Global HRM: Equal Employment, Compensation & Motivation

Introduction to Global HRM

Human resource management is one of the essential components of the competitiveness of global firms. Corporations that perform exceptionally in human resource management tend to integrate strong discipline in their people with attention to strong social capital—developing networks and relationships within the organization. The multiplier effects of this combination generate inimitable conditions for people management, which in turn drives employee engagement in the global context.

The rapid advancements in information technology, along with globalization, have transformed the way employee management is carried out in organizations. This transformation has defined the significance of global HRM in ways that were not anticipated fifty years ago. HRM seeks to enable the proper deployment of human capital so that an organization can satisfy and retain customers both in domestic markets and globally (Sparrow, Brewster, & Chung, 2016). Based on the current competitive business environment, proper management of human capital has become crucial. As a result, the primary task of multinational corporations (MNCs) revolves around identifying, recruiting, and managing competent human resources to enhance functional efficiency and improve productivity.

The establishment of political and economic forums such as the World Trade Organization and the European Union, together with the rise of trade blocs, has considerably altered the business environment as far as open markets and competition are concerned. In essence, the business field has transformed into a global business environment. Today, experts have influenced not only staffing requirements and the entire labor market but also HRM practices. Strategic alliances and joint ventures have become common forms of doing business across the globe. Global markets, changes in business structures, and high-tech communication technologies now demand new forms of HRM approaches for MNCs. Arguably, globalization has affected the HRM area more severely than any other functional area.

Presently, HR managers must provide an international orientation to all HR functions, including employee recruitment, training, motivation, compensation, and development. Orientation within the global context has the greatest relevance because business today is increasingly interlinked between countries. Moreover, because MNCs must recruit, motivate, and retain people at both the home office and overseas plants, the concept of global HRM helps them to procure, allocate, and effectively utilize human capital in the global business environment (Perkins, Shortland, & Perkins, 2006).

Global HRM is about managing human capital worldwide. It involves hiring, allocating, and properly using the knowledge, skills, and ideas of employees in response to business needs. Global HRM has been recognized as a main determinant of failure or success in the highly competitive business economy. It has become a primary source of competitive advantage because other factors of production—such as raw materials, technology, information, and capital—can be easily imitated (Festing, Budhwar, & Cascio, 2013). The caliber of individuals within a company, however, cannot be duplicated and offers a unique competitive advantage.

MNCs must carefully focus on their human resources because people control other factors of production. Yet most MNCs tend to underestimate the significance of the HRM function in selecting, training, motivating, and compensating employees assigned overseas. Research reveals that over 40,000 MNCs are currently engaged in international business (Sparrow, Brewster, & Chung, 2016). Modern developments in information technology have allowed these corporations to manage their global HRM function efficiently and effectively, maximizing their global management cadre.

When implementing global HRM, planning must involve decisions about staffing policy and global strategy. Major challenges include controlling geographically dispersed functions, assessing the suitability of employees from alternative sources, and enabling decision-making independent of the head office. The interdependence of structure, strategy, and staffing is of particular importance. A company's desired strategy must direct its staffing models, and the organizational structure must be appropriate for implementing that strategy. Nevertheless, structural constraints often affect strategic decisions, and unique sets of competencies and staffing constraints affect both strategic and organizational decisions. Therefore, MNCs strive to achieve a system of fit among these factors that facilitates strategy implementation (Festing, Budhwar, & Cascio, 2013).

Global Selection and Expatriate Training

The appointment of employees to overseas positions is one of the most complex processes in international HRM. The selection criteria used by MNCs build on success factors similar to those applied in domestic offices, but additional factors related to the circumstances of the assignment are considered. Sadly, many HR managers are inclined to select potential expatriates simply according to their known expertise and domestic track records, often overlooking whether the chosen employee possesses the necessary interpersonal skills and cross-cultural awareness for the assignment. It is also necessary to evaluate whether the individual's family and personal situation enables adaptation to a new culture, since enhanced adaptation helps employees discharge their assigned roles effectively from the outset.

MNCs typically assess five groups of success factors for potential expatriate applicants: motivational state, family situation, relational dimensions (such as flexibility and empathy), language skills, and job-related factors (Podnar, Kohont, & Jancic, 2012). It is difficult to establish the relative importance of each factor. However, the most flexible approach to maximizing talent is to first consider whether the assignment could be filled by a host-country national. Such a model of expatriate selection relies on factors such as the level of interaction required with local employees, the similarity between the candidate's own culture and the host culture, and the length of stay. Generally, the more rigorous the selection and training process, the lower the chances of expatriate failure.

MNCs often structure the selection procedure as a decision tree in which progression to the next stage depends on evaluation of critical factors related to the position or the applicant. The most basic selection procedure is to choose a local national, who requires minimal training in local business customs and culture. Nevertheless, locally selected candidates normally receive additional training in the MNC's company-wide processes, corporate culture, and technology. If a local candidate cannot fill the post yet the job demands a high degree of interaction with the local community, MNCs conduct extremely careful screening of applicants from other geographic regions and implement vigorous training programs.

As seen in MNCs based in Asia and Europe, HR policies at all organizational levels are influenced by home-nation policies and culture. For example, in Japanese subsidiaries operating in India and Singapore, promotion from within and expectations of mutual loyalty are culture-based practices transferred to subsidiaries (Kang & Shen, 2017). At Matsushita Electric Industrial Co., Ltd.—today known as Panasonic Corporation—the employee selection criteria for expatriate positions resemble those used in the Western world. The company selects candidates based on characteristics captured in the acronym SMILE: Specialty (knowledge and skills), Management ability, International flexibility, Language capability, and Endeavor (ability to persevere).

