Introduction

Globalisation and advancements in technology have opened more opportunities for businesses. It has now become possible for organisations to set up and operate businesses in varied global markets. This has been a favourable way of expanding and increasing the customer base. Despite the opportunities created, there are challenges associated with operating in the international markets. There are numerous aspects that the business needs to consider to help move in the desired direction. The responsibilities of the human resource department do not change, but they tend to increase once a business moves to the international scene (Renzaho, 2016). HRM is still responsible for performance management, training and development, staffing, compensation and benefits, human resource planning and labour relations among other things.

While operating in the international market, HRM needs to enhance flexibility, knowledge sharing, local responsiveness and transfer of competence for success to be actualised. There is also the need of developing a global mindset, fostering effective communication, and putting more emphasis on informal control mechanisms (Stolt, 2010). International HRM tends to differ with domestic HRM in some aspects. IHRM encompasses more functions compared to domestic HRM. Heterogeneous functions are also more, and the perspectives are changing constantly. There is also the need of being involved more with employees’ personal lives, and there is more influence from external sources.  The level of risk is also high compared to the typical domestic HRM. Among the trends associated with international HRM is the fact that international trade’s growth is more rapid compared to the world output (Stolt, 2010). The flows of foreign direct investment are also increasing and the numbers of inter-firm, cross-border agreements have risen dramatically just to mention a few.

This shows that operating in the global market can prove to be difficult to multinational companies due to the aspects that need to be put for the success to be actualised. The HRM needs to be diligent in its activities to avoid failure at the international level.

Challenges for International HRM

Cultural Diversity

Understanding and maintaining cultural diversity has always been a salient issue for international HRM. There is a need for varied changes for any business that intends to work with people from different locations and backgrounds. These changes ought to come in terms of new ideas and style of operations, unfamiliar social practices, and new ways of communication. Based on the environment that people have been brought up, they will usually see things from different perspectives. This can be a good thing to the organisation involved due to the array of ideas that will be produced. However, it can also be problematic due to inherent conflicts that are likely to occur (Tayeb, 2011). HRM has a big responsibility with regards to this issue to help ensure that everything is going as per the plans of the organisation.

Compliance with International Laws

Every country has its set of laws of how businesses ought to be conducted within that geographical area. Some of these laws are similar in some countries, but there are also major differences being experienced. That is why it is important for an organisation to have a clear understanding of the laws governing certain activities in countries that they intend to venture for their business activities. Adapting to these laws is usually paramount to ensure the business does not find itself on the wrong side of the regulators. The laws involved are complex most of the times, and there is always a need for employing individuals that have specific knowledge of the country’s business laws.

Benefits and Compensation

Compensation and benefits are usually regarded as the backbone of any human resource strategy. They are even more important in focusing on the employees’ work-life balance in the international HRM. Work-life balance works to ensure that employees have initiatives and programs that help to improve both the professional and personal lives. Numerous MNCs already have these programs in place that include things like flexible working hours, extended holidays, and on-site childcare among others. These are programs initiated with the objective of making the lives of employees better. Organizations take this initiative since they understand the value of employees as being valuable assets hence keeping them happy means that their productivity will improve. However, implementing the programs on the local scale becomes a challenge for organisations. This is because what might seem desirable and productive in one market, is not necessarily going to work in another market.

How these Challenges Impact HRM Practices

Cultural Diversity

Cultural diversity in the workplace brings about challenges to the international HRM. When a multinational corporation operates in a foreign market, there is the tendency to include employees from different cultural backgrounds. Among the reasons is that the company needs a balance between employees in the local market and those from the country of origin. It is prudent to include employees from the parent country since they have been in interaction with the company’s operations hence they are aware of exactly what needs to be done. Local employees are also important since they have valuable knowledge regarding the home market, which is the target market (Tayeb, 2011). Involvement of these employees with different cultural backgrounds in the same workplace environment tends to break down corporate homogeneity. This is because there are people used doing things in a certain way, and there are others used to doing this in a different way (Alfes et al., 2013). It becomes difficult to work in partnership in such an environment. Conflicts are also likely to occur every now and then, and this makes it necessary for the human resource management to keep a close eye on the employees.

Cultural diversity also tends to create a challenge when it comes to communication prospects. International HRM has the knowledge that it is favourable to institute appropriate cultural communication and non-verbal business etiquette. This is quite important when a company is indulging with international teams. The necessity and benefits that come with being polite might come out as being obvious, but it is more dependent on understanding what is regarded as being polite by an interlocutor. This means that what was being considered as being polite in the home country is not necessarily going to be considered the same way in a foreign market (Vaiman & Brewster, 2014). This makes aspects of communication challenging for MNC as there is a need for ensuring that appropriate and desired prospects are used as per the cultural expectations of the market involved. Going with assumptions will only result to failure and unwanted setbacks.

There is also the tendency of worker expectations and norms to vary greatly at the workplace due to cultural diversity. People might be working in the same environment, but given the different cultural backgrounds, they are programmed to have different expectations. For example, religion on most occasions has a profound effect on personal identity. An MNC recruiting like 200 employees is statistically likely to have Christians, atheists, Sikhs, Muslims, Jew and Buddhist. This is not necessarily regarded as an inevitable recipe for conflict, but there are issues of accommodation of differences ranging from leave for diverse holy days and practical matters of dress requirements to potentially larger issues like distinct approaches to moral questions (Alfes et al., 2013). This is a challenge that companies are usually not good with. This is because it is an aspect that affects the HRM officials too; who are supposed to be solving such issues when they arise.

