Ihrm in Multinational Corporations

Over the last decade, the numbers of multinational corporations (MNCs) have increased significantly because of the dramatic growth of internationalization and global competition. MNCs play an important role in order to maximize profits and manage complex of international business activities. In spite of the fact that the multinational corporation is operated in several countries (Stonehouse, Cambell, Hamill & Purdie, 2005), the operation and strategic planning of international firms would be more complex than domestic firms in terms of dealing with affiliates across borders and transferring human resources and knowledge between parent companies and their affiliates. Due to these complexities, MNCs can be confronted with various challenges that force them to emphasize on manifest activities especially international human resource management (IHRM) (Ondrack, 1985 & Scullion, 1995 cited in Harzing & Ruysseveldt, 2004).

IHRM has become a considerable strategy assisting international organization to be successful by managing the effective employees for running international activities in MNCs (Briscoe & Schuler, 2004). Therefore, it is likely important to integrate appropriately organizational strategy with international HRM (SIHRM) in order to implement the global achievement of organization and obtain competitive advantages. However, the important issue of SIHRM is a design of SIHRM in term of how to balance the needs between integration and differentiation of both parent organizations and their affiliates that influence by internal factors, such as experience in managing internal operations and external factors, such as industry and regional characteristics. (Shuler, Dowling & De Cieri, 1993 cited in Taylor, Beechler & Napier, 1996). This essay will argue that the attitudes of senior management could be an emphatic challenge because it is an important key of designing appropriate SIHRM orientation relating with MNCs’ strategy. Additionally, culture diversity is an influential challenge. Moreover, managing expatriate is a significant challenge of combining SIHRM and organization strategy. Consequently, the integrating IHRM and organizational affect the roles and activities of both HR practitioners and general managers and both groups are important to reduce those challenges impact.

This essay will begin with the explanation of MNCs’ strategies and SHIRM model including identifying the challenges that link with each level of the model. Next, the attitude of senior management, cultural diversity, local legal and the challenge of selecting and managing expatriates will be analyzed. Next, this essay will indicate the implication of HR practitioners and general managers. Finally, it will be conclusion and give some recommendation.

Organization strategy is a considerable fundamental component to determine suitable SIHRM in MNCs. Following Bartlett and Ghoshal, (2000 cited in Harzing & Ruysseveldt) there are four different strategies based on level of resource combination: multidomestic, international, global and transnational strategies. A multidomestic strategy that emphasizes local responsiveness and a global strategy that emphasizes global consistency will be focused in this essay. Companies will use a multidomestic strategy if affiliates are independent of MNCs’ resource. By contrast, if resources are interdependent, company will follow a global strategy. The organizational strategies affect the selection of SIHRM orientation that appears in the first level of Taylor and his colleges’ SHIRM model.

According to Taylor and his colleges’ SHIRM model (1996), there are three levels of group relating with SIHRM. Firstly, the parent company level including MNCs’ SIHRM functional focus and MNCs’ SHIRM orientations divided into three types: adaptive, exportive and integrative SIHRM orientations. An adaptive SIHRM orientation emphasizes the differentiation that allows using of local HRM systems and no transferability. While, an exportive SIHRM orientation focuses on transferability of parent firm’s HRM system to overseas affiliates. An integrative SIHRM orientation focuses on the best HRM system of both home and host countries and interactive transferability. The second level is the affiliate’s HRM system based on the degree of similarity of parent and affiliate. They have concluded that an exportive SIHRM orientation is the highest level of similarity following by an integrative SIHRM orientation and an adaptive SIHRM orientation. Additionally, this degree is influenced by affiliate’s strategic role, method of affiliate’s establishment and parent and host country’s environments: culture and legal. Thirdly, an affiliate employee group’s HRM system focuses on managing particular employees who are critical to MNCs’ performance in affiliate.

Consequently, if MNCs follow multidomestic strategy, it