Introduction
Introduction
Human resource management refers to all activities undertaken by an organization to effectively Human resource management refers to all activities undertaken by an organization to effectively utilize its human resources. These activities include, amongst others, HR planning, staffing, utilize its human resources. These activities include, amongst others, HR planning, staffing, performance management, development, compensation and managing employee relations. performance management, development, compensation and managing employee relations.
In order to understand which activities change when HRM goes international, we have to define In order to understand which activities change when HRM goes international, we have to define IHRM first. Broadly speaking, the consensus is that IHRM is about the worldwide management IHRM first. Broadly speaking, the consensus is that IHRM is about the worldwide management of human resources. There are a few definitions, according to Schuler and Tarique (2007), of human resources. There are a few definitions, according to Schuler and Tarique (2007), “…the field of IHRM is about understanding, researching, applying and
“…the field of IHRM is about understanding, researching, applying and revising all human revising all human resource activities in their internal and external contexts as they impact the processes of resource activities in their internal and external contexts as they impact the processes of managing human resources in organizations throughout the global environment to enhance the managing human resources in organizations throughout the global environment to enhance the experience of multiple stakeholders.“
experience of multiple stakeholders.“
More specifically, according to Stahl and Björkman in their Handbook of research in More specifically, according to Stahl and Björkman in their Handbook of research in International Resource Management, IHRM is, “We define the field of IHRM broadly covers all International Resource Management, IHRM is, “We define the field of IHRM broadly covers all issues related to the management of people in an international context. Hence our definition of issues related to the management of people in an international context. Hence our definition of IHRM covers a wide range of human resource issues facing MNC‟s in different parts of the IHRM covers a wide range of human resource issues facing MNC‟s in different parts of the organizations. Additionally, we include comparative analyzes of HRM in different countries”. organizations. Additionally, we include comparative analyzes of HRM in different countries”.
In other words, the purpose of IHRM is to enable the multinational enterprise (MNE) to be In other words, the purpose of IHRM is to enable the multinational enterprise (MNE) to be successful on a global level. Strategic international human resource management (SIHRM) successful on a global level. Strategic international human resource management (SIHRM) focuses on strategic HRM in MNEs and recognizes the importance of linking HRM with focuses on strategic HRM in MNEs and recognizes the importance of linking HRM with organizational strategies in order to achieve sustainable competitive advantage.
Differences between domestic and international HRM
More HR activities
To able to operate in an international environment, human resource department must able to involve or perform a number of activities that would not be necessary in a domestic environment such as: international taxation (usually applicable for expatriates in both domestic and international tax liabilities), international relocation and orientation (arranging for pre-departure, training, providing immigration and travel details, providing housing, shopping, medical care, and recreation as well as school information and so on.), administration services for expatriates, host government relations and language translation services.
Need for broader perspective
A broader, more international perspective on issues or an idea would be more beneficial to an organization in a foreign country or when hiring foreign workforce (expatriates). They will be able to standardize and endorse premiums and policies that are beneficial to both organization and employee.
More involvement in employee‟s personal life
A greater need or degree of involvement in employee‟s personal lives is necessary for the selection, training and effective management in both parent-country nationals (PCN) and third-country nationals (TCN) employees. The organization of the HR department must ensure that the expatriates understand the relocation and all it entitles, such as housing arrangements, health care and all aspects of the compensation given.
Changes in emphasis as the workforce varies in between PCNs and HCNs
When foreign operation matures, the emphases put on various human resource activities differ. The organization would no longer use the parent-country nationals (PCN) and third country nationals (TCN) as trained locals (HCN; host-country nationals) become available. This broadens the responsibilities of local HR activities such as planning, staffing, training and development and compensation.
Risk exposure
The human and financial impacts of failure in international arena are more severe than in domestic business. For example, expatriate failure or premature return of expatriate from international assignment is potentially a high- cost problem for most MNE‟s as the expenses may be as high as three times more than domestic salary.
Another aspect of risk is terrorism, particularly since the act of terrorism on 9/11 in New York in 2001, has shown to have an impact as employees assess potential international assignment.
Broader external influences
The major external factors that influence IHRM are the type of government, the state of the economy and the generally accepted practices of doing business in each of the various host countries in which the multinational operates. The impact of different factor influences decision making in terms of labor used; whether by hired the quota of cheap employee as well as maintaining a quota of host-country nationals required by the authorities, that will drive the HR department to learn and interpret the local ways of doing business and the general conduct regarding activities such as gift giving and will be likely be more involved in administering benefits either provided or financed by the multinationals.
Important challenges for human resource management in internationalize in small-medium enterprise (SME‟s)
SME‟s or also known as small-medium enterprise is what it stands for in the business industry. It consists of new beginner that wanted to be a part of the business field. Despite the small sized business, their contribution of to the country‟s economy is significantly important to the country‟s growth.
