HUMAN RESOURCE MANAGEMENT (HRM) IN THE GLOBAL

PERSPECTIVE: THEORY AND PRACTICE.

INTRODUCTION

Human resource management (HRM) is universal in terms of strategies,

policies and processes. The term has gradually replaced personnel
management. Managing and developing human resources in the international
(global) setting is increasingly recognized as a central challenge, particularly
to multinational enterprises (MNEs). Human resource management is both
academic theory and a business practice that addresses the theoretical and
practice techniques of managing a workforce. While the theoretical aspects
of the discipline may also be universal, the same cannot be said of its
practice. The paper defines human resource management, the theoretical
basis of the discipline, business practice and global or international human
resource management. Thereafter, the paper concentrates on global
perspective or issues in international human resource management practice.

HUMAN RESOURCE MANAGEMENT

Human resource management is the strategic and coherent approach to the
management of an organization’s most valued assets – the people working
there who individually and collectively contribute to the achievement of the
objectives of the business. The terms “human resource management” (HRM)
and “human resources” (HR) have largely replaced the term “personnel
management” as a description of the processes involved in managing people
in organizations.

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Human resource management can also be defined as the function within an
organization that focuses on recruitment of, management of, and providing
direction for the people who work in the organization. As a change agent, it
is concerned with the nature of and regulation of the employment
relationship at the level of the workplace and broader society.
The human resource management model emphasises.
• The need to search for new ways of working
• The central role of managing in promoting change
• The treatment of workers as individuals rather than part of a collective
workforce
• The encouragement of workers to consider management as ‘partners’
rather than as opponents – ‘us and us’, rather than ‘us and them’.
THEORY
The theoretical discipline is based primarily on the assumption that
employees are individuals with varying goals and needs, and as such should
not be thought of as basic business resources, such as trucks and filing
cabinets. It takes a positive view of workers, assuming that virtually all wish
to contribute to the enterprise productively and that the main obstacles to
their endeavours are lack of knowledge, insufficient training, and failure of
process. It is an innovative view of the workplace management, which,
asserts that human techniques when properly practiced, are expressive of the
goals and operating practices of the enterprise overall.

As an academic theory, the goal of human resource management is to help

an organization to meet strategic goals by attracting, and maintaining
employees and also to manage them effectively. The key word here is “fit”,

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that is, human resource management approach seeks to ensure a fit between
the management of an organization’s employees, and the overall strategic
direction of the company. The basic premise of the academic theory of
human resource management is that humans are not machines, therefore, we
need to have an interdisciplinary examination of people in the workplace.
That is why fields such as psychology, industrial engineering, industrial and
organizational psychology, industrial relations, sociology etc play a major
role.
PRACTICE
Human resource management (HRM) as a business practice comprises
several processes, which used together are supposed to achieve the
theoretical goals mentioned above. These practical processes include:
• Workforce planning
• Recruitment (sometimes separated into attraction and selection)
• Induction and orientation
• Skills management
• Training and development
• Personnel administration
• Compensation in wage or salaries
• Time management
• Travel management (sometimes assigned to accounting)
• Payroll (sometimes assigned to accounting)
• Employees benefits administration
• Personnel cost planning
• Performance appraisal.

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GLOBAL OR INTERNATIONAL HUMAN RESOURCE
MANAGEMENT
Global or international human resource management is the process of
employing, developing and rewarding people in international or global
organizations. It involves the world-wide management of people, not just the
management of expatriates. An international organization or firm is one in
which operations take place in subsidiaries overseas, which rely on the
business expertise or manufacturing capacity of the parent company. Such
companies or organizations bring with them their own management attitudes
and business styles. Human resource managers of such organizations cannot
afford to ignore the international influences on their work.

