Describe about the Issues in International Human Resouce Management.
Human resource management is an approach that allows business organisations in managing their workforce and optimising their performance using various functions, such as performance management, training and development, compensation and benefits, career development, etc. The basic idea behind human resource management is to improve the relations between employees and employers and to improve the work conditions for the employees to achieve maximum outputs. After the spread of globalization, business organisations throughout the world are competing on a global scale and they cannot simple rely upon their processes or resources to achieve market competencies as they can be easily replicated. Business organisations are now relying upon their human resources and investing millions of dollars to develop them so that their human resources can help them in achieving market competencies.
Human resource management can be divided into two different categories:
Domestic Human Resource Management à it is an approach which is followed by companies that have their working operations in a single country. Domestic human resource management is less complicated as it involves the management of employees belonging to one nation alone (eduCBA, 2016).
International human resource management à it is an approach that is followed by multinational companies that have their operations running in multiple countries. International human resource management is way more complicated than domestic human resource management as it involves management of employees belonging to diverse cultural backgrounds. It includes management of diversity, expatriates, etc. which makes it more complicated and important at the same time (Whatishumanresource.com, 2016).
Cognizant Technology Solutions Corp Company is an organisation that offers technology related solutions to its clients. The company was started in 1994 and has its headquarters based in the United States of America. The company has an approximate workforce of 244,300 employees. Cognizant Company is a market leader in the industry and has been receiving a lot of demands for its services in the recent times. As a result, the company has thought of opening up new subsidies in difference countries and expand its business further. The management of the company has decided that it would open up 3 new subsidiaries within a period of 5 years while the first subsidiary would be opened up in India in order to take advantage of economies of scale.
Cognizant Company has a very efficient human resource management department that has been able to recruit, engage and retain a large pool of talent by providing excellent work conditions to them but the experience of the department has only been in the management of domestic human resources. The human resource management department of the company has less experience in the management of human resources at an international level and people coming from diverse backgrounds. Further, the company has also decided that it would want it subsidiaries to have to same work culture which is present in the headquarters and to achieve such a goal, the management has decided to send a team of 43 expatriates to the Indian subsidiary in order to look after the business and establish the parent culture of the company in the new subsidiary. Therefore, the expatriate program has become another major area of concern for the human resource department of the company. In this assignment, we will discuss some major human resource management issues that the organisation will face while trying to expand its operations on foreign countries.
Let us discuss the issues related to the management of human resources that the management of Cognizant company will face while trying to expand its operations in a foreign country:
Recruitment And Selection à recruitment is the process of identifying human resource vacancies inside an organisation when the application forms for that post have arrived while selection is a process of screening candidates to find the best fit for a particular job vacancy. Recruitment and selection are one of the most important function for the human resource of any organisation as they help an organisation in fulfilling the demands of the human resource that are identified over a period of time. If an organisation does not recruit and selects new candidates, then the organisation would always feel a shortage of human resources and would not be able to function properly.
Recruitment and selection becomes very complex when it has to be done for an organisation that is expanding its operations to a foreign country. As Cognizant company is planning to expand its business operations by starting a new subsidiary in the Indian market, it will face numerous recruitment and selection issues because there is a lot of difference between the legal and social policies of the parent and the host country. The company will have to, first of all, select a staffing approach for its Indian subsidiary. Cognizant company can go for polycentric, geocentric, ethnocentric or regiocentric approach. Ethnocentric approach involves staffing of home country employees at higher position in the host country. Polycentric approach involves staffing of host country employees for all types of posts. Regiocentric approach involves staffing of employees belonging to a particular region at all kinds of posts while geocentric approach involves staffing of employees belonging to any part of the world at any type of post (Study.com, 2016). As discussed above, the company has a clear strategy of establishing its parent culture in the subsidiary. Therefore, it will have to go with an ethnocentric approach. The management of the company will have to `take care of Indian labour laws and tax liabilities. It would not be possible for the company to staff the entire Indian subsidiary with home country nationals as it would not be cost effective and even the Indian government would not allow the company to operate on its land unless it provides employment opportunities for the Indians. Therefore, in order to operate in India, the company will have to abide by the employment rules that the Indian government will put forward (Smallbusiness.chron.com, 2016).
A multinational company can have three types of employees working for it:
Home country nationals à these are the employees who belong to the same country where the headquarters of the company are located.
Host country nationals à these are the employees that a company recruits from the country where it is planning to expand its business or open up a new subsidiary. In other words, these are the employees that belong to the country where the company is expanding its business.
Third country nationals à these are the employees who neither belong to the host country nor to the home country. These employees belong to a third country and are recruited on the basis of some special talent or skills which are required by the company to run its operations.
Expatriates is a term used for those employees who are sent to foreign locations for fulfilling the tasks assigned to them by the headquarters. Management of expatriates has been identified as one of the biggest issues for the companies who have international operations (Bowman and Meacheam, 2000).
