The globalization of business

"The globalization of business is making it more important than ever to understand how multinational enterprises (MNEs) can operate more effectively. A major component of this understanding appears to be the field of human resource management, and in particular, the field of international human resource management". (Schuler et al. 2002) International Human Resource Management has increasingly been recognized as a central challenge. In today's dynamic hypercompetitive marketplace IHRM has become an evolving phenomenon, reflecting the growing recognition that the effective worldwide management of human resources is arguably a major determinant which makes the difference between survival and extinction in International Business.

IHRM focuses on the operation of international firms in host countries. Its ultimate concern is being able to manage strategically in situations which involve crossing national boundaries. According to (Boxhall 1992) IHRM is being "concerned with the human resource problems of multinational firms in foreign subsidiaries (such as expatriate management) or more broadly, with the unfolding HRM issues that are associated with the various stages of the internationalization process. (Wall & Rees 2004 p 282) The complexity involved in functioning in different countries and employing different national categories of employees is the most important variable that differentiates international HRM from domestic HRM.


The primary objective of the HRM function is to ensure that the most effective use is made of its human resources. To accomplish this, HR professionals contract a range of activities. The five functional areas that will be discussed are: 1. recruitment and selection, 2. training and development, 3. performance evaluation, 4. remuneration and benefits and 5.labor relations. However, the scope and complexity of the role of the IHRM manager at British Airways is increased as the primary focus is to undertake a global perspective of managing the human capital of its subsidiaries across international borders. These compelling issues which the IHRM manager faces are likely to be more severe than the domestic HR manager. A useful model of the nature of IHRM is presented in Figure 1.

British Airways is the world's largest international airline. Its headquarters is based in London. British Airways services its global network from a centralized operation. The British Airways group consists of British Airways Plc and a number of subsidiary companies throughout the world. As the IHRM manager of the organization one critical factor that influences the degree to which international and domestic activities of the HR function differs is the "socio-cultural environment". Socio-cultural environment refers to the values and attitudes toward achievement, risk-taking, work, and social organization of authority, status, roles, institutions, and social systems. Geert Hofstede classified national cultures according to four dimensions: 1. Individualism vs. Collectivism, 2. Power Distance, 3. Uncertainty Avoidance, 4. Masculinity vs. Femininity. ( See Appendix 1 )

The need to work more effectively in multi-cultural environments is an issue for both IHRM managers and Domestic managers as organizations now have increasingly diverse workforces. From an IHRM perspective this is critical as the IHR manager have to consider the political legal environment, trans-national political orientation, government policies and regulations when interacting with employees who have different educational and cultural backgrounds and value systems. Whereas the Domestic HR manager operates under a system where there are homogenous values, attitudes and similar social organizations. Therefore the IHR manager has to be aware of the implications of cultural differences when establishing HR policy decisions.


The recruitment and selection process is vital. It refers to the processes through which an organization takes in new members. Recruitment involves attracting a pool of qualified personnel for positions available. Selection requires choosing from this team of candidates whose qualifications most closely match the job requirements. Recruitment and selection from a Domestic HR perspective is more extensive in terms of the use of sources available for recruitment, objective selection criteria, and more sophisticated selection techniques.

In international recruitment and selection the IHR manager must consider both headquarters' practices and those prevalent in the countries of its subsidiaries as national culture and in some cases local laws requires specific approaches to the recruitment and selection practices. Traditionally, MNCs have used parent-country nationals (PCNs) in order to ensure that policies and practices of the headquarters are carried out correctly. However, due to cost issues firms have increasingly had to turn to third-country nationals (TCNs) or host-country nationals (HCNs). As a result IHR managers have found themselves with co-ordination and control issues. As stated by (Dowling et al 1999) This is the reason why expatriates are still used in order to act as structure reproducers, building local talents, protecting company interests and transferring a firm's corporate culture.

Consequently, there are no set standards or circumstance when an IHR manager should hire a PCN, TCN, HCN. Whether an organization should hire locally, globally or use expatriates may also depend on its general staffing policies i.e ethnocentric, polycentric, geocentric and regiocentric approaches. ( See appendix 2 ). There are various advantages and disadvantages related to hiring PCN, TCN, or HCN. (See Table 1) According to Griffin and Pustay (1997) an IHR manager selects the most promising candidates for international assignments based on the following criteria: "Managerial competence (technical and leadership skills, knowledge of the corporate culture), Appropriate training (formal education, knowledge of the host market and its culture and language), and Adaptability to new situations (ability to deal simultaneously with adjusting to a new work and job environment, adjusting to working with HCNs, and adjusting to new national culture." (p741).

These attributes are critical as the primary cause for expatriate failure is the inability of the manager and or family to adjust to the new locale. At British Airways the organization has adopted a polycentric approach towards recruitment as they access their flight crews and administrative staff from within the host country subsidiaries in an effort to reduce staff relocation costs and to cater to the needs of passengers from different cultural backgrounds.