Introduction
The businesses globally are highly concerned about their competitiveness and performance effectiveness which is substantially dependent on Human Resource Management (HRM) strategy of the organization. HRM plays key and vital role in attraction, retention and growth of valuable and rare human resources which serve as the core resource of organization and thus foster competitiveness in the organization. The complexity of HRM lies in the notion that businesses are operating beyond the national boundaries and thus International HRM (IHRM) has emerged which deal with people management beyond boundaries (Scullion, Collings and Gunnigle, 2007). It has been addressed by Sparrow (2018) that IHRM is not just management of expatriates, but it involves management of diverse people in international market. The researchers have highlighted the importance of IHRM by shedding light on the roles which are played by it the context of international as well as multinational businesses. IHRM enables the alignment of culture and HRM strategy with that of organizational strategy and assures that skills and expertise of human resources are well aligned with operational requirements of the organization (Shen, 2004). Likewise, IHRM assures that employees’ needs in an organization are well addressed and they are empowered to enhance their engagement and satisfaction. IHRM also encourages efforts of organization to support continuous improvements, and develops lifelong learning of employees, such that new knowledge of acquired and innovation capabilities of organization can be supported (Malek and Budhwar, 2013). Therefore, an effective IHRM has wider roles to play in an organization and it assures to adapt HRM policies with respect to changing environment, changing industry conditions and changing needs of human resources.
Strategic Approach to IHRM: The strategic approach of IHRM focuses on the notion that HRM plays its roles to attain strategic fit, by assuring that key HRM strategies are linked with core organizational strategies and goals. Mainly, the strategic perspective of IHRM is viewed from the phenomenon of best practice, best fit and resources based view (RBV) (Morley et al., 2016). The best practice approach is based on Universality Theory (UT) which states that organizations are available with set of superior and best practices for management of human resources and adoption of these practices can drive excellence based on IHRM (Mone and London, 2018). However, this approach is subject to great criticism as it does not addresses the unique and differentiated requirements of diverse organizations and industries. Every organization has a unique strategy which is tailored to differentiated needs of that organization and adoption of best practices of IHRM might not provide integration with underlying strategy of that organization (Noe et al., 2017). Therefore, this approach is not suitable for strategic IHRM.
On the other hand, the best fit approach is linked with Contingency Theory (CT) which states that success cannot by assures through implication of any universal prescription of IHRM and thus consideration of contingent factors is crucial to assure strategic fit and to define success of organization (Rees and Smith, 2017). These contingent factors could encompass type and size of the business, structure, culture and strategy, labor market conditions, environmental factors, skill requirement of organization and location in which organization operates (Purcell and Hutchinson, 2007). The IHRM practices which are context specific and have alignment with unique aspects of specific organization, are likely to drive high performance within that organization. Therefore, by looking at the changing context of industries and workplaces, it can be considered that by contrast to best practice approach of IHRM, best fit approach is more effective for driving performance of organization.
The third strategic perspective of IHRM is RBV, which is concerned with the development as well as exploitation of human resources which are valuable, rare, inimitable and organize-able to drive competitiveness of the organization (Shiryan, Shee and Stewart, 2012). This perspective focuses on the notion that tacit knowledge among human resources is crucial to make them rare and valuable for the organization (Scullion and Collings, 2006). The knowledge and skills of human resources cannot be copied or imitated by the competitors and thus these resources are considered as key source of competitive advantage.
Key Functions and their relation: IHRM is wide and diverse field which is comprised of multiple functions which are interconnected with each other. These function include, recruitment and selection, reward management, performance management, training and development, employee autonomy and empowerment, diversity management and relationship management, at large (Arnaboldi, Lapsley and Steccolini, 2015). All of these functions are highly integrated and effectiveness of one is linked with effectiveness of all functions. For instance, if recruitment and selection will not be appropriate, then talented and knowledgeable workforce will not be chosen and all other functions will be affected consequently (Ayeleke et al., 2016). Therefore, in order to assure an effective and competitive HRM system, it is crucial to assure effectiveness of each individual function of IHRM.
Relation between HRM/IHRM and organizational performance: The performance of organization is considered a complex and multidimensional phenomenon which could be reflected by number of outcomes. Mainly, the measures of financial profitability are used to assess the performance of organization, yet it might ignore the aspect of operational performance (Chung, 2018). However, recently, tools such as Balanced Scorecard are devised to measure the different aspect of performance of organization. It has been highlighted in the study of Bititci, Cocca and Ates (2016) that there is substantial linkage between HRM/IHRM and performance of the organization. The linkage of IHRM and performance is explained by different theoretical perspectives, such as universality theory (best practice), contingency theory (best fit), resources based view, configuration theory (focuses on synergetic effects of innovative HR practices), AMO theory (Ability, motivation and opportunity) (Brewster and Bennett, 2010). In addition to these theories, there are other perspectives as well. The focus of all these concepts is based on the notion that IHMR fosters attraction, retention and engagement of highly knowledgeable, skilled and valuable workforce. The engagement of commitment of workforce is enhances based on appropriateness of IHRM practices and thus positive employee related outcomes can be increased (Chami-Malaeb and Garavan, 2013). When organizations adopt most suitable HR policies, then workforce is more likely to be motivated and committed to work, which not only improved individual performance and also has substantial effect on improvement of organizational performance as a whole.
