INTERNATION AL HUMAN RESOURCE MANAGEMENT

SUBMITTED ASHISH NEGI STUDENT 10525843. BY: ID:

MSc in MNGT & IB.

INTRODUCTION TO HUMAN RESOURCE MANAGEMENT. The word Human Resource Management can be defined in two ways. The first definition of Human Resource Management is that it is the process of managing people in organizations in a structured and thorough manner. This covers the fields of staffing (hiring people), retention of people, pay and perks setting and management, performance management, ch ange management and taking care of exits from the company to round off the activities. The second definition of Human Resource Management encompasses the management of people in organizations from a macro perspective i.e. managing people in the form of a collective relationship between management and employees. This approach focuses on the objectives and outcomes of the Human Resource Management function. What this means is that the Human Resource function in contemporary organizations is concerned with the notions of people enabling, people development and a focus on making the employment relationship fulfilling for both the management and employees. These definitions emphasize the difference between Personnel Management. To put it in one sentence, personnel management is essentially workforce centred whereas human resource management is resource centred. The key difference is Human Resource Management in recent times is about fulfilling management objectives of providing and deploying people and a greater emphasis on planning, monitoring and control. In todays growing world Human Resource Management is not limited to a certain company or a country it has gone international. Thus comes International Human Resource Management.

INTRODUCTION TO INTERNATIONAL HUMAN RESOURCE MANAGEMENT. International human resource management is concerned with the human resource problems of multi-national firms in foreign subsidiaries (such as expatriate management) or, more broadly, with the unfolding HR issues that are associated with the various stages of the internationalization process (Box all 1995). International human resource management is more complex due to the employment of workers with different national characteristics and the operation of the multinational enterprise units across diverse national contexts. MNE should think about what extent should they follow home country standards international human resource management policies and practices and to what extent should they be locally adapted? MEN approaches to such questions vary according to factors endogenous to the organization as well as exogenous factors. So that SIHRM help the MNEs to make the IHRM policies and improve it to be a management strategy level in the organization.

Defining International HRM from the perspective of a multinational firm Before offering a definition of international HRM, we should first define the general field of HRM. Typically, HRM refers to those activities undertaken by an organization to effectively utilize its human resources. These activities would include at least the following: y y y y y y Human resource planning. Staffing. Performance management. Training and development. Compensation and Benefits. Labor relations.

We can now consider the question of which activities change when HRM goes international. According to Morgan (1986) international HRM consists of three dimensions:

1. The three broad human resource activities of procurement, allocation, and utilisation. (These three broad activities can be easily expanded into the six HR activities listed above). 2. The three national or country categories involved in international HRM activities: the host-country where a subsidiary may be located, the home-country where the firm is headquartered, and "other" countries that may be the source of labour or finance. 3. The three types of employees of an international firm: host-country nationals (HCNs), parentcountry nationals (PCNs), and third-country nationals (TCNs). Thus, for example, IBM employs Australian citizens (HCNs) in its Australian operations, often sends U.S. citizens (PCNs) to AsiaPacific countries on assignment, and may send some of its Singaporean employees on an assignment to its Japanese operations (as TCNs).

International Human Resource Management in respect with the running of business in Japan. In recent years, at both practical and theoretical levels, human resource management and strategic management have been integrated. This led to a new line of research denominated as strategic should be considered as a strategic factor, not only for its role in putting managerial strategy in effect, but also for its potential as a source of sustainable competitive advantage (Wang and Shyu, 2008). SHRM involves designing and implementing a set of internally consistent policies and practices to ensure that firm human resource contribute to achieving SHRM is that organization adopting a particular strategy require HR practices that are different from those required by organization adopting alternative strategies (Tichy et al., 1982; Miles and Snow, 1984; Dyer, 1984; Baird and Meshoulam, 1988, Peck, Sully et al, 1996; Delery and Doty, 1996; Grundy, 1997; Wright and Snell, 1998).

