Human Resource Management (HRM) in a Multinational Enterprise

Comparison between Domestic and International HRM The practices of international HRM and domestic HRM involve a number of commonalities. For instance, personnel planning, staffing, recruitment, selection, evaluation and development as well as remuneration are practices carried out by both domestic and international HRM. However, the operations of domestic HRM involve employees within the border of a single nation whereas international HRM encompasses three categories of nationals (Farndale Paauwe, 2005).Advertising We will write a custom essay sample on Human Resource Management (HRM) in a Multinational Enterprise specifically for you for only $16.05 $11/page Learn More In other words, international HRM utilizes the services of personnel from the parent nation where the corporation is headquartered. Additionally, global HRM deals with employees from host countries where the corporation’s subsidiary offices are located. Moreover, international HRM utilizes other third countries’ personnel as sources of labor, research as well as development. Despite the commonalities in the practices of domestic and international HRM, two main differences exist in their practices. The differences arise from the complications in operations of international HRM and the employment procedures of personnel from different nations. Considering the complexities of operations in different countries, Multinational Enterprises (MNE) must identify and comprehend the best ways of managing the geographically dispersed personnel within foreign subsidiaries in order to have control of both domestic and foreign employees as well as gain international competitive edge (Farndale Paauwe, 2005). In other words, international HRM practices are more complex compared to domestic HRM due to a number of reasons. First, the international HRM tackles international taxation, coordinates foreign currencies and exchange rates. Further, the HR of an MNE manages the concerns of workers from different cultures as opposed domestic HR managers who only manage employees of a single country. Moreover, international HRM practices must adhere to external concerns in its foreign subsidiaries including local codes of conduct, religious beliefs and providing employment opportunity to the natives. Regarding the employment of diverse national groups of employees, international HRM must follow the set regulations concerning the recruitment of personnel. For instance, employees who work abroad and are United States nationals must remit annual income taxes to the government. In addition, the HR manager of MNE must incorporate the diverse cultures of employees in the operations. Standardization of HRM Practices The integration of international HRM practices through the imposition of parent practices to the subsidiaries of the MNEs is driven by two main factors. First, strategic aspects are invaluable drivers of standardizing HRM practices of MNEs. In other wo rds, the international corporations have to function within the framework of global circumstances.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More For instance, the MNEs carry out operations within the peripheral perspectives of the industry as well as inter-organizational connections and agreements. Such aspects influence the practices of international HRM and the aims of the multinational enterprise (Harzing Ruysseveldt, 2004). Second, the organizational context is another important driver for standardization of HRM practices. In essence, the unique and diverse culture of MNEs and the institutional environment of the firms are widely thought-out to determine the explicit HRM practices in different states. Additionally, the organizational structures including exports and sales of subsidiaries affect HRM practices. The adoption of a worldwide corporate culture by an MNE has numerous advant ages. For example, in situations where high capital ventures are to be remunerated, the HR executives are supposed to utilize the business culture and lingo of the host nation. Additionally, the adoption of the international corporate culture for each subsidiary prevents the elimination of the corporation’s protected market niche due to changing regulations of the host countries. The Role of Subsidiary For multinational enterprises to gain competitive edge in operations, the coordination and integration of the firms’ dispersed organizational units is critical. As such, the subsidiary is capable of achieving local receptiveness as well as international incorporation (Dowling et al., 2013). In other words, a subsidiary is critical in the operations of MNE because it function together with the firm’s headquarters to achieve optimal output. The subsidiary performs a number of roles. In fact, the subsidiary acts as integrated player, implementer, local innovator as w ell as global pacesetter. As an integrated player, the subsidiary is tasked with the responsibility of coming up with useful information that can be utilized by the organization to realize optimal performance. Regarding the role of an implementer, the subsidiary undertakes the creation of individual knowledge and depends heavily on the data from sister ancillaries in performing the directives of the parent firm (Caldwell, 2003). The role of global innovator is where the subsidiary acts as the source of information and knowledge