International Human Resource Management and Cross-Cultural Training - Literature review Example

International Human Resource Management Cross-Cultural Training 1. Introduction Globalization increases the need for HRM to evolve and expand to support the human resources need of international organizations. Since effective workforce management in a global scale is critical to the success of international businesses, IHRM should implement strategies that can reduce stress caused by competition and global staffing needs. These include selecting the appropriate recruitment options and training required by expatriates. Cross-cultural training is one solution being use to reduce the impact of cultural shock and enhance the performance of organizations’ international assignee or expatriates. However, although it is popular among multinational organizations, it is not clear if such approach is applicable to every culture and effective in its actual implementation. The following section is a literature review of IHRM and cross-cultural training and development. It include an investigation of contemporary issues surrounding IHRM highlighting the different ideas presented by various authors, cross-cultural training requirements and implementation issues, and concerns that needs further research. 2. Literature Review International Human Resource Management or IHRM can be viewed as an expansion of common HRM in small organizations. According to Dowling et al., (2008), HRM are activities generally being undertaken by an organization to ensure effective use of its human resources. It is a process of sourcing, allocating, and making use human resources effectively particularly in international organizations (Bhattacharyya 2010, p.240). For Tayeb (2005), HRM can be viewed as both utilitarian instrumentalism, a driving force behind an organization’s strategic objectives and human development policies integrated with business objectives (p.6). HRM activities may include planning, staffing, monitoring and performance assessment, implementing training and development, providing appropriate compensation and benefits, and industrial relations (p.2). When a local organization goes international, some of these HRM activities expand into a more complex form that includes broader activities in procurement, allocation, and utilization of human resources. For instance, since an international organization will be dealing with different categories of employees such host-country (HCNs), parent country (PCNs), and third country nationals (TCNs), HR activities will have to deal with expanded procurement, allocation, and utilization in all three categories. IBM for example, will have to deal with their Australian employees in their Australian (HCNs) or send their Singaporean employees to Japan as TCNs. In other words, there is interplay among human resource activities, employee types, and the country in which the organization operates (Dowling et al. 2008, p.3). In the age of globalization, managing workforce in the global scale is a critical aspect of international business particularly in areas associated with strategic international human resource management (Stahl & Bjorkman 2006, p.15). This is because every organizations operating in a global scale has to compete aggressively for new markets, products, and services thus must manage its global workforce effectively (Caligiuri et al., 2010, p.2). At the minimum, they have to deal with cultural differences in hiring, consider and implement employment practices in multicultural setting, and train employees differently. For instance, all members of the organization should be able to work with other people so different from themselves in terms of language, culture, motivation, and education. They may also need to provide diversity training and awareness programme to ensure that all employees understand each other. These include management ability to organize and motivate diverse employees with different cultural upbringing. Train employees in effective cross-cultural relationship building and negotiation strategies, and develop best practices in multicultural setting (Yasgoor et al. 2008, p.172). Knowledge of the relationship between human resources practices and the success of a global organization is very important as IHRM strategies will play an important role in reducing stress caused by international expansion and intense competition (Green 2004, p.2). For instance, the rapid globalization increased investment across borders, encouraged mergers and acquisitions, international joint ventures, and alliances by different global companies. Moreover, competition becomes intense and most organizations have to deal with foreign products and services produced by either foreign-owned subsidiaries or local firms that are now owned by overseas companies (Briscoe et al. 2008, p.10). According to Tayeb (2005), knowledge of the nature and scope of these competitions is essential particularly when deciding or planning an HRM strategy. For instance, a competing multi-domestic industry HR department will be likely to engage in supporting activities in each domestic market such as cost reduction, efficiency, and value added products and services. On the other hand, a competing global industry will be likely dealing with HR functions required to effectively coordinate will affiliates and support international activities of the firm in the world market (p.118). More importantly, HR departments of global industries have to deal with global staffing which is a key issue in international human resources management (Storey 2007, p.216). These include selecting the