Challenges In International HRM: An Essay.

Oracle Corporation: A brief background

Discuss about the Challenges Facing International Human Resource Management.

As the pace of technological advancement rises and most firms develop a deeper international focus, effective management of the human resources to adapt to the changes becomes inevitable. However, effective management of the human resources is arguably one of the most challenging tasks to an organization. Changing economic and political landscape coupled with globalization mean that what effective management of human resources comprised of initially is constantly and increasingly changing thus requiring an international orientation. Globalization has turned the world into a global village with most companies expanding to overseas markets with an aim to widen their market base. However, management of human resources in the foreign countries has posed a hydra-headed dilemma to the management. The reason being IHRM (International Human Resource Management) deals with complex issues the main one being the development of management techniques in the host countries where different cultures, economic systems, and different legal systems exist. Sweeping demographic changes coupled with the millions of women pouring in the global workforces imply that multinational companies face an ever increasing pressure to innovate creative ideas aimed at integrating and retaining the diverse global workforce.

Oracle Corporation is an American transnational firm specializing in computer technology with its head offices in Redwood Shores, California. The company owes to the sedulous work of Bob Miner, Ed Oates, and Ellison who founded the company in 1977 under the name SDL (Software development laboratories) (Rachel, 2013). The company fundamentally specializes in the development of Cloud engineered systems and database software. Since its foundation, the company has undergone various milestones that have seen it develop more product and services such as Oracle Beehive Corporation software. Further, the company offers other complementary services such as consultancy, financing, and training services. During the late 1990’s, Oracle Corporation faced one of the most serious human resource crisis which saw the company lay off about 10% of its workforce as a result of accounting errors. The crisis resulted from the company’s adoption of the “up-front” marketing strategy which ushered in accounting scandals in the company.

Although IBM served as the leading firm in the technology field, it failed to provide databases on window operating system. Consequently, Oracle sought to exploit this market gap which have seen it rise to its prominence today. Rachel (2013) states that the company’s total assets amounts to $ 112.18 billion, while its revenues for the year ended December 2015 amounts to over $ 38 billion. Oracle Corporation employs more than 137,000 employees in its different branches and subsidiaries across the world. With the company having branches in several parts of the world, Africa offers a rich market base for the company to exploit given the technological advancement experienced in Africa. The company must, however, be prepared to navigate the jerky waters of the dynamic and complex global workforce especially in Africa because of the huge influx of women in the global workforce. According to a survey conducted by Sam (2013), management of the human resources serves as the most substantial challenge facing multinational companies seeking to exploit the African market. The fact does not, however, mean that no solution exist to solve the dilemma of international human resource management.

Challenges that Oracle would face in the management of its human resources in Ivory Coast, Africa

Staffing policies

Staffing refers to the process through which an organization selects and trains individuals to take specific job functions where the management charges them with responsibilities associated with the job function. Given the fact that there exist key areas of departure between domestic and international businesses, human resource managers must choose the appropriate staffing policies as dictated by organizational needs. Lee and Wu (2010) notes that success of international human resources rests on the ability of the HR managers to choose the most appropriate staffing policy.

The main type of approaches to staffing policy in IHRM are ethnocentric staffing, polycentric staffing, and geocentric staffing. The ethnocentric policy approach advocates for the recruitment of home country nationals to occupy top positions in the firm such as Executive positions (Robert et.al, 1998). Such a policy ensures that the management of the company has substantial experience in the business environment.

Contrary to the ethnocentric policy, the polycentric approach advocates for the assignment of the home country staffs to executive positions in the head offices and assignment of overseas workers to the middle-level management position (Ulrich et.al, 2009). The policy enables the organization to learn about local markets from the overseas workers. Finally, the geocentric approach advocates for the allocation of the executive position to the best person suited for the position regardless of the nationality of the employee, culture or background.

Development of an effective staffing policy poses a significant challenge for IHRM (International Human Resource Management). The ability of a firm to attract, recruit, and maintain qualified, skilled, and committed workforce handles the success of any company (Prahalad, 1983). One of the primary challenges is the geographical barrier between the head offices and the overseas branches which make it practically hard to implement a day-to-day relationship (Dave, 1996).  Several other factors affect the staffing policy in IHRM as summarized below

Kapoor, (2011) argues that certain political risk factors in the overseas countries serve to create an air of uncertainty and an environment of suspicion in IHRM. As such human resource managers live with the fear of unknown; consequently, the fail to make strategic decision owing to their long-term nature for fear of what will transpire.

Undoubtedly, the host country’s legal system serves as the main determinant of the staffing policy to be adopted by an organization (Silzer and Dowell, 2010). As such, most international firms face a challenge where the host country sets the minimum representation of the local employees in the multinational firms.

Challenges/issues in staffing policy in IHRM

Several economic factors such as the economic development and position concerning the investment made by the MNCs have a huge impact on the staffing policy adopted by multinational firms. Schuler et al. (1993) argue that the international human resource managers must take into account the differing purchasing as well as prosperity powers. For instance, escalating costs in many developing countries have forced MNCs to replace the expatriates with the local managers. Moreover, as a result of the scarcity of managerial talent in most developing countries MNCs have experienced huge transaction costs as they ‘import’ managerial staffs from other countries.