for other auxiliaries. Regarding the local innovator, the subsidiary has the full responsibility of developing appropriate expertise and proficiency in the important functional sections. In general, the subsidiary provides the coordination mechanisms and location competencies that enable the parent firm to achieve the overall strategic roles.Advertising We will write a custom essay sample on Human Resource Management (HRM) in a Multinational Enterprise s pecifically for you for only $16.05 $11/page Learn More Factors that Drive Localization of HRM Practices for MNE Adjusting HRM activities according to the norms and values of a host nation is significant for the success of MNEs (Farndale Paauwe, 2005). The major factors that drive localization of HRM practices for a multinational enterprise are the cultural and institutional environments. To begin with, the cultural environment of an organization affects the way in which the employees of the firm share diverse ways of life including common values, attitudes and behaviors transmitted through a gradual dynamic process over time (Dowling et al., 2013). In other words, culture influences work and HRM practices in a number of ways. For example, culture affects the remunerations conduct including the diverse anticipations of the executive and junior staff relations as well as performance. Additionally, in an organizational culture in which performance is based on incorporated personal social relations, equilibrium of inherent and extrinsic remunerations is often valued. On the contrary, a MNE whose work culture is based on individual autonomy and segregation, extrinsic rewards are normally emphasized. Institutional culture also ensures humane orientation of employees, collectivism in the organization as well as gender egalitarianism to minimize discrimination based on sex. Generally, the HRM practices of the MNE are invaluable in enhancing cohesion between subsidiaries through the adoption of the local norms and values (Dowling et al., 2013). Second, the institutional environment is significant in determining the performance as well as anticipations in subsidiaries. In other words, institutional norms and values such as attributes of education system and industrial relations are important HRM practices. For instance, in recruitment and selection processes, education qualifications are always considered. Further, the scope of labor legislati on and its regency of codification, which is another important institutional factor influences HRM practices through creating codes of conducts that are concerned with equal payment for equivalent job and the determination of minimum wages (Harzing Ruysseveldt, 2004). In general, the institutional environment affects the staffing decisions of MNE. Localization of HRM practices has a number of advantages. First, localization saves on expert costs in terms of salaries and other benefits. The costs of hiring experts are high since the firm has to cater for the expenses of international assignments. As such, the firm utilizes local personnel whose packages are less considered to expert salaries and benefits. Second, localization of HRM practices also utilizes the talents of the local people through recruitment and selection into various work positions.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Impact of Culture and Institutional Environment Cultural as well as institutional aspects dictate the manner in which the management of human resources within multinational enterprises is conducted. As such, the MNE operating in the international market must recognize and comprehend the social outline entrenched in international culture to overcome the bottlenecks associated with the customs (Harzing Ruysseveldt, 2004). Recruitment and Selection Recruitment refers to the process of attracting individuals with suitable qualifications to apply for jobs whereas selection is picking the best-suited individuals for positions within an organization from the list of applicants. Culture and institutional environment influences the recruitment and selection of employees within an organization in a number of ways. As such, the firm must consider external and internal aspects in such process. Therefore, several steps must be adhered to in the recruitment and selection process to meet the requ irements of the organization’s culture as well as the institutional environment. For instance, transparency, fairness and qualification requirement must be considered in the process. Additionally, organizations must eliminate the stereotypes of disrespect and lack of recognition during the process. Further, the comprehensive structured screening method allows the interviewees to elucidate the comprehension of job specifications and how to deal with the obstacles that may be encountered in the execution of their functions (Farndale Paauwe, 2005). Training and Development Training and development are important aspects of HRM. The cultural and institutional environments greatly influence training and development of employees in a number of ways. First, development and training must incorporate the norms and values of employees. In addition, MNEs must undertake the institutional management aspects such as formulating policies, offering funds for execution as well as putting up v arious governing bodies to attain the required strategic goals (Dowling et al., 2013). The management