RECRUITMENT & SELECTION. Recruitment is the process of generating a pool of capable people to apply for employment to an organization, and Selection is the process by which managers and others use specific instruments to choose from a pool of applicants a person or persons most likely to succeed in the job(s), given management goals and legal requirements. (Bratton and Gold 2003: 221) Japan has one of the fastest-aging societies in the world. According to the National Institute of Population and Social Security Research, Japanese over 65 years old currently make up about 21% of the population. They are projected to rise to 27% in 2018 and to 35% in 2050. With about 4 million people estimated to become eligible for retirement over 2008 and 2009, the resulting worker shortage is an imminent problem that foreign HR managers in Japan must fully understand in order to counter. In order to overcome this problem the HR managers are taking various steps. Each year, the major Japanese companies hire groups of new college and university graduates as their new manager employee class. These new graduates get their training on-the-job in Japan, which does not have Western-style business schools. This on-the-job training is consistent with, and grows logically out of the tradition of lifetime employment. Smaller companies try this method as best they can, but must rely on other recruiting and hiring methods as well. Usually, when a company has more than 100 employees, it can begin to successfully use the college and university graduating classes as its preferred method of hiring. Foreign companies use temporary staffing, university recruiting (which is difficult for them), mid-career hiring, overseas Japanese, and expatriates to fill their position. To find such employees, these companies use such techniques as word of mouth, employment agencies, newspaper ads in English and Japanese (for example, publications such as The Japan Times) and executive search firms, both in Japan and elsewhere. In addition to the different management and decision-making styles, as described above, language is also an important factor. Although English is the second language in Japan, few Japanese, including businesspeople, speak fluent English. Because communication and relationships between and among employees and with clients and customers is so important, fluent Japanese is essential in Japan. Thus, people who cannot speak fluent Japanese are not desirable employees. As a result, foreigners without these language skills are much less likely to be hired by Japanese companies. Women, of course, are less likely to be hired for any kind of responsible positions n Japanese i companies, which rarely offer management opportunities to women. Women, including college graduates, are hired as secretaries, and they must have good computer skills.

The Unique Recruiting and Human Resources Practices in Japan

Lifetime Employment Japan is known for lifetime employment with a single company. While this widespread practice is not required by statute, it is taken into account by the courts in deciding particular employment cases. This practice works both ways: a Japanese employee expects to stay for life with one company or family of companies for 30 or 40 years, and the employer expects that employee to remain for his or her working life. Employees are first recruited and hired out of high school or university, depending on the job. Managerial and technical jobs are filled by university graduates. Such an employee can expect to

receive a new assignment, by way of on-the-job training, every three-to-five years. In this way, each employee gets to know the company thoroughly and develops a range of experience and responsibilities. Under this system, a company invests a significant amount on training for its employees, knowing this investment will pay off as the employee grows with the company. After a lifetime of work with a company, the employee will receive a lump-sum payment from the employer and retire, usually between the ages of 55 and 65, although those who serve on a companys board of directors are often allowed to serve until age 65. Seniority System A characteristic of Japanese employment directly related to lifetime employment is the seniority system. Japanese society, its individuals and employers, respect authority and the chain of command. They believe that persons who are promoted and otherwise recognized should be treated with respect and deference. This is reflected throughout Japanese society, where seniority is favoured and there is a strong tradition of progression and promotion that comes with seniority and age. Employees compete hard, but within the traditional rules of respect, to be promoted and receive greater responsibility. Those who fail may be sent to subsidiaries or sister companies, perhaps in a slightly lower position. This system also supports those who cannot keep up due to illness or other factors outside their control, by giving them easier jobs or window dressing jobs. The Japanese are very uncomfortable when a younger or junior employee is promoted over someone older or with greater seniority. To do so may invite sabotage, or even ostracism from the mainstream. Nevertheless, sometimes, through rarely, a younger or junior person is promoted over the heads of others. More often in such a situation, a younger person of unusual abilities is given greater responsibilities without receiving a title or salary reflecting his or her increased responsibilities. This person will have a competitive advantage when higher positions become available and are formally awarded, after that person has gained more seniority and/or age.

