CHAPTER 2: LITERATURE REVIEW

2.1 Introduction to literature review

This chapter provides a critical review of existing literature on the role played by human

resource management in recruiting, training, compensation and retention of the employees. This

chapter will be divided into four sections directed by the research objectives mentioned in the

previous chapter. The second section will include a discussion on HRM and contemporary

issues. The following section to that will look at the various organizational approaches to

International Human Resource Management (IHRM). This chapter ends by presenting the

literature gap identified by this study and how to fill that gap.

2.2 Human resources management and contemporary issues.

According to CITE3, a reward system expresses the overall plan for the institution for

employee compensation for their commitment and excellent work. CITE3 notes that there are

components of rewards that include dimensions, elements, practices, and programs that jointly

define the strategy of the organization. According to the study, the top management needs to

develop an effective benefit incentive plan that caters for the different needs the employees have.

Based on the work by CITE4, motivated employees always go that extra mile when demanded

by the job requirement before even asked to do so. CITE4 notes that these employees have a

tendency to being more creative, energized, and productive compared to unmotivated employees

who put little to no efforts and avoiding more work. Not every employee has work motivation as

it is desired by organizations, however organizational factors and individual characteristics

influence their motivation. In agreement with CITE4, CITE5 argues that an effective rewards

system motivates employees into giving thorough efforts towards their work. According to
CITE5, employers need to continuously improve pay procedures and policies that will allow

them to keep their employees attracted, motivated, retained and satisfied at their jobs.

On the other hand, the study by CITE6 indicates that workplace diversity involves

availing supporting essentials and tools to the employees at all stages within the organization to

develop an innovative workforce that adds to increasing the organizational competitive

advantage in the increasing sustainable labor pool. CITE6 defines diversity as accepting,

recognizing, and understanding an employee’s differences irrespective of their race, ethnicity,

class, gender, age, or sexual orientation. Findings by CITE7 show the effectiveness of using

incentives as a way of motivating the employees. By emphasizing the usage of incentives for

rewarding the employees, CITE7 notes that this will unravel the anxieties, frustrations, and

problems that the employees encounter in their workplace. In addition to this, CITE7 argues that

this will help the management to set to staff welfare development programs aimed at boosting

the employees’ productivity and output. CITE8 argues that the existing corporate dynamics have

seen to the growth of business ethics in both the professional practice and academia. However, as

CITE8 notes, there is increasing moral lapse in HRM activities pushing leading HR professionals

and academics to consider reinventing new strategies in order for them to manage ethics in HRM

successfully.

2.2 Organizational approaches to International Human Resources Management (IHRM)

According to CITE9, organizations are continuously expanding their business

international operations for sustainable profitability and growth. Aimed at improving their

competitive advantage globally, companies employ international management measures such as

the polycentric aimed at acquiring the services of host country citizen employees (CITE9).

Amazon applies this approach as it encompasses low recruiting and training costs with less
communication and adjustment problems since they’re hiring employees coming from the same

region (CITE10). The ethnocentric approach is proven to be efficient as shown by CITE11

whereby organizations export employee’s whose nationality is that of the parent company to the

host country to fill those positions lacking individuals who are qualified to fill some of the top

management posts. CITE11 acknowledges that this approach allows core competencies

knowledge transfer to the foreign operations.

CITE12 in agreement with CITE10, companies applying the geocentric approach allows

organizations to try different combinations of the best employees from the headquarters and their

subsidiaries to creating practices that are consistent globally. These organizations applying this

approach always employ the best fit person for the post, regardless of the type. Findings by

CITE12 show that the geocentric approach is centralized, however the training is developed by

inputs from both subsidiaries and headquarters staff. CITE12 notes that organizations using this

approach have a similar performance evaluation system globally while being applicable

universally. However, developing the global system proves to being the most challenging.

According to the study conducted by CITE13, a major focus in diversity management by the HR

is on the equality notion. This has mostly been described as workplace discrimination or fairness.

Many organizations do not have diversity management methods that are effective enough in

making use of and valuing diversity in the workplace. Findings by the study conducted by

CITE13 have practical implications that are noteworthy. The review shows there is a growing

need for HRM to play a major role in developing an effective diversity management. CITE14, in

agreement with CITE13 notes that the rise in globalization has led to many organization craving

for relevance and success in economic expansion, which requires increased interactions between

individuals coming from various backgrounds, beliefs, and cultures than ever before. According
to CITE14, organizations composed of diverse workforce and valuing diversity make economic

sense as they are a significant component of improving productivity at the workplace. CITE14

agrees with CITE10, that the embracing of diversification of organizational members based on

their psychological and physical attributes is what leads to organizational success like in

Amazon.

2.3 Conclusion of literature review

This chapter reviews past studies done by various researchers which focus on the

contemporary issues facing HRM and the organizational approaches to IHRM such as

geocentric, ethnocentric, as well as polycentric in how they affect organizational performance.

This chapter also covered diversity management as well as employee compensation which has

been seen to motivate and improve employee productivity. The research is in line with the topic

researching on the role of HR policies in the success of organizations. However the role of

diversity management has not been covered extensively on how it has enabled many

organizations in having that competitive edge over their competition in the same industry. The

next chapter will cover the methods which were applied in researching this topic.