International Entrepreneurship and Management Journal

ISSN: 1757-1938 SJR : 0.847 SNIP : 1.89948

The Assessment of Similarities and Differences between HRM and IHRM

IRSTB O7.51.91

Rysbek Utkelbay, Senior Lecturer, PHD, International Relations Faculty, Al-Farabi Kazakh National University, Kazakhstan

Samuel Osei-Nimo, Professor, Business school, University of Uister, London,UK

Anargul Rakhmetzhan, Senior Lecturer, International Relations Faculty, Al-Farabi Kazakh National University, Kazakhstan

1. Introduction:

Due to globalisation, the international commitment of organisations has continually increased, undertaking several shapes, from an internationalization seeking to absorb the capacity excess of domestic production, through a global production which compacted the world into an ultimate targeted market, via a multinational production based on offshoring solutions, or even a transnational involvement with a high managerial independence and an enhanced responsiveness to local demand (Banfield and Kay, 2012; Armstrong and Taylor, 2014). This increase in international commitment added to the democratization of technology owing to internet and disruptive innovations as Christensen (2013) claimed, bring into the spotlight the prominence of human resources as a way for organisations to differentiate themselves from the current global competition (Gomes, 2012; Dowling et al., 2013). Furthermore, in order to maximize the efficiency perceived from their human resources, companies develop several managerial strategies in order to appropriately deploy their strategic capabilities in term of human resources to come out with added values for customers (David, 2005; Thomas, 2002; Dowling et al., 2013). Therefore, in order to evaluate the implications of the international scope of business on the management of human resources, it would be necessary as a starting point to define the basic field of interaction concerning human resource management (HRM), and then allocate the international dimension to this concept to arise with a broad perspective of HRM, in what would be defined as international HRM or IHRM (Gomes, 2012). Finally, a comparison between HRM and IHRM would be assessed in order to appreciate their similarities and differences instantiated with illustrative industrial examples.

2. Definition of key concepts:

As previously stated, a well-managed human resources becomes a key factor of differentiation and success for enterprises either in the domestic or international level, thereby, HRM, which is defined by Dowling et al. (2013) as the organisations’ engagement in activities that enable them to put in favourable the usage of human resources, has significant impacts on the efficiency perceived from the firms’ employees concerning their individual achievements, their synergy within their teamwork and even their adequacy to the missions allocated to them (Armstrong and Taylor, 2014). In fact, several activities are assigned to the HRM services within a company and which are interlinked with the efficiency perceived from employees, likewise the staffing activities, notably in term of recruiting vand selecting new workers or executives and their placement in the adequate assignments, and also the activities related to the development of employees and their pre-integration or upgrading training, added to the management and evaluation of the personnel performances which is obviously linked to their apportioned compensation in term of remuneration, bonus and welfares (Dowling etal., 2013; Gomes, 2012).

Besides, these activities allocated to HRM, regardless of either the company is domestic or international, remain of significant importance in the procurement of human capitals, their allocation in the adequate missions and their efficient utilisation (Banfield and Kay, 2012). Still, while expanding or operating internationally, a broader perspective related to the type of countries which encompass the firms’ operations and to the kind of employees emerging from these countries’ differences should be taken into consideration, which would enlarge the scope of the HRM activities as claimed and illustrated. Therefore, as clearly shown in the previous graph, the scope of IHRM activities goes beyond the basic fields of HRM, as in the international level, HRM get involved with the adaptation to different types of countries, notably the host-country which may comprise a company’s subsidiary, the parent country where the firm’s headquarter is located and the third-countries as possible sources of human, financial and different inputs’ capital (Dowling et al., 2013; Armstrong and Taylor, 2014). Furthermore, operating in different locations means the involvement of the company’s employees in International missions, which create different types of expatriates, between host-country nationals that are assigned with a movement from the companies’ subsidiaries located in host-countries into the headquarter country of the firm, the parent-country nationals that achieve the inverse movement of the previous type of expatriate, and the third-country nationals which are neither originated from the host nor the parent countries of the company, but who might work in both of them (Ibid). Consequently, IHRM is defined by Stahl et al. (2012) as the widen commitment in term of scope and perspective concerning issues facing the human resource of a company, as it involves the interaction between the basic activities of domestic HRM and the different countries where the firm operates in term of extensive external factors and the risk management related to the broader macro-environment surrounding the company, and also the diversified kind of expatriates issues related to the different locations of the firm.

Thus, in order to evaluate the implications of international commitment on the HRM activities, it would be necessary to elaborate a critical comparison between HRM and IHRM which would assess the similarities and differences between this two concepts.

3. Similarities and differences between HRM and IHRM:

As stated before, there are some basic activities that remain in prominence regardless of the domestic or the international context of HRM, what would obviously constitute the field of similarities between HRM and IHRM (Thomas, 2002), still the international context, with its widen Source: an adaptation of Morgan (1986) framework concerning the enlarged scope of IHRM activities pp44. required perspective, defines the differences perceived between the two concepts (Thomas, 2002;Morgan, 1986).

