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International HRM Strategies and Practices

  1. Executive Summary

Every coordinated human activity, which is conducted in-group, will most often be formed into structure called organization. Organization is a system with a ‘ collage ‘ of individuals or staff doing their assigned work under a leader’s control for the organization’s benefit well as them. These workers have to be recruited optimally to optimize the performance of the organization. Therefore, if American Company starts a subsidiary in India, they take into consideration other factors, thereby hiring appropriate workers and implementing effective management styles in a significant way. So, this paper will discuss how an American-born MNC can concentrate on HRM practices when it decides to open a subsidiary in India, especially transferring HRM practices. As the American company wishes its subsidiary to have a diverse workforce, its HRM activities will be focused in that direction. According to the fictional nature of the case, which could also serve as restrictions, the methods used in this study will be based on external sources. Nonetheless, after considering all the cultural aspects and the management style, it becomes clear that there is a good case for opening and operating a subsidiary successfully adopting certain steps.

  1. Introduction

In an organization, the workers only form the crucial ‘cog’ in the running of the organization. And, only if these crucial workers are recruited or staffed optimally through an effective staffing process and Human Resource Management, the organization can achieve optimum success. In the case of running an enterprise or organization, the staffing function is a continuous process, and so the leader or the manager particularly the Human Resource Manager should perform the staffing function at all times. It is necessary that the management must ensure a constant availability of sufficient number of efficient employees from managers, executives, technical persons to labourers, for the efficient functioning of the enterprise. The chosen workers would, ultimately, be physically, psychologically, emotionally and temperamentally fit for the job. This can be achieved by adoption or an optimum staffing process. According to Koontz and O’Donnell, “The managerial task of staffing includes managing the structure of the company through proper and efficient selection, evaluation and personnel development to fill the roles designed into the structure”. The optimal hiring method and the organization’s resulting optimum performance can vary according to the organization’s design or type. That is, it is possible to divide organizations into national companies and multinational companies. National or indigenous firms are normally started and will only function only in their home countries, without crossing the borders. While Multinational enterprises or companies (MNC) will cross the borders and will enter many countries where there are opportunities. When those organizations have enough opportunities, it can set targets and formulate various strategies to achieve those targets.

International HRM Strategies and Practices

  1. Methodology

The research method for this study would come primarily from the secondary sources, specifically for the enterprise. That is, as the corporation or MNC of American origin is fictional in nature, additional information has to be gathered from secondary sources to explain its tactics and structure. While secondary source information may be maximally correlated to illustrate the strategy of a fictional organization, there will be limitations due to the difference in the scenario. When it comes to the analysis of both the home and the host countries, the methodology could also be based on secondary sources. As there are no official websites for United States and India in relation to business management and HRM practices, the paper had to use sources from secondary sources. That is, crucial information can be accessed from internet, legitimate books and also current news magazines about both the country management and HRM practices.

  1. Company Strategy and Structure

The American-born multinational company is truly a global company, as it operates in more than 30 places in 15 countries around the world. It is headquartered at Seattle in United States of America. The company plans to extend its operations to another country and the country they selected is the Asian country of India. That is, it wants to open its subsidiary in the South Indian city of Chennai. After opening the subsidiary, the structure will be formalized with the right combination of home country personnel and host country personnel. Quite logically, the top management will be filled with American personnel, who will then recruit apt and qualified prospective Indian employees from in around the city and also from other parts of the country. While recruiting employees for its subsidiary, the strategy that can be adopted by the American company with positive and optimum results, is actualizing a diverse workforce. That is, the work structure can be made more diverse by following the strategy of incorporating diversity element and by recruiting employees from different diverse groups. India is a land of diversity, with people coming from various religions, castes, etc. “Practically every major religion has a strong bond with India. India represents the world’s most religious country. In India, too, there are numerous culets, each practicing its own ideologies and interpretations of the major religions. There is none like the Indian language. By some counts there are over 200 languages in India (Kamat). So, if the company recruits Indian employees, without directly focusing on their lineage or background, they would be able to involuntarily get a diverse work structure. If the company recruits just 25 Indian employees, chances are high that they would be able to get diverse work force, because among those 25 Indian employees each will have different background. With this structure, the strategy of the company will border on optimal diversity, with optimum performance come from those diversified staff. Also, the company intended to recruit some of the brightest and talented individuals from the groups or sections of population, who are not given adequate opportunities due to their allegiance to particular group and its way of living. For example, handicapped individuals, people from low castes, etc can be recruited. If these groups of people are given opportunities, apart from fulfilling the needs of the organization, will mainly improve the ethical image of the company. That is, the company is hoping that these diversity programs will bring in many dynamic people from different backgrounds, who can enrich the creativity and innovation part of their business. Apart from these employee centric outcomes, the company will be able to build a positive image about the company in the minds of the customers, all over the world. This strategy and the resultant positive image will bring in many benefits to the company and its HRD (Human Resource Department), like elevating its brand image, easier identification of company’s products particularly among the ‘minority’ groups (who will be happy with the company for recruiting one of their kind or group members). “Diversity strengthens the importance and trust in the brand and our diverse consumer base within our society. “(nike.com). So, the company can introduce this diversity program to recruit talented group of workers from diverse population and thereby improve its brand image.