best option in recruitment such as staffing the organization with expatriates, host country nationals, and third country nationals. However, these options presents their individual IHRM challenges such as various tax laws, custom, traditions, and ways of working of culture represented in the workforce (Jackson & Mathis 2007, p.250). For more than two decades, most globalizing companies make use of expatriate but the cost associated with expatriate assignments made them consider the local and third party nationals as a vital source of staffing (Schuler & Jackson 2007, p.230). Human resources departments of global business organizations are often engaged in problems associated with cultural and institutional variations, which make HR management particularly difficult. Six identified problems include recruitment of the right senior managers capable of managing a diverse workforce. Second is complex staffing activities for multi-cultural workforce. Third is the problematic and costly poor performance of expatriates. Fourth, unavailability of suitable international managers and fifth, is global staffing difficulties caused by the rapidly internationalizing SMEs. Finally, “inpatriation” requiring the development of multi-cultural international workforce (Stahl & Bjorkam 2006, p.141). Apparently, staffing and workforce development are key issues in the IHRM requiring HR strategies far beyond the traditional. According to Vance & Paik (2010), staffing or recruiting suitable workforce is a competitive reality since it is about not only bringing new people into the company but also satisfying work demands and meeting organizational objectives (p.171). The Royal Dutch/Shell Group of Companies, with offices in United Kingdom and the Netherlands and operating to around 145 countries, employs over a hundred thousand people worldwide. For this reason, the energy and petrochemical company created a recruiting function for global recruitment that includes Shell People Services to handle recruitment of professional-level employees. Shell also uses enterprise software like SAP to aid in global recruitment by providing a common database and workflow process. All potential candidates are able to obtain information from Shell through its company website that serve as global posting board for employment opportunities. It includes work details and job description, initial location of positions, travelling requirements, and how such positions are appropriate within Shell. Shell recognized the need to support various countries legal requirements thus adapted a recruiting system on a national and regional basis (Vance & Paik 2010, p.170). However, Shell like many other global businesses will have to handle the cost of establishing professionals in another country which according to Jackson & Mathis (2007), can run as high one million dollars for just a mere three year job assignment. Shell is also vulnerable to higher cost when that particular professional quits prematurely and decides to transfer elsewhere. More importantly, Shell can also suffer from failure rates for global assignments, which can be in the range between 40 to 50 percent in some bad situations (p.250). One of the solutions proposed and are being use today in order to reduce failure rates is cross-cultural training. Results of some studies according to Briscoe et al., (2007) suggest that this type of training do help reduced expatriates failure rate. For instance, the Shell Oil Company in the US shows that three days cross-cultural training reduced the return rate of personnel sent to Saudi Arabia by 5%. In contrast, only 20% of personnel sent overseas do well without cross-cultural training (p.226). Cross-cultural training reduces culture shock that will be experienced by the expatriates and their families. It can also reduce the stress caused by cultural distance or the distance between the home culture and the host culture. This type training provide those involved with awareness of different cultures, build a mental map of the new culture so expatriate understand the nature of the local people, and practices that will help succeed overseas (Briscoe et al. 2007, p.227). Similarly, Aswathappa & Dash (2007) suggest that cross-cultural training must be an integrated approach and the main input in all training provided for expatriates. These include specific cultural orientation of the host country, understanding the values of the global assignment, managing stress, awareness of nuances associated with cultural differences and their impact on the international assignee (p.174). The effectiveness of cross-cultural training also draws the attention of the Taiwan government and implements them on their people working in China. This cross-cultural training include text and oral language training, awareness of China’s local regulations, habits, economic and political situations, and working conditions. Moreover, expatriates are being trained on stress management, hygiene, human relationship, and cross-cultural communication (Perkins & Shortland 2006, p.118). Apparently, the move of the Taiwan government is to avoid waste of time, money, and resources when their people working in China cannot function in a multicultural environment. Cross-cultural programs are often designed to minimize interpersonal misunderstanding and generally, such preparations are aimed to alleviate cultural shock and unsuccessful communication while on the job (Adekola & Sergi 2007, p.240). According to York (2009), the failure of an expatriate to adjust to the social and business environment of the host country is costly particularly in terms of operation