Global Human Resources Management: HRM's Factors and Business Implications

Global Human Resources Management: HRM’s Factors and Business

Implications

Cassandra Gonzales

National University

MGT 430 Survey of Global Business

Professor: Tony S. Robertson

October 17, 2022

Running Head: GLOBAL HUMAN RESOURCES MANAGEMENT: HRM’S FACTORS AND BUSINESSIMPLICATIONSGonzales, 2

Human resources management is an important function of any

business, whether it is a strictly domestic firm or an

international firm. “Human resources management refers to the

activities an organization carries out to use its human resources

effectively. These activities include determining the firm’s

human resources strategy, staffing, performance evaluations,

management development, compensation, and labor relations” (Hill,

2013, p. 616). Without the right people and their alignment to

the firm’s business strategy, a business cannot succeed. A

“strong fit between human resource practices and strategy is

required for high profitability…superior performance requires not

only the right strategy, but the strategy must also be supported

by the right …people” (Hill, 2013, p. 617). The article The

Relationship between Human Resources Management Practices, Business Strategy and

Firm Performance: Evidence from Steel Industry in Taiwan further illustrates


the importance of human resources management and its relationship

to a firm’s business strategy. The article states “A number of

researchers found a link to HRM practices with…increased firm

performance. (It was) found that business strategy and HRM

practices interaction is an important factor in organizational

effectiveness (and that) business strategy moderates the

relationship between human resource practices and firm

performance. (When) business strategies (are) paired up with

appropriate HRM practices (there is) a positive effect on firm

performance… companies that closely coordinate their business

strategy and HRM practices achieve better performance than the

companies that do not” (Lee, Lee, & Wu, 2010).

The role of the human resource manager is to ensure that a

firm’s human resources support the business strategy. By ensuring

that the firm’s human resources are aligned with its business

strategy, the firm can increase productivity, efficiency,

effectiveness and profits. The HRM functions that are utilized to

undertake the process of acquiring human resources and ensuring

their alignment with the business strategy are; “staffing,


training, compensation, and performance activities. (These

functions) have a critical impact upon the people, culture,

incentives, and control system elements” of a firm (Hill, 2013,

p. 617).

Staffing Policies

Staffing the right people for a firm is one of the primary

functions of a human resource manager. Staffing policy “is

concerned with the selection of employees for particular jobs…

this involves selecting individuals who have the skills required

to do particular jobs (and) can be a tool for developing and

promoting the desired corporate culture of the firm” (Hill, 2013,

p. 618). There are three different staffing policies;

ethnocentric, polycentric, and geocentric. Each approach has

varying degrees of diversification when it comes to management.

At one end of the spectrum, with all management positions filled

with home country nationals, is the ethnocentric approach. At the

other end of the spectrum is the geocentric approach, where

management positions are filled with whoever is the best fit;

regardless of nationality. The adoption of a staffing approach is


usually not static. It has been shown that firms move from the

ethnocentric approach to the geocentric approach as they mature

and gain experience within the international market. “The

pattern of value orientation and international staffing,

respectively, starts with an ethnocentric orientation, leads to

polycentric orientation, and ends in a regiocentric or geocentric

orientation The gradual and dynamic character is,… an incremental

process” (Isidor, 2011).

Ethnocentric Approach

An ethnocentric staffing policy is one in which all key

“positions at headquarters and at the subsidiaries (are) reserved

for parent-country nationals (PCN)” (Yoram Zeira, 1977). The

reasons behind the utilization of the ethnocentric approach are;

first, to “maintain a unified corporate culture.” As well as, to

expedite the “transferring (of) core competencies,” which are

tacit knowledge and not easily conveyed or codified. Third, the

parent company “believes the host country lacks qualified

individuals to fill… management positions” (Hill, 2013, p. 619).

However, this approach to staffing also has many drawbacks. One


such disadvantage is that it “limits advancement opportunities

for host-country nationals.” (Hill, 2013, p. 619). Consequently,

this can result in “resentment, lower productivity, and increased

turnover” (Hill, 2013, p. 619).

