The Crucial Roles of Domestic HRM and IHRM in Shaping Organizational Structure: A Comparative Analysis of Strategies and Impact

The Crucial Roles of Domestic HRM and IHRM in Organizational Structure

In the intricate ecosystem of organizational dynamics, the roles played by Domestic Human Resource Management (HRM) and International Human Resource Management (IHRM) stand as pivotal pillars shaping the foundation of success. Each, in its distinct realm, contributes significantly to the organizational structure, ensuring efficiency, cohesion, and sustainable growth.
HRM (Human Resource Management) is an integral part of every organization. Whether you are a company operating domestically or internationally, efficient HRM is crucial to remain competitive in today’s economy. Of course, there are many similarities between domestic and international HRM, but there are also some especially important distinctive differences between HRM and IHRM that companies should be aware of.

Domestic HRM: The Bedrock of Internal Functioning

Domestic HRM lays the groundwork for organizational success by focusing on internal operations within a specific country or region. It encompasses functions such as recruitment, training, performance evaluation, and employee relations tailored to meet local requirements and regulations. Its significance in the organizational structure lies in:

• Employee Engagement and Productivity: Domestic HRM initiatives aim at fostering a conducive work environment, ensuring employee satisfaction, and boosting productivity within the organization's home base.

• Compliance and Legal Adherence: Managing local labor laws, compliance with regulations, and ensuring ethical practices forms the core of Domestic HRM, safeguarding the organization against legal pitfalls.

• Talent Development and Retention: Effective Domestic HRM strategies focus on nurturing talent, providing growth opportunities, and retaining skilled employees, forming a foundation for future leadership.

HRM: Navigating Global Frontiers

In the era of globalization, International Human Resource Management (IHRM) steps onto the global stage, overseeing human resource activities across borders. Its significance in organizational structure lies in:

• Cultural Sensitivity and Diversity Management: IHRM navigates cultural complexities, fostering cross-cultural understanding and inclusivity. It harmonizes diverse workforces, ensuring a cohesive organizational culture across borders.

• Global Talent Acquisition and Retention: IHRM strategies are crafted to attract, develop, and retain global talent. It scouts for skills and competencies that align with the organization's global aspirations.

• Legal Compliance in International Settings: Adapting HR practices to comply with different international laws and regulations ensures ethical operations and avoids legal complications in various regions.

  

The Symbiotic Relationship: Harmonizing Domestic and International Realms

Similarities Between Domestic HRM and International HRM

The major functions of domestic HRM and international HRM are almost the same. These include business planning, recruiting employees, managing their performances, and overseeing training, development, appraisal, and compensation.

The environmental factors also influence domestic and international HRM functions, although to different degrees. The HRM, irrespective of whether they are functioning in a national or cross-country setting, must be mindful of the location’s political, legal, and economic atmosphere and how these affect the market.

Moreover, both HRMs must regularly intervene in the administrative proceedings to ensure that the employees stay motivated and productive. This is done to encourage employee retention and upskilling throughout all company levels.

• Recruitment & Selection: Both aim to hire the best talent suitable for various organizational roles. HRM suites can help you hire the best talent across international border.

• Training & Development: Upskilling employees and aligning them with the company’s objectives is a key function in both domestic and international contexts. More than half of US employers (52%) provide upskilling training so employees can perform new jobs.

• Compensation & Benefits: Crafting competitive packages to attract and retain employees is a universal HRM function. Forbes Advisor found that 40% of employers say workers leave their jobs to find another offering better employee benefits.

• Performance Management: Evaluating employee performance, providing feedback and ensuring alignment with business goals is crucial, regardless of the location of operation. The methods also need to be evaluated every once in a while. The Gartner Performance Management Benchmarking Survey showed that 81% of HR leaders are changing performance management.

• Labour Relations: Ensuring the smooth functioning of an organization by managing relationships between employers and their unions or representatives is essential across borders.

Difference between Domestic HRM and International HRM

It emerges that international HRM practices have to be different from those of domestic HRM. It is characterized by more and varied HR activities, need for broader perspective, more involvement in employees’ personal lives, high emphasis on change in employee mix, high risk exposure, and more external influences. Let us go through the discussion of these characteristics and identify how international HRM differs from domestic HRM.

• More and Varied HR Activities: As compared to domestic HRM, in international HRM, there are more and varied HR activities. In international HRM, the volume of the same HR activities which are relevant for domestic HRM too increases because these activities have to be performed in a different context.

• Need for Broader Perspective: As compared to domestic HRM, international HRM requires much wider perspective in respect of almost all HR activities. It implies that HR managers have to consider a variety of factors in making decisions on any issue of international HRM. Many of these factors are not relevant in the case of domestic HRM.