In fact, for instance, in the staffing activities related to HRM, the importance of recruitment and selection remains immeasurable for the firms’ success independently from the geographical context, as no matter how developed the infrastructure of a company, the backward evaluation of skills, capabilities and motivation of the candidates aiming to join the company is worthy for effectiveness and success of the whole company (Michaels et al., 2001; CBI, 2014). Effectively, the managing director of Pearson, which is a multinational whose one of its specialities consist on the educational development and the professional integration of individuals (Pearson, 2014), claimed that successful organisations in cooperation with them require and insist on the fact of the well preparation and development of skilful and versatile competences within the future candidates for what it constitutes for them in term of key factors of integration and success in their assignments (CBI, 2014). Therefore, pursuing the flow of arguments it could be argued that one of the HRM and IHRM similarities, is the importance allocated to the adequate recruitment and selection of new personnel in the local context or the international one (Huselid et al., 2009; Schuler et al., 2010). In fact, Tesco, which is a retailing UK company, has been given by Guthridge et al. (2008) as an illustrative example of the recruitment and selection of new candidates based on the adequacy to the post offered, as the company is setting different websites of recruitment, adapted to the level of work experience and the education of the candidates, as a strategy of personnel attractiveness based on what has been define by Guthridge et al. (2008) as the employee value propositions concept (EVP). Contrariwise, other scholars as Armstrong and Taylor (2014) and Dowling et al. (2013) insisted on the amplification related to the prominence of adequacy of recruitment when it concerns the international level, as they claimed, unlikely to HRM, IHRM is concerned with a wider perspectives related in the case of recruitment and selection to the mind-set of employees which are concerned with expatriation among the international locations of their companies, and their mastering of the languages of these countries, their ability to adapt to different cultures and their familial situations that condition their availability for eventual expatriation. Therefore, all these criteria have to be evaluated by the company willing to hire employees with international profiles in order to enhance the success rate of its expatriates (Ibid). Indeed, for instance, LG, which is one of the Korean world giant of electronics, undertakes a formal methodology for the selection of employees in regard to their ability to achieve foreign assignments (Black and Gregersen, 1999). This approach is based on an external company survey that charges LG an average of $400 per candidate, and that in the early stage of recruitment evaluate, based on 100 questions, the ability of the employee to achieve foreign assignments in term of its cross-cultural competences, its international extensive knowledge and experience, and its personal conditions that would have an impact on his availability for abroad missions, what indicate the strengths and weaknesses of this employee in term of expatriation requirements. Consequently 97% of LG parent, third and host-country nationals succeed in their expatriations due to their selection adequacy (Chambers, 2007).

Similarly, several correspondences occur between HRM and IHRM in term of training and development activities assigned to HR responsibilities, and that independently of the geographical scope context (Banfield and Kay, 2012). Indeed, owing to the continual technological development and the incessant disruptive innovations, the continual training and development of employees become worthy both for the ability of the companies to sustain their competitiveness and also for the employees as a motivational aspect of their personal career development (Christensen, 2013;Harris and Moran, 1991; Chambers, 2007). In fact, Nokia which is one of the world leaders of mobile and communications, for example, enable its motivated employees to continually enhance their technological and managerial skills via its networks of professional educational centres and its intranet interface available for all its employees as a gateway for e-learning and experience sharing (Nokia, 2015). However, in order to be rational, business specialists likewise Dowling et al. (2013) urged to not underestimate the effect of importance’s accentuation of the training and development activities while companies enhance their international commitment. In fact, the international dimension add broader aspects to consider by HR managers while expatriating the companies’ employees, as added to the technical background required for their assignments, employees in their international missions should be able to master the cultural characteristics, the language, and the specific laws of their future destinations in order to succeed in their assignments (Thomas, 2002; Armstrong and Taylor, 2014), as researches revealed a huge correlation between the cross-cultural formation and the success in international assignments in term of performances, adjustment and the well entente with the host-country nationals (Selmer, 1995). In that regard, Nokia use its large commitment in the international level by facing its engineers from different origins and subsidiaries in trimestral meetings, in order to enhance the experiential share and competence spread between their international employees (Black and Gregersen, 1999). Against the flow of arguments, Porter (1990) argued that the importance of training in the international level may be diminished by inciting international managers, while defining its Diamond framework, to well analyse the factor endowments related to their industry while expanding to new markets, as this aspect praise the analysis of skilful workforce presence in the market in relation to a specific industry, likewise the processors industry in Japan or the services and banking in UK, which would be worthy in term costs saving related to employees training and development (Hill, 2014).