Now there are a few other categories of recruiting staff by the HR Managers. Temporary Staffing Temporary help agencies provide clerical and related staff. The law permits the HR managers to hire such staff for up to one year. At the end of every contract period, up to a maximum of one year, companies can make new contracts with the temporary staff for the next year. The operation of these temporary employment agencies is not unlike similar agencies in the United States. The hiring company may have the option to hire the temporary staff person on a permanent basis after some specifically stated trial period has passed. University Recruiting University recruiting is still the most popular method by which large Japanese companies recruit and hire new professional employees, and there is a strong preference among students to join prestigious Japanese firms. University recruiting places companies in head head competition -to with each other, which is especially keen for graduates with engineering and other technical degrees. Many Japanese companies have long been recruiting from these institutions, have alumni from them, and are in an entrenched position when it comes to recruiting at these universities. Such companies usually have one or more employees whose sole task is to recruit from universities and to maintain their contacts there. As might be imagined, there is a strong old boy (and, on occasion, old girl) network among these companies and the universities, based on a lifetime of relationships in business, government (which works closely with industry in Japan), and the professions.

Hiring Overseas Japanese Given the traditional culture of, and constraints on employment in Japan, foreign companies need to look to non traditional sources of acquiring top-flight Japanese employees. One such source is Japanese nationals studying and/or living abroad who want to return to Japan, or who have already returned. The number of such Japanese has been growing steadily recently, and they are well trained and highly motivated. Such returnees, many of whom are in their 30s, have, will have, or believe they will have, a difficult time readjusting to the highly formalized Japanese way of doing business. At Japanese companies, foreign ways of doing things may not be welcome. S uch persons may thus be attracted by the workplace flexibility, merit-based advancement and continuing international opportunities offered by U.S., European, and other foreign companies doing business in Japan. These factors might be particularly attractive, for example, to women who have had advanced training in the United States and who do not want to subject themselves to the discriminatory way in which Japanese companies conduct business.

Factors affecting HR policies Both internal and external environments are considered in light of the organizations mission and purpose. Once organizational strategies are determined, HR management strategy represents an integral part of achieving this broader organizational strategy Kane and Palmer, 1995). Important HR practices common to much of the theoretical work in SHRM can be identified as; internal career opportunities, training, results oriented appraisals, profit sharing, employment security and participation. By focusing principally on business strategies, the SHRM view systematically ignores other organizational contextual variables that may have important direct effects on HR department activities (Tsui and Milkovich, 1987)

External Factors The market environment has been extremely turbulent during the past decade. Therefore, to maintain continuous success in the face of rapidly changing global conditions, firms must identify and analyze environmental characteristics and develop HR practices to meet changing market needs (Chang and Huang, 2005). External factors affecting HR practices are those pressures on firms that cannot be controlled and changed in a favourable way in the short run (Kane and Palmer, 1995). These factors are briefly explained below. International and national economic changes: With the development of global economy, the international dimension of HR practices has become more and more significant. The focus of HR practices has shifted from traditional topics such as internal selection and rewards to concepts such as globalization and international competition (Satow and Wang, 1994).

Technological changes: Technology lies at the heart of manufacturing industry. It provides a series of business advantages (Garavan et al, 2008). As organizations have been faced with shrinking product life cycles in many industries, in many cases, they have started re-assessing their operational arrangement and managing processes (Power, 2004). In addition, technological developments alter the context of HR practices in JAPAN and the way they are implemented.

National culture: The increasing internationalization and globalization of business makes it more pressing than ever to understand how to establish HRM practices that can deal with cultural and national differences (Alas et al, 2008). Culture has a crucial importance in organizations preferences in developing appropriate structure and methods for their HR practices (Chandrakumara and Sparrow, 2004). Cultural factors cover a wide range of issues and differ significantly across countries. Wasti (1998) investigates the applicability of Turkish and American human resource practices in Japan from a socio-cultural perspective. By comparing work-related values of the three countries, she argues that Turkish HR practices are more compatible with Japanese societal characteristics than are their American or Western counterparts. On the other hand, intra-national differences existing in the same country also lead to variations in HR practices.

