IHRM Paper-401.3
IHRM Paper-401.3
IHRM Paper-401.3
But employment laws, labour markets, trade unions, political system, economic
policies, etc. force HRM vary considerably around the world. Added with changing
institutional, cultural and technological scenario, IHRM and comparative HRM
increasing becoming more and more significant, as it attempts to manage the entire
workforce (including expatriates) across the world in the most cost-effective manner
possible and becoming a key contributor to organizational success.
KEY TRENDS:
We are becoming more international, world is becoming one market;
Technology, economies, communication, etc. are making it more possible;
Global/multinational enterprises (enlarged/expanded business boundaries) are
leading the economic changes, growing number and diversity of participants,
rising complexity and uncertainty.
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Global transfer of work – either in terms of creation of new jobs or through global
sourcing of certain parts of individual’s or unit’s work – (1 st wave) low level
manufacturing being transferred to low cost locations, (2nd wave) simple service
works being relocated and now higher-skill white-collar jobs being transferred.
US jobs to Indians with less cost, Phillip’s operations at Sanghai, and Boing
employing Russian Engineers are examples.
They have to manage a wide range of multiple relationships; as they need to deal with
groups as:
Headquarters, regional and subsidiary level managers
Headquarters and subsidiary employees
National and international law-making/influencing bodies
Local and regional communities.
Generally the word ‘international’ means anything outside the country. So IHRM can
be covered under three headings:
(i) Cross-cultural Management,
(ii) Comparative HRM, and
(iii) IHRM
It is believed that every nation has its unique sets of values and beliefs which
are reflected in the ways the society and the economy operate and also in the ways
people operate at work and are managed there.
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Therefore, this is one of the key factors in the internationalization of
employment – the cultural differences between nations – the values and attitudes.
Different nationals have different values reflected in general attitude – work-obsessed
Americans, polite Japanese, modest Malays – at work as they affect the way people
organize, conduct and manage work.
(iii) IHRM:
This examines how MNEs manage HR across different national contexts. The
international context adds to the complexities when one looks beyond the national
boundaries/settings.
It is again, not the variety of practice but also the range of policy and strategy
issues. While managing people, MNEs need to look at international coherence and the
cost-effective approach, being responsive to the differences in assumptions and to
those people who work internationally.
Level of analysis emphasizes on the way how firms manage the resources that enable
them to develop core competencies and distributing capabilities.
International expansion is only possible when firms can transfer their distinctive
knowledge-assets abroad into new international markets.
Organization structures have to respond to a series of strains faced by the process of
globalization (e.g. growth, increase geographical spread, and need for improved
control and coordination across business units and increased capabilities to maintain
integrated standard remaining locally responsive.
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Global HRM:
When we discuss global HRM, challenges/issues of global consensus and regional
differences come to our minds:
Global consensuses are seen in challenges like (a) change management (b) Leadership
development (c) measurement of HR effectiveness.
Challenges seen at regional level are many, but dominant issues are:
(a) In Africa: Health & welfare benefits, learning and development
(b) In Asia-Pacific & North America: Succession Planning
(c) In Europe: staffing, recruitment and availability of local labour
(d) In South America: Compensation (specially cite compensation)
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PCNs, HCNs, TCNs can be found in key positions anywhere including senior
management level at headquarters and even on board of directors.
But now-a-days many organizations are international from the start-up days. Above
models may not be very much useful today.
Issues:
-Institution, legal & cultural circumstances
-environmental factors
-cost effective management system
-regional variations &HR
-change management
-leadership
-HR effectiveness
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Developments, Issues & Challenges in IHRM
Political Risk Assessment –The Arena: Host Countries/Home Countries and MNCs.
=Basic market issues lead to Government Interventions in the practice of business:-
Buyers suffer from imperfect information:- Information is costlier/not
available/not perfect.-Information available after major purchase
Natural Monopolies(tend to develop): -In the areas of communication and utility
services – Market entry becomes difficult for others.
Production Process:- Pollutes the air, water, etc. Affect6ing environment. –
Production is done at the cost of society.
Company focuses on its own goals and efficiency – ignores health & safety-
Ignores patent & creativity
Gross Imbalance/Inequality in the power of market participation:- Worker vrs.
