Optimizing HRM: Standardization Vs. Localization

What is International Human Resource Management?

Question:

Discuss about the Standardization and localization in International Human Resource Management.

The term internationalizing denotes the way of increasing the involvement of business in international markets in order to be more competitive and expand their business beyond the domestic territory. One must think globally and has the ability to understand cultures that exists in host country if it plans to serve internationally. International Human Resource Management is denoted as the collection of activities that focuses on managing the organization human resources at the international level in order to achieve the objectives, mission and goal and also gain competitive advantages over competitors at each level either national level or international level. International human resource management involves various functions of HRM like recruitment, selection, training and development, performance appraisal, promotions, payments and rewards and many more at international level. It also aims at focusing on other activities like skills management globally and expatriate management.

• International human resource management is highly concerned with the HRM issues that involves international boundaries other than the home country.
• International human resource management is also concerned with the relationships and bonding between the HRM activities in an organizations and the foreign external factors in which the organization works on.
• International human resource management also includes comparative HRM studies. For an example: How the companies in other countries like Japan, Thailand and Switzerland make plan to upgrade skills of their employees are different from each other.

International human resource management is highly concerned about how to manage HR at MNC i.e. Multinational Companies. It basically involves three major types of employees’ i.e. Home country employees, Host country employees and Third country employees (Saleeth, 2010).

The characteristics of HRM in the internationalizing of the firm generally involves from the initial strategic level of analysis in a multinational parent company. International HRM initiative basically involves two major organizational levels i.e. multinational parent company and their foreign subsidiary. It also involves maintaining a strong relationship between the two levels. There must be a fit between the standardization and localization of multinational parent companies policies and procedures and practices and host country. It often happens that the multinational enterprises insist their policies and practices to be executed and transferred strictly in order to protect their interest segments. MNEs also earn several operational efficiencies when they export their standardized policies in order to take guarantee of the operational consistency in international business. To standardize and socialize the new organization in many areas like finance reporting, HRM and operational reporting and monitoring, key appointment must be taken prior. International HRM standardization can be visualized as a rational management initiative by multinational enterprise in order to transfer HRM practices and policies to international operations  with a concept that these standardized operations will perform and product the better performance for both the partners (Wilson, 2003).

The issues of standardization and localization for MNEs is trying to maintain the balance of HRM factors like strategy, structure, size of the firm and maturity in the firm. Every corporate culture in an organization has a very strong impact on the standardizing because culture and external factors of the local environment affect the operational mode and role on the localization strategy. Today every MNC involves itself to standardize HRM practice in the most effective and efficient way. But this is not beneficial for the whole workplace but it can be beneficial to managers who works in a group at the cross boundaries of the firm. Maintaining globalization in a corporate elements is quite easy and possible but the international organizations should recognize that the while making those local adaptations and exceptions, standards are required which drives localization (Steger, 2010). Localization is basically driven by the various cultural and institutional environment factors which are observed in the local entity itself. National culture is also the major factor in international HRM. Those cultures which are totally based on the personal relations consider to value more compete balance on both the rewards i.e. intrinsic as well as extrinsic. While the cultures which are based on the isolation or personal independence only compete on extrinsic rewards. The pressure that are found in the institutes works as a powerful influences on the practices of human resource and those institutions values and norms are totally based on the features of the national business system (Ampalazz, 2014).

Functions of HRM in International Business

Other major issues involved is educational training. Educational training is the major factor that is required for many countries. From the HR perspective, training and development of the staffs in an organization plays a very major role because no organization can successfully improve and grow unless their staffs are well trained. The main aim of training the staffs is to increase the capabilities in order to perform the duties with full potential. To increase the skills and potential of the staffs, several training methods should be organized. Some of the training methods can be training with theoretical education, introduction to organization and job training. The staffs who are trained have better knowledge about the products and the service offered by the organization (UKEssay, 2015).

While untrained staffs are unaware about the change and the innovation and they also have the feeling of low confidence. Providing training to the staffs improve and enhance strength and ability to solve the issues that exists in the organizations, analyze them and provide the solution regarding the same. It also aims at increasing the ability of the employees to perform the certain task given to them. Now when it comes to international HRM, training employees is the first major important factor to be considered because it have an impact on international business. International HRM is managing the work across the boundaries and controlling all the activities of it. If a company works internationally, but do not have well trained staffs, it will be very difficult for the organization to achieve its objectives. Educating them and conducting training programs will help them in understanding the policies and rules of the host country and then working accordingly (F, 2015).