Training and preparation for cross-cultural interactions are among the most crucial areas of international HRM. Many expatriates end their overseas assignments abruptly due to an inability to adjust to the local environment or poor performance. Those who remain often function at lower levels of effectiveness. Depending on the expatriate's position, indirect costs to the organization—such as damaged relations with customers or the host government and the resulting loss of market share—can be greater than anticipated (Sparrow, Brewster, & Chung, 2016). Practical differences and cross-cultural adjustment are persistent sources of challenge for expatriates and their families.

Although cross-cultural training is useful, very few expatriates historically received it. MNCs often failed to provide adequate social support or training during international assignments, rationalizing this with the assumption that managerial processes and skills are universal. In fact, many MNCs used an employee's domestic track record as the primary selection criterion for overseas assignments (Festing, Budhwar, & Cascio, 2013).

Unlike in previous years, today's MNCs offer significantly more preparation and training for their expatriates. Lower recall rates reflect the fact that companies are sending overseas employees who are better prepared and more adaptable to foreign environments (Sparrow, Brewster, & Chung, 2016). Although training programs deserve credit for this improvement, the outcome also reflects more intelligent HRM planning overall—starting with proper selection of employees based on family circumstances and long-term knowledge of the individual.

Another contributor to expatriate success is the longer duration of overseas assignments, which gives employees more time to adjust and reach full capacity. Today's MNCs also provide their expatriates with significant support, sometimes setting up dedicated local divisions for this purpose. A notable example is the NEC Corporation, whose strategy centers on what it calls the permanent boot camp—an elaborate training program that prepares NEC expatriates and their families for the challenges of a foreign posting (Kae, 2012). The demands on expatriates arise from the multiple relationships they must maintain, which differ markedly in the host-country context. These include internal relations with company members, family relations, and external relations with the local community, customers, and suppliers. Identifying problems likely to be encountered by the expatriate is the first step in a comprehensive training program. Other elements include language instruction, cultural training, and familiarization with the local lifestyle.

Equal Employment Opportunity and Diversity Initiatives

The concept of equality has been desired in various sectors of society for many years, extending to employee management in organizations globally. For years, countries worldwide have endorsed laws promoting workplace diversity. Although diversity management is a common imperative for MNCs, the evolution of regulatory and legal developments reflects a landscape characterized by multidimensional and varied approaches (Kang & Shen, 2017). Previously, various world regions recorded unique successes in the achievement of equal employment opportunity and diversity management. Whereas the majority of Fortune 500 firms in the US have implemented diversity programs, the European Union has led initiatives to attain gender parity in corporate management. Asian countries have even set progressive quotas aimed at increasing the representation of personnel with physical disabilities. These examples illustrate how countries have undertaken varied initiatives to foster equality in the global workplace.

Globalization has enabled many corporations to establish operations in multiple countries. This renders diversity management and equal employment opportunity not only issues of strategic significance but also drivers of competitive and economic success. Equality in the workplace implies access to learning opportunities, resources, and participation in legitimately heterogeneous societies. It also means that companies gain added value by setting themselves apart from competitors (Kang & Shen, 2017). Beyond business incentives, diversity initiatives are commonly imposed as equal employment opportunity measures aimed at eliminating stereotypes and prejudices that have historically restrained the representation of minority groups. In recent years, both public and private diversity initiatives have proliferated as a result of these complementary forces.

Although many nations have passed legislation prohibiting discrimination in employment, some jurisdictions have gone further by enacting laws that promote positive discrimination. Positive discrimination occurs when certain groups are favored in order to rectify an existing imbalance that works against them. For example, in the United Kingdom, the Equality Act of 2010 requires all employers to implement positive action in their recruitment processes (Marston, 2007). The Act encourages companies to give an advantage to applicants if the company has reason to believe that the candidate suffers a disadvantage linked to a protected characteristic. The intention is that positive discrimination will enable individuals who share the protected characteristic to minimize or overcome that disadvantage. In 2007, South Africa passed a similar law (Marston, 2007). The EU has also endorsed various regulations allowing Member States to take positive action to promote equal employment opportunity.

India embraced a reservation program on constitutional grounds, allocating a portion of public service jobs for traditionally under-represented communities, including certain religious minorities and castes. Similarly, Nigeria and Malaysia adopted affirmative action programs in the recruitment of public servants to achieve the desired ethnic balance. However, the US Supreme Court has rejected outright quota initiatives in which companies conceal determinations about national origin, sex, race, and other protected classes (Kang & Shen, 2017). While over-represented groups may argue a case of reverse discrimination as supported under Title VII, companies should nonetheless strive to create diversity programs (Marston, 2007) to avoid legal accusations from employees who may feel excluded or disadvantaged.

Adding further complexity, the Federal Contract Compliance Office has established regulations requiring contractors to benchmark, take positive action, and conduct inquiries to ensure equal employment opportunity and adequate representation of individuals with disabilities. For companies interacting with the finance industry, the Dodd-Frank Act established an office to monitor and ensure the fair inclusion of women and minorities in each company operating in the US.

Conclusion

The concept of global employee management continues to evolve and shape how organizations relate to their people. The advancement of technology hastens and redefines the process, improving the ability of organizations to adapt to a competitive business environment. Current trends include evolved strategies for employee selection, training, compensation, and development, which have changed the way MNCs manage expatriates. Equal employment opportunity has led companies to adopt frameworks such as positive discrimination policies, pay equity regulation, and sexual and moral harassment policies to comply with evolving laws. These developments have also changed the way compensation packages and benefits are structured in the global business environment, making international HRM one of the most dynamic and consequential fields in modern management.

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