International Human Resource Management (IHRM) is becoming more critical for organisations due to the growing internationalisation of organisations both large and small. Cultural influences on international business processes and practices have become a crucial topic in the field of international human resource management and organisation in the 20th century. Since the breakdown of communism, the role of national culture and philosophy in the business processes and practices has become a significant topic. Given the increased globalisation of industrial organisation and the increase in interdependencies among different nations in the globe, there has been an upsurge in the need to understand the influence of culture in the management of employees in an organisation. In addition, effective organisational employee’s management is vital to the success of international organisational operations; the management of employees from diverse cultures presents an organisational and leadership challenge (Hickson 2009). This essay will critically analyse how national culture influences the management of employee. The paper will also propose the best ways of addressing employees’ cultural differences in management of international business subsidiary.
National Culture Influences How Organisations Manage Their Employees
The most popular proposition of cultural dimensions is the one proposed by Hofstede. In his four cultural dimensions, it is possible to describe each national culture and apply its influences to the management of employees in an organisation. According to Hofstede’s model, the French culture is usually considered as being risk avoiding, femininity and individualistic. In accordance to the above cultural traits, the influence of French culture in an organisation can easily be tracked. The French are well known for their love for bureaucracy; this is because they view bureaucracy as an ideal way of realising the norms and values of French national culture in the management of employees in multinational companies. This culture is usually believed to lower the functional risk within an organisation, and employees’ actions are normally based on clear and objective parameters. In addition, this national culture puts the emphasis on placing the employees on the hierarchy in accordance to individual skills and efforts.
The influence of Japanese culture on employee management is usually reflected in multinational companies. This culture is strongly derived from the Buddhist traditions. Lack of risk acceptance, masculinity, collectivism and small power distance is common portrayal of Japanese culture in multinational companies. However, this culture usually creates strong relations between employees and management. The collectivism is not only voiced through visible signs such as behavioural unification but also in team decision making in an organisation. In addition, collectivism is also reflected in functioning quality circles and employees’ skilful cooperation within an organisation. This culture significantly influences the way employees’ responsibility is outlined in an organisation.
Furthermore, Japanese organisation culture is not mostly focused on the short term results as compared to American culture. As a result, they condition the employees to work towards achievement of long term goals and objectives. The culture also provides flexibility in a short time strategy. However, Japanese culture is usually not as profitable as American culture because it focuses on increasing the market share rather than returning the invested capital. This culture is employees friendly because it places the interest of stakeholders and employees at the same level with those of shareholders.
It is common that national cultures impact the management of employees in an organisation. However, it is more evident that most organisational decisions are usually influenced by the employee’s cultures. During economic integration in multi-national companies, the issue of employees’ differences and similarities normally emerges (Mendenhall & Oddou 2011). In most European nations, individuals in multinational companies are usually oriented to problem solving techniques that are based on group discussion and argumentation. Solutions to a problem are first discussed before interested parties can engage in a negotiation. In contrary, in American culture, the decision about the operation of an organisation is solely made by the manager and later becomes enforced by the rest of the employees in the organisation. The American culture values numbers and facts hence do not ponder on solutions.
American culture is evident in most multi-national companies. The decision making process is normally formalised, and most decisions are made in respect to short time horizon. American culture puts a lot of pressure on the senior manager due to the pressure that emanates from the shareholders. The shareholder normally expects a quarterly report from which a manager is rewarded or harshly punished. Therefore, when a manager fails to provide promising results, the position is normally endangered. Therefore, this forces the manager to pass the pressure to employees in order to earn profits in a short term basis.
The European time horizon is shorter than that of Japan but longer than that of the USA. This is because it relies on the branch of the organisation that is active. Japanese managers in multinational companies discuss new business solutions with regular employees at a personal level. They obtain the opinions and views from the employees, but the final decision is solely made by the managers. The employees feel that they have been a part of decision making process. Therefore, their morale becomes raised, thus, encouraging them to work more efficiently.