Factory – consumer vrs. The firm.
Certain products and/or services are reserved (considered as nation’s
right/necessity) –Managing water/energy – Defense – Housing
There are inherent factors that lead to conflict between firm and government.
Major Issues are: (that dominate interrelationship between Govt. and business)
The divergence between basic goals (breeds conflict);
Govt’s attempts to control the activities of firm;
Issues of ethics and firm’s basic social responsibilities;
Disruptive political events that influence the business.
International players are more affected in the process. Bribery is a recurring issue-
Bofors/helicopter
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Major concerns of Host country:
Employment Technology
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IHRM – Comparative HRM – REWARD
It is a fact that people work for money. It is also a fact that they also work to find a
meaning and a sense of identity.
It is another recognized fact that extrinsic reward erodes intrinsic interest.
Therefore pay and pay systems are always discussed when management talks about
commitment, involvement or performance.
A good deal of discussion around reward now centres on motivation and
incentivisation. Expectancy Theory suggests that motivation and performance are
shaped by the links between efforts and rewards and by the significance or’valence’
of the reward to the person in question.
Now interest in ‘incentivisation’ via ‘pay package’ has increased and is a matter of
discussion from top to bottom in an organization.
Our discussion looks at various bases for constructing pay-packages, understanding
cross-national comparative variation in pay-practices, various forms of pay for
performance, the strategic space for reward, etc.
Now, group performance has also been covered when we discuss about pay/reward.
The traditional concept of limiting the reward into promotion is added with
performance based pay and promotion.
However, there are some general trends that seen to be spreading across the world, but
also some significant differences in the way that each country tends to compensate its
workers for their time and commitment that they bring to work.
Generic Processes Across Culture:
There is a generic cross cultural process of pay satisfaction and its influence on work
behavior.
Pay has four meanings; (1) Carrie4s motivational properties; (2) signals relative
position; (in terms of achievement of tasks and in relation to performance in
comparison to others) (3) carries meaning in relation to the relative control an
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individual has (autonomy at work); (4) carries meaning in terms of utility it creates
the easy or difficulty with which it can be spent.
The Structure of Pay; (1) elements of pay, (2) form of payment (3) climate of payment
(secrecy or participation) can determine the meaning of it to the individual.
Of course, from above four meanings ‘relative position’ seems to be the most
powerful to enhance motivation.
Reward practices can be linked to national culture and institutional factors, but
this cannot be same as in case of other HR practices like Recruitment and Selection
because these are required to produce specific outcomes with individuals in form of
performance, identification with organization, commitment to and engagement with a
goal.
But utility of pay and the process of pay satisfaction is similar across cultures
when it comes to engineering complex organizational behaviors, we have to
understand subtle way in the way culture affects associated behaviors.
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Before we can make sense of the different impacts that national culture has on
the various constituent elements – HRM practices, leadership, psychological contract,
commitment and so forth – we must be clear how these elements generally relate to
and influence each other.
Reward is an important outcome from an effective employment relationship,
but within any given cultural context (that influences the variables at organizational
and individual levels) firms that are pursuing globalization strategies (may be
identified as cross-broader alliances), there is a specific HRM architecture.
This may be seen in terms of the bundles of HRM practices, the technical
effectiveness of the practices within national context and professional HRM
capabilities of HR function.
National Culture level of Analysis. (Organizational functioning Model: Cause-
effect links within an embedded cultural context)
Organizational level of Analysis
Bento & Ferriera (1992) analyzing earlier works offered a series of dualities in
culture, together considered as ‘cultural lens’ through which to view the underlying
attitudes or assumptions of workforces regarding reward:
=equality – inequality
=certainty – uncertainty
=controllability – uncontrollability
= individualism – collectivism
= materialist foregrounding – personal foregrounding
In the sphere of reward the key contrast is between a focus on the incentives offered
by high pay differentials and a focus on the benefit of low ‘socially healthy’
differentials.
It also involves elements of perceived fairness or justice, within HRM system.
But it is told that assessment of distributive justice can be linked to cultural factors,
and studies focus the impact of distributive justice on important performance-related
attitudes.
Studies of distributive-justice concern themselves with rules and standards by which
decisions about the allocation of resources are made and perceived to be fair.
