Human resource management is an important factor in developing business and international human resource management proves more important in the globalized world. The appearance of multinational companies in every corner of the world to look for business opportunities has created numerous jobs for local labor forces. Nevertheless, managing local employees is not so similar as managing employees in the home country due to critical differences of culture. Culture difference is one of the most challenging issues for multinational companies in managing international workforce. As a result, requirement for understanding cultural differences is prioritized, that would be discussed by studies of Hofstede, Trompenaars and GLOBE.
Globalization process is considered as one of the most controversial issues in contemporary world since it seems impossible to find the fully satisfied definition for this term. Nevertheless, it is undeniable that globalization process has profound influences on a diversity of aspects of the world, including politics, economy, society, technology or culture. Furthermore, its effects do not happen only in any single country or region but also in the global level; therefore, no sector or industry could avoid changes. As a result of globalization, companies began to search for the potential opportunities outside the national border to establish branches in other local countries. This moment remarked the existence of multinational companies such as Microsoft, Unilever or Nike.
The size of these multinational companies has increased in accordance with the additional geographical markets they enter. Thereby, the rapidly increasing number of employees inside the headquarter and in local subsidiaries has led to the complexity in human resource management. It was the diversity of nationalities among employees that require multinational companies to adjust their people management from traditional method to international human resource management (IHRM) initiatives. IHRM development strategy has played a much more vital role in business development strategy as it has to solve numerous issues related to compensation and benefits, performance appraisal or talent retention. However, one of the most challenging problem is cultural differences among different nations that would affect business performance directly.
There are more than 150 countries and authorities in the world with distinguished characteristics in respect of history, geography or philosophy; therefore, there are a variety of cultural differences among countries. Even in a country, the culture among regions proves different. People living in a culture context would be strongly affected by features of this culture about behaviors, beliefs or actions. Hence, if companies expect to manage these people efficiently, a comprehensive understanding of this culture should be invested. For example, thinking and behaviors of Japanese would be different from those of French or Brazilian. The culture of an American company could not be used to manage all employees deriving from those countries.
Multinational companies would have to deal with a variety of activities and problems related international human resource management. First of all, the multinational labor force could trigger the discrimination phenomenon among different employees who have various nationalities. For example, if a multinational enterprise determines to pursue geocentric human resource strategy, there might be a tendency that a group of labors whose nationalities are ranked into less developed nations would face discriminated situations derived from more developed countries. In addition, there might be a case in which some male employees coming from their own cultures of rejection to cooperate with female employees could cause gender discrimination. Regardless of any kind of discrimination, it is guaranteed that the productivity of the whole organizational performance would be lowered.
Secondly, the multinational work force might make MNCs to face cultural conflict. For instance, if a company targets to exploit new markets such as Middle East or South Affrica, through a number of activities related to cross-border mergers or acquisitions strategic movement. When the deals are completed, at least two companies, including the locally acquired company and the acquiring company, would be integrated into one model. This integrated process would experience a clash of culture between employees of two companies who might get familiar with working under the values of old corporate culture as well as their own national culture.
In order to create the third integrated corporate culture that could satisfy employees from two joined companies, it would take the integrated company a lot of time to progress. According to Barkema, Bell and Pennings (1996), this mutually adapted process could be termed as double-layered acculturation that refers to the situation in which multinational companies would undergo an amount of effort to integrate the national culture embedded in the partnership corporate culture and the newly established culture. Nevertheless, it is not an easy task since the diversity and complexity of culture have been identified by Hofstede, Trompenaars or GLOBE studies for a long time. The failure to answer this question could result in profound culture conflicts that would cause critical reduction of employees’ performance.
Another issue related to human resource management activities is concerned as knowledge transfer process that would include participation of parent country nationals (PCNs), third country nationals (TCNs) and host country nationals (HCNs). The diversity of nationality background among employees might enable companies to own a variety of knowledge, containing both technical and tacit knowledge. If tacit knowledge is expected to be transferred among employees, direct conversations and interactions should be made continuously. However, as analyzed by Harzing and Pinnington (2011), there might be 3 barriers that need to be abandoned to transfer knowledge among multinational labors. Those barriers could be named as sender unit ability and willingness; receiver unit ability and willingness; the mechanism to transfer knowledge. The success in solving these barriers would lead to valuable assets for companies since the headquarter could collect the diversity of knowledge from other subsidiaries while HCNs and TCNs branches could receive globally strategic knowledge shared by PCNs employees.
In Hofstede’s culture model, there is a great consensus that any multinational company would have to deal with critical issues caused by the differences in culture among employees who derive from different nations regardless of the existence of integrated corporate culture established by that company. Implemented in more than 40 years since nearly 1970, a variety of Hofstede’s research have focused on analyzing differences in the thinking and social behaviors of international people coming from 74 countries and regions. The large database that was collected through thousands of surveys and questionaires for different objectives such as employees of big multinational companies (IBM for example), airline pilots, students, civil service managers, high-class consumers or Chinese employees and managers has provided a credible and valuable synthesis of globally cultural differences. After being edited several times, Hofstede’s culture model has classified global cultures into 5 differentiating dimensions, including Power Distance, Individualism versus Collectivism, Masculinity versus Feminity, Uncertainty Avoidance, Long-Term versus Short-Term Orientation. According to Hofstede, Hofstede and Minkov (2010), the sixth cultural dimension was recently added and labeled as Indulgence versus Restraint as a result of the change in international population.
In terms of cultural measurement, according to Hofstede and Hofstede (2005), based on the scale from 0 to 100, each nation’s culture would be reflected through an empirically independent score and positioned between poles as combination of all dimensions. Additionally, this statistic also demonstrates the inherent issues incurred by a specific culture as well as proposed solutions.