ISSUES IN INTERNATIONAL (GLOBAL) HRM

International human resource management involves a number of issues not
present when the activities of the firm or organization are confined to one
country. The issues in global HRM include:
• The variety of international organizational models that exist
• The extent to which HRM policy and practice should vary in different
countries. (This is also known as the issue of Convergence and
Divergence).
• The problem of managing people in different cultures and
environments
• The approaches used to select, deploy, develop and reward expatriates
who could be nationals of the parent company or ‘third-country

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 nationals’ (TCNs) – nationals of countries other than the parent
company who work abroad in subsidiaries of that organization.
INTERNATIONAL ORGANIZATIONAL MODELS
Bartlett and Ghoshal (1993) have identified 4 models
1. Decentralized federation in which each national unit is managed as a

separate entity that seeks to optimize its performance in the local

environment. (This is the traditional multinational corporation).
2. Coordinated federation in which the centre develops sophisticated

management systems enabling it to maintain overall control, although

scope is given to local management to adopt practices that recognize
local market conditions.
3. Centralized hub in which the focus is on the global market rather

than on local markets. Such organizations are truly global rather than
multinational.
4. Transnational in which the corporation develops multi-dimensional

strategic capacities directed towards competing globally but also

allows local responsiveness to market requirements.
CONVERGENCE AND DIVERGENCE
Another issue facing international organizations is the extent to which their
human resource (HR) practices should either ‘converge’ worldwide to be
basically the same in each location, or ‘diverge’ to be differentiated in
response to local requirements. There is a natural tendency for managerial
traditions in the parent company to shape to the nature of key decisions, but
there are strong arguments for giving as much local autonomy as possible in
order to ensure that local requirements are sufficiently taken into account.
(This is known as global/local dilemma). Convergence may be increasing as
a result of the following factors:

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 • The power of markets
• The importance of cost
• Quality and productivity pressures
• The development of like-minded international cadres
• The widespread practice of benchmarking ‘best practice’.
CULTURAL DIVERSITY
Culture and environment diversity is a key issue in international human
resource management (HRM). In a study that become a classic in the study
of cultural differences, Hofstede (1980) investigated value differences
between over 11,000 employees in some 40 countries employed by
International Business Machine (IBM). His study focused on the influence
of national culture on the sub-cultures of the worldwide organization.
4 key dimensions were identified.
1. Individualism versus Collectivism – i.e. where individualism is a

national cultural attribute that favours people looking to themselves

and their families as their first priority, and where collectivism is an
attribute that favours people giving their prime loyalty to, and finding
protection in, the wider group.
2. Power distance – i.e. the extent to which different cultures accept

different distributions of power within the society; High Power

distance society accepts wide differences of power between those at
the top of society and those at the bottom, while Low Power distance
society sees power as being shared much more equitably, leaving less
of a power gap between the top and the bottom ranks.

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 3. Uncertainty Avoidance – i.e. the extent to which a society is tolerant
of uncertainty and which therefore feels less need to avoid it (Low
Avoidance) or feels threatened by it (High Avoidance).
4. Masculinity versus Femininity – i.e. where a nation has a tendency to

prefer assertiveness and materialism (masculinity), or has a higher

concern for relationships and the welfare of others (femininity).
Comparing the results obtained from the 40 different countries against the
criteria of the framework, produced 8 ‘culture clusters’, labeled according to
geographical areas (Asian, Near Eastern and Nordic) or language (Latin,
Germanic and Anglo) and economic development (Less developed or
More developed).
1. More developed Latin 2. Less developed Latin
High power distance High power distance
High uncertainty avoidance High uncertainty avoidance
High individualism Low individualism
Medium masculinity Whole range of masculinity

(Belgium, France, Brazil (Columbia, Mexico, Chile,

Argentina, Spain, Italy) Venezuela, Peru, Portugal)

3. More developed Asian 4. Less developed Asian

Medium power distance High power distance

High uncertainty avoidance Low uncertainty avoidance
Medium individualism Low individualism
High masculinity Medium masculinity

(Japan) (Pakistan, India, Taiwan,

Thailand, Hong Kong,
Philippines, Singapore)

