International Human Resource Management - ABB Engineering Company - Case Study Example

International Human Resource Management (Challenges and Issues) Name Institution Professor Subject Date Introduction Activities in the last two decades have shown an increase in the number of organizations that have internationalized their operations as they are being pushed by the need to remove national protectionist trade policies and deregulation of international fiscal and monetary markets (Cieri, et al, 2003). This has called for managers to increasingly pay attention to the impact of globalization on the management of human resources across national boundaries (Cieri et. al, 2003). The issues to give more attention have issues such as expatriate management, managing other cultures, working with impetrates and managing diversity in multicultural domestic forces (Cieri, 2003; Dowling et al., 2008). Such issues are much focused on because of the kind of dilemma that they put companies in. In this context, this paper is geared towards discussing the issues and challenges in international human resource management in details. The discussion will revolve around aspects of international human resource management like culture, differing management practices, leadership, communication, recruitment, relevant HR functions and global financial crisis and its effects. The discussion as well is based on knowledge of international human resource management as worldwide management of human resources (Schuler, 2002, p.41; Harzing & Ruysseveldt, 2003). The purpose is to enable the multinational enterprise to be successful globally, be competitive globally, be efficient, be adaptive and responsive over short periods and have the ability to transfer knowledge across their globally dispersed units (Schuler, 2002, p. 42). Case Study: ABB Engineering Company In 1988, two firms were witnessed merging together, that is, ASEA of Sweden and Swiss firm Brown Boweri and formed the largest engineering firm in the world, ABB (McGraw-Hill, 1).Their greatest advantage was that they all had international operations and therefore when it merged, it managed sales of over US$ 15 billion and 160, 000 employees (McGraw-Hill, 1). At this time, ABB was being managed by Swedish CEO, Percy Barnevik and he managed to transform the company competitively until most firms were closing down in Europe as it expanded its operations to Asia and North America. The expansion went on for a decade with ABB setting up new businesses and diversifying its operations by establishing local ventures with local companies in China and other markets like France (McGraw-Hill, 1). Barnevik's aim was to create an international company that was global and local, big and small and radically decentralized with centralized reporting and control. This led to the formation of business units with committees and functional councils being set up to operate them. However, after this high speed of growth, ABB started encountering problems. First was the economic downturn in Europe; being a target of many expensive asbestos-related damage claims in US; limitations in the firms’ management. In addition, smaller local acquisitions were not well integrated with the rest of the firm; failure to achieve sufficient global synergies and efficiency; conflict between business areas and national units; local profit centres continued to operate their own human resource management systems nationally but not regionally (McGraw-Hill, 2). The new manger then, Goran Lidahl tried to impose discipline by eliminating regions and giving more but to global business but all was in vain. Another manger came, Jorgen Centerman (McGraw-Hill, 2). He reorganized ABB into seven business divisions structured along user markets but this increased complexities of the firm because there were no country managers to coordinate local operations (McGraw-Hill, 2). This led the firm to a point of bankruptcy before another CEO took over, Jurgen Dormann. Dormann, sold the group process initiative, sold noncore businesses and settled the asbestos claims in the US. He returned the country mangers to work and simplified the company structure on power and automation (McGraw-Hill, 2). He also established a new global ABB People Strategy aimed at linking HRM with the business (McGraw-Hill, 2). This made the firm to start being profitable again. The next manger Kindle, focused on reducing complexity through common management processes and guidelines that would help address drawbacks in the company's operations. This made the company to improve and be globally efficient. Such dilemmas and challenges that ABB passed through as it wanted to be a wide international firm do exist and the difference is only communication between company and its subsidiaries. Culture The process of globalization has speeded up issues in international human resource management. This has thus called for the removal of geographical, religious and cultural boundaries when conducting business, followed by erosion of cultures and distance barriers in order to develop new concepts of managing people outside their traditional boundaries (Plessis & Beaver, 2008, p. 168). Culture in this context can be seen as a 'construct which cannot be observed directly but is inferable from verbal statements and other behaviours and which involves collective mental programming that draws lines between nations' (Plessis & Beaver, 2008, p.170). The differences that culture can cause in multinational organisations are the key focus here. This starts with the issue of staffing which can be in different approaches. First, employees can be sent from their home country of the company (hoe-country nationals); they can also be host-country nationals; and the last one being one where people from other countries besides hoe and fill positions (Franklin, 2008). Some companies integrate the three approaches. In the course of doing this, a challenge of culture is normally experienced. This starts from religion to traditions. The issue of culture also depends on which part of the world the company is located. This then calls for human resource managers to research deeply on issues of cultural differences and use that information to adjust their style of hiring and management (Franklin, 2008). This should be done with an idea in mind that some cultures are yet to give equal rights to everyone in societies and that why hiring a woman to fill a position that was thought to be for a man might bring issues. What managers should bear in mind in addressing the challenge of culture is that some cultures work towards collectivism with teamwork being more valued while others are individualistic cultures (Plessis & Beaver, 2008, p. 171). A problem occurs when it comes to transferring techniques from one culture to another. This for example is a challenged by American managers when imposing their cultures face problems like differences in power distance, different levels of achievement-based incentives and differences in work-related attitudes especially in masculinity and femineity (Jackson, 