IMPORTANCE OF HRM FOR SUCCESSFUL INTERNATIONAL STRATEGIC ALLIANCES
Outline the importance of human resources management for the successful operation of international strategic alliances. Assess the significance of the major problems encountered by partners in the design and implementation of effective human resources management practices.
Introduction
In the ever competitive, challenging and dynamic business environment, businesses no longer able to stay alone or to compete effectively with other businesses in the ever globalized world. Today, competition is leveled to the extent whereby a network of companies is competing with another network of companies. A single entity or corporations is hard to survive or to fulfilled the ever demanding customers’ needs and expectations, while it is also not effective for only a company to compete against the well-established network of competitors. In fact, the competition between businesses had intensified in the recent years in an ever globalized and integrated world, whereby business cooperation or strategic alliances had extent beyond borders. Today, businesses are partnering with businesses from other nations, to form stronger partnership or collaborations between businesses of different countries for different types of benefits.
In the context of international strategic alliances, one highly critical issue to be aware of by senior management is the human resources management (HRM) practices or system to be applied in the organizations involved in the strategic alliances (Dessler, 2011). Although many HRM issues that is critical for an organization persist in managing people in the international strategic alliances context, the people management issues is more complex in an international strategic alliances arrangement, due to potentially distinctively different cross cultural and social factors. Thus, in this article, the importance of HRM for successful implementation of international strategic alliance will be discussed. Furthermore, the problems faced in the implementation and design of effective HRM practices that could be encountered by partners in the design and implementation of effective HRM will be discussed as well.
Importance of HRM for Successful International Strategic Alliances
In business management, human resources management is a very important area to be managed, as human are ultimately the key contributors towards the success or failure of an organization. In fact, in the ever competitive business environment, the requirements of human resources management are becoming more prevalent. Firstly, as the world enter into a knowledge based economy, people skills and competencies had now replace the other sources of competitive advantages, such as capital, machinery or other forms of business assets in determining the relative performance of a firm in the challenging world. Secondly, as the business landscape is becoming more competitive, businesses are competing to recruit and retain talents in the organization. Talent wars are not something uncommon today. Thus, all these are causing that HRM is increasingly important to an organization in the new economy system.
In such a scenario, the importance of HRM is becoming more obvious and prevalent as the businesses expand towards the global arena for bigger market shares, to growth and profitability, as well as to reach better economies of scale or stronger brand name in the world. In the context of international strategic alliances or partnerships, human capital has been the key criteria determining the degree of successfulness or effectiveness of cross countries collaboration or alliances (Ming, 2002). This is because cross cultural or cross nations expansion and collaborations are complex and complicated process, whereby the organization must become more changeable, adaptable, flexible and responsible in the different business environment, due to the differences and sometimes, even contradictory social cultural environment and consumers preferences, attitudes and behaviors. In facing with the challenges to operate or cooperate in a different business environment, it is becoming more important for the corporations to have smart, talented, dynamic and motivated employees to deal with the challenges troubling the firms in daily operations or decision making process. In such a scenario, HRM is very important in assisting a firm to become more effective and successful in the international strategic alliances process. Besides, from another perspective, HRM is also crucial to ensure effective and proper management within the organization. HRM is not only crucial towards achievement for success of competitive advantages of international strategic alliances in the external environment, but is also very important in coordinating smooth, responsive and effective operations internally. Within the firm, HRM is crucial to bring the people, primarily from different cultural background, of different behaviors, attitudes, beliefs and assumptions into a team (Dessler, 2011) that can focus and work together in the accomplishment of the corporation missions and visions.
In fact, the importance of HRM in international strategic alliances is nothing can be denied by the practitioners, as people have been observing that cross nations or cross cultural alliances have been hard to achieve success due to people issues (Berrell et. al., 1999). This can be witnessed by the abundance of literature of cross nation or international strategic alliances to be linked to the issues of human resources management. This is nothing hard to understand, as managing of people and workforce is complex, particularly in the context of managing people from different cultural settings. Besides, when people of different background and cultural settings interact, the psychological process due to the interaction can be complex, dynamic and hardly predictable. Thus, it is not hard to see that researchers are arguing that cross cultural management is a new topic to be taught to business students, and in the context of real world corporation business management, to the many employees. It is argued extensively that education, training and development of employees related to cross cultural issues, in terms of cross cultural interaction, and alliances is critical for any firms to become effective in collaborating with other firms from other nations.
