IMPLICATION OF CULTURE FOR HRM

Different countries have different management and leadership style, policies and practices,
hierarchical structure and control systems. Culture is the quality in a person or society or an
organization that arises from a concern for what is regarded as excellent in arts, letters,
manners, scholarly pursuits, etc. The cultural differences in organization have impacted various
HR practices. It has also led to ineffective communication, conflicts and confusion among HR
and other employees.

Let’s discuss how cultural changes have impacted the Human Resource Policies:

1. Recruitment Policy: Every company and every country follow different recruitment policies.
Hiring employees depends upon which cultural attitude one is following:

Ethnocentrism: It is a cultural attitude wherein one’s own culture is considered superior than
others. When organization expands their business they tend to follow the same policies and
practices in the host country that they follow in the home country. The employees feel negative
about such cultural attitude as they find it very narrow and self – centered.

Polycentrism: The parent company appoints a local manager in the foreign subsidiary as he has
better understanding about the culture, behavior and other scenario in the host countries.

Geo-centrism: Any person can apply for specific position of the organization around the globe.
The best manager with the required qualification and experience is appointed. This leads to
more interaction and bonding between employees as they get transferred to different divisions
around the globe and so understand various cultures

2. Selection Policy: Selection process varies from country to country. Some countries follow
extensive selection process like Asia whereas some countries follow short selection process like
US. But most of the times, a screening process is followed by sessions with professional
psychologist who tries to make you aware of the different culture, work and style of living in the
other country. Employees find it very difficult to adapt to the language, dressing and food habits,
life style etc that makes him as well as his family depressed. So, an organization should select a
candidate who has technical skills, desire to work overseas, good family situations, stress
management skills etc.

3.Training and Development policies: This is a process that every employee has to undergo
to understand the work, company and its culture. But a manager finds it challenging to train
people from different countries having distinct culture, language, food and dressing habits,
values and norms etc. e.g. The Americans like to keep a distance of more than 6 inches while
interpersonal communication whereas Arabs prefer to communicate closely. Similarly, the
significance of words and gestures is different in different countries, which makes it more
difficult to communicate effectively. HR Managers find it very difficult to train people from varied
cultures.
4. Compensation Policy: Compensation policy has to take into account various aspects like
tax, cost of living etc. There is a vast difference in the tax structure, cost of living, retirement
policy, pension scheme among various counties. So, while determining compensation an HR
Manager should consider all of the above aspects. The compensation paid should be always
more than the amount he/she use to get in the home country.

5. Motivation: Manager needs to understand the need to motivate his employees. The meaning
of motivation also differs from country to country and therefore culture to culture. The motivation
strategy should be culture specific. E.g. Americans give more importance to work and less
importance to riches/wealth whereas Chinese give more preference to self achievement and
riches. So, HR manager has to have a clear understanding of these cultures and formulate the
motivational strategies in this view.

6. Performance Appraisal: This depends upon who will be in-charge of performance

appraisals. There should a manager who can provide correct appraisals on time. In many
organizations, discrimination takes place which leads to less job satisfaction. Some managers
have no idea about the performance of an expat. If the appraisal takes place in home countries
there is always a disadvantage of geographical distance which does not give true reports on
performances.

7. Leadership Style: Every country follows a different leadership style. Some follow formal,
some informal, some have tall structure some have wide, some follow centralized structure and
some are decentralized. This difference in leadership style makes manager’s role more
challenging. The decision making structure is more centralized in Germany than in UK.
Japanese prefer to act as silent leaders, Korean follow the paternalistic leadership style and
Arabs consider silence to be weak.

You can make out from the above points how culture has impacted the Human resource policies
and practices. These issues on culture can be taken care of if the management is ready to
contribute and participate to solve it.

EDUCATION – HUMAN CAPITAL

Human capital is the collective value of the capabilities, knowledge, skills, life
experiences, and motivation of an organizational workforce. Sometimes human capital is called
intellectual capital to reflect the thinking, knowledge, creativity, and decision making that people
in organizations contribute.
The importance of human capital in organizations can be seen in various ways. One is
sheer costs. In some industries, such as the restaurant industry, employee-related expenditures
may exceed 60% of total operating costs. With such significant levels comes an increasing need
to measure the value of human capital and how it is changing through HR metrics.
 The training and expertise of employees determines the skills available to the
firm.
 The adaptability of employees determines the strategic flexibility of the firm.
  The commitment and loyalty of employees determine the firm's ability to maintain
competitive advantage.

POLITICAL – LEGAL SYSTEM AFFECT HRM

The Importance of Understanding HR Legal Issues
The role of Human Resources in the workplace has never been more important.
Aside from the traditional functions of recruitment, onboarding, training and payroll, HR
professionals must also have a comprehensive understanding of relevant and updated
HR law and its corresponding regulations. These HR employment laws regulate hiring
and firing, workplace safety, benefits and pay, and confidentiality, and serve to protect
against discriminatory practices and harassment. They also provide guidance in the
event of workplace conflict or complaints.