Cultural distance serves as one of the main determinants of the staffing philosophy and impacts immensely on IHRM. Lather (2010) argues that among the most complex challenges facing international human resource managers is cross-culture communication. Culture refers to a ‘software of the mind’ that directs the pattern of thinking and behavior thus influencing how a particular people live and how they associate with others (Adler and Graham, 2009). Cultural differences inarguably handle the performance of the company. Some cultures may support particular types of organization and reject others.

Most countries in the developing countries in Africa are characterized by a dwindling youth population and high unemployment rates. Consequently, such countries experience a severe skilled labor shortage given the fact that most of the youths have limited skills. Research have established that more than half of Africa’s population comprise of youths below the age of 25 years most of whom are still students. Currently, the only solution to solve the problem of a limited skilled workforce is by the company filling the gap with older skilled workers and bringing more women into the workforce (Theodor, 2006).

Given the fact that human resource managers face an array of challenges when deciding on the appropriate staffing policy, the following solutions would assist in solving the problems associated with international staffing

As Barrera (2010) notes, irrespective of the good will that might exist in any firm, miscommunication will more often than not occur owing to the differences in culture between the communicators. However, cross-cultural management serves as the leading solution to cross-cultural conflicts. Multicultural companies can adopt several strategies to overcome the blocks of behavior, emotions, culture, and race. Such strategies include the transfer and dissemination of knowledge and bicultural skills.

Collins et al. (2007) argue that short-term assignments serve as the most appropriate form of the non-standard tasks. Such assignments involve a temporary/short-term (less than a year) transfer of the staffs/employees to a foreign subsidiary. Such assignment would assist the firm to solve the challenge associated with talent shortage in the host country and managerial development. Short-term assignments also come with additional benefits which include increased effectiveness, flexibility, and simplicity.

Recommendations to solve the challenge of international staffing

Such an assignment involves an employee working in one country for a week or two and then transferring to another workstation in another country and so on. Such an arrangement enables to solve the challenge of cross-culture communication and increased flexibility.

International human resource managers face a range of challenges in their efforts to create and develop a high-caliber workforce (Gregersen and Stroh, 1997). An important point to note in training and development is that the HR manager should not only focus a lot of attention on quality training but must also make sure that the training is effective and engaging. The following are the challenges faced in training and development.

Given the fact that multinational firms have areas of operations in different location coupled with the fact that there are multiple trainers, it becomes hard to standardize the training hence the inconsistency in training. The reason rests on the fact that the level of knowledge, teaching style, and emphasis may differ from one trainer to the next.

The corporate world has witnessed a huge increase in part-time workers, shift working, home working, teleconferencing, and videoconferencing, and field working. As such, HR managers face a serious challenge on how to train employees especially those in homeworking and shift working as they spend minimal time in the firm (Barrera , 2010).

A significant challenge IHRM faces in training and development which is associated with global expansion is the primary areas of departure between the employees’ primary languages. No one specific language can be understood by all the employees (Kapoor, 2011). As such, the employees might misunderstand some instructions and directives such as compliance and safety directives posing a serious challenge.

Given the dynamic nature of the corporate world, the quicker the company trains and develops its workforce, the higher the opportunity to achieve a competitive advantage. However, given the travels, human resource managers have to make across borders, and the rise of shift and part-time working, training, and development may take an extended period.

Training and development require substantial investment given the nature of workers coupled with other challenges such as a difference in the primary language.

Invention of a reusable content

HR managers should design/develop the training content in such a way that they can use the same content (with minimal changes and updates) for multiple/different training situations to reduce the training costs.

Given the challenge of high training cost coupled with inconsistent training, HR managers should engage training experts to ensure effectiveness in the utilization of the available resources. Pfeffer, (1994) notes that development of e-learning courseware is an intensive and technical task which requires the services of an expert; otherwise, the company will incur huge costs.

Such technologies assist the HR managers in delivering flexible training courses especially to shift and part-time workers. Given the fact that the employees can take the courses at their convenience, it increases flexibility. However, the HR manager should monitor the trainee’s progress.

Standardized curriculum serves to enhance a standardized and consistent training thus solving the challenge associated with inconsistent in training.

Translating the training content into different languages that suits all the employees would assist in solving the dilemma associated with different primary languages.

A study conducted by Clark (2011) noted that among all the talent management processes implemented by most human resource managers in international business, performance appraisal faces the most disdain. The most serious challenges faced by international human resource managers are as discussed below.

The primary goals of any performance appraisal are the identification and resolution of performance issues. However, Cao (2004) notes that execution of annual performance appraisal appears silly and illogical since an error might have occurred at the beginning of the year and will only be noted at the year end.