efficiency, performance, and client relationship (p.343). It is therefore necessary to apply the appropriate cross-cultural training level, the length, method, and rigor of training programmes for expatriates. For instance, an employee that will be sent from Finland to Sweden may not need the same pre-departure training and orientation to one who will be sent to China. In other words, training must be in line with the geographical and cultural distance, and the length of the assignment (Sparrow 2009, p.146). Since a person that is immersed in a new culture is deprived of the comfort offered by their cultural orientation, an expatriate’s success is largely dependent on the quality of his cross-cultural adjustment. For instance, expatriates may need to speak a totally different language, withstand culture shock, work and comply with different laws, interact and follow a different custom or traditional, and understand the ways and means of local nationals. The inability to adjust therefore can result to discomfort leading to poor performance and costly implications that include loss of self-esteem for the worker and damaged reputation for the host company. Cross cultural training therefore is just not matter of orientation but planned intervention that could increased the chances of expatriate to live and work effectively in an unfamiliar environment and culture (Harzing & Ruysseveldt 2004, p.284). “He who knows two cultures lives two lives” (a Chinese saying in Vance & Paik (2010, p.54). Personal worldviews differ significantly particularly in religion, age, family orientation, government, education, and individual development thus it is wrong to assume that an Asian trained with Western-style management training will be behave as an American manager. There are thus certain limitations that should be considered when providing cross-cultural training such as cultural adaptability and ability to accept cultural differences. Moreover, cross-cultural issues such internal cultural disparities as the difference in basic value systems. In China for instance, there is a significant difference when dealing with entrepreneurs from peasant stock and a highly educated technocrats that can affect and confuse a multi-party transaction (Vance & Paik 2010, p.55). It is thus important for cross-cultural training efforts to support the specific need of international businesses. These include bridging the cultural gap by focusing on common work goals and objectives, collaboration, and interdependence. For instance, a successful cross-cultural training effort can make a Chinese manager in a British firm in Sweden feel secure and belong despite multiple national cultures. Similarly, a Western manager who was trained in”guanxi”, a Chinese concept of relationship, can avoid the feeling of isolation (Vance & Paik 2010, p.54). In a study conducted by De Cieri et al. (2005) about the challenges of international human resource management, one of the main issues identified with IHRM is the lack of business knowledge by HRM and their lack of credibility to be considered as business partner with senior management. The sources of the study are senior IHRM practitioners of well-known multinational enterprises operating in Australia that include Unilever, HSBC, Cadbury-Schweppes, Shell and BP or British Petroleum (p.593). This is because IHRM requires much more than standard HRM practices but a careful understanding of the varying cultural, legal, political, ethical, and economic situations among nations and its people. The HR manager must be therefore knowledgeable on critical success factors and the potential of the company for international venture, concept and approaches to international recruitment, local laws and regulations, international compensation, and trends in international training and development (Durai 2010, p.647). These include being aware of factors pushing a convergent approach to training and development such the localization of training initiatives in developing countries, the importance of considering the impact of national context and institutions in such initiative, the NGOs role, and the rise of China as an economic superpower (Dowling et al. 2008, p.153). Generally, previous research suggests that IHRM should conduct human resource planning, staffing, training and development, performance evaluation, and study of compensation. However, in reality, most British, German, Japanese, and American owned multinational companies are not using some important criteria in their expatriates work performance evaluation. These include criteria on cross-cultural interpersonal qualities, foreign culture, laws, and customs sensitivity, and other criteria that are not directly related to performance such as ethics. Moreover, the patterns of compensation being received by managers are different. For instance, American and Japanese international companies mostly provide their parent company nationals with home country entitlements while host company nationals are limited to fringe benefits. In contrast, Europeans seems fair and providing home benefits for both groups (Sparrow 2009, p.432). There is thus an apparent variation in IHRM practices and tendency to ignore factors that are not directly related to performance or qualities produced by cross-cultural training. According to Dickman (2008), although cross-cultural training have been popular among multinational companies, there are still gaps between the training being provided and the actual needs of expatriates for training before and after their assignments. Moreover, although many international organizations do prepare their