HR Legal Compliance
HR legal compliance protects both the employee and the employer and
companies are duty-bound to operate within the framework that governs the workplace
environment. Organisations must implement policies and procedures which align state
and federal laws with the strategy and objectives of the company. Failure to keep up to
date with new HR laws can result in fines, penalties and, in some cases, legal
proceedings.
Non-compliance can also affect the reputation of a company so knowledge of
these laws is a key requirement of any organisation. This is often challenging as laws
vary between different states and jurisdictions. Businesses must monitor any legal
changes and adapt company policies and procedures accordingly. These policies must
also be effectively communicated to all employees so that they are aware of their rights
and the company as a whole has a common shared vision.

HR Management Responsibilities
An effective HR manager has knowledge and experience of all compliance
issues. These include issues relating to employee benefits and compensation, health
and safety, leave entitlements, discrimination and harassment, confidentiality, and
employee labor rights. It’s crucial they have knowledge of all laws that affect human
resources management. Also, they must be capable of designing and implementing
internal guidelines that take these legal requirements into consideration. They must also
be aware of standard practices and procedures in the event an employee, or ex-
employee, files a complaint or lawsuit. Hiring the right person for this position not only
ensures regulatory compliance but it also contributes to the overall success of the
company.

How Does HR Law Affect Human Resource Management?

HR law affects all aspects of human resource management. HR professionals
must stay informed of changes in the law. It is the duty of HR to proactively review and
update internal policies to ensure workplace compliance.
Employment Law for HR Professionals – What You Need to Know
There are a number of things a company can do to stay on top of these changes and avoid HR
law complacency:

 Be proactive and anticipate changes in the law. Keep up to date with upcoming policies
going through the government and be aware of how they could impact internal policies
and procedures.

 Regularly conduct audits. Create checklists and review them periodically to ensure HR
regulatory compliance in all business areas.

 Assign dedicated policy owners within the HR department to promote ownership and
responsibility.

 Attend regular conferences and webinars to stay up to date with upcoming changes to
laws affecting human resources management.

 Provide ongoing employment law training for HR professionals. Train employees on the
importance of complying with internal policies and procedures.

 Proactively implement policies that align with changes in employment laws human
resources professionals need to be aware of.

 Avoid cost/benefit analyses relating to the costs associated with compliance. Whatever
investment is required to ensure compliance will be far lower than the potential expense
a company incurs by penalties and lawsuits.

Federal Laws & Legal Issues in HRM

 Social Security Act (1935): a federal safety net for elderly, unemployed and
disadvantaged Americans. The main stipulation of the original Social Security Act was to
pay financial benefits to retirees over age 65 based on lifetime payroll tax contributions.

 Fair Labor Standards Act (1938): Sets the federal minimum wage (periodically raised by
Congress), restricts child labor, sets overtime pay.

 National Labor Relations Act (1935): Also known as the Wagner Act. Gives workers the
right to unionize and prohibits employer unfair labor practices.

 Equal Pay Act (1963): Eliminates pay differentials based on gender. Signed into law by
John F. Kennedy with the aim of eliminating the practice of paying women lower wages
for the same job based on their gender.
  Civil Rights Act (1964): Prohibits employment discrimination based on race, color,
religion, gender, or national origin.

 Age Discrimination Act (1967): Prohibits age discrimination against those over 40 years
of age.

 Occupational Safety and Health Act (1970): The safety and health act protects worker
health and safety, and provides a hazard-free workplace.

 Americans with Disabilities Act (1990): Prohibits employment discrimination based on

mental or physical disabilities.

 Family and Medical Leave Act (1993): Requires employers to provide unpaid leave for
childbirth, adoption, or illness.

 Retirement Income Security Act (1974): Sets minimum standards for most voluntarily
established retirement and health plans in private industry to provide protection for
individuals.

ECONOMIC SYSTEM AFFECT HRM

1. Globalization:
Globalization refers to the increasing unification of the world’s economic order through
reduction of barriers to international trade as tariffs, export fees, and import quotas. The goal is
to increase material wealth, goods, and services through an international division of labour by
efficiencies catalyzed through international relations, specialization and competition.
It describes the process by which regional economies, societies, and cultures have
become integrated through communication, transportation, and trade. Globalization is caused
by four fundamental forms of capital movement throughout the global economy.

The four important capital flows are:

 i. Human Capital (i.e., Immigration, Migration, Emigration, Deportation, etc.)
 ii. Financial Capital (i.e., Aid, Equity, Debt, Credit & Lending, etc.)
 iii. Resource Capital (i.e., Energy, Metals, Minerals, Lumber, etc.)
 iv. Power Capital (i.e., Security Forces, Alliances, Armed Forces, etc.)

After the world war many committees and associations have emerged with focus on free global
trade.