The primary goals of a performance appraisal are the recognition of results, provision of feedback to address weaknesses, and determination of training needs. Unfortunately, there exist no perfect metric to serve as the basis for performance appraisal (Prahalad, 1983). Most HR managers use the percentage of work completed as the basis for performance appraisal. Moreover, the metrics for performance evaluation differ in different countries posing a more serious challenge to IHRM.

Performance appraisal may turn out to be the worst enemy to the international human resource manager in legal proceedings. Also, some employees might object to the disciplinary actions such as bonus and salary reduction and seek legal protection. Given the difference in the legal systems in different countries international human resource managers face the challenge of designing the right reward and disciplinary metrics to avoid confrontation with the legal bodies.

Biver (2007) argues that according to some cultural backgrounds in different countries some employees feel they are entitled to a benefit, either a promotion or a pay raise, irrespective of their performance. Such a mentality arises from the fact some organizations provides for annual bonus and salary increment which is not tied to performance. As such, the system does not differentiate between top and poor performance. It proves practically hard to change such a mentality due to cultural and societal values.

Given the fact that performance appraisal serves as a vital instrument in training and development, IHR managers must develop ways to solve the challenges associated with performance appraisal.

Daniel (2003) recommends that HR managers should conduct performance appraisal in real time. At the minimum, performance appraisal needs to be conducted quarterly. Workers would fell motivated and appreciated even where the managers give an informal sign of appreciation such as “congratulations for your hard work” (Adler, 1997). If the HR manager finds it hard to conduct quarterly performance appraisal, he should develop approaches to tracking performance throughout the year.

Different performance appraisal bases should be developed to evaluate performance in different countries and cultures. Such metrics should be measurable and linked to the strategic mission/objective of the organization (Cornelius, 2004). For example, IHRMs should create an appraisal system that distinctly distinguishes between the poor. Average, and top performers. As such, the human resources manager should limit the number of ratings.

The HR managers should be fully trained to understand the impact of different cultures on performance appraisal and how to conduct performance appraisal in different work environments Bennis and Nanus (2005). The managers should further learn how to use the performance appraisal system consistently to minimize employee disengagement and mistrust.

IHRM face a serious challenge in designing a compensation system suitable to effectively and sufficiently attract and retain culturally and technically qualified/skilled professionals to occupy various job positions.

The tax systems in different countries have huge implications on the compensation system. The income tax rates, taxation of pension contribution, employees’ bonus and allowances taxation all serve to determine the level of compensation rate. In a country where the taxation rate is high, the employees must be a substantial pay to compensate them for the amount paid in taxes. As such, the staffs occupying similar position but in different countries might get a different gross salary. High taxation rates in most of the African countries pose a dilemma to IHRM.

In most developing countries, the government usually sets the minimum wage rate pay to prevent exploitation of the citizens. International businesses are forced to adhere to these rules even in the circumstance where the skills and the level of education and experience of the employees do not match the minimum wage rate. Moreover, Marri (2015) notes that labor unions play an indispensable role in the determination of the minimum wage rate. In countries with strong labor unions such as Australia, MNC must face the challenge of offering huge minimum wage rates.

In almost all parts of the world, insurance cover for employees is a mandatory requirement. However, the challenge comes in as a result of different economic and political risks inherent in different countries which make insurance covers for employees unaffordable to most MNCs.

Aging workforce and increasing health issues among the employees such as obesity and cancer have raised a serious concern in International human resource management. Even more challenging is the fact that the young population does not participate in the workforce the way they used to Punnett (1993). Their productivity has decreased; consequently, it becomes hard to design a compensation system that will serve to motivate them.

Given the difference in economic conditions and economic growth in different countries, international human resource managers face a challenge in designing the appropriate system to take care of this difference. Inarguably, the high cost of living will impact on the repatriations allowances, housing and overseas allowances, and bonuses based on performance.

Balancing the compensation programs with the firm’s objectives

The MNC’s HR managers should ensure that a balance exists between the basic salary, cost-of-living, allowances, taxes, and the objectives of the organization. Such a move would ensure that the firm compensates its employees fairly to keep them motivated. On the other hand, it ensures that the organization does not incur huge costs (Tsui, 2007).

IHRM should adopt comprehensive and effective performance appraisal system to serve as the basis for determining the compensation system. Such a system will ensure that the company does not incur more than it should (Nagar, 2011). Although there are inherent risks and challenges associated with management appraisal systems, effective appraisal systems would solve the challenge associated with the compensation system

Given the fact that economic conditions and tax laws in different countries impact adversely on the compensation systems, MNCs should set up a common pension and insurance schemes for all its staffs in various countries. Such a scheme would enable the firm in minimizing the cost associated with risks in different countries (Theodor, 2006).

Conclusion

The interconnection of local and global economies as a result of globalization has significantly impacted on international human resource management. As firms seek to exploit international markets, HR practices and strategies are increasingly becoming crucial given the fact that they act as the mechanism for coordination and control of international operations. As such, International Human resource departments must transform as the modern corporate world experience an array of complex challenges. Any company/firm seeking to exploit global market must at all cost navigate the jerky waters of the dynamic and complex corporate economy if it has to benefit from international operations.

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