Besides, it is worthy to recruit skilful employees or train them to improve their competences, however, it is also important to retain them and to make them faithful to the company (Schuler et al., 2011). Thus one of the most important responsibilities for both HR and IHR managers is to master the process of compensation of the company’s employees. In that regard, the managers may take into considerations several criteria (Ibid). Indeed, some companies with less international commitment may use the kind of post-basis in their rewarding processes, others, likewise Ryanair bases their compensation on the level of meritocracy and performances (Ryanair-Corporation, 2015).

However, in order to address the issues related to the international expatriation, likewise macro environmental influence in term of taxes upgrading for expatriates, their family concerns, housing, their children studies and the maintain of the same level of life, companies with more international profile as Microsoft use a regional banding method for compensation or the strategy of localized compensation which address the issues of expatriation cost-of-living (Schuler et al., 2011).

4. Conclusion:

To reiterate, the HRM became of major importance in this era of high competitiveness, and the major indicators of similarities and differences between HRM and IHRM is the scope of perspective that goes beyond the basic activities related to HRM into the treatment of issues related to expatriation and international commitment (Dowling et al., 2013; Banfield and Kay, 2012).

5. References:

Armstrong, M., Taylor, S. (2014) Armstrong’s Handbook of Human Resource Management Practice. 13th Edition. London: Kogan Page Limited.

Banfield, P., Kay, R. (2012) Introduction to Human Resource Management. 6th Edition. New York: Oxford University Press.

Black, J. S. and Gregersen, H.B. (1999). The Right Way to Manage Expats. Harvard Business Review. 77(2) p. 52-63.

CBI (2014) Gateway to Growth: CBI/Pearson Education and Skills Survey 2014. Available from: http://www.cbi.org.uk/media/2807987/gateway-to-growth.pdf [Accessed the 28th July 2015].

Chambers, E. (2007) Best Practices for Training Advertising Expatriates. University of Wisconsin-Stout Journal, pp 1-39. Available from: http://www2.uwstout.edu/content/lib/thesis/2007/2007chamberse.pdf [Accessed the 26th July 2015].

Christensen, C. (2013) The innovator’s dilemma: when new technologies cause great firms to fail. Boston: Harvard Business Review Press.

David, F.R. (2005) Strategic Management: concepts and cases.10th Edition. New Jersey: Prentice-Hall.

Dowling, P.J., Festing, M., and Engle, A.D. (2013) International Human Resource Management. 6th Edition. Hampshire: Cengage Learning EMEA.

Gomes, S. (2012) International Human Resource Management (IHRM). Word Press. Available from: https://xisspm.files.wordpress.com/2012/02/chap-2-concept-of-ihrm.pdf [Accessed the 25th July 2015].

Guthridge, M., and Komm, A.B. (2008) Why multinationals struggle to manage talent. The McKinsey Quarterly. pp. 1–5.

Harris, P. R, and Moran, R T. (1991). Managing Cultural Differences. Houston: Gulf Publishing Company.

Hill, C.W.L. (2014) International Business: Competing in the Global Market. Berkshire: McGraw-Hill Education.

Huselid, M.A., Beatty, R.W., and Becker, B. (2009) The differentiated workforce. Boston: Harvard Business School Press.

Michaels, E., Handfield-Jones, H., and Axelrod, B. (2001) The war for talent. Boston: Harvard Business School Press. Available from: http://www.clmworkforce.com/docs/workforceDemands/TheWarForTalent.pdf [Accessed the 27th July 2015].

Morgan, P.V. (1986) IHRM: Fact or Fiction. Personnel Administrator. 31(9), pp 43-47.

Nokia. (2015) Nokia Training and Learning 2015. Available from:

http://networks.nokia.com/ru/portfolio/services/training-learning [Accessed the 25th July2015].

Pearson (2014) Pearson Annual Report and Accounts. Available from: ar2014/01%20PearsonAR_FULL.pdf [Accessed the 29th July 2015].

Porter, M.E. (1990) The Competitive Advantage Of Nations. Harvard Business Review, pp73-91. Available from:http://dl1.cuni.cz/pluginfile.php/50387/mod_resource/content/0/Portercompetitive- advantage.pdf [Accessed the 7th July 2015].

Ryanair (2015) Ryanair Labs: Digital and IT Recruitment. Available from:

http://corporate.ryanair.com/careers/ [Accessed the 29th July 2015].

Schuler, R.S., Jackson, S.E., and Tarique, I. (2011) Global Talent Management and Global Talent Challenges: Strategic Opportunities for IHRM. Journal of World Business. 46(4), pp506- 516. Available from: http://www.sciencedirect.com/science/article/pii/S1090951610000684 [Accessed the 25th July 2015].

Selmer, J. (1995) Expatriate Management. West Port, CT: Quorum Books.

Stahl, G., Björkman, I., and Morris, S. (2012) Handbook of Research in International Human Resource Management. Cheltenham: Edward Elgar.

Thomas, D.C. (2002) Essentials of International Management: a Cross-Cultural Perspective. London: Sage Publications.