HRM in an MNE
Similarities and differences between domestic and international HRM
International Human resource management is a process that involves the procurement, allocation and utilization of human resource within a multinational corporation or for at least three countries. While the HR managers within these organizations are expected to integrate the HR policies as well as the practices across various of their subsidiaries that have spread in several countries in order to realize the goals of the organization while at the same time making these policies and practices quite flexible In order to allow the significant policy differences that occur in the policies within the different countries. International HRM is thus concerned with the identification and understanding of how Multinational Corporations are able to effectively manage their worked force which is geographically dispersed so as to leverage their HR resources and through that be bale to create both a local and global competitive advantage. Domestic HRM on the other hand is the process that involves the procurement, allocation and effective utilization of human resources within local countries. There are some commonalities between IHRM and domestic HRM practices especially in areas such as HR planning and staffing, selection and recruitment, appraisal development, rewards and so on.
From the name we already get the idea that IHRMs work internationally or beyond the borders of a nation while the domestic counterpart operates within the set, national or local borders.in this connection it is expected that IHRMs follow rules and regulations as well as stringent international policies such as the ones that are related to taxation in the course of their operation at their international location of work, language requirements, employment protocol and special work permits. When it comes to the local HRMs they follow the rules and regulations are regarding local taxation and the usual employment related issues that occur.
IHRMs normally have a border perspective since international organizations normally cater for three different types of employee categories; PCNs, HCNs, and TCNs. The HCNs or host country nationals are employees that still have citizenship of the nation where this foreign auxiliary branch of the organization they work for is based currently. PCNs are Parent Country Nationals who are expatriates that work in other countries alongside the country they come from originally. Lastly the TCNs are third country nationals who are in mots cases contracted by the government or military personnel. These contracted people are neither the one who contracted them nor the host nation.
IHRM is also more complex as compared to domestic HRM due to various reasons; IHRM normally addresses a broader range of activities as compared to the domestic HRM. Another reason is that the IHRM are faced with the problem of dealing with people that belong to more 5 than one nationality hence they have to set up different systems within the different locations. On the other hand the HRM in domestic environment only administer HR programs to the employees that belong to only one nationality. IHRM normally requires so much involvement in the personal life of an employee when it comes to the domestic environment HRM they are not so much concerned with the employees personal life. There are heightened exposures to risks for IHRM that come with the international assignments such as health and safety risks to the employees and their family. These risks are quite minimal when it comes to the domestic HRM.
Standardization of HRM practices
The International Human resource management practices which have been developed over the last decades have pursued a contextual analysis the standardization or in other words global integration of multinational parent companies human resource management policies as well as practices and localization meaning local differentiation of host countries practices. The tension that exists between standardization orientation of the multinational organizations and the necessity of localized adaptation has been pointed out as a theme that dominates in the internalization of human resource management. The control of cross border operations of an MNE revolves around the processes, routines, procedures and practices which can be transferred even abroad. During the process of transferring systems and know how the input and role that people context and has a high level of complexity as a result of the diverse cultural environment that exists within this environment. Therefore standardization is quite important when it comes to HRM practices there are various goals that are associated with standardization. These are to reach consistency, transparency, ease of administration, sense of equity, and the alignment geographically fragmented workforce around the same objectives and principles that apply in the organization (Mir,2010).
The main challenge that the MNEs face is the creation of a system which can operate effectively in multiple countries through the exploitation of local differences and interdependencies at the same time leading to the sustenance of consistency. There are three factors that drive standardization which are; organizational strategy and structures. Standardization is guided by the strategy and structures that exist within an organization this means that organizations are structured in a flexible way such that it can be easy to integrate new HRM practices according to the environment the subsidiaries of the MNE are in operation. The strategies of the organizations are in place such that they allow the incorporation of new HRM practices according to the country the MNE is located. The second driving force is the organizational culture MNEs operate in different countries that have their won different cultural practices however each of the organizations has their own organization culture which forms the basis for their practices. Therefore the organization culture of an organization plays a critical role in creation of standardization since it is what guides the operation of the organization. The organization culture of an organization has to on the same level with others in the world and therefore there is need for standardization. The final driving force is the size of the firm and its stage of maturity in terms of the degree of international maturity. Organizations have to be at par with others that carry out their operations globally in terms of size and maturity .therefore standardization comes into play when the organization has to be o the same level with its counterparts in its operations (Chen,2012).
MNEs are shaped by the institutions which are in existence in the countries they originate from and the make attempts to introduce these HRM practices that are based in their parent countries in their foreign subsidies. We have to examine the extent to which the HRM practices introduced in the subsidiaries are impacted by the context of the host country.at the same time we also have to look at the extent to which the MNEs try to transfer their HRM activities that have been shaped by their home countries environments to the foreign locations where the go. Finally it is also important to note that these foreign practices are also transferred from the foreign locations to the headquarters of the MNEs.it is important for the worldwide MNEs to adopt a worldwide corporate culture for each of its subsidiaries that are in operations in the different locations. This is because the different locations have different cultures that they operate under. This means that a worldwide corporate culture will integrate the different cultural practices and hence making it easy for the organization to carry out its operations in the location without any problem that pertains to organizational culture.
Role of subsidiary
Subsidiary strategy is a concept that has come up in the international business world .subsidiaries help in the reduction of the complexity of multinational organizations reality into numbers that are manageable that are of characteristics that are related hence making it easy to understand and explain how multinational companies function. MNCs involve a network of transactions that are composed of capital flows, knowledge flows and product flows. They argue that it is this three, knowledge flows are quite important in the sense that the proportion of global and transnational MNCs in which this knowledge flows are considered to be especially important is on the rise and that very little is known when it comes to the management of knowledge flows either in the domestic or even the international context. There are two distinct aspects of knowledge flows which are magnitude of transactions which is the extent to which subsidiaries normally engage when it comes to the transfer of knowledge and the second one is directionality transfer of transactions which is whether subsidiaries are the receiver of knowledge or the one who is providing it. When these two dimensions are combined they lead to the definition of four generic subsidiary roles; Global innovator, Integrated player, Implementer and local Innovator (O'Brien,2010).
Global Innovator subsidiary is taken to be the fountainhead of knowledge for other units. This subsidiary role has become very important as MNCs are now moving towards into a more transnational model whereby individual subsidiaries act as center of excellence…
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