To be competitive across the globe, MNCs should involve in making the decisions of when to best make changes to the several subsidiaries in terms of standardization and localization. Company must ensure that it should focus on the major core activities and competencies and further replicate these major competencies across its subsidiaries because they are key factor to separating themselves from their major competitors. In absence of this unique trait, there would be very few to differentiate their organization from the major competitors and would create problems in the success of the company (Potoki, 2010).  In this competitive market, it gives an opportunity to the competitors to gain market shares. In order to consider core competencies, MNCs must use standardization because it makes the company to use its strength and stand as a leader in within an industry. The factor core competencies must be used selectively because not everything that exist in the company is considered to be under core competencies. Whenever core competencies are not involved in an organization and when there is need for the subsidiary to adapt some particular local cultures to be successful in the specific field, then at that time MNCs should allow all the firms to conduct localization (Strano, 2011). There are many strategies adopted by MNCs to standardize or localize. Some of them are 1) The adaptation strategy which are adapted to meet market forces but they are never needed to the degree of a localized strategy which means that the marketing mix strategy is a only changes and varied when needed. 2) Worldwide segmentation strategy where the segments of the customers exist across the globe and they can be offered a very standardized product. 3) Requirements of sub global strategy when grouping the host country markets into small clusters which will be similar and standardized based on the region. Each marketing mix strategies have their own standardized product around the subsidiaries (S, 2011).

Standardization and Localization of HRM Practices

There is a great importance of the HR manager’s role in internalization in order to achieve MNEs difficult and complex purposes. Managing human resource in a company in a better way which is highly involved globally needs cultural awareness and the ability to respond promptly to all the external factors that exists in the environment. Managing HR at international level requires motivating and employees that will inspire them to work with a collaborating nature even though they don’t live in the same location. They should be able to work with a mutual understanding in both the countries i.e. either in the home or in the host country.

Fostering and cultivating Global collaboration: When companies start working at the international level, HR professionals must be more realistic and generalist. They must be aware of all the internal operations in the organizations and should work more on the personnel work in a more effective way. The HR managers cares about the competitive advantages that prevail in the organization and also helps to achieve profitability and economic factors in the difficult financial times. They also aim at decreasing the employee attrition and getting participated in the community too (Sanders, 2011)

Working with the managers: When companies shave become more globalized, HR professionals also act as a business partners who are highly involved in interviewing and recruiting new employees in the organization and then further providing training and development programs. When a company operate its business on an international level, it will require HR personnel who will work and cooperate with all the other managers in the particular product line (Duggan, 2014).

Building teams: When a company in involved in the international business, it must ensure that the business operations are working well together with all the other diversified team members. It must be sure that all the members of the host country as well as all the members of the home country should work as a single team in order to achieve the company s objectives, goals and vision. The team members can be motivated and inspired by conducting and organizing various workshops that will be related to team building and by promoting employees and also by providing them rewards. Rewards can be in the form of monetary as well as in non-monetary. In many of the organization, individual recognition plays a major role in motivating the employees while it does not always prove to be true in all the organization. HR professionals helps to create awareness and also helps us to know how a tram can work effectively and gain a huge profit across the borders (Farndale, 2010)

Training and Development in International HRM

Providing training: HR professionals maintains an environment which is productive in nature by ensuring that employees are well trained and have the enough skills to complete the task assigned to them. The employees should accomplish the given job task with the best knowledge and skills. HR professionals conducts training and development programs that helps employees to get credentials for performing the several functions. They also make sure that the company follows all the government rules and regulations properly (Gond, 2011). For an example: In Europe, all the employees that work in an organization must follow the standards that are set and gain a healthy and safe work place settings. The employees in an organization must be aware about all the rules and regulations of the host country so that all the international operations must be carried in a successful way (ZKjadoon, 2015).

Cross border merger and acquisition is the deal between the domestic firm and foreign firm in the target country. Today the trend of M&A is increasing day by day and has accelerated with the globalization. In recent years, America and Africa are attracting maximum number of cross border M&A which has taken place due to the combination of political gridlock in many countries. Companies get involved in cross border M&A because they aim at gaining huge incentive sin doing so. Or it can also be said that both the host country as well as home country gains a huge advantage from the deal. Many domestic firms perform so well that the in the emerging market that it attracts M&A and foreign firms to get involved in it. Apart from this, the foreign firms also consider all the risk factors that are involved in the cross-border M&A like political risk, economic risk, social risk and general risk. All these risks can be examined by the risk matrix which helps to examine the risk factors involved in the company and its possible outcomes to be determined as well. The foreign firms evaluate the M&A partners using the risk matrix and calculate the potential whether to get involved in the M&A partners or not. If the scored score is not appropriate then they will not be involved in M&A and if the score is good, then they can be involved in M&A. the cross-border M&A also requires political support and regulatory approvals because the deals cannot be done in the absence of these factors (Chaudhuri, 2009).