The Japanese managers present cultural differences to their employees on a daily basis unlike the European multinational managers who work in closed and separate offices. The multinational managers in the USA are usually uninterested in the organisation because of the pressure placed on the knowledge of the techniques and methods of management systems. This is made evident by the frequency in which managers are replaced, a situation that is uncommon in the most European multinational organisations. In European countries, the career path followed by the employees is usually stated explicitly, the employee’s knowledge and experiences are considered when rising in the hierarchy ladder. In Japanese culture, the employee chooses a multinational company to work for life, and the career projections for young employees are usually clearly stated. The employees are only required by the culture to be loyal, hardworking, and scrupulous in order to achieve the highest position designed for him in the company.
In both Japan and America, the decision of the managers is absolute and respected by every employee. In Europe, being a manager is not enough. One needs to have charisma and necessary leadership skills. The manager must have the ability to encourage and motivate employees to abide his decisions and instructions (Stone & Stone-Romero 2008). This is where the conservatism and sluggishness of the Europeans became evident in the management of a multinational company. In American culture, a manager proposes ideas and does not hesitate when executing a project is considered risky. In Europe, manager delegates the project to an employee in fear of producing undesirable results. However, in Japan, a manager who hesitates to implement a new project is usually considered to be incompetent.
Differences in multinational organisational management do not only result from the cultural variations but also from institutional and legislative elements. For instance, in the USA, the prime objective of a multinational company is to make revenue for the investors. Therefore, the employee’s management is usually conditioned toward the realisation of that objective. In Europe, an organisation considers the interest of suppliers, creditors, customers, employees and local society. Therefore, the company has to consider all the groups mentioned above in its pursuit for profit. In Japan, employees are normally accorded the status of co-owners of the multinational organisation. Therefore, the main objective is normally to protect the well-being of people, with profit making being the only means to realise this goal. The issue of cultural differences and its impact on the human resource department are significant due to the increase in multicultural diversity. This has resulted from bringing together employees from different nationalities by the process of globalisation and formation of global based companies.
How A MNC Might Address Cultural Differences When Deciding How Best To Configure HRM in an Overseas Subsidiary
Cultural differences remain persistent and present an array of challenges to many multinational companies with operations in many overseas subsidiaries. Many of these cultural problems form what is known as the internal cultural problems. However, some of these cultural problems can be external in nature. Going by the nature of the global market environment, multinational companies will always find themselves in a situation that demands quick response to some of these cultural challenges. As the multinational companies continue to diversify their operations, managing the cultural challenges is becoming something that is getting the attention of many multinational companies.
Human resource management is a strategic department in every multinational company. It is involved in training, performance appraisal, labor relations and recruitment of employees or the staff. Through putting up efficient and effective human resource department policies, Multinational companies can configure HRM in an overseas subsidiary. Managing human resource in overseas subsidiary is more complicated than doing the same at home. All oversea subsidiaries for many multinational companies have different cultures. A multinational company can effectively address cultural differences when deciding how best to configure human resource management. It can achieve this by identifying the cultural challenges and formulating effective policies.
Managing and Controlling Cultural Diversity
Cultural Diversity is one of the main cultural challenges that many multinational companies face. There is always a cultural diversity in the organisation. This has the potential to affect policy development and management of the company. This is so because before passing or formulating any policy, the multinational company has to consider the cultural background of all employees. Cultural diversity can be managed by putting in place a communication system. Such a communication system will create awareness among the employees in the oversea subsidiaries. This will also ensure the cultural diversity presence in the employees is minimised. It will enhance team performance by the end of it relieve the human resource management of the multinational company. There are other innovative methods that multinational companies have adopted to manage culture differences. For example, Tabra Incorporation manufactures accessories and jewelry in California comprised of modest employees from China, Ethiopia, India, Thailand and Tibet. This company has acknowledged the importance of the culture diversity of its employees. The company always hangs the flags of countries from which these employees originate. These flags are hanged from the ceiling of its main production facility.