An additional drawback to the ethnocentric approach is that

it can lead to “cultural myopia, the firm’s failure to understand

host-county cultural differences that requires different

approaches” (Hill, 2013, p. 619). Cultural myopia can result in a

manager making major mistakes that could offend the host country

consumers. This could, in turn, result in tarnishing the

company’s reputation, lost profits, or even the failure of the

company. Finally, an ethnocentric policy can be expensive. A

company that takes on this staffing strategy must transfer home

country nationals to other countries to fill management

positions. This can result in substantial relocation and

traveling costs.

While many firms start out using an ethnocentric approach,

few maintain this staffing policy for the life of the firm. The

article Human Resources Management and Early Internationalization: Is There a


Leap-Frogging in International Staffing? states “Technological intensity

increases the probability of the choice of an ethnocentric

staffing policy, especially for early internationalizers…

Corporations adopt an ethnocentric approach in the early phase of

multinational development. Over time, they change to a

polycentric policy and as the company becomes even more

international it adopts a regiocentric or geocentric policy”

(Isidor, 2011). As firms mature within the international market,

and gain valuable experience and knowledge, many shift to a

polycentric approach for more cost efficiency.

Polycentric Approach

A polycentric staffing policy “requires host-country

nationals to be recruited to manage subsidiaries, while parent-

country nationals occupy key positions at corporate headquarters”

(Hill, 2013, p. 620) The article Human Resources Management and Early

Internationalization: Is There a Leap-Frogging in International Staffing?, further

defines a polycentric approach as one in which “the headquarters

considers foreign subsidiaries as independent national entities,

and autonomy is granted to a great extent” than with a


ethnocentric approach (Isidor, 2011). The polycentric approach

has two important advantages. First, “a firm is less likely to

suffer from cultural myopia. (Secondly,) a polycentric approach

may be less expensive to implement, reducing to costs of value

creation” (Hill, 2013, p. 620). Because the company is taking

advantage of host country nationals to fill management positions,

the firm reduces the chances of making costly mistakes because of

cultural misunderstandings. Additionally, hiring host country

nationals to fill management positions eliminates the need to pay

the substantial travel and relocation costs associated with the

ethnocentric approach.

However, the polycentric approach has disadvantages as well.

The polycentric approach can result in “host-country nationals

(having) limited opportunities to gain experience outside their

own country and thus cannot progress beyond senior positions in

their own subsidiary” (Hill, 2013, p. 620). Due to the fact that

the firm is utilizing host country nationals for subsidiary

management positions, and filling headquarters’ management

positions with home country national, there is no transferring of


people from country to country. Subsequently, the host country

national’s opportunities are limited to those that arise within

the country in which the subsidiary is located. This can result

in frustration, and high turnover among management.

Another disadvantage to the polycentric approach is that a

gap can arise between the firm’s headquarters and its

subsidiaries. A “gap …can form between host-country managers and

parent-country managers. (This gap inhibits) the coordination

required to transfer core competencies or to pursue experience

curve and location economies” (Hill, 2013, p. 620). Each country

has its own distinct culture, perspectives, and ways of

operating. Consequently, a firm’s company culture can vary from

subsidiary to subsidiary. This gap between the parent company and

the subsidiaries make it difficult to transfer tacit knowledge

such as core competencies, and can impede in a firm’s

productivity, efficiency, and affects its competitive advantage.

Geocentric Approach


The geocentric approach is the best approach in terms of the

most efficient use of a company’s human resources. This approach

“seeks the best people for key jobs throughout the organization,

regardless of nationality” (Hill, 2013, p. 620). The article Is

There a Relationship between a Geocentric Mind-Set and Multinational Strategy?

states, “A geocentric IHRM policy values ability over national

origin: Nationality makes no difference in… key subsidiary

positions. Competence, not passport, counts… Full use is made of

all of the firm's human resources, wherever they are located.