2. Monetary Policies:
Monetary policy is the process by which the monetary authority of a country controls the
supply of money, often targeting a rate of interest for the purpose of promoting economic growth
and stability. The official goals usually include relatively stable prices and low unemployment.
Monetary policies of various countries change significantly according to the prevailing economic
situation.

3. Explosion in Stock Markets:

With the advent of free trade and globalisation across the world, there has been a
significant change in stock markets of various countries. Due to availability of capital for
companies due to portfolio investments and Flls there is an explosion in stock markets.

4. Trade in Commodities:
Since the advent of internet and online trading in 1990s, commodities also entered in the
virtual trading market. With the entry of commodities like gold, silver, platinum etc. the power of
safe heaven asset is slightly lost from dollar. Safe heaven asset is the one which is expected to
grow in rates with time. Dollar is considered as safe heaven but due to anticipation of a double
dip recession, it is losing its appeal as safe heaven.

5. Growth of Unemployment in Developed Countries & Employment in Developing Countries:

The prices of factors of production are rising continuously in countries like U.S.A and
European countries. Companies tend to outsource their manufacturing and service base to
developing countries due to which there is a growth of unemployment in developed countries &
employment in developing countries.

6. Growth of Inflation in Developing Countries:

Due to growth of employment in developing countries and shift in focus of major MNCs
there is a growth of inflation. Apart from that various economic policies like free trade,
globalization, etc. also have an impact on inflation.

7. Great Divide (GDP Growth Rate):

There is a great divide in the growth rate of various countries. Developed countries are
growing at a very slow rate or can be said as stagnant economies whereas the developing
countries are growing at a faster rate.

8. World Economy is more Powerful than Individual Nations:

It has been said, “US sneezes the world freezes”. But the saying is not entirely true in
the current era. Today the world economy is more powerful than individual nations, and the
same was seen in the 2008 recession when the impact of American recession was not much felt
by India.
MANAGING EMPLOYEES IN A GLOBAL CONTEXT
Globalization, the process of integrating a business's operations and strategies across a
wide array of cultures, products and ideas, is having an impact on the role of human resource
managers. Once concerned with local issues, HR must now consider the effects of workforce
diversity, legal restrictions and the interdependence between training and professional
development on the organization.

 Recruitment and Onboarding Process

Attracting, hiring and retaining a skilled workforce is perhaps the most basic of the
human resources functions. There are several elements to this task including developing a
job description, interviewing candidates, making offers and negotiating salaries and benefits.

 On-the-Job Training
Even when an organization hires skilled employees, there is normally some level of
on-the-job training that the human resources department is responsible for providing. This is
because every organization performs tasks in a slightly different way.

 Continuing Professional Development

Closely related to training is HR's function in professional development. But whereas
training needs are centered around the organization's processes and procedures,
professional development is about providing employees with opportunities for growth and
education on an individual basis. Development often entails moving an employee between
departments so that he or she gains skills in multiple areas. For an international operation,
this may also mean moving employees across boundaries.

 Benefits and Compensation

While the management of benefits and compensation is a given for human
resources, the globalization of companies in the twenty-first century has meant that HR must
now adapt to new ways of providing benefits to an organization's employees.

 Ensuring Legal Compliance

The final function of human resource management is perhaps the least glamorous
but arguably of utmost importance. Ensuring legal compliance with labor and tax law is a
vital part of ensuring the organization's continued existence. The federal government as well
as the state and local government where the business operates impose mandates on
companies regarding the working hours of employees, tax allowances, required break times
and working hours, minimum wage amounts and policies on discrimination.
TYPES OF INTERNATIONAL EMPLOYEES

Types of employees in IHRM

The name international human resource management itself indicates that human
resources are recruited from various countries. Here nationals of various countries
contribute their skills and efficiently for the growth of the organization. They are mainly
three types, parent or home country nationals, host country nationals, and third country
nationals. These three types are differentiated on the basis of citizens of headquarters of
the company, citizens of the subsidiaries of the company, and citizens of various
countries.

 Home country or Parent Country Nationals (PCNs)

Home country nationals are the employees of the organization and these are the
citizens of the country where the headquarter is located.
Employees belonging to the country where a company’s headquarters are located
are called as parent-country nationals or home country nationals.

 Host Country Nationals (HCNs)

Host country nationals are the citizens of the country where the subsidiary is located
or when any organization recruits the nationals of the country where the subsidiary is
located.
Employees belonging to country where the company has set up a subsidiary or a
manufacturing facility are called host- country nationals.

 Third-country Nationals (TCNs)

Third country nationals are the citizens of the other countries, and they are neither
the citizens of the country where the headquarters is located nor the citizens of the country
where the subsidiary located.
Employees who work in the home or host country facility of the company but are not
nationals of either are called third- country nationals.

International HRM also means dealing with issues related to different countries, expatriation,
repatriation, cross-cultural issues etc.