Cultural diversity is also responsible for mistrust at the workplace. People of different nationalities tend to treat each other in different capacities. There are those that will consider themselves more superior to others based on the backgrounds involved. This is likely to instigate conflicts since the inferior parties will try their best to showcase their superiority. Development of such an environment is likely to create tendencies of sabotage; involving employees from both sides of the divide. This only works to ruin the operations of the organisation hence making it a challenge for HRM.

Another issue rests on the behaviour of the employees. Different studies have shown that each culture displays unique behaviour that ought to be considered with regards to employee development and organisational leadership (Monteiro & Birkinshow, 2016). A good example is how Indian employees appreciate a paternalistic style of leadership, respect for the superior’s skills and expecting direction, attention, approachability and top-down communication. Assessing Japanese employees gives a different perspective given that these employees tend to align quickly with company objectives and remain loyal, but they are less satisfied individually. Going with this knowledge it is apparent that it is not possible for MNCs to have identical reward systems when operating in different areas as it would be ineffective. The same thing goes with career development in the organization. Career development opportunities are among the things that contribute significantly to attracting top talent. This is why this is a big challenge for HRM since there is a need to ensure that the relevant aspects have been addressed in accordance with the specific country of operation.

Compliance with International Laws

Compliance with international laws has always been a major challenge for International HRM. There is always the need of the HRM to study the law in detail to ensure that there is a proper understanding of what ought to be done at all times. A practice might be executed with good intentions, but it is not recognised as being favourable by the law of a certain country (Negandhi, 2013). That is why it is important for the establishment of protocols that are customised for each region, and they are communicated effectively.

Compliance with the law brings about challenges to HRM with regards to the hiring of employees. Part-time and temporary employees tend to play a significant role in an organisation’s workforce. However, the laws that govern these types of employees tend to be different for varying countries. A good example is a country like Indonesia that does not recognise the concept of part-time employees. Here, part-time employees are entitled similar rights as those of full-time employees. They are also expected to receive similar benefits like the permanent employees (Geppert & Dörrenbächer, 2013). This is something that the HRM has to understand to ensure that the organisation does not fall on the wrong side of the law. Failure to comply only results to lawsuits that can end up being very expensive. There is also the concept of attaining bad publicity as a result of not complying with set laws and regulations.

Another issue is with the policies governing the organisation. There is a possibility that some of these policies will conflict with local laws or regulations. This is tricky for the organisation since it would warrant a deviation from the set ways of doing business. The changes are likely to have a negative effect on the potential economic value. However, the HRM needs to be the voice of reason regardless of the negative implications for the finances of the organisation. There is the need of now coming up with policies that are in line with the requirements of the law regardless of how effective the previous policies were.

Another challenge for the HRM with this respect is trying to help employees from the head office to settle in a region that has different regulations from the one they are already used to. It might take time before they settle in and start operating as it is required given that the organisation is keen not to find itself on the wrong side of the law. This is likely to necessitate the HRM to change its hiring attributes to help come up with an appropriate balance between local employees and head office employees when it comes to the top positions. There will be a dilemma of whether to go with personnel that is well aware of the local laws or personnel that has a good understanding of how the organisation operates (Brewster et al., 2015).

Benefits and Compensation

Compensation and benefits are important tools for HRM. The programs used to ensure that employees have a favourable life in light of offering their services to the organisation. Therefore, Implementation of these strategies becomes even more complicated by MNCs due to the diversity involved with the countries of operation (Guest, 2011). This is why companies that have the ability to develop a clear global pay philosophy are well positioned to make the employees happy most of the times, something that brings about efficiency at the workplace.

Among the challenges that organisations face with regards to compensation is how to compensate employees from the head office. Given that these employees are now working in foreign countries, there must have been incentives brought forward by the organisation to help them make the decision of moving from their home country. The employees expect to receive similar compensation and benefits like the other employees in their home country. This brings bout a conflicting aspect for the MNC due to the local employees in the country of operation. They would also demand compensation of a similar magnitude. Failure to accord them similar compensation comes out as a discrimination tendency since they are working in a similar capacity like the other employees (Bloom et al., 2012). To some extent, they might even be more valuable than the employees from the head office. Given the laws governing labour in the host country, an organization might end up being liable for legal action due to discrimination tendencies.

Another issue comes with the creation of incentives by the organisation through compensation. Companies have policies that they use when it comes to the creation of incentives. However, these policies might not work effectively in all the markets of operation. There are cultures that do not accept the tendency of linking pay to a group or individual performance.  This creates a roadblock to pay for performance; which is something that most organisations use. Now the company is forced to go back to the drawing board and come up with a compensation mechanism that is going to create the desired incentive (Edwards & Kuruvilla, 2009).

Conclusion

The number of multinational corporations has been on the rise due to increased globalisation over the years. This has made it possible for companies to increase their customer base hence the expected profits. Despite these opportunities, there are challenges involved with MNCs. International HRM tends to differ from domestic HRM in varied ways. The scope of responsibilities tends to increase, but the expectations of what should be attained remain to be the same. The increased responsibilities mean that there is more risk involved too. Among the challenges that internal HRM is likely to encounter are based on cultural diversity, compliance with international laws and benefits and compensation. These are challenges likely to affect MNCs operating in different parts of the world. The challenges come as a result of the difference between the company’s country of origin and the host country. It is upon the HRM to take the relevant initiatives to ensure that these potential challenges do not affect the company negatively even if they were to occur. The moment the HRM has prior knowledge regarding potential problems, it becomes possible to find solutions to help deal with the issues as and when they occur. Challenges are usually not detrimental to an organisation, how they are handled is what determines the long-term outcome.

 References

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