Problems Faced in Implementation and Design of Effective HRM Practices
As argued above, the importance of HRM towards successful design or implementation of international strategic alliances is not something that can be denied. Nonetheless, although the importance of HRM is acknowledged, the challenges or problems usually faced by management in the context of international strategic alliances are something worth discussing. It is very crucial to understand and investigate these issues in depth, so that as the managers understand the potential challenges or difficulties, they can set their expectations accurately and plan in advance to deal with these problems or challenges.
One of the key issues of international strategic alliances in the context of HRM is the staffing process to be employed in the joint venture or alliances. Staffing can be crucial as people may be highly sensitive to the appointment of people to fill the different positions in the joint venture. For example, one very sensitive issue is about who should take the leadership position, and in case of conflicts, who has the main say to deal with the difficult decision making process. Besides, the leadership of key management positions is sensitive as each partner will definitely want to appoint their personnel to safeguard their respective interests and well beings in the strategic alliances. Not only is that, it is also crucial to understand if the personnel appointed understand the cross cultural different and able to lead the people from diverse background, social cultural settings or mindset toward achievement of the goals set forwards in the international strategic alliances. In many joint ventures, the operations fail badly due to the fact that people from one side do not want to obey the order sincerely from the management, whom is appointed from the other partner. It is also not something uncommon that the key leader appointed simply unable to lead the diverse workforce, and had made deadly wrong decisions in managing the people.
Apart from that, another common problem faced in international is about the promotional process in the alliances. For this issue, it tends to arise when the parent companies send certain personnel from the parent companies to work in the joint venture. As the career path design and the HRM system or practices in the parent companies may be distinctively different from that of the system employed in the joint venture, these personnel may face harder promotional issues in the newly formed strategic alliances. Besides, people may not be willing to try out new things, or to face the risk of uncertain career path or promotional opportunities when they are asked to join the new venture. Thus, overall, it is crucial to understand that the differences between promotional opportunities of the concerning promotional system or career path designed for the employees may be working against the senior management intention to send the relevant or best people to spearhead the joint venture. The system to attract good staffs to the new joint venture is critical and impactful towards affecting if experienced staffs are willing to take up the risks to participate in a new business venture under the international strategic alliance. It is crucial for the firm to understand how the reward system differ from the parents companies to that of the new joint venture. It can be reasonably expected that people may need time to get accustomed to the new rewards system and to make sense of that system. Besides, there are also questions if the reward system is relevant and effective in managing workforce. If the reward system is not designed properly, people simply may not able to work effectively (Ming, 2002), or to adopt different attitudes to gaming the reward system for personal benefits.
Similar to the reward system, the performance management system in the newly formed joint venture between two companies in the international context may not be effective or accurate in managing the workforce. For example, it is definitely not easy to decide which companies’ performance management system to be used in the newly formed joint venture. Besides, it is also challenging to decide which companies’ performance appraisal or management system to be adopted in the new venture, and if these policies, practices or procedure will require adjustment or amendment to fit the local context. Negotiation between the two parents companies may be a long process. However, it is reasonable also to expect that if the agreed upon performance management system can effectively guide and lead the employee performance in the newly formed corporations. In this issue, the different cultural settings, or workforce mindset, assumptions, expectations and educational background may be great challenges to be handled (Thang et. al., 2007). In fact, it is also reasonable and mind boggling to ask if there really exist any effective or great performance management system to manage people of different cultural, experiences, educational or social background (Matveev et. al., 2004).
