Significance of Effective Human Resource Management in a Global Organization
How To The Understanding Indonesian Business Culture?
The report focuses on the significance of effective human resource management in an organization that is operating globally. The given case study highlights the organization culture issues that the subsidiaries of Australian technology organization face while operating internationally. Organization culture involves behaviors of an employee that contributes to the business environment (Alvesson, 2012). There are numerous aspects of organization culture important for conducting business such as- language, social structure, education and so on. The culture of the host country also affects the performance of an organization especially of those that operates internationally. Even though the enterprises operating globally bring huge opportunities, they face many challenges regarding culture within the business. Organizational culture generally influences three major segments of business operation, which includes- enterprise hierarchy, etiquette and proper communication. The case study shows the circumstances where the management of the subsidiaries imposing the same HR policy has adverse impact on the performance as well as cohesion of team (Shields, 2015). This report also elucidates on the Hofstede approach about the organization culture and it relation with the present scenario.
According to Home – Hofstede Insights. (2018), an organization can be successful if it considers domestic influence and the present cultural boundaries of those countries in which it is operating. The Hofstede approach on the enterprise culture is the valuable measurement of cultural differences that most of the corporations use while planning to expand its business in the international market. Furthermore, this approach also facilitates the corporation to smoothly adapt with the existing culture of the foreign nation. Apart from this, this approach also provides an insight to the HRM of an organization to identify strategic policies to be implemented in the business operation. It has been stated by Hofstede that both national and regional factors contributes to the organization culture, which in turn influences the behavior of employees in an entity. According to Hofstede, there are five factors, which influences organizational culture. These have been elaborated in the following section-
This relates to divergence in the work cultures depending on delegation of power to the laborers. There are some organizations where power is unequally distributed among the workers irrespective of their different work designations. However, the superiors or leaders are treated in better way whereas other employees are given more responsibilities and are not provided any special treatment. On the other hand, in some organizations there is equal distribution of power among the workers and hence every individual in the hierarchy have equal rights.
Organizational Culture and Its Impact on Business
The scores of Australia and New Zealand in power distance dimension are 36 and 22 respectively while Indonesia’s score in this dimension is 78. This shows that the enterprise operating in Australia and New Zealand have well established hierarchy and the managers depends on other workers, thereby all the employees have equal rights. Indonesia scoring high signifies that the workers do not have equal rights.
Several organizations values teamwork in its business operations and it is observed that workers in these organizations work in collaboration. Moreover, these organizations believe that total output grows and expands when workers exchange their ideas for innovating products or services. On the contrary, there are few organizations where the employees work individually or single unit.
Australia and New Zealand have scored high in this dimension which is 90 and 79 respectively while Indonesia has scored low in this dimension. This reflects that both Australia and New Zealand have individualist culture while Indonesia has collectivist culture.
This dimension refers to the affect of divergence in male value and female value relating to the organizational culture. It has been opined by Minkov & Hofstede (2012) that, there are few organizations where the males dominate female employees. However, the organization has different regulations and culture as compared to those organizations where females dominate the male employees.
Both Australia and New Zealand scores are moderate in this dimension at 61 and 58 respectively while Indonesia scores low at 46. This indicates that the organizations operating in Australia and New Zealand have male dominated culture while Indonesia has female dominated culture.
This dimension signifies the organizational culture where the employees know various ways for responding to unforeseen circumstances (Minkov & Hofstede, 2012). It thereby deals with the employee’s tolerance level in the uncomfortable situation. The organizations also provide training to the employees for facing difficult situation.
Australia and NewZealand have scored 48 and 49 respectively while Indonesia has scored 48 in this dimension. This indicates that organizations in Australia and New Zealand are better equipped to handle risks and adversities as compared to Indonesia.
Several organizations mainly focus on building good relationship with workers. The employees in these organizations make effort in order to meet with the management expectations. The employees focus on long term goals and this leads to their greater attachment with the organization. On the contrary, there are other organization wherein the workers are concerned with position and image in the marketplace. However, the workers in these organizations concentrate on goals and opportunity in business.