Strategies for Standardization and Localization

International alliance is the partnership of two or more companies from different countries. By setting up such partnerships, the company gain a competitive advantage. The strength are combined together worked hard to achieve the objectives and goals set in an organization (Li, 2015)

Conclusion

It can also be concluded that in order to get involved in the cross-border M&A, an organization must be regulatory scrutiny about all the ownership patterns, rules and regulations with the holding structures. Moreover complex decision that exists in the organization are taken by the HR managers who are well trained and skilled enough to take any managerial decisions. The role of HR professional is very vital in an organization because they are the one who motivate and inspire other employees to achieve the desired objectives and goals. Today, standardization and localization are widely used in an organization in order to separate themselves from the competitors. It also provides an opportunity to the other competitors to gain a competitive advantages.

References

Ampalazz. (2014). Retrieved from what are the issues of standardization: //www.coursehero.com/file/10948645/DQ2/

Chaudhuri. (2009). Retrieved from cross border M&A: challenges and opportunities in global business environment: //www.eiasm.org/frontoffice/event_announcement.asp?event_id=664

Duggan. (2014). Retrieved from Role of Human Resource Managers in Internationalization of Business: //smallbusiness.chron.com/role-human-resource-managers-internationalization-business-11567.html

F, R. N. (2015). Retrieved from Staff training and development methods: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4384864/

Farndale, E. S. (2010). The role of the corporate HR function in global talent management. Journal of world business. 45(2), 161-168.

Gond, J. P. (2011). The human resources contribution to responsible leadership: An exploration of the CSR–HR interface. Journal of business ethics. 98(1), 115-132.

Li. (2015). Retrieved from International Strategic Alliances: www.oxfordbibliographies.com/view/document/obo-9780199846740/obo-9780199846740-0063.xml

Potoki. (2010). Globalization–De-Localization. Report of the EPD Working Group.

S, B. (2011). Retrieved from Localization vs. Standardization: Global approaches to CSR Management in multinational companies: //www.mba-berlin.de/fileadmin/user_upload/MAINdateien/1_IMB/Working_Papers/2011/WP_6

Saleeth, H. (2010). Tutebox. Retrieved from What is International Human Resource Management?: https://www.tutebox.com/2850/business/hrm/what-is-international-human-resource-management/

Sanders, K. &. (2011). HR-line management relations: characteristics and effects. The International Journal of Human Resource Management. 22(8), 1611-1617.

Steger, M. B. (2010). Retrieved from Globalization. John Wiley & Sons, Ltd.

Strano, M. H. (2011). GLOBALIZATION OR LOCALIZATION.

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Ans: Global standardisation of human resource management programs can be visualised as a rational management initiative by multinational companies to transfer their human resource management policies and practices to global operations. The program is initiated and executed with the belief that these standardised policies will be conducted to produce better performance for both partners.

Ans: Standardisation is the process of developing and implementing technical standards based on the consensus of various parties involved in the operation, including firms, interest groups, governments, users, and standard organisations. Standardisation also involves consistently promoting and mandating good quality of compatible technologies within a given industry safely.

Localisation is the process of adapting service to meet the “look and feel” requirements of the desired population. A localised product is manufactured after thoroughly considering human-best practices and behavioural patterns. Usually, local service is one that is developed within the local culture.

Ans: Given below are seven HR practices that one can standardise internationally:

• Hiring the right people- Hiring eligible candidates will ensure that the company’s reputation is in safe hands.
• Employee management – Employee management covers a holistic approach to teaching employees the tricks to achieve the set goals.
• Compensation and benefits – Compensating and providing incentives are surefire ways to make employees feel appreciated and acknowledged.
• Create a safe workspace – Corporate employees spend 1/3 of their days in the office. That makes HRs look after workspace safety with extra care. Also, prioritising workspace safety vouches for a solid global HR practice.
• Create an ethical workspace – No casual work culture should be entertained or adapted at the cost of ethics. HRs should prioritise creating an ethical workspace as well.
• Fair termination policies – As crucial as a hiring policy is a good firing policy, HRs should look after them.

Ans: An excellent example of the Standardisation of HRM practices is when a multinational company makes centralised decisions regarding the inclusion and execution of HRM practices at subsidiaries and conducts them in parent countries as well.

An excellent example of Localisation of HRM practices is when a multinational company establishes a lucrative employer brand, attracts, and retains local talents and deepens its human resource localisation strategy.

Ans:  Pros:

• Policies across various outlets of the same company are the same. This means lowered costs as all the outlets can enjoy economies of scale.
• Standardised HR practices provide adequate brand protection since differences and changes in the brand off-springs expose the industry to risks.

Cons:

• Lack of uniqueness: Different outlets will offer the same opportunities
• Lack of adaptation: Standardisation restricts MNCs from adapting to the ever-evolving and dynamic market