Most managerial positions, including those at the very top, are

open to all within the firm… The objective of a geocentric HRM

policy is the gradual elimination of the very idea of a home or

host country” (Kobrin, 1994).

The geocentric approach has many advantages. By putting the

best people a company has into its management positions,

regardless of location, a firm can “build a cadre of

international executives who feel at home working in a number of

cultures” (Hill, 2013, p. 620). This can lead to the creation of

“informal management networks,” which managers can utilize to


gain insight on issues, acquire knowledge, or find assistance.

(Hill, 2013, p. 620). Through the use of the informal networks a

“strong unifying corporate culture” is also created.

Additionally, this approach “reduces cultural myopia and

(enhances) local responsiveness” (Hill, 2013, p. 620) A firm is

able to reduce cultural myopia and increase local responsiveness,

because each time a manager is transferred to a new location it

becomes a learning experience. “Foreign assignments become a core

component of the organizational and career development process…

to develop …worldwide perspective and cross-cultural skills.

Foreign assignments are used to enhance individual and

organizational learning in all parts of the system” (Kobrin,

1994). Through the use of a geocentric approach, managers are

able to gain further insight into different cultures, customs,

and preferences. That insight not only expands the manager’s

cultural awareness and understanding, but can be shared

throughout the informal management network. Subsequently, a firm

is able to build a diversified management pool that is

knowledgeable and adaptable.


However, much like the preceding staffing approaches, the

geocentric approach has drawbacks as well. First, this approach

can prove to be difficult to implement. This is because, “Many

countries want foreign subsidiaries to employ their citizens. (To

encourage this,) they may use immigration laws to require the

employment of host-country nationals” (Hill, 2013, p. 620).

Second, the geocentric approach can be quite costly. If a

company wants its best people to fill its open positions, it will

have to transfer those individuals from country to country. This

can result in substantial travel and relocation expenses. These

expenses can reduce the value-adding benefit of using a

geocentric approach.

Training and management development

Training and development is an important aspect of human

resources management. “Training programs (are) used to give…

management the skills required for success in a foreign posting…

Management development is a much broader concept. It is intended

to develop the manager’s skills over his or her career with the

firm…build his or her cross-cultural sensitivity and experience,


(and) enhance the management and leadership skills of executives”

(Hill, 2013, p. 626). Training at every level of a company is

important. The more knowledgeable the employees are, the more

productive they will be. “Only though well-trained personnel, an

organization can achieve its goals. Training is defined as

learning that is provided in order to improve performance on the

present job” (Karthik, 2012).

There are three categories of training that are critical to

any multi-national corporation (MNC) manager; cultural training,

language training, and practical training. Cultural training is

utilized to increase a manager’s cultural awareness and

understanding. By increasing a manager’s cultural awareness and

understanding, the manager can increase their effectiveness in

other countries, and decrease the chances of cultural myopia.

Language training is important for manager that will be

transferred to another country. Although “it is quite possible to

conduct business all over the world in English… having an

understanding of, and a willingness to communicate in” the local

language will also increase the managers effectiveness and help


to build stronger business relationships (Hill, 2013, p. 627)

Being able to build strong business relationships is important

because it can help build a firm’s reputation. This can

subsequently lead to increased profitability. Practical training

is used to familiarize manager with their daily activities.

“Practical training is aimed at helping…managers…ease themselves

into day-to-day life…the sooner a routine is established, the

better are the prospects (the manager) will adapt successfully”

(Hill, 2013, p. 627). Proper training at all levels can have many

value-adding benefits for a firm, such as; increased employee

satisfaction, and decreased employee turn-over. “To increase the

commitment level of employees…senior management teams (are)

increasing the role of training (with a) greater emphasis on

employee development and long term education. Training is now the

important tool of Human resources management to control the

attrition rate because it helps in motivating employees, (and)

increasing the level of job satisfaction” (Karthik, 2012).

Ultimately, a knowledgeable and well trained human resource pool


will lead to a more efficient and productive firm, and strengthen

the firms competitive advantage.