Discussion of two Strategic Functions
The two strategic function which are chosen for understanding the linkage of IHRM with performance of organization are; training and development and performance management. It has been highlighted by Chung, Bozkurt and Sparrow (2012) that all functions of IHRM are substantially associated with betterment of individual and organizational performance. However, prior to make any judgment, it is crucial to understand these functions and its underlying linkage with performance (De Silva and Chandrika, 2016).
Training and Development: Training and development is comprised of two core aspects, training and development. Training is linked with identification of discrepancies in knowledge, skills and abilities of the workforce to that of desired level of these traits, such that workforce can be offered opportunity to bring improvement in their expertise (Du Plessis, 2009). The trainings contributes in fostering learning among workforce, such that they can become able to attain the desired objectives of performance. On the other hand, development has long term focus which is linked with broadening the skills set and knowledge base of employees for pursuit of future opportunities of growth and excellence. It has been addressed by De Silva and Chandrika (2016) that researchers have been exposed with question in earlier days that how IHRM practices and policies can induce higher level of productivity among employees. They have considered training among the core functions of HR which can help in enhancing the performance and productivity levels of employees (Farndale et al., 2011).
The effectiveness of training lies in the notion that it should be based on needs of employees and should also be complied with the needs and goals of organization. The well designed training most likely leads to desired results. It has been noted in the study of Feng (2017) that when training objectives need to be aligned with strategy and vision of the organization, as performance goals are mainly based on the wide strategy of organization. Such well aligned training serves as the way of assuring that training will play its strategic role and it will enhance the skills and expertise of workforce which are most needed for driving performance outcomes (Lloyd and Härtel, 2004). Therefore, it can be mentioned that training is an important function of HRM to foster performance.
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The international HR managers are exposed to the challenge of managing diversity and thus their training design should incorporate the needs and learning preference of diverse workforce (Hansson, 2007). For instance, members from collective societies might want training based on group learning exercises, while workforce from individualistic society might have differing learning perspectives (Katou and Budhwar, 2010). This can posit challenge to IHRM and thus training design in globally operating companies might be more heterogeneous and inclusive then the training design of local businesses. It is noted by Lazarova, Peretz and Fried (2017) that effective design of training can not only improve skills of workforce, but it enable them to feel valued, which can in turn improvement their engagement and productivity. Therefore, the link of training and performance of employee and organization is clear.
On the other hand, development plays a strategic role in management of International HR, as it focuses on long run development in skills of employees and focuses on making them valuable and inimitable (Grover and Furnham, 2016). The development has direct connection with RBV, which states that humans are core resource of organization and their development can improve intangible value of organization. For instance, as stated by Hansson (2007) humans are the core resource as they make it possible to use all other resources of organization, for achievement of organizational effectiveness. Therefore, when HR managers focus on development of human resources, then they invest in improvement of organizational performance as a whole.
The employee development is considered to overcome any gaps in skills and knowledge base of workforce and thus knowledge based organization can be created who rely heavily on tacit knowledge and skills of workforce to bring innovation. Well-developed workforce is likely to be competitive and it has the potential to drive high performance standards within organization (Gerrish, 2016). Likewise training and development is considered as major investment of organization on development of its workforce and thus employees pay back in the form of improved morale and commitment (Festing and Barzantny, 2008). The workforce with enhanced morale and better skill set is considered as valuable, rare and it is inimitable by the organization. Such humans are considered as key strategic resource of the organization and through these resources, organization can effectively generate competence with industry (Martin-Rios and Erhardt, 2008). The performance score of well training and developed workforce are more and they drive performance of organization as a whole (Morley et al., 2016). Thus, in international market, training and development of workforce serves as key factor for enhancement of organizational effectiveness and performance.