Hofstede Approach to Organizational Culture
The score of Australia and New Zealand are low in this specific dimension as compared to Indonesia. This signifies that both Australia and New Zealand have normative culture while Indonesia has more pragmatic culture.
The HR department of this Australian subsidiary enterprise has faced numerous challenges while operating in Indonesia. The management faces several problems while implementing its HR policies regarding recruitment of efficient and skilled workers, rewards systems, implementation of staffing policies, bringing culture change within the organization and so on (Marchington et al., 2016). These complex problems occurred due to huge divergence between Australia and Indonesia regarding cultures, legal system and economic system involving- divergence between labor laws, compensation laws. The law for organization in Indonesia being highly complex poses risk to this subsidiary. In addition to this, it creates a huge difficulty for the managers of this organization to operate in Indonesia (Registration, 2018). Another problem that HR managers of this subsidiary face during implementation of their policies is appropriate understanding of this nation’s diversity in culture. In addition to this, the shortcomings of Indonesia’s education system also create issues for managers of this subsidiary organization. For this reason, the HRM of this organization had to make huge investment in providing training to their workers due to deficiency in their skills as well as knowledge (Vance & Paik 2014). The people residing in this nation have hierarchical mindset, which in turn negatively influences the business environment of this subsidiary organization. Besides this, the managers of this subsidiary organization also faced issues regarding high turnover of the workers, absenteeism, total productivity and conflict among the team members. Owing to these complex problems, the performance of this subsidiary organization operating in Indonesia declined over the last few years.
The given case study focuses on the problems that HRM of this organization faces owing to implementation of same HR policies as well as practices in the business operation. The different dynamics of culture in Indonesia mainly dominates the organizations operating in this country. Hierarchy is the vital factor that influences the culture of this subsidiary organization although the principles of hierarchy are similar to that of other Asian nations. According to Hofsetede approach of cultural dimension, Indonesia has highest the value in power distance and cultural dimension as compared to the other two countries. However, inequality among the workers exists in the organizations that operate in Indonesia. Owing to principles of hierarchy, the managers of these entities have more power in comparison with other employees working under them (Giauque, Anderfuhren-Biget & Varone, 2013). On the other hand, the organizations operating in New Zealand as well as Australia do not face any such problem. This is because the managers of these entities mainly rely on the workers working under them and hence are taken into account as equal. Thus, the cultural dimension approach of Hofstede highlights that enterprise culture in Indonesia highly varies from that of Australia and New Zealand. Moreover, it is also evident from the Hofstede approach that Indonesia’s organization culture is female dominated whereas the organization culture in Australia and NewZealand are male dominated. Therefore, the international organization expanding its operation in this nation faces numerous difficulties owing to varied culture. This case study however reflects that implementation of same HR policies of Australia to that in subsidiary of Indonesia creates difficulties in their operations (Brewster et al., 2016). On the other hand, the HR managers of the New Zealand do not face any problem by the implementation of same HR policies that of Australian enterprise.
Five Cultural Dimensions That Influence Business Operations
It has been evident from the given case study that adoption of same HR policy in Indonesia regarding rewarding of employees has a negative impact on the performance of team members (Pieper, 2012). This reflects that this subsidiary operating in Indonesia has a high cultural value in power distance dimension. The HR policy of offering rewards to the workers based on their own performance indicates provision of equal rights among the employees (Briscoe, Tarique, & Schuler, 2012) However, adoption of this reward policy creates huge conflict among the employees as their culture do not support equal rights among the workers. Hence, it becomes difficult for the subsidiaries of an Australia enterprise to operate in Indonesia.