Performance appraisals

“Performance appraisal systems are used to evaluate the

performance of managers against some criteria that the firm

judges to be important for the implementation of strategy and the

attainment of a competitive advantage. (Performance appraisals)

are an important element (to a firm’s) control system” (Hill,

2013, p. 630). An article entitled No Easy Path to HRM Performance

Measurement Systems: Exploring the Introduction of the U.S. Human Capital

Assessment and Accountability Framework and the Flemish Management Code

states, “the eight reasons managers…have for introducing

performance management systems (are) as evaluation, control,

budgeting, motivation, promotion, celebration, learning and

improvement” (Vandenabeele, 2008) Performance appraisal can be

utilized for many reasons. They can be used to determine if a

manager requires additional training or development, or if a

manager should be acknowledged or rewarded. Performance

appraisals can be utilized in the decision making of who should


receive a promotion, or who should be let go. Additionally, they

can also be used to measure the growth a department or subsidiary

has made towards meeting an objective.

Although the utilization of performance appraisals can be

beneficial to a firm, one concern to be considered is

unintentional bias. “Unintentional bias makes it difficult to

evaluate the performance of …managers objectively” (Hill, 2013,

p. 630). This is especially true when the performance appraisal

is being given by an individual in a different country, with a

different culture, ways of performing daily activities, and

expectation of performance. However, there are ways of reducing

such bias. For example, due to the fact that different cultures

have differing expectations of performance and work habits, the

performance appraisal should be given by an individual who is of

the same cultural background or located at the same subsidiary as

the manager being evaluated. An individual at the same location

or with the same cultural background will have a better

understanding of what is expected of the manager, and how the

manager’s performance has been given the local work environment


and cultural constraints. Additionally, “a former (manager) who

served in the same location should be involved in the appraisal

to help reduce bias” (Hill, 2013, p. 630). This is another method

of ensuring that the person giving the appraisal has the proper

understanding of the work environment in which the manager works,

and how that environment affects the manager’s performance. By

ensuring that the individual has a good understanding of the

circumstances that affect a manager’s daily performance, the firm

can decrease the possibility of unintended bias in the appraisal

process. Performance appraisals can be very beneficial. The

information gathered from them can be utilized in a number of

different ways for the advantage of both the firm and the

individual being appraised. However, it is important to eliminate

as much bias as possible, in order to acquire the most accurate

and useful information.

Compensation

There are two important considerations of compensation.

First, “how compensation should be adjusted to reflect national

differences in economic circumstances and compensation practices.


(Secondly,) how …managers should be paid. (Hill, 2013, p. 630).

Having an understanding of economical and political circumstances

is very important when contemplating compensation policy. The

article Pay Trends for 2014: Salary increases hold steady illustrates how

economical and political circumstances can have a lasting effect

on compensation trends. The article states that as a result of

the recession that occurred due to the 2008-09 financial crisis,

“Average base pay increases for 2014 will remain at 3 percent for

the second year in a row in the U.S.—roughly one percentage point

below pre-recession levels…Employers continue to be cautious with

their salary budgets… and average promotional pay increases

stagnated” (Stephen Miller, 2013). Furthermore, “As a result of

the Affordable Care Act, 8 percent of respondents have capped

work hours of part-time employees (and) eight percent are

providing incentives for employees to obtain benefits via another

source” (Stephen Miller, 2013). Political and economic

circumstances clearly have a significant impact upon a company’s

compensation policies, and how its employees will be paid. As

such, both political and economical conditions should be an


important consideration when determining a firm’s compensation

policies.

International labor relations

Another important function of human resources management is

“to foster harmony and minimize conflict between the firm and

organized labor” (Hill, 2013, p. 634). One of the most important

resources a firm has is its human resources, and its success is

dependent upon them. Widespread employee dissatisfaction and

conflicts can ultimately lead to a decrease in productivity, lost

profits, high employee turnover, or even the firm’s failure.

