce and they should only be put, where they will yield the highest returns. Companies, adopting international human resource management, exhibit better resource allocation ability. These companies are also seen to be more adaptable to changes in the environments of both domestic and foreign countries. This ability to adapt is very crucial to the survival of organizations since the environment is known to be very dynamic.International human resource management makes organizations sensitive to the needs of the employees. Some of the needs may seem personal and not a concern of the employer, but in real sense, if something is affecting an employee, then, it is automatically of concern to the human resource management. Some of these personal issues hinder significantly the performance of the employee but with international human resource management, closer and personal relationships are created between the employer and the employee to ensure that the labor force is producing to its potential. International human resource management also focuses a great deal of attention to the industry. It makes organizations vigilant of the current issues that might impact the organization both positively and negatively (Adler 1997, p. 17). This trait is necessitated by the nature of the environment, but it makes the organization able to take advantage of opportunities even before the competitors are aware of them. The organizations are also placed in a better position to adapt and change to survive adverse conditions in the environment.
Human resource management is a very important function in organizations today, given the degree of competition in the market. Survival and success of organizations depends greatly on the utilization of manpower. Organizations that have an effective human resource department have a competitive advantage since employees contribute more than any other resource to the organization. The way this resource is managed is of great importance. Although there seems to be some degree of commonality between domestic and international human resource management, the difference set the two apart and clearly make international human resource management an improved and a thorough way to handle the labor force in order to bring out its full potential. Human resource management in a global view ensures that the right people are put at the right place and at the right time, taking advantage of opportunities and making the best out of them. The differences between global and domestic human resource management can be clearly attributed to the degree of complexity in doing business in different parts of the world.