International HRM: Cultural, Political, and Economic Challenges

Introduction

By looking at the changing trends in the world of commerce in recent times, one can clearly notice that the business community is becoming increasingly competitive. This competition has given rise to international business, where enterprises — regardless of their size — are expanding their operations into the global market. As an outcome, an efficient and effective work environment has become a fundamental necessity that enables organizations to maintain strong footholds in the marketplace and generate profits (Daly, 2011).

Considering the challenge of maintaining an effective organizational culture, businesses rely on human resources as their foundation. People are the primary source through which organizations develop and grow. Therefore, the competence and effectiveness of human interaction is the prime contributing factor to business success, since better people mean better business (Daly, 2011).

The importance of Human Resource Management has escalated to paramount heights over time. As a result, the role of HRM has also changed — especially when business is operated on a global platform. Initially, HRM was considered only a support function for organizations, but international business reshaped its role into that of a strategic partner that facilitates enterprises in achieving their goals in the international marketplace (Daly, 2011).

The development of an effective workforce for international business is a more difficult task than many organizations anticipate. The growth of international business has left an indelible imprint on the field of human resource management. This paper incorporates a comprehensive discussion of the various factors that have impacted HRM, the challenges faced by human resource management due to the growth of international business, and recommendations that would help human resource management prepare for and overcome these challenges.

Background: The Rise of International Business

International business is no new phenomenon — it has been practiced for a very long time. Extensive cross-border trade has been implemented since the time of the Greeks and Romans. However, the Industrial Revolution brought the concept into greater prominence, reshaping the ways of doing business through the application of new techniques and numerous other developments in international commerce (Briscoe, Schuler & Tarique, 2012).

Since the modern international business community is more competitive, organizations must develop long-term strategies to remain focused on their competitive strengths in order to survive and sustain their position. Old practices become obsolete over time and are no longer appropriate to new surroundings. Rapid international growth, which has evolved as an outcome of intense competition, has also brought numerous problems — problems that have gone beyond simple expatriation, making coordination and control increasingly complex issues (Briscoe, Schuler & Tarique, 2012).

Human resource management on an international platform is not only responsible for recruitment, but also plays an immense role in building corporate cohesion and inter-departmental alliances. By contrast, domestic or local human resource management has a more specific set of duties related to employee management. When businesses operate internationally, HRM policies and responsibilities are effectively doubled, as they must manage and control workplace diversity (Briscoe, Schuler & Tarique, 2012).

Growth in international business affects human resource management because HR is fundamentally about managing people. The term "global business" encompasses many dimensions, including diverse workforces, different cultures, multiple languages, varied legal and political systems, and diverse economies. These elements illustrate that human resource management is now full of challenges that have not only impacted the field, but have also altered its role within the organization (Briscoe, Schuler & Tarique, 2012).

Worldwide competition is escalating at an unprecedented rate, making the field of human resource management increasingly challenging. For this reason, HR personnel need to broaden their horizons and develop policies and strategies not only domestically but also internationally. If human resource management fails to do so, organizations may be unable to succeed. Globalization is one of the prime causes that have given rise to workforce diversity, technological advancements and innovations, and changes in the overall environments of individual countries. As a consequence, the pressure on HR departments has skyrocketed, as organizations demand loyal, proficient employees who can bring success both domestically and globally (Briscoe, Schuler & Tarique, 2012).

Impact of Cultural, Socioeconomic, and Political Factors on International HRM

Working domestically means governing a relatively limited set of aspects, but when international business comes to the forefront, those responsibilities automatically escalate. Every country has its own history, government, laws, traditions, ethnicity, religion, values, and geography, all of which vary from other countries. These are the primary aspects that make nations different from one another and that largely shape domestic organizational culture — and therefore become a source of difficulty for human resource management operating internationally (Briscoe & Schuler, 2004).

Considering the aspect of culture, distinctive attributes based on cultural characteristics are typically embedded in human resource practices within specific countries, indicating that HRM is pervasively affected by cultural values. The attitudes of employees at the managerial level also vary from culture to culture. These specific cultural attributes come under deep scrutiny when developing policies and strategies for international human resource management (Briscoe & Schuler, 2004).

Socioeconomic factors also translate into differences in HR practices. Since socioeconomic elements represent factors such as education levels, standard of living, and health, it is difficult for employees to adapt to an environment that is entirely opposite to what they have experienced. For instance, workplace diversity in an underdeveloped nation creates the possibility of discrimination and non-acceptance of an organizational culture that is open and flexible (Sims, 2007).

The political environment of a country also contributes significantly to the development of HR policies. An underdeveloped country with unstable political conditions would lead to different HR policies — such as security incentives and pay incentives — while a country with stable political conditions would not draw the same level of attention to such policies. Therefore, political conditions in international host countries have a direct impact on HR policy development within organizations (Punnett, 2012).

The strategies of international human resource management are also substantially affected by changes in economic factors. Many countries welcome international business and foreign investment; unfortunately, others do not. Low costs of living and cheap labor often attract international expansion, but such countries frequently exhibit unstable economic conditions. Furthermore, challenges intensify when these issues are compounded by inadequate infrastructure — including roads, electrical power, schools, and telecommunications. It therefore becomes a challenge for human resource management to maintain successful business operations in such environments (Sims, 2007).

All of these factors illustrate that international business poses considerable impact on human resource management and demands that HRM practices remain flexible and adaptable to international conditions. The basic practices of HRM — including recruitment, training, and employee management — are complicated by cultural variation, socioeconomic factors, labor costs, and political conditions.

Conclusion

The growth of international business in recent times has revolutionized the workplace in ways that few could have imagined. This new era of the international business community has created a substantial impact on the field of human resource management.

Since the functions of human resource management are grounded in the organizational culture of the parent country, international expansion affects the entire field of HRM. This is largely due to the differences that exist across cultures, political systems, economies, and socioeconomic conditions from country to country. Because of these critical and fundamental differences, human resource management also confronts additional challenges including knowledge dissemination and recruitment. Furthermore, the organizational strategy developed for international human resource management influences its major functions — such as recruitment, training, compensation, and labor relations.

Human resource management can, however, resolve these issues. Cultural shock can be mitigated through cultural orientation programs and training sessions for employees deployed to new international or host locations. Providing comprehensive support over compensation and benefits and informing employees about local labor laws are also effective strategies. Building a diverse workforce is an additional measure that human resource management must pursue in order to sustain successful and competitive international business expansion.

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