For instance, recent facts reflect that the people residing in Indonesia are adopters of emerging technologies and thereby rise in mobile application has influenced the communication process within the business (Registration, 2018). Indonesians usually communicate with each other via mobile applications during their work. The subsidiary organizations in this country need the workers to use emails for communicating with others and control information. However, as the Indonesian counterparts use mobile applications for sharing documents, this can be challenging for the managers when it comes to keeping the record of crucial documents. As the documents shared through mobile applications cannot be saved, the managers find it difficult to view all the conversations between the workers. Hence, these evidences show that the foreign companies in this nation face numerous challenges in its operations due to cultural differences.
The following suggestions will facilitate this subsidiary to address these challenges and sustain in the new marketplace:
- Indonesians prefer to build strong relationship with every individual and hence it is recommended that the HR managers should integrate new policies regarding teamwork.
- The HR managers should avoid critical agreements with the workers during first meeting
- As the business culture in Indonesia relies on hierarchical principles, the managers of this enterprise should refer all the workers with huge respect (Budhwar & Debrah, 2013)
- The managers of this organization should also understand organization culture of Indonesia in order to achieve success in business operation
Conclusion
It is evident from the above discussion that strategic implementation of policies will help this Australian subsidiary to enhance its business operation and financial performance. It has been seen from the Hofstede cultural dimension that, this subsidiary organization faces several difficulties while operating its business in Indonesia. From the above study also reflects that as New Zealand culture is almost the same to that of Australia, adoption of similar HR policies in New Zealand subsidiary as that of Australia creates no problems or challenges for these managers. On the other hand, as the Australia and New Zealand culture is different from that of Indonesia, implementation of same HR policies and practices creates issues within the work environment. However, the HR managers of this organization are thereby planning to implement change in its policies in order to improve business culture within the workplace. It is also necessary for the HR managers of this organization to understand the behavior of workers before adopting any business strategy. Implementation of effective strategy will help the organization to increase the total productivity and improve the performance of this subsidiary. Moreover, this subsidiary enterprise should also hire expertise from Indonesian culture in order to properly understand this nation culture and change its operations accordingly.
References
Alvesson, M. (2012). Understanding organizational culture. Sage.
Armstrong, M., & Taylor, S. (2014). Armstrong’s handbook of human resource management practice. Kogan Page Publishers.
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Bratton, J., & Gold, J. (2017). Human resource management: theory and practice. Palgrave.
Brewster, C., Houldsworth, E., Sparrow, P., & Vernon, G. (2016). International human resource management. Kogan Page Publishers.
Briscoe, D., Tarique, I., & Schuler, R. (2012). International human resource management: Policies and practices for multinational enterprises. Routledge.
Budhwar, P. S., & Debrah, Y. A. (Eds.). (2013). Human resource management in developing countries. Routledge.
Giauque, D., Anderfuhren-Biget, S., & Varone, F. (2013). HRM practices, intrinsic motivators, and organizational performance in the public sector. Public Personnel Management, 42(2), 123-150.
Home – Hofstede Insights. (2018). Hofstede Insights. Retrieved 29 April 2018, from https://www.hofstede-insights.com
Marchington, M., Wilkinson, A., Donnelly, R., & Kynighou, A. (2016). Human resource management at work. Kogan Page Publishers.
Minkov, M., & Hofstede, G. (2012). Hofstede’s fifth dimension: New evidence from the World Values Survey. Journal of cross-cultural psychology, 43(1), 3-14.
Pieper, R. (Ed.). (2012). Human resource management: An international comparison (Vol. 26). Walter de Gruyter.
Registration, C. (2018). Understanding Indonesian Business Culture – Emerhub. Emerhub. Retrieved 29 April 2018, from <https://emerhub.com/indonesia/understanding-indonesian-business-culture/>
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., … & Plimmer, G. (2015). Managing Employee Performance & Reward: Concepts, Practices, Strategies. Cambridge University Press.
Vance, C. M., & Paik, Y. (2014). Managing a global workforce: challenges and opportunities in international human resource management. Routledge.
Vance, C. M., & Paik, Y. (2014). Managing a global workforce: challenges and opportunities in international human resource management. Routledge.
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