Differences between HRM and international HRM

Introduction

The concept of international Human Resources Management is in its infancy phase, therefore faced with various challenges both in learning and practice. Specifically, the major challenge the international Human Resources Management face is to solve a multidimensional puzzle located at the crossroad of organizational and national cultures (Sparrow and Harris 2003; Stroh 2005). As a result, the approaches, strategies and models applied in dealing with these challenges for HRM persons in a global arena differentiates between domestic and international Human Resources Management (Dowling 1990). Holding to this views, this paper seek to examine the differences between domestic and international Human Resources Management, while at the time assessing the developments in the field of international Human Resources Management.

According to Wilkinson and Redman (2006) states that international HRM is characterized by three main approaches: cross-cultural management approach that deals with human behavior within organizations from an international perspective. Second approach involves the comparative industrial relations which analyses HRM systems in various countries. And the thirdly approach focus on aspects of HRM in multinational firms practices.

It is through these three approaches that international HRM can be understood and differentiated from domestic HRM practices and theories (Kamoche 2007). However, it is a point of worth to mention that the third approach shall be greatly used in examining international HRM process, activities and policies in the perspective of how international firms are managed as opposed to domestic HRM.

In this regard, international HRM is defined as the interplay among three dimensions of human resource activities, types of employees, and countries of operation (Dowling 1990). Whereby human resource activities are: Human resource planning, Staffing, Training and development, Compensation and Benefits, Labor relations and Performance management are expansion of procurement, allocation, and utilization in international HRM.  Types of employees vary in the sense that domestic HRM deals with employees from the same country, while international HRM have diversified workforce: HCNs (host-country nationals), PCNs (parent-country nationals) and TCNs (third-country nationals) (Welch, Schuler and Dowling 1999).

For example, IBM employs Australian employees as HCNs in Australia based operations, may send US employees as PCNs to other nation like Asia-Pacific nations on assignments and sometimes send Singaporean workforce as TCNs to Japanese operations (Von Glinow 2007). Countries of operation involved in international HRM include; host-country where subsidiary may be located, home-country where the firm is headquartered and other” countries that may be the source of labor or finance. These vast of operation are opposed to domestic HRM that have all its operation in the home-country and majorly use PCNs, although HRM activities may be similar. Definitional differentiation can be best demonstrated by Morgan model (Kamoche 2007; Von Glinow 2007) in the figure below.

        Figure 1: international human resources model

International HRM

TYPES OF STAFF Host Country Nationals (HCNs) Parent Country Nationals (PCNs) Third Country Nationals (TCNs)

COUNTRIES Host Home Other

HR ACTIVITIES Procure Allocate Utilize

 

 

 

 

 

 

 

           

        Source:  Morgan P.V. (1986). “International Human Resource Management”: Personnel

                                                       Administrator, vol.31:9, p. 44.

             In broad sense, domestic and international HRM involves the same activities. However, domestic HRM involves workforce from one national boundary only, while international HRM involves managing different national categories of workers. Therefore, the distinction between domestic and international HRM, lies in the aspect of complexities of operating in different countries, employing different national categories of workers and deals more with a multicultural workforce (Sparrow and Harris 2003; Stroh 2005). In this perspective, it is a point of worth to point out the variables that gives the differences.

Variables that Differentiate between domestic and international HRM

The differences in HRM practices between domestic and international venture can be seen in terms of the various variables, which gives the insight to the complexity of operating at multinational level. These variables are the attitudes of senior management; the industry (or industries) with which the multinational organization is involved; cultural environment; and the extent of reliance of the multinational on its home-country domestic market.

The Cultural Environment

Culture in HRM describes a shaping process. In other words, culture implies that members of a given society share a distinct way of life with common behaviors, values, and attitudes that are transmitted over time in a gradual, yet dynamic, process. In this regard, individuals are not born with a given culture, but acquired through socialization process. For example, the Americans liking for hot dogs is not inborn, but rather acquired through interaction with society (Boxall and Purcell 2003; Ruysseveldt and Harzing 2004).

In this context, international HRM involves interaction and movement of people across national boundaries, the essential aspect for human resources managers is an appreciation of cultural differences and when these differences are important in international scenes. In this connection, domestic shall pay attention to local, regional or national culture, which is opposed to international scene where much attention is paid to national differences found in the characteristics of organizations or/and their members (Von Glinow 2007).

Therefore, at international level both macro-level variables of culture such as structure and technology used by firms across cultures and micro-level variable such as the values, attitudes and behavior of people within firms forms the culture with respect to the behavior of individuals within these firms maintaining their cultural specificity (Wilkinson and Redman 2006). This is in contrast to domestic HRM where it entirely focuses on the micro level only.