  1. Analysis on Host Country

A) Labour Market

India, one of the developing countries of the world, entered the era of globalization and open market reforms after 1990’s. From then onwards, it has been an open market allowing many multi-national corporations. All types of MNC’s have entered or entering the Indian Market and its Labour market is providing it the perfect back up. The Labour Market in India is quite extensive because of its high population and at the same a quite good proportion of qualified people. “India’s labor market can be divided into three sectors: rural workers, who make up about 60% of the workforce, formally organized, which makes up about 8% of the workforce the population; and the unorganized or informal urban system comprising 32 per cent of the workforce “(Kamat). Even though, majority of the Indian population indulge in agriculture, in recent times or decades, due to the development of the educational and industrial sector, there is a sufficient organized work force. That is, these labourers or prospective employees are educationally strong, as many of the Indian population are trying to complete their graduation and even Post-graduation. Also, with the development of industries, many of these prospective employees were employed in those industries. If they are employed in industries for a longer period of time, they will be able to get optimum practical experiences, which can also be used by the American company while recruiting the India people. So, overall the labour market in India is extensive and at the same fully equipped to handle of fulfil the needs of the subsidiary to be located at Chennai.

B) Labour Legislation

In terms of Legislation regarding Labour, India has one of the strongest at the same time loophole filled laws. That is, the labour legislations were quite strong in India mainly due to its democracy and the urge to protect the interests of the Indian employers and importantly employees. Apart from these reasons, “Democracy is a charming form of government, full of variety and disorder, and dispensing a sort of equality to equals and unequal alike.” (Plato). In India, there are numerous political parties from national level to state level. And the thing, all the three countries (particularly the politicians) have in common is the culture of corruption. Corruption is a global phenomenon, but in these countries especially India it has percolated into every aspect of common life. “Corruption is a global phenomenon which causes poverty, impedes development and drives investment away. It also weakens the legal and political systems that are to work for the public good “(UNODC 2007)

Cultural Perspective

A) Recruitment

In a multinational company, the workforce recruited as part of the staffing process will show a lot of diversity, including the American company. That is, as MNC’s are organizations which are established on foreign shores, it would have ‘collage’ of workers. As mentioned above Organization is a ‘structure’ where ‘collage’ of workers will do their allocated work. This team of workers like the five different fingers in one’s hand; will be different from one another having different characters, attitudes, education, background and importantly ethnicity, thereby bringing in the diversity element. So, in case of MNCs, staffing of these diverse workers under the concepts of International Human Resource management (IHRM) will be the common feature. This is applicable to India as well because as mentioned above India is a land of diversity and recruiting a sizeable group of employees will surely bring in diversity. In India, the recruitment process happens directly at the company premises as in any other country. Yet, the recruitment process has moved to universities and colleges in the last decade or so, with the rise of many educational institutions. That is, many colleges and their well-equipped students have become a big recruiting avenue for many IT companies and other knowledge-based enterprises.

B) Wage Systems

In India the pay systems are based on the industry sector in which the employee works. That is, as India is mainly an agriculture based economy for major part of the last century, with major market and consumption happening inside the country, the wages were kept on the lower levels. But, with the advent of globalization, entry of foreign majors and importantly rise of Indian companies, the wage structure increased manifold. That is, as the Indian companies made giant strides, they increased the wages of the employees. Likewise, when the foreign majors entered the India, they enticed the cream of the talent with high salary packages. So, the wage systems particularly in the knowledge sector are on par with the world standards.

  1. Analysis on Home Country

  • A) Labour Market

The labour market in USA is quite extensive, with qualified employees can be found in all the segments of the population. That is, USA is not focused in any one industry, it has diverse interests and labour can be found in any field. When it comes to opening up a subsidiary in a foreign country like India, they tend to perform without any inhibition. Even though, they may struggle with the climate and the culture, being professionals, they can adjust to the schedule.

  • B) Labour Legislation and Government Role

Labour legislations in USA are quite foolproof, with all the safety and ethical considerations taken into account. That is, successive governments have strengthened labour legislations, so that nothing dangerous or unethical happens to the labours.

  • A. Recruitment

The society of USA consist of a diverse cultures with people from different race, ethnicity etc. living in different parts of USA. So, employees are recruited from different diverse groups with many current companies willingly trying to incorporate diversity.