people for foreign assignments, there is no evidence to suggest that these are common practices (p.112). The probably is that development in international organizational behaviour such as IHRM and cross-cultural management is not strong enough compared to marketing and finance. For instance, evidence suggests that only 4.2% of articles in American management journals were written to support international organizational behaviour (Baran et al. 2006, p.104). Moreover, Briscoe & Schuler (2004) mentioned the late awakening in the impact of human resources in international business and the lack of professionalization of IHRM. The same view is supported by the findings of De Cieri et al. (2005) mentioned earlier where senior IHRM practitioners exposes the major problems confronting HRM which is mainly lack of knowledge and credibility (p.593). Apparently, there is also a possibility that works supporting development in cross-cultural training is less since they are closely related. Another problem is the fact that although diversity training and development are popular HRM approaches, there is no literature detailing the appropriateness of such approaches to other culture. Even Geert Hofstede’s “Four Cultural Dimensions” – power distance, uncertainty avoidance, individualism, and masculinity- depicting a country’s culture (Albrecht 2002, p.85) is not enough as countries around the world vary greatly from these dimensions. For instance, this concept suggest that U.S. and Western Europeans are relatively high on individualism and low on power distance which Asians are collectivistic with high power distance. Although it can be use as a starting point, the data were taken in the 1970s and probably no longer applicable today. This research also experienced the scarcity of studies detailing the effectiveness of cross-cultural training and applicability of such training to a particular culture. The reason probably is the fact that some authors may find hard to prove that another culture can be learned. According to Snow (2009), that idea that one culture is applicable to people of other culture seems unfounded, unrealistic, and insensitive since people from different nation differ in cognition. Moreover, when someone deals with people in another culture, everything seems to change as they usually think and feel differently (p.167). Noticeably, cross-cultural communication is more often discussed than cross-cultural training involving behavioural and cultural adoption since communication competence is more likely to succeed. Lane (2004) explains that competence in communication is a good predictor of overall intercultural effectiveness while working in the host culture. This is because it can facilitate social interaction and transfer of technology with host nationals. Moreover, people with mindful intercultural communication often have empathy, respect, interest in the local culture, open-minded, sociable, tolerant, and adaptable (p.105). 3. Conclusion Cross-cultural training is an important issue in IHRM since international business needs to consider the impact of culture to the success of the organization. In cross-cultural training, IHRM must consider various approaches in multicultural working conditions such as the ability of expatriates and their families to cope with cultural shock and discomforts due to cultural distance. However, it is not clear whether existing IHRM approaches such as pre-departure cultural training and orientation are applicable to every culture as there is limited evidence to suggest this possibility. However, the study found that although some part of cross-cultural training such as awareness of host country’s culture, custom, and tradition can help an expatriate reduce the impact of culture shock, more focus should be given to effective intercultural communication as understanding one another is the key to cooperation. In contrast, trying to adopt with the host culture is somewhat difficult as their reasoning and social perceptions are entirely different. For this reason, there should be some more research detailing the impact of cross-cultural training on different culture and able to identify which element is more effective. Moreover, the IHRM community should focus on the development of strategies concern with multicultural working conditions and provide credible evidence of its success. 4. References Adekola A. & Sergi B., 2007, Global Business Management: A Cross-Cultural Perspective, Ashgate Publishing Ltd., United Kingdom Albrecht M..., 2002, International HRM: Managing Diversity in the Workplace, Wiley-Blackwell, United Kingdom Aswathappa K. & Dash S., 2007, International Human Resource Management, Tata McGraw-Hill Education, India Baran R., Pan Y., Kaynak E., 2006, International Joint Ventures in East Asia, Routledge, United States of America Bhattacharyya D., Cross-Cultural Management: Text and Cases, PHI Learning Pvt. Ltd., India Briscoe D., Schuler R., & Claus L., 2008, International Human Resource Management, Taylor & Francis, United Kingdom Caliguiri P., Lepak D., & Bonache J., 2010, Managing the Global Workforce, John Wiley & Sons, United Kingdom De Cieri H., Fenwick M., & Hutchings K., 2005, The Challenge of Interantional Human Resource Management: Balancing the duality of strategy and practice. 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Sharpe, United States of America Yasgoor K. & Bressler S., 2008, Kaplan Human Resource Certification, Kaplan Publishing, United States of America York K., 2009, Applied Human Resource Management: Strategic Issues and Experential Exercises, SAGE Publications Inc., United Kingdom Read More