January 10th, 2018
Role of exogenous and endogenous factors in an International HRM model
Various external factors can influence how human resource management (HRM) issues are approached within an organization. Such factors as legal environment, dominant culture in the country, institutional pressures and economic and political conditions may affect an organization’s HRM practices to varying extents (Schuler & Tarique, 2007). For instance, when hiring for top positions in foreign subsidiaries, some organizations may prefer expatriates to reduce agency costs and promote global managerial practices. Other organizations will however prefer host country nationals to mitigate challenges associated with cultural adjustment. Similarly, legal differences between countries may make what comprises acceptable employment practices in one region to become unfair and unsafe hence outlawed practices in others (Schuler & Tarique, 2007). Competitive pressures, policies and economic environment also differ from one region to another such that wage levels will be different form one country to another (Schuler & Tarique, 2007). Such diverse external factors form a significant determinant of success in HRM practices adopted hence are a critical component in modelling International HRM.
While aligning HRM practices to external factors, the approach adopted should also be convergent to internal factors affecting their success. Externalization approach may help achieve competitive advantages such as economies of scale, but making the approach sensitive to the local environment is equally important (Schuler & Tarique, 2007). Organization specific attributes such as the type of business, organizational culture, and systems already in place could determine the criterion and extent to which successful global practices are adopted by the firm. Units of evaluating performance and basing remuneration could for instance differ according to whether the business is trading in services or goods. Similarly the organization culture and systems in place determine the ease with which businesses can adopt new ways advocated by global models of HRM. Therefore internal factors would be important in determining how change is managed in the organization.
Schuler, R. S. & Tarique, I. (2007). International human resource management: A North American perspective, a thematic update and suggestions for future research. International Journal of Human Resource Management 18(5), 717-744. DOI: 10.1080/09585190701246590.