Conducting Cultural Research
Organisations or companies of a multinational always will face challenges when managing their human resources. For example, when it comes to staff placement and recruiting the human resource, managers may find it challenging to overcome cultural barriers in finding qualified personnel for positions in the overseas subsidiary. In such a case, the multinational need to conduct a research on the cultural barriers likely to come across in an attempt to effectively configuring the human resource (Engle 2008). Additionally, conducting a cultural background of the oversea subsidiary will enable configuring the human resource aid in the identification of prospective employees. In some countries, certain customs or culture do not value education. Conducting a research on the cultural background of these oversea subsidiaries will thus be beneficial in that the multinational companies will have the best people employed.
Making A Cross Cultural Strategic Plan
There should be well laid procedures that spell out the role of human resource when conducting its business. Such strategic plans should ensure that the human resource conduct itself in a manner that does not promote racial or ethnic discrimination.
Cross-cultural training stresses on training the employees about other employees’ culture. It also involves sensitising them to the biases and discrimination that employees from different cultures feel. Cross culture trainings aim at helping the multinational employees to work and live comfortably with other employees (Austin 2000). Multinational companies can use two approaches of coaching. This will help in managing the cultural differences so as to effectively configure the human resource department.
The first type of employees training on cultural differences offers training or coaching to the diverse groups of staff in the multinational company. Individuals from these diverse groups are trained for the entry level skill. The second approach used to train employees on the cultural differences is by use of managers (Engle 2008). Managers in the overseas subsidiaries are trained on cultural differences and thus help the human resource department. Cultural training can be achieved through several methods.
This type of cultural differences training provides the employees in the overseas subsidiaries with information on geography, history, climate and the economy.
Orientation in Culture
This aims at familiarising the employees with value and belief systems. It also trains the employees of oversea subsidiary the culture of the host country (Albrecht 2001).
This aims at training employees other people’s language. This enhances the communication between the employees and the human resource management (Albrecht 2001).
Utilising and Valuing Diversity
Multinational companies can bridge the cultural differences in their workforce by valuing and utilising the employees’ cultural diversity. This can be achieved through several steps.
Conducting an Organisational Audit
The audit should be able to assess the company culture and recommend the way forward. Assessing the multinational company culture can be done in various ways. First, the multinational company can hire the services of an oversea consultant’s agency in the country of operation. This consultant agency will do a culture analysis and report back the findings. The second method that a multinational company can use is to conduct or assess its own employees. It can assess this by looking at how the employees from different cultural backgrounds act. Listening to the employees as they speak can also help in identifying the cultural differences that are present. The multinational company can then develop programs and make it easy for configuring the human resource.
Assess the Pulse of the Company
If the majority of people with cultural diversity in the company feel good about their experiences and enjoy, then their motivation and satisfaction in the organisation will increase.
Establishing and Communicating Clear Performance Standards
The headquarter offices should set performance standards and competences necessary for any job in overseas subsidiary.
Identifying and Overcoming Customs or Etiquette
Multinational companies face the challenge of cultural difference in the form of customs and etiquette. For example, a multinational company operating in Saudi Arabia has to be extremely careful when selecting a leader to oversee the company’s meeting. Sending a woman to conduct such a meeting will be a serious offence to some business men in the Middle East. In such a scenario, the multinational company needs to identify such customs so that proper preparations are made.
Determining the Desired Company Culture
After learning about the cultural differences of an oversea subsidiary, the multinational company can then decide on what kind of company culture to have. The companies can achieve this by reviewing and revising their missions (Austin 2000). The company can also change its values so as to incorporate or accommodate the cultural differences in the oversea subsidiaries.
Although Cultural differences in the management of international human resource management may not be apparent, failing to understand it can make it hard for the human resource to discharge its mandate. Failing to appreciate cultural differences among the employees of staff will eventually lead to strain relationships, embarrassing blunders and drug down business performance of the multinational company. Culture diversity presents a problem to many multinational companies in their endeavors of configuring the human resource. Cultural difference among the companies’ personnel is thus an essential problem and a threat towards sustainability to multinational companies. Therefore, Human resource departments must adopt an equilibrated attitude in the synergetic administration of cultural differences. Multinational companies have to develop mechanisms of conciliation the differences among the employees through adaption and recognition of these cultural differences. Successful management of cultural differences in a multinational company will enable the multinational companies to utilize the cultural diversity of its employees rather than see this diversity as a challenge.