The company will have to select a team of expatriates, which is one of the most difficult task. The company will have to invest a lot of resources in sending the expatriates for a foreign assignment as they have to provide the expatriates with housing allowances, medical allowances, hardship allowances, travel allowances, etc. and also have to look after the families of the employees sent on a foreign assignment. If such employees fail in fulfilling the purpose of their foreign assignments, the company losses a lot of its important resources. It is also difficult for the company to keep its expatriates motivated. It has also been notices that most of the expatriates fail in their foreign assignments because of their inability to adjust in the host country culture and in absence of technical capabilities. In case an expatriate fails and is repatriated to the home country, it reduces the morale of the organisation and the overall productivity suffers too. Thus, the management of expatriates is a major concern in international human resource management as the companies have to select the best people so that they do not waste their resources and investments (Selmer and Suutari, 2011).
Management of cross cultural diversity has also been recognized as one of the most concerning issues for international human resource managers. It is obvious that when a company starts an international business subsidiary, it will staff its subsidiary with home country nationals as well as host country nationals. When there are significant differences in the cultural backgrounds of the two countries, it becomes very difficult for the human resource management of the companies to deal with the cultural diversity that starts to exist in the workplace (Smallbusiness.chron.com, 2016).
When Cognizant Company would start its operations in India, the employees selected from India and expatriates sent from America will have to work hand in hand with each other. As they have different cultural backgrounds, working together would mean that they will have to adapt to new styles of working, new ways of communicating with each other and becoming familiar with each other’s social practices, which is easier said than done as cultural issues have been identified as one of the prime reasons for the failure of expatriate programs. It has been noticed in a number of cases that when people belonging to diverse backgrounds are brought forward to work as a team, they are not able to adjust with the cultural values and social norms of the others. They experience a cultural shock and their performance can drop down while they can fail in completing their assignments in extreme cases. As a result, international human resource managers provide a great deal of attention to deal with issues pertaining to cross culture compatibility. They organize a number of regular cross cultural training and development programs that are aimed at increasing the cultural sensitivity of the employees and to help them in understanding and respecting the cultural values of those who work with them (Scribd, 2016).
Compensation and benefits are another area of concern for the human resource management of multinational companies. Compensation and benefits have been regarded as the backbone of all human strategies but when it comes to international human resource management, compensation and benefits play an even greater role than work life balance for the employees.
In international human resource management, expatriates have a key role to play towards the achievement of organisational goals and objectives. It is important for the companies to provide their expatriates with proper compensation and benefits that would keep them motivated to work harder as a hardship of any kind on the foreign land would decrease their morale and might ultimately result into the failure of the expatriate program. Further, the compensation decided for the expatriates should also be in accordance with the industrial standards so that they are neither overpaid or underpaid. The benefits provided to the expatriates have also to be governed properly as additional or unnecessary benefits would greatly add up to the expatriate management program. Cognizant Company will face a lot of problem while deciding the compensation and benefits for the expatriates as there is a lot of difference between Indian lifestyle and the American lifestyle. Though a lesser salary would be enough for an expatriate to maintain a perfect lifestyle but an expatriate might feel underpaid if his salary is fixed lesser than what he or she was being paid in the home country.
Deciding the compensation and benefits for host country employees is also very important. Cognizant Company will have to carry out an extensive survey in India and will have to gather information about the average income of different employees on different posts according to the Industrial standards (Yousef, 2015). The company would also have to abide by the wage agreements that the Indian government will put forward. Further, it would also not be possible for the company to provide lesser salaries to the Indian employees and pay their expatriates exponentially higher than their Indian counterparts. Such actions can cause unrest in the organisation and the employees can start leaving the organisation if they feel that the organisation is not being just in matters of compensation and benefits. Thus, the company will have to be very careful when it comes to taking a decision about the compensation and benefits for the expatriates as well as for the Indian employees (Smallbusiness.chron.com, 2016).
Training and developing the employees of a multinational company is important as well as a great issue for the human resource management. Training and development of human resources becomes very important when a company is planning to employ them in a diverse environment. In the case of Cognizant Company, the American employees will be working together with the Indian employees, which makes it obvious that all of them would face a number of issues while trying to settle cope up with each other’s cultural values. Therefore, it is important for the company to organise cultural training and development programs for all its employees so that they do not have to face a cultural shock once they have to work in a diverse workplace.
Another issue in the process of training and development of employees in international human resource management is that it becomes difficult for the employers to select from localized training and development or a globalized training and development program. If the human resource management of a multinational company localizes the process of training and development for the employees, then it would not be able to establish a greater integrity amongst its subsidiaries (Dowling, Welch and Schuler, 1999). On the other hand, if the management goes with a globalized training program, then the cost of such a program can be very high and would ultimately increase the operating costs for the company.
Conclusion
Cognizant Company is a market leader in the industry but will have to expand its business overseas to retain its competitive edge and to continue to grow. Expanding its business in three other countries, other than its headquarters, is a very efficient decision but the human resource of the company will have to perform a lot better as earlier it had to manage only its domestic employees but once the company starts to expand its business overseas, it will also have to manage employees belonging to diverse cultural backgrounds. Apart from diversity issues, the management will also have to deal with other issues, such as training and development, compensation and benefits, expatriate management, etc. as the success of the company is dependent on the capability of the management to deal with the international human resource issues discussed above.
References
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