In an article entitled, Twinkies’ demise proves the stupidity of U.S.

labor relations; it states, “The company (Hostess) blames a

nationwide strike by the Bakery, Confectionery, Tobacco Workers

and Grain Mill International Union for the imminent death of its

brand. In response, the workers say management has failed to

innovate…the latest reports are that the mediation broke down and

that the company will proceed with liquidation” (Horsey, 2012).

This article illustrates the importance of a company having good


labor relations. Although Hostess was struggling prior to the

strike, had Hostess been more willing to listen to its workers

and take appropriate action, Hostess may have been able to

prevent the strike and Hostess’ subsequent failure. There is an

important point to be learned from Hostess. “Give employees as

big a voice as investors. Give them a place at the table…Do not

treat them as faceless cogs in a machine, treat them as what they

are: the essential people who make the product or provide the

service and who have good ideas of their own…Workers should not

have to strike to be given a fair share…they should have a real

stake and a real voice” (Horsey, 2012). Employees are an

essential element of any firm. They are a valuable asset. As

such, they should not be ignored or treated unfairly. Every

effort should be made to foster positive mutually beneficial

relationships between the firm and the employees.

Corruption

Corruption is a worldwide problem, varying in degree of

presence from country to country. Human resources managers have

the important responsibility of taking ever possible step to


decrease the likelihood of corruption occurring within the human

resources department and throughout the firm. Corruption can

occur at any level or within any department of a firm.

Additionally, corruption can take many forms. “Some examples of

HR Corruption are requests for sexual favors from job applicants

in return for a job, acceptance of bribes from Firms in return

for Training and HR Consulting contracts, payment or sexual

favors for promotions, employee loans, etc and deliberately

influencing HR policy through collusion with Trade Unions”

(Adjabeng, n.d.).

The request for sexual favors in return for a job,

promotion, or contracts not only constitutes corruption, but is

also sexual harassment and conflict of interest. “Sexual

harassment (consists) of three dimensions: gender harassment…

unwanted sexual attention …and sexual coercion: behaviors using

bribes or threats, and/or making job-related benefits contingent

upon sexual cooperation” (Raver, 2005). Sexual coercion can have

negative implications upon the individual in which the request

was directed, the team that the individual works within and even


the firm as a whole. “sexual harassment is an organizational

stressor that has significant, negative outcomes (including) low

job satisfaction, psychological distress, anxiety, and depression

… job loss, career interruption, increased turnover, and

absenteeism … low team cohesion throughout the team, (and) low

levels of team citizenship behaviors;” just to name a few (Raver,

2005).

Two ways of decreasing the possibility of corruption are to

implement policies and have controls in place to handle such

situations. For example, providing employees with a phone number

they can call to report observed corruption, ensuring all

employees have the EEOC contact information, or educating

employees on Whistleblower rights and related laws. Additionally,

training on the subject is also an important factor in reducing

the chances of such corruption from occurring. Training on what

corruption is, the consequences, and the courses of action for

both those individuals directly involved and those who observe

the corruption, should be provided to all employees on a regular

basis.


Conclusion

Human resources management is an essential function for

every firm. Ensuring that a company has the right people for the

right job is just one of the functions of a human resources

manager. Another function is ensuring the company’s human

resources align with the overall business strategy, while taking

into consideration how the firm’s staffing policy will affect the

company’s management pool and costs. A third function is

determining compensation policies and taking into consideration

how economical and political circumstances will affect those

policies. Providing, and making the most efficient use of

performance appraisals is another function of a human resources

manager. Finally, it is the responsibility of the human resources

manager to continually strengthen their employee pool. This is

accomplished through adequate and frequent training of all

employees, at all levels, in combination with building

cooperative and mutually beneficial relationships with, and

between, them. Corruption is a worldwide problem that can have a

considerable negative impact upon a firm. It is the


responsibility of the human resources management to ensure all

employees are educated on the subject and given the proper

resources to address the problem if it occurs. These functions

will ensure that the company makes the most of its human

resources, and in return will get the greatest benefits from

them.

Bibliography

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