The Importance of Cultural Awareness

Cultural awareness significance derives its usefulness in the various cross-cultural researches that have made possible for abandonment of the culturally insensitive attitudes and behaviors resulting from misguided belief or ignorance in the international HRM field. According to Sparrow (2004), states that culturally insensitive behaviors and attitudes originating from human resources mangers ignorance or misguided beliefs such as “what works at home will work here” or “my way is best,” (Stacey 1996; Mabey 1999) are not only inappropriate for human resources persons in international scene, but also attributed for failure of international business.

Therefore, to international HRM awareness of the cross cultural is essential both at corporate headquarters and in the host location. This implies that international human resources manger shall formulate and implement activities such as hiring, promoting, rewarding, and dismissal based on the value system peculiar to the host country’s culture and not in accordance with home country (Barsoux and Schneider 2003). The awareness should also inform the appointments in a multinational dimension in such a way that an organization can have an expatriate general manager from home country, but should appoint the HR department manager a local. The justification being that this local person is familiar with the host country’s HR practices and by doing so conflicts are avoided.

Industry Type

Industrial type is important because it determines international industrial competition pattern. In this regard, first dimension continuum of international competition is the multidomestic industry where competition in each nation of operation is essentially independent of competition in other nations with common examples including retailing, insurance and distribution (Stroh 2005; Boxall and Purcell 2003; Ruysseveldt and Harzing 2004). The second continuum of international competition is the global industry, whereby organization’s competitive position in operational state is significantly influenced by its position in other nations (Boxall and Purcell 2003; Ruysseveldt and Harzing 2004).

These two dimensions task international HRM as a global firm to integrate its activities on a worldwide basis to capture the linkages among nations. Thus, international firms need to strive for consistency in their ways of managing their workforce on a worldwide basis in order to develop, build and maintain their corporate identity (Dowling 1990).  While at the same time they need to adapt those consistent ways of managing their workforce to the specific cultural requirements of different societies within which they operating in to be effective locally. Therefore, consistence arrived at depending on the cultural environments gives the distinction between domestic and international HRM.

Reliance of the Multinational on its Home-country Domestic Market

Most multinational industries are influenced by their inherent behavior of relying on its home-country domestic market which is evident in most “global firms”. Holding to this fact, extend of reliance on the home-country domestic market and size is vital component of the multinational organization. Welch, Schuler and Dowling (1999) they argue that small home-country domestic market is one of the major motives for pushing various organizations to “go international”.

Therefore, home-country domestic market is maintained and relied on, while exploring foreign markets. This reliance on domestic home –country market imply that large domestic market influences all aspects of how an international firm organizes its activities, influence the attitudes of senior managers and generate a large number of managers with an experience base of exclusively domestic market experience which can be applied to international level (Mabey 1999).

Attitudes of Senior Management to International Operations

In order to internationalize HRM function of an organization, it has less to do with behaviors and concern, but more with states of mind and mindsets (Wilkinson and Redman 2006). This aspect is the most powerful and significant variable that gives the distinction between domestic and international HRM (Sparrow 2004). This is because domestic HRM mostly dwell on the organizational and employees behavior, while international level behavior is substantiated with states of mind and mindsets. Therefore, there is a need for managers at international level to have strong international orientation to emphasize the importance of international operations in terms of corporate objectives and goals (Stroh 2005: 469).

The focus of a corporate HR manager is to work with top management in fostering the desired global mindset. In order to achieve this, the HR manager should be able to reason globally and design and implement policies that enhance development global oriented staff (Sparrow 2004; Barsoux and Schneider 2003).  The model adopted from Peter Dowling indicating the variables differentiating domestic and international HRM is below.

Figure2. Variables that differentiate domestic and international HRM functions

 

The cultural environment

Attitudes of senior     management

Extent of reliance of the multinational on its home-country market

Complexity involved in operating in different countries and employing different national categories of employees

The industry: with which the multinational is primarily involved.

International and    domestic HRM functions

Source:

Peter J. Dowling, (1990) International dimensions of human resource management: University of Tasmania. p. 216

In summary, the paper has critically and categorically distinguished domestic HRM from international HRM. In the course of evaluation of these differences, the paper has examined definitional oriented distinction and moved to further discuss the variable that enhances the difference.  In general however, the paper has arrived at the main difference between domestic and international HRM results from the complexity involved in operating in different countries and employing different national categories of employees rather than deal with one country only.

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