Allocation problem are resolved by restoring a series of decision-rules that determine
the entitlement of recipients. In practice, these rules reflect the familiar normative
rules of society that relate issues of social and industrial justice. They are also seen to
embody decision logics and the value position of individuals and their motives. The
logic and value positions are linked to national culture.
Several rules have been identified the fairest way to share rewards. Two most
important and potent rules that distinguish between meritocracy and egalitarianism are
based on principles of:
Equity: whereby entitlements are based on relative contributions and differential
reward is legitimate as long as it is based on an equitable way of differentiating
performance. (Dominant in US, UK, Canada, Australia, etc.)
Parity and Equality: in which allocation resource are insensitive to input
differences and call for resources to be distributed equally to all regardless of
relative productivity. (Applicable to collectivity culture Japan, China and a great
part of India). Where team achieves, reward given to team without analyzing
contributions of individuals.
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But countries following equality-based policy face the challenge by equity-based.
Certainty-uncertainty:
Where certainty is valued employees seek rules, standards and clear procedures, they
are uneasy about returns from work subject to risk, most especially where the basis of
variability of reward is not explicitly detailed.
The reverse is employees’ expectations in case of uncertainty. The reward determined
in case of uncertainty is implicit and ambiguous.
Controllability-uncontrollability:
In highly controllable cultures, the organization is perceived as having the potential to
significantly shape or create the organizational context, so is seen largely responsible
for the situation faced by the employees.
In case of uncontrollability predictability more depends on environment than
organization.
Individualism- collectivism: Relevant to the motivation of employees, and to their
assignments or responsibility for good or bad outcomes to an individual or to a group.
Individualism favours individual achievements and rewards where as collectivism loo
National cultures and pay practices are related. But it has disadvantages:
(1)Acceptance nationally, a single system, is still a little patchy.
(2)Autonomous influences of social actors and of institutions on pay structures and
practices are undermined.
Employees’ view on PfP is not available, even in UK which has a great deal of
information on PfP.
Data available are least indicative of the trend, acceptance, etc.
In many cases employees are not aware of this component in their pay-
packages.
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However, some reporting’s, negligible are available in UK (11%), Belgium
(9%), Germany (12%), Sweden (15%). On the whole 23% are subject to some form of
PfP as reported in European Survey of Working Conditions (2007).
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Companies report significant improvement from group delegation initiatives in
two respects – with regard to reduction of number of managers and increase in output,
when the work (decisions and deliveries) are more delegated to group.
But in some countries like Sweden it seems to be negative.
However, modern forms variable pay in conjunction with intensive delegation
to groups appears to be a substitute for product innovation strategy.
Comparative IHRM – The Role of HR Dept. – change & challenges
Role of the HR Dept.: Meaning of HRM is disputed, so also the role. However, 5
major roles of the department are:
Employee advocate,
Human Capital developer
Functional expert
Strategic Partner
HR leader
Human
Capital
Developer
Employee Strategic
Advocate HR Leader Partner
Functional
expert
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4. Strategic Partner: has multiple dimensions – business expert, change agent,
strategic HR planner, knowledge manager and consultant;
5. HR Leader – required to function in each of the above four roles. He needs to lead
the HR function, collaborating with other functions, setting and enhancing the
standards for strategic thinking, and ensuring corporate governance.
Though HR manager play important strategic roles very rarely they are seen
occupying the highest position at company and so also in many organizations they do
not have credibility to play strategic role.
However, the role is gradually changing, due to changing native of HRM
This is a part of new rhetoric of HRM in many countries. Managing pay-roll, training
and development, etc. though being outsourced but core activities are still with
companies.
However, it depends on nature of company and policies to do so.
Effects of E-HRM: Shared service and outsourcing are now added with development
of IT system that gives HRM a new shape, to transform internal operations.
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They are yet to provide guidance in innovation, absorptive capacity,
technology acceptance and change management, which is the major hindrance in
accepting e-HR.
The focus on Downsizing: It is always debated in the context of e-HR and allocation
of responsibility to line managers, outsourcing and showing that HR Dept. needs to be
deconsized.
But there is no consensus and size seems to be unequivocal. It varies
considerably with country and the size of the organization, the nature of function,
unionism intensity, etc. have influenced the issue.
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