2002, p. 13). Swedish companies that will extend operations into cultures that are hierarchical, more rule bound and more status conscious than Swedish culture may also encounter such problems (Jackson, 2002, p. 13). Therefore, there is a need for managers of international corporations to be cross-culturally aware. Changing Management Practices The issue of change management poses a challenge when it comes to personnel management. This directly or indirectly affects the HR process and may at times form the basis of conflict. Management practices in HR can be looked at in terms of leadership and organizational performance. In cases where the management assumes a top-up bottom-down approach, chances are that the HRM is poor (Villanova University para 2-3). Empirical tests point to a possible interconnection between leadership development and change in management in the HR. The tests rates leadership management at 35% and change management at 48% for most companies (Villanova University para 2-3). On an international scale, leadership development poses as challenge in cases where critical strategic planning is required. HR professionals are subjected to pressure to deliver expected/desired results make informed choices as well as nurture future leadership within the organization. Such challenges are similar to those witnessed in ABB Company mentioned in the case study. Every manager came with his own style and this threatened the life of the company at some point. Political, Economic, Legal and Technological Environment and Issues Arising Managing workers across national borders has been challenge from the past especially when it comes to considering the technological environment. International management was difficult due to the problem of communication. However, the development of transport and communication has made human resource management easier. Improvements in communication have allowed easier communication between managers and employees (Jackson, 2008). When recruitment is taking place, managers need to be aware and respond adequately to the cultural, political, and legal environments both domestically and abroad when doing international recruitment (Bohlander & Snell, 2007, p. 648). As stated before, a manager needs to have cross-cultural awareness when he goes to manage in another country. This extends to taking care of the legal requirements in those countries; the policies that existing governments in those countries have put in place. When legal and political factors are not looked into, there arises a state of conflicting interests. Similarly, economic environment needs to be looked into. Look at the case study above and one will realize that the major problem that ABB faced was being hit by the downfall in the economy of Europe. Therefore, despite its 10-year success it had to re-strategize in order to survive the storm. This point bears it weight in the fact that institutional arrangements and labour market practices continue to add pressure for divergence (Plessis & Beaver, 2008, p. 173; SAJMR, 2012, p. 53). Recruitment and Relevant Skills and Abilities for HR Managers The process of recruitment or staffing as discussed under culture does pose a challenge in the international human resource management. This because mangers apart from considering cultural issues do choose staff without a clear guideline and reasons as to why they think they are fit for the assignment. This later creates conflicts. The recruitment of expatriate is very important and therefore there should be sound reasons as to why a person is chosen for an assignment (Plessis & Beaver, 2008, p. 175; Brewster & Harris, 2012). in order to counteract problems associated with recruitment and international human resource management in general, managers need to have skills that will enable them implement strategic organizational change for increased quality, productivity and employee satisfaction by going through a constructive training program (Villanova University para 14 ). The HR managers should be able to design compensation systems that will motivate employees and structure benefit packages whenever success is realized (Villanova University para 14). This would include having financial and budgetary skills in addition to principles for developing, utilizing and conserving human resources. Conclusion Appreciating how to manage staff in the context of international human resource management is very important in today's world. International human resource management can be viewed as a set of activities, functions and processes that aim at attracting, developing and maintaining the human resources of a multinational organization (Plessis & Beaver, 2008, 168). Therefore, human resource management involves the concepts, policies, strategies and practices, which most international organizations use to manage and develop the people who work for them. However, managers face challenges and issues to do with culture, leadership, changing management styles, and technological, legal and economic changes in the process of their work. One major solution is for mangers to be cross-culturally aware all the time. Bibliography Brewster, Chris & Harris, Hilary, (2012). International HRM: Contemporary Issues in Europe. London: Routledge. Cieri, De Helen, Fenwick, Marilyn & Hutching, Kate. (2003). International Human Resource Management: Challenges for Teaching and Practice. Working paper 59/03, Department of management- Monash University. Franklin, Ricky. (2008).International Staffing: Abroad Challenges for a Human Resource Manager: A Look at The Difficulties that Human Resource Staff Can Face in Staffing Abroad. Yahoo Contributor Network. Web, June 3, 2008 Accessed on 13th January 2013. Harzing, Anne-Wil & Ruysseveldt, Joris Van, (2003). International Human Resource Management. New York: Sage. Jackcon, Terence. (2002). International HRM: A Cross-cultural Approach. London: SAGE. McGrawHill. (no date). The Challenges of International Human Resource Management. Plessis, Andries J, Beaver, Bob. (2008). The Changing Role of Human Resource Managers for International Assignments. International Review of Business Research Papers, vol. 4, no.5, pp. 166-181 SAJMR (2012). International Human Resource Management: Managing People in Multinational Enterprises. Spectrum: A Journal of Multidisciplinary Research, vol. 1, no. 2, May 2012, ISSN 2278-0637. Faculty of Management and Economics, Semnan University. Sanchez-Gardey, Gonzalo. (2005). Strategic Human Resource Management: Integrating the Universalistic, contingent, configurational and contextual perspectives. International Journal of Human resource Management, vol. 16, no. 5, pp. 633-659 Schuler, S. Randall et al. (2002). International Human Resource Management: Review and Critique. IJMR. University of Pittsburgh, Blackwell Publishers Ltd. Available at www.InternationalHRMReviewandCritique.pdf Villanova University. (2013). Human Resource Management Challenges. University Alliance Online < www.villanovau.com/human-resource-management-challenges/> Accessed on 13th January 2013. Read More