Performance Management as strategic function of IHRM: The second strategic function of IHRM is performance management, which is considered as system of assessing, evaluating and then enhancing the performance of employees. The core purpose of performance management system is to assure that performance standards are effectively communicated to workforce and they are well motivated to achieve those standards (Du Plessis, 2009). The core aspect of performance management as strategic function lies in the fact that it articulates vision of organization with performance objectives of each job position and then that articulated vision is communicated to the workforce in clear manner (Chung, 2018). This aspect of performance management enhances the link between IHRM practices and strategy of the organization, which serves as source of effectiveness for organization. It has been highlighted by De Silva and Chandrika (2016) that performance management enables planning of the ways through which high performance standards can be achieved. The evaluation of workforce performance against those standards is carried out in appraisal stage, where performance is rates are good and bad. The main benefit of these ratings is realized in the next stage, when performance appraisal results are communicated with individual employees (Lloyd and Härtel, 2004). The feedback about employees’ performance is significant as performance gaps and their underlying reasons can be identified and timely can be taken either on behalf of employees or management to overcome those gaps. For instance, during the formal feedback, employee might unveil that performance gap is based on unfavorable working condition, lack of interest in specific job task, lack of empowerment or lack of autonomy by the management (Chung, Bozkurt and Sparrow, 2012). Based on the revelations, changes can be initiated to bring improvement in working conditions or employees might be offered enhanced autonomy to increase interest in specific job. On the other hand, the feedback review session might reveal that performance gap is based on lack of skills or expertise of employees with respect to specific job position (Shiryan, Shee and Stewart, 2012). In that case, employee can either be rotated to other job which has more compliance with skills set of that employee, or training opportunities can be offered to improve the skills and expertise of employee (Brewster and Bennett, 2010). Likewise, the gap in performance could just be the result of lack of motivation among workforce which requires implication of different motivational approaches by human resource managers.
It has been noted by Grover and Furnham (2016) that performance appraisal results also serve as the basis of reward management of the organization. This aspect highlights that performance plays strategic role and it is linked with other functions of IHRM as well. The association with reward management is linked with the notion that ratings of performance appraisal helps in differentiating between the good and bad performers (Katou and Budhwar, 2010). Thus, performance based reward mechanism can be initiated, through which goods performers are offered bonuses, pay raises and promotions, with an aim of enhancing their motivation. While, the poor performers are provided performance oriented feedback or might be provided with training to help them improve the level of their performance (Chami-Malaeb and Garavan, 2013). The provision of training to poor performers sheds light on the fact that need assessment for training and development is also based on performance management system. A fair and well implemented performance management system not only identifies the performance gaps, but it forms the basis of training and development, which is another strategic function of IHRM (Festing and Barzantny, 2008). These evidences highlighted that role of performance management is highly strategic in nature.
The process of performance management and it within organization clarifies that core focus of performance management system is on improvement of performance of workforce. It helps in planning, appraising, monitoring and communicating the performance of workforce, such that steps are taken to help them achieve the desired performance goals. It has been argued in the study of Farndale et al. (2011) that when employees are offered opportunity to sit and talk about their own performance, then they feel valued members of the organization. The performance management system offers voice to employees and enables them to communicate their concerns to management in clear manner (Gerrish, 2016). Moreover, when workforce is provided with detailed and growth oriented constructive opinion through performance management, then the results are in the form of enhanced efforts and performance of the workforce. Additionally, performance management is seen by employees as a two way street, where they can also provide their opinions freely (Katou and Budhwar, 2010). Thus, the management becomes able to identify that what role manager or supervisor is playing in fostering or restricting the performance of employee. Therefore, obstacles in the path of success can be removed both by managers well as by employees and results can be witnessed in the form of enhanced performance of workforce. On the basis of these views, it can be mentioned that if performance management system works effectively then workforce is more likely to feel respected by the organization and thus they offer their commitment to the organization (Martin-Rios and Erhardt, 2008). The enhanced commitment and engagement of workforce effectively leads to better performance of the employees and of the organization as a whole (Hansson, 2007). Thus, a well-managed and fair appraisal system is an important strategic parameter of the organization, which can work to improve motivation and engagement of human resources and can promote success of organization in global market.
Conclusion
IHRM is considered as management of human resources in international market, which is challenging as well as crucial for defining success and performance of the organization. The insight of strategic approach of IHRM has been obtained by shedding light on three perspectives, including; best practice, best fit and resource based view. It was found that best fit and resource based view are more suitable for success of IHRM. Additionally, it has been highlighted in essay that different functions of IHRM are interlinked with each other and success of IHRM depends of integration and effectiveness of these functions. The link of IHRM and performance of organization is further viewed and it was found that when IHRM activities are carried out in best way and skilled and competent workforce is developed, the performance of organization enhances subsequently. The linkage can be further clarified by considering that humans are core resource of organization and their development means effective utilization of all other resources, which can then drive performance of employees and of organization.
The essay has further focused on two strategic functions of IHRM, encompassing; training and development and performance management. The link of training and development with organizational performance is based on the fact that when employees’ skills and knowledge is developed, then their engagement and morale increase and they become better able to use their skills to achieve high standards of performance. In addition to it, performance management helps in evaluation of employee performance and then focuses on the ways through which performance can be fostered. Performance management system initiates feedback about employees’ performance and thus addresses gaps in performance, which helps in improvement of employee as well as organization’s performance.
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