Industry/sector characteristics: In analyzing HR practices, classification of organizations as manufacturing and service firms is taken as the basis of the discussion. The idea behind this division is the fact that different production processes necessitate different HR practices.

Legislation/regulations : Legislation and regulations are frequently cited as hving a direct impact on HR practices (Kane and Palmer, 1995). In Japan, the constitution sets the basic rules regarding the operations and functions of organizations.

Actions of competitors : Differences in HR practices are likely to be found when comparing organizations that differ in the extent to which they are attempting to gain competitive advantage. There are many ways in which Japanese companies can gain a competitive edge or a lasting and sustained advantage over their competitors, among them being the development of comprehensive human resource practices (Jackson et al, 1989: Kane and Palmer, 1995; Poole and Jenkins, 1996; Narasimha, 2000).

Actions of unions: In order to analyze the factors affecting the HR practices in Japan, one also needs to consider the activities of unions in Japan. Some unions may seek to influence HR practices more directly than other. The presence or absence of unions in Japanese organizations is a silent variable known to be associated with some HR practices (Kochan et al, 1984). There are noticeable changes in Japanese industrial relations towards more employee -oriented relations. The question here is how to find room for the coexistence of HRM and industrial relation practices.

Internal Factors Internal environments of Japanese organization strongly affect their HR practices. Internal factors are specific to a firm influence its response to a given situation. The effect of a firm-specific variable upon HR practices will depend on the situation facing the firm at a given decision point. That is, one variable dominant at one stage may be substituted by another as circumstances change (Welch, 1994). Organizations size: it is an important factor explaining both the intensity and the type of HR practices. Although HRM practices are a common feature within Japanese organization, evidence suggests that there are a large number of small firms in Japan that do not practice them.

Organizational structure: In response to global competition and a rapidly changing business environment, corporate strategies and structure are becoming more flexible and integrated. A firm strategy and structure are important in determining HR practices flexibility and integration.

Business strategy: There is a two-way causality between business strategy and human resource decisions. Organizations generally use different competitive strategies in order to gain an advantage in the market place. These strategies are most effective when they are systemati ally coordinated c with human resource management practices. Japanese companies can improve their environment by making efficient choices about human resource practices that consistently support their chosen strategy (Milkovich and Boudreau, 1991; Schuler, 1992).

Top management: The influence of top management on HR practices is acknowledged by many people, even if only to the extent of advising that top managements support should be obtained (Ondrack and Nininger, 1984).

Line management: A key to organizational success is the active participation of line management in designing and implementing HR activities. Since line managers are responsible for creating value, they should integrate HR practices in their work (Okpara and Wynn, 2008). This requires a dynamic power and information sharing relationship between HRM and line managers.

Academic/Professional influences on HR practices: HR staff are often involved in the decision making process about HR policies and practices. Their knowledge about alternative HR practises may represent important variables in their own right. Potential inputs to there knowledge bases include the written body if HR theory and research, what they have learned from experience, and information obtained from peer, particularly those working in the same industry. Another source of knowledge for Japanese HR is consulting firms.

Having examining the external and internal factors affecting HR practices, we can say that not only Japanese but other companys HR policies are also very much affected by the internal and external factors.

CONCLUSION This review and analyses of factors confirmed that HR practices (recruiting and selection, compensation and benefits) are related to internal and external factors as they affect the HR policies in different ways in different countries. In the end the study indicate that the most important internal factors affecting HR practices in the Japanese firms are priorities of top management, organizational strategy, actions of corporate headquarter, and size of the organization. Important external factors on the other hand, appear to be legislation and regulation , and characteristics of the industry and sector. Japan is one of the most fast growing economies in the world and having a good HRM structure is what will keep them in the game. They have a unique recruitment n selection method which allows them to have a very unique Human Resource Management which has t look after the company, its o employees and their working. In other words its unique style of HRM keeps the system running and differentiates them from the world.