B. Transfer of (company name) HR practice

  • Case for Transfer

Culture is an evolving thing for every country. “Our society is changing and the diversity that we are now embracing has taken us a long time to settle” (Tewarie, 2006). Cultural elements such as music, dress which can be seen today will be a thing of the past tomorrow. But there are some elements of culture like God, religions, marriage etc that will continue to have its presence infinitely and this will be common to different countries or societies. That is, the culture of United States and India has many similarities and that work as an aiding factor for the case of Transfer. The culture of the United States, known as the Western culture because of its location in the western hemisphere, has lot influences from the British culture, due to the British rule over the United States from the 17th to 19th centuries. British culture spread to the United States in the form of Literature, faith, costumes, etc. The same is the case with India, which was also ruled by British for a period of 300 years. The English language left over by the British has become the unofficial national language of India, spoken by majority of the population. “When you are traveling around India, you can surely get along, almost everywhere, with English” (enchantingindia.com 2006). So, the only similarity between USA and India, left over by the British imperialism is the English language and this will act as an apt case of transfer. That is, as language is an important factor for communication in a business environment, the commonness achieved through English will surely help the American company to run the subsidiary successfully

.”If culture is all human activity and thinking objects, there is only one human culture “(Podur 2002). The society of USA consist of a diverse culture with people from different race, religion, ethnicity etc. living in different parts of USA. Even though white race and religion of Christianity is the most predominant, people from various race and religion do exist with them. Like wise, India is the home to various religion, language, caste etc. “… since India is a secular pluralist society, the home of every religion known to humanity” (Tharoor 2006). But in the case of India, Indo Aryans and Hinduism are the major race and religion. So, when we look at these aspects, both USA and India is somewhat similar having a multicultural society, even though the dominant religion is different for both of them. This aspect will also help in running the business in the subsidiary. That is, as the American managers who oversee the subsidiary, will be exposed to multiculturalism in their homeland, they can manage the Indian employees, who will be of different cultures

  • Case Against Transfer

Each country will be different from others on some or many aspects. From different people, language, climate, food etc, etc… the list is a never-ending one. And based on these differences, the concept of management also evolves into different styles. The various management styles visible in the functioning of an organization are clearly dependent on the culture of a country. That is, when one looks at the management style of USA, one get the feeling that, it is an open management with no holds barred attitude. The important feature of the management style of USA is, even though there will be a hierarchy inside the organization, all the individuals of the organization from the Managing Director to a security guard will enjoy openness and it will visible in every part of their interactions. When we analyze this managing style to the Indian management styles there will be lot of differences. That is, the management style followed in India is quite different from the above-mentioned styles because it is of closed type. Closed type in the sense, all the important people in the management form an exclusive group and it would be difficult for the lower level workers to approach them. This aspect of management could impede the effective functioning of the subsidiary

  1. Conclusions and Recommendations

That is, with every Multinational enterprise wanting to expand their reach and make an imprint in various markets, there will be enough opportunities for it, to initiate that expansion drive. So, from this information one can understand that USA’s management style has some differences as well as similarities with the management style of India. So, when our managers deals with the managers of these two countries he/she has to take into consideration some key issues to make the interaction more effective. “Managers have to play multiple tasks in an organisation, and how they deal with different situations depends on their management style” (rpi.edu)

Firstly, when our manager interacts with an Indian manager, he should ‘break the ice’ by wishing to him in the Indian way. That is, Indians always gets excited when some one appreciates and felicitates their culture, and wishing them in their way can be the beginning. Then, Indians especially managers are more likely to get emotional in quick time both in the positive direction and in the negative direction. Positive in the sense they will show lot of happiness and also expect others to reciprocate it. Negative in the sense, they could easily get edgy and tensed up during the conversation, which can result in abuses, fights and in total, the end of the interaction and partnership. So, the Indian managers should be handled with lot of care. Indians always love food and if it is a casual meeting, restaurant could be the best place to interact. Because their favourite foods always lighten their mind and interaction could move smoothly.

  • enchanting-india.com 2006, Facts about India, viewed May 7, 2008 http://enchanting-india.com/EI-popup-language.htm
  • Kamat, V, The Diversity of India, viewed May 7, 2008 http://www.kamat.com/indica/diversity/
  • nike.com, Diversity, viewed May 7, 2008 http://nikebiz.com/company_overview/diversity/learn_more.html
  • Plato, Quotes, viewed May 7, 2008 http://www.democracy.ru/english/quotes.php
  • Podur, Justin (2002). ZNet Institutional Racism Instructional. viewed May 7, 2008 from http://www.zmag.org/racewatch/znet_race_instructional.htm
  • Tharoor, Shashi (2006). The idea of India India’s mosaic of multiplicities. Retrieved March 17, 2007 from http://www.shashitharoor.com/articles/catalyst-jan06.html
  • UNODC. (2007). Countering the global problem of corruption. Retrieved March 17, 2007 from http://www.unodc.org/newsletter/en/200601/page004.html

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