However, faced with this changing competitive environment, small and medium sized enterprises in many instances are struggling to professionalize their business activities in terms of formal strategic planning procedures, decision making systems, organizational structure, information technology systems, accounting systems, clear job descriptions and so on.
In order to be in a globalize arena, SME‟s must grow in not only in operational method but most importantly in human resource management. To able to compete in the international stage, the human resource department must grow in terms of learning, managing expatriate management as well as overcome the limitation of lacked of resources and to cope with outsourcing.
The challenges of learning
The learning processes are of the critical importance in the volatile global environment of modern business. It is a challenge to the human resource management as organizational leaning is often neglected and the consequences shows in the long run of the business operation. For example, SME‟s preferable chooses cross border alliances as their foreign entry strategy to internationalization after exporting and subsidiaries has shown poor result or failure as the long term strategic needs are not met. Besides that, training and development activities tend to be rather short-term orientation which lend to the stunted growth of the enterprise.
To overcome this limitation, small organization or rather, SME‟s should have no ted the cultural distinction between the behavior and impart the vital formalized training rather than socialization and local networks. This would encourage staff to grow in boundary spanning position. They would be able to resists to impose “large firm thinking” in aspect relevant to internalization decision. Moreover, by conducting training programs that could include strategy and communication seminars would boost the capacity in perceiving relevant environmental
development and would be motivated enough to report and share their observation regularly and systematically.
Besides that, the second important challenge in an internationalized SME is expatriate management.
The lack of knowledge about the „optimal‟ balance between formal and informal training still exists in SME‟s as well as the ignorance of the relationship between training and its effect to firm‟s performance. This is because to SME‟s, training is perceived as “unaffordable luxury” especially in regards to the training of the expatriate. Besides that, the cultural integration of foreign acquisition remains a challenge for SME‟s. This is due to the training entails of the language course as well as the cross cultural courses only give a minor role emphasis.
To overcome is challenge, SME‟s need to engage more on the quality training for more individual chosen to be sent to perform tasks and assignments abroad. The first aim is to find a focus fit individual with the rights skills and the right attitude to be able to coach and to be an exemplary employee to ensure that majority or all staff will be able to mellow and reflect the organizational attributes in an international standard in their work. This would reduce the chance of premature expatriates and well as prevent the possibility of highly cost expenditures.
Lastly, the limited resource of the HR department and outsourcing is also one of the important changes in an internationalized SME‟s.
There are many barriers that would obstruct the path to internationalization for a SME, namely shortage of working capital to finance exports, indentifying foreign business opportunity, limited information to locate or analyze markets, the inability to contact potential overseas customers and many others-to name a few. This result in the control of the internationalization processes and time are scarce. The lacking of the existence of sophisticated management strategies and as well as the failure to appoint a HR specialist just because that the cost cannot be justified due to the size of SME‟s itself. In other words, it‟s simply not importance to a small organization as their main tasks are just administrative tasks and most of the important HR decision is taken by the founder or the owner of the enterprise. It is problematic because:
Complexity of the HR activities will likely to result in becoming a significant drain on the
Many HR tasks involve substantial complexity and, thus, the quality of HR decision may
well be affected that the general managers often lack the significant training and expertise in HR.
Based on contractual agreement, SME can seek out provider HR related services. This option can lead to improve managerial satisfaction and higher quality HR decision. However on the long run of the business, outsourcing is un-trustable as important activities need to be monitored to avoid leakage of confidential information.
To overcome this problem, founder of enterprises or manager of a small organization should change his or her mindset and learn to decentralize appropriate decision to their designated position inside and organization while every decision made is informed and consulted with the higher authorities. This would ensure a smoother and faster operational management in an organization, while able to grow into a bigger firm that compass of trust and the assurance of the ability of the right employee that would reflect the organization‟s mission, vision, objectives, and short and long term goals.
To prevent the usage of outsourcing with providers of HR related services, SME‟s can cultivate their own specialize HR department to deal with not only administrative tasks but only all of the staff that related to the personnel of the enterprise. This would help the management to be able to concentrate on the production line and able to fully optimize resources while bear in mind of creating a high quality goods of product and services. By having an efficient HR department, managing the company would be one step smoother and easier to cope with other challenges that may arise.
Conclusion
Human resource management in an international arena is challenging and often conflicting with an organization‟s own belief or culture. The challenges are often important for the growth or on e step closer for SME‟s to reach internationalization or globalization. An organization‟s growth and success often depends on the enterprise having the right staff that would not only bring profit but also image that is long lasting in every customer whether national or international. Human resource management is responsible to help the organization to achieve their own my fitting the right people to the right job that is aligned to the organization‟s culture as well as managing the whole welfare of the personnel and employees whether they are PCN, HCN or even TCN to ensure the operational management can be smoothly conducted at home and even abroad. Therefore, international human resource management is not only about managing people but it‟s more, wholly integrated within an organization.