• More Involvement in Employees’ Personal Lives: As compared to domestic HRM, HR managers are required to have more involvement in employees’ personal lives in the case international HRM. This higher level of involvement is required to ensure that the employees are suitably placed in an international location with which they are not well familiar. This lack of familiarity may be on a number of factors like housing, health care practices, meeting of legal requirements of host country, etc.

• High Emphasis on Change in Employee Mix: In international HRM, high emphasis is placed on change in employee mix particularly in terms of nationality of employees. Very often, it happens that when an organization establishes a business in a foreign country, it recruits a greater number of employees from the country of its origin. However, in order to have a favorable image in the country of its operations, it recruits and develops local (host country) personnel. As a result, over the period of time, the proportion of local employees becomes sizeable. This strategy is adopted by most of the multinationals. This process is taken on gradual basis.

• High Risk Exposure: There is high risk exposure in international HRM as compared to domestic HRM. The risk involved may be of different types (political, regulatory, etc.) in an international business. However, HR-related risk may be in the form of lack of suitable HR practices meeting local requirements, social-cultural risk in the form of non-acceptance of parent country nationals as employees, etc.

• More External Influences: A maxim of managing a business is- farther away a business goes, more influences it has to face. This is true for international HRM too. As compared to domestic HRM, international HRM activities are influenced by a variety of external factors. HR managers are required to deal with a new set of socio-cultural milieus, political and legal system, etc.

The importance of Domestic HRM and IHRM extends beyond individual realms, their synergy fuels organizational success:

• Integration for Global Strategy: Harmonizing Domestic HRM and IHRM aligns HR strategies with the organization's global objectives, ensuring a cohesive approach in achieving overarching goals.

• Leveraging Diversity for Innovation: By combining Domestic HRM's focus on internal efficiency with IHRM's cross-cultural expertise, organizations create an environment ripe for innovation, leveraging diverse perspectives.

• Adaptability and Resilience: The interplay between Domestic HRM and IHRM fosters organizational adaptability and resilience in the face of global challenges, ensuring agility in response to dynamic market shifts.

Conclusion:

In conclusion, the symbiotic relationship between Domestic HRM and IHRM is the cornerstone of a well-structured organizational framework. While Domestic HRM lays the groundwork for internal stability, IHRM navigates global complexities, ensuring adaptability and success in an interconnected world. The seamless integration and collaboration between these two realms fortify organizations, enabling them to thrive in a rapidly evolving global landscape.

References:

Brewster, C. & Mayrhofer, W. (2012), Handbook of Research on Comparative Human Resource Management, Edward Elgar Publishing.

Dowling, P. J., Festing, M. & Engle, A. D. (2017), International Human Resource Management (7th ed.), Cengage Learning.

‌Gulati, S. (2020). Difference between Domestic and International HRM. [online] Essays, Research Papers and Articles on Business Management. Available at: https://www.businessmanagementideas.com/difference-between/difference-between-domestic-and-international-hrm/21089.[accessed on 5th December]

Jackson, S. E. & Schuler, R. S. (2019), Managing Human Resources in a Global Business Context, Routledge.

Multiplier (2022). Domestic HRM vs. International HRM | Multiplier | Multiplier. [online] www.usemultiplier.com. Available at: https://www.usemultiplier.com/blog/domestic-hrm-vs-international-hrm.[accessed on 5th December]

Scullion, H. & Collings, D. G. (Eds.) (2011), Global Talent Management, Routledge.

Stahl, G. K., Björkman, I. & Morris, S. S. (2012), Handbook of Research in International Human Resource Management, Edward Elgar Publishing.

Sparrow, P., Brewster, C. & Chung, C. (2016), Globalizing Human Resource Management (2nd ed.), Routledge.

Tarique, I. & Schuler, R. S. (2010), 'Global Talent Management: Literature Review, Integrative Framework, and Suggestions for Further Research', Journal of World Business, vol. 45, no. 2, pp. 122-133, doi:10.1016/j.jwb.2009.09.007

Tung, R. L. & Verbeke, A. (2010), 'Beyond Hofstede and GLOBE: Improving the Quality of Cross-Cultural Research', Journal of International Business Studies, vol. 41, no. 8, pp. 1259–1274, doi:10.1057/jibs.2010.22.

www.rapid.one. (n.d.). Understanding Domestic vs. International HRM for Business Expansion. [online] Available at: https://www.rapid.one/blog/domestic-hrm-vs-international-hrm.[accessed on 5th December]