5. Near Eastern 6. Germanic

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High power distance Low power distance
High uncertainty avoidance High uncertainty avoidance
Low individualism Medium individualism
Medium masculinity High masculinity

(Greece, Iran, Turkey, (Austria, Israel, Germany,

Yugoslavia) Switzerland)

7. Anglo 8. Nordic

Low power distance Low power distance

Low-medium uncertainty avoidance Low-medium uncertainty
avoidance
High individualism Medium individualism
High masculinity High masculinity

(Australia, USA, Canada, (Denmark, Norway, Sweden,

Great Britain, Ireland, Finland, Netherlands)
New Zealand, South Africa)

From this Hofstede concluded that it was impractical to produce a unified

managerial approach that could be adopted world wide to meet the needs of
individuals and groups, their structures and the requirements of change.
The conclusion to be drawn from this study is that a contingency approach
to human resource management is called for in these circumstances.

Ouchi also made an important contribution to our understanding of the

international dimension of human resource management. He studied the
characteristics of Japanese and American organizations to see if selected
practices from Japan could be translated to the United States. Ouchi
discovered the following differences in the behaviour of Japanese and
American organizations.

Japanese organizations American organizations

Offer lifetime employment Offer (generally) short-term

(Core workers only) employment

Promote from within Recruit form outside

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Career paths are non-specialised Generally specialised career paths

Shared decision-making Individual decision-making

High degree of mutual trust/loyalty Varying degrees of trust/loyalty

between managers and employees between managers and staff

Importance of collective responsibility Individual responsibility for results

Long –term performance appraisal Short-term performance more

important

Success seen in terms of Success seen in terms of

Co-operative efforts individual achievements

Ouchi then proposed what he called ‘Theory Z’ as opposed to McGregor’s

Theories X and Y as a means by which American companies could imitate
certain features of the Japanese approach to managing people. He argued
that American firms could make changes in the following areas of human
resource management:

• They could offer more secure employment prospects and better

prospects of a career
• They could extend employee participation in decision-making
• They could place greater reliance on team-spirit and on recognizing
the contribution of individuals to team effort
• They could encourage greater mutual respect between managers and
their staff.

Given the difficulties of developing careers in today’s’ business

organizations, where reducing the number of job levels, as well as
minimizing the number of jobs is commonplace, it seems unlikely that most
international organizations can offer their employees guarantees of long-
term prospects. However, some of these characteristics have adopted in
many organizations and indeed are regarded as ‘good’ or ‘best practices’.

In view of the above, the ‘universalistic’ approach to HRM prevalent in the

USA is rejected in Europe where the basic functions of HRM are given
different weights between countries and are carried out differently. In

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addition, the cultural differences mentioned above have produced the slogan
in international human resource management “Think GLOBALLY and act
LOCALLY”. This means that an international balancing act is required,
which leads to the fundamental assumption made by Bartlett and Ghoshal
that: ‘balancing the needs of co-ordination, control and autonomy and
maintaining the appropriate balance are critical to the success of the
multinational company’.

To achieve this balancing act, there are six capabilities that enable firms to
integrate and concentrate international activities and also separate and adopt
local activities:
• Being able to determine core activities and non-core activities;
• Achieving consistency while allowing flexibility;
• Building global brand equity while honouring local customs and laws;
• Obtaining leverage (bigger is better) while achieving focus (smaller is
better);
• Sharing learning and creating new knowledge;
• Engendering a global perspective while ensuring local accountability.

CONCLUSION
Global human resource management provides an organized framework for
developing and managing people who are comfortable with the strategic and
operational paradoxes embedded in global or international organizations and
who are capable of managing cultural diversity. Because of cultural
diversities and issues of convergence and divergence, it is impractical to
develop a truly international approach to global human resource
management. This means that organization structures, management styles,
organization cultures and change management programmes have to be
adapted to the dominant cultural attributes of the host nation just as a careful
balancing act is sought between being global and local needs.

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