of multinational enterprises believes that future growth and development depends largely on quality training and education system. Therefore, all subsidiaries must rely on the trained personnel from the local public training institutions. As such, nations must ensure that training and education of personnel are geared towards the needs of the industry. Further, MNE should adhere to the institutional requirements of quality training and appropriate education system as an integral part of labor force during the process of production. Therefore, human resource development programs such as training and career development form the foundation of enhancement and mobilization of human capabilities to meet the demands of the labor market (Farndale Paauwe, 2005). Compensation Culture and institutional frameworks have greater impact on compensation. Compensation and reward system of an organi zation remains to be one of the important factors that contribute to the improved work performances among employees. Compensation directly affects performances of employees and remains critical in the attainment of the organization’s goals. Therefore, cultural and institutional aspects have to be considered when deciding on the best compensation strategy (Dowling et al., 2013). In other words, employees have diverse values and norms that organizations have to put into consideration while determining effective rewards. Essentially, employees will consider compensation as effective when the types of rewards meet their primary objectives. Often, the central argument is that fair rewards system satisfies the needs of employees, motivates and improves performances. Moreover, the most excellent compensation practices take into account internal institutional processes such employees’ performance management practices as well as competitiveness. Internal balance in the compensa tion practices and design implies the organization’s activities and practices that ensure the attainment of goals. On the other hand, external institutional aspects such as competitiveness encompass compensation practices in relation to industrial standards or regulatory framework. In most cases, compensation practices follow the regulatory frameworks set by the industry or legal authority. However, the MNE must ensure that its compensation practices are geared towards enhancing employee’s motivation and attaining set institutional goals as well as norms and values in order to gain competitive advantage (Caldwell, 2003). In other words, compensation practices must be aligned with the employee’s general productivity as well as motivation. Task Distribution Within the workplace, variation in the workforce may arise from cultural orientations including race, religion and intellectual heritage. Moreover, diversity in the workplace may result from institutional chara cteristics that include education background of the personnel. In essence, variations found within the personnel emphasizes structure component of the organization. Therefore, HRM managers should be capable of understanding the effects of these dimensions on the work performance, success as well as motivation when distributing tasks. Most importantly, the HRM managers should comprehend how cultural and institutional dimensions bring about diversity in the workplace and the way they affect interactions of workers in the process of task distribution (Caldwell, 2003). Further, culture and institutional environments initiate structures that take into consideration all the dimensions of diversity in the workforce during task distribution. Conclusion In summary, the practices of international HRM and domestic HRM involve a number of commonalities include personnel planning, staffing, recruitment, selection, evaluation and development as well as remuneration. Despite the commonalities in t he practices of domestic and international HRM, two main differences exist in their practices. The differences arise from the complications in operations of international HRM and the employment procedures of personnel from different nations. Additionally, localization and standardization of HRM are practices are critical in the management of MNE. Further, for multinational enterprises to gain competitive edge in operations, the coordination and integration of the firms’ dispersed organizational units is significant. Moreover, Culture and institutional frameworks have greater impact on compensation and reward system of an organization remains to be one of the important factors that contribute to the improved work performances among employees. References Caldwell, R. (2003). The changing roles of personnel managers: old ambiguities, new uncertainties. Journal of Management Studies, 40(4), 983-1004. Dowling, P. J., Festing, M. Engle, A. D. (2013). International human resource m anagement: managing people in a multinational context. North Way, UK: Cengage Learning EMEA. Farndale, E. Paauwe, J. (2005). The role of corporate HR functions in multinational corporations: The interplay between corporate, regional/national and plant level. Center for Advanced Human Resource Studies, 5(10), 8-25. Harzing, A. Ruysseveldt, J. (2004). International human resource management. London:Sage. This essay on Human Resource Management (HRM) in a Multinational Enterprise was written and submitted by user Jude Boyer to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.