Examining Human Resource Management Challenges In Indian And British Multinationals
Abstract
This essay aims to first understand the complexities of human resource management in multinational companies (MNCs) located in India and the United Kingdom and presents an overview of the challenges the human resource industry faces. For Indian MNCs, the biggest challenge is managing the cultural feature and its impact on the overall HR process, along with a lack of effective recruitment and selection process whilst the United Kingdom faces issues in repatriation and gears up for the effect of external factors such as Brexit and other regulations, that is predicted to shake up the industry.
The idea of international human resource management (IHRM) has become an increasingly relevant subject as world business has become a global village and there is a greater need to understand the issues and practices in this context. In the words of Scholte (2005), “Globalization is indeed a distinctive and important development in contemporary world history. However, its scale and consequences need to be carefully measured and qualified. ” This rapid globalization has in turn led to the growth and expansion of multinational companies (MNCs) that have grown sharply over the past 20 years – as per the World Investvent Report 2007, the United Nations Centre on Transnational Corporations has counted an estimate of almost 80, 000 MNCs worldwide in 2006 alone.
Frequent debates on the topic of international human resource management have led to extensive research in the past two decades to understand what has been called ‘the dual logic of IHRM’ and the functionalist vs the critical approach. Studies on multinational companies (MNCs) look into strategies of standardization of human resource practices which are often evaluated by looking at both internal – structure, strategy, experience, coordination mechanisms etc. , and external factors – features of the region of operation, industry traits. However, human resource functions do not remain the same in every MNC but differ depending on the type of firm. Management development, succession planning, career planning, top management rewards, managing the mobility of international managers were noted to be some of the key activities in centralized global firms while highly decentralized firms had a lower degree of coordination and executives had a limited scope of their roles. Boxall (1995) stated that management practices are socially constructed in each society. Furthermore, Pinnington (2011) identified cross-cultural communication, and diversity, global knowledge management, and local and global sustainability to be the main challenges for IHRM which can be looked at from an overall perspective. What must be noted is that the degree of influence of culture-bound and culture-free factors varie from country to country since the nature of HRM is known to be specific. Budhwar and Sparrow (1998) elaborates on this illustration by talking about the impact of trade unions in India which shows the context specific nature while in the U. K. , the context specific nature of British HR is marked by the downsizing of the workforce.
In this regard, culture has proved to be an important factor in shaping human resource management in MNCs; however, there is often the underlying question of the extent to which management styles can be standardized or customized according to the culture. Hofstede and his work on national cultures has been one of the breakthrough studies in examining differences using the initial four dimensions of power-distance, uncertainty avoidance, individualism/collectivism, and masculitiny/feminity. To get a better understanding of the challenges that MNCs face in different countries, it is imperative to discern the most important differentiator and influencing factor – the culture which determines disparity. Using the Culture Comparison tool based on Hofstede’s dimensions available on the Hofstede’s Insights webpage, we look at the country of India, a melting pot of cultures and a huge population, and an Anglo Saxon country, the United Kingdom. Results illustrate that India scores highest in power distance where hierarchy and a top-down structure in organizations is appreciated while employees expect to be clearly directed in their functions. Overall, control is familiar and recognised and attitudes towards managers are formal. The U. K. is the polar opposite and shows a low power distance which reveals a society that believes inequality must be diminished.
India shows a balanced blend of a collectivist and an individualistic society whereas the U. K. demonstrates a completely individualist outlook and are taught to do so from an early age. Both countries lean towards the masculine dimension ascertaining the dominant values as competition, success and achievement, and also share a common stance on uncertainty avoidance leading to believe in acceptance for imperfections.
Thus, it is safe to say that human resource management in India is deeply affected by the cultural aspect, boasting a distinctive national culture, and an institutional inheritance that sways towards the west but with a South-East Asia aligned political and economic strategy. The influence of culture is so strong here that the hopes, needs, beliefs, work values, aspirations form the basis of the desirable conduct of employees. Its heterogenous population makes it a complex puzzle to solve.