Not only is that, there are also issues of employees loyalty in the newly formed joint venture under the theme of international strategic alliances. As people may be transferred from the parent companies to the new joint venture, it is uncertain if the staffs working under the new joint venture are loyal to the new company. Besides, it is also issues if the people from different companies can work together effectively, with trustful relationships among the many staffs in the new venture. This is important as the degree of trust will affect how people interact. For example, without trust within the people, people may not able to work effective for common goals, to share ideas, to support each other and to work in a team for better performance and attainment of certain organizational objectives. When trust does not present, conflicts between people can be more serious and frequent, and when that happen, people no longer able to work effective, or simply to concentrate on the work, but instead engage in detrimental or non-productive activities to deal with the tricky situations or non trustworthy staffs from the other parent companies.
When two different entity, particularly those with different corporate culture or corporate values, meet together, there is bound to have huge problems in the decision making process of the newly formed joint venture. For example, people from different corporations may have very different rules or practices in decision making process, as they are guided by different cultural factors of values previously. People are likely to get stunned when they found that the people from other side of the partner tend to have very different ideas, and judgmental rulers in the decision making process’ particularly one that is contradicting or opposing to their current beliefs or practices. Thus conflicts management within the organization between the staffs are crucial and indeed, not to be ignored. There must be proper ways to solve the conflicts between people in the organization, and how to utilize the different ideas, and the advantages offered by the diversity of workforce for better achievement and performance in the newly formed company. In fact, as we had discussed above, the decision to choose who is the key person that can make the ultimate decisions are crucial to the success of any joint venture. The practices or policies must be fair, and take the interests of both parties involved in the international strategic alliances into account before any materials decision is to be made.
As discussed before, cultural differences between people in the context of international strategic alliances is the key barrier preventing effective or successful joint venture between many firms from the west to firms in the east. In fact, the culture between different regions of the world is so obvious that researchers have developed different framework to characterize the different cultural dimensions between people around the world. According to Hofstede (2003), cultural differences can be analyzed from four key dimensions, such as high or low power distance, individualism or collectivism culture, either masculinity or femininity, and lastly, either high or low uncertainty avoidance. All these will certainly affect the effectiveness of cross cultural communication, as people may not see eyes to eyes or able to understand the intended meanings to be conveyed by the counterparty of different cultural background (Harvey et. al., 2002). In fact, in many of the instances, people may simply not able to realize they the way they behave or communicate had already offended the other with different cultural beliefs or assumptions. Thus, it is important for management to understand the difficulties of communication within the joint venture, and to understand if the information technologies or communication channels available in the joint venture is effective and relevant. There are also challenges to which how the management can set up best practices to aid the accurate communication process between people from different cultural or social background. In event that the people are not able to speak a same language (Matveev et. al., 2004), the challenges in the strategic alliances is even more critical.
Depending on the location of the joint venture, there is bound to have unfamiliarity or cultural shocks of certain people in the new environment (Awang et. al., 2010). For example, when people working in the UK is sent to take up managerial expatriate roles in the new company in China, these expatriates will certainly faced some degree of unfamiliarity and challenges to adapt to the new business or workplace environment. Thus, it is important for the senior management to understand that such issues of unfamiliarity can be great impendent to proper performance from these employees, which definitely need certain time frame to suit the new business landscape or workplace (Dunbar et. al., 1990). The learning curve of these expatriates can be steep (Hogan et. al., 1990). Thus, it is crucial for HRM personnel to develop effective training and development program to assist these expatriate to become more culturally fit in the different environment (Caudron, 1991).
Conclusion
Overall, this paper had discussed the how the competition landscape in business environment around the world had evolved. Today, businesses are competing in a network manner, where companies are required to partner with other strategic partners for mutual benefits in the every challenging marketplace. This gave rise to the issues of international strategic alliances. As the competition is becoming more global, and the process of globalization is not expected to be reversible, international strategic alliances are not something that can be ignored by business managers or academicians. In fact, this article had also discussed extensively on how HRM are important in the context of international strategic alliances. In the first part of the writing, it is argued that human resources management is crucial for the success and superior performance of the joint venture. This is not hard to understand as people is the moving forces that work together in a team under a joint venture between firms from different culture or nations, towards achievement of the predefined company or cooperation objectives. In the second part, the challenges, problems, common issues as well as the difficulties faced by managers in international strategic alliances are discussed. All these are critical as it provide accurate awareness and expectation for managers to ponder upon before they enter into any strategic alliances across nations or culture.
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