MNCs in the West, such as the United Kingdom, have been observed to follow a more ethnocentric approach in managing their subsidiairies but Indian MNCs are more adaptive and adopt a highly localized approach, particlarly in their staffing. These findings have been further reiterated in a study conducted by Budhwar and Khatri (2001), also one of the few in literature that examines the HRM functions and differences of India and Britain, which has interestingly noted that the former inherited constitutional and administrative similarities from the latter. However, this is just one of the few similarities between the two. Diversity management in the two markets is contrasting – while in Britain, the idea of diversity is based upon either race, gender or age, in India it relates to caste, religion, socio economic status, among others. In order to set the tone for a compelling comparison and identify the challenges, Gospel’s (1992) broad typology will be used that outlines human resource management’s key features through three areas – work relations, employment relations and industrial relations. Cappelli, et al. (2010) discuss a concept of a unique ‘India way’ that takes into account the national business philosophy constructed on four pillars including improvisation and adaptability or jugaad in Hindi, creation of innovative value propositions, holistic engagement with employees and recognition of businesses’ societal role. As highlighted earlier, the influence of cultural, economic, social and political factors on HRM policies in Indian organizations are very strong where often, selections, promotions and transfers are controlled by status and political connections. This reveals that work outcomes are overlooked and family and group attainments are given more importance to. British organizations, however, are in contrast where such trends do not visibly exist.
In addition, promoting the adoption of international HRM practices associated with recruitment and retention, training and development, reward systems and the management of employment relationship is a result of the growth of foreign direct investments and increasing number of Western-trained managers. Three coexisting models of employment relations have been identified by Bhattacharjee and Ackers (2010); “an unsystematised form characteristic of the informal economy; a more formal model of domestic employment relations associated with traditional industries; and those of the new, outward facing service industries that have emerged in the past two decades. ” Recruitment and selection is another important facet key to the successful functioning of expatriates and managers in multinationals. Critical shortages of managers may become a significant problem if MNCs do not improve their recruitment and selection practices. Organizations in competitively challenged sectors need to cope with issues to work force reduction policies, look into de-skilling, re-skilling and multi-skilling as well as career development issues to develop a diverse workforce into efficient, high performance employees. Budhwar & Khatri (2001) evaluate the presence of trade unions in India as well as the U. K. and observe that the trend is strong in both markets, although there is a decline in unions there is an increase in membership. Similar to the U. K. , Indian trade unions are greatly influencial in HR policies and practices of Indian companies and are more co-operative. On the other hand, the influence of trade unions has seemed to decline the the U. K. over the past decade.
Taking everything into account, it is quite clear that MNCs in India face a huge challenge as a consequence to its deep-rooted attachment to culture and developing HRM functions that can be truly defined as “global” is not very feasible in the current environment. With over 15 recognised languages, 7 religious categories, 2378 castes and a population of over 800 million, diversities are reflected in every facet – be it styles of living, patterns of life or succession rules making the generalization of national culture’s impact an uncertain one. This also presents one of the reasons for the lack of comparative human resource research since there is a need to go much deeper into the operational aspects of Indian MNCs. The recruitment process followed is also ineffectual for a multinational, by giving more importance to personal connections, caste, culture and political affiliations, among many others, in selection and hiring rather than considering professional workplace skills that would be instrumental in the company’s success. A few of the issues that currently prevail in Europe deals with increasing repatriation and has become an acute crisis. This is because internalization has taken place simultaneously with the downsizing of domestic business resulting in reduced opportunities for expatriate managers on re-entry. Stroh and Caliguiri (1998) emphasize on the need to develop a focused and strategic approach to repatriation to be able to retain the valuable employees. In addition to the challenges in human resource identified by past research for the U. K, political factors and changes in laws and regulations could further shake up the way HRM currently works. Sparrow’s insights on the forecast of HR challenges in the UK, as published by a Forbes article last year predicts, shifts in foreign direct investment and business locations the impending impact of Brexit draws closer. He states that multinational companies will need to be flexible with shifting of business models and will need to restrategize and manage their costs in some particular locations, in the wake of the collapse of trade deals.
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Waterhouse Coopers (PwC) summarizes that the key issues the human resource industry will face according to priority relate to communications, leaderhsip, motivation data and technology, maximizing efficiencies, talent market and immigration, geographic and business footprint, and political and trust agenda. Post Brexit, multinationals in the U. K. will also need to focus on creating a diverse and more inclusive workspace and broaden the aspect of insectionality. The general data protection regulation recently introduced in the country is also among one of the several external factors affecting the overall human resource industry that will force several companies to alter the way they process data to comply with the new laws.
However, it is difficult to ascertain the specific challenges for both countries due to lack of evidence and research in the same area. While several studies have been conducted to understand human resource management in multinational companies, very few have selected and compared India and the United Kingdom specifically. Additionally, the numerous studies that have been conducted on the same lines have been in the early or late 90s and with globalization changing the face of multinationals day by day, the data provided may not be very relevant in today’s day and age. Therefore, it is rather challenging to determine the exact issues that prevail in the industry and provide a general overview of the most prominent concerns.
