Distinguishing Features of HRM in a Developing Economy

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Introduction
Human Resources Practices in Indonesia
Recruitment and Selection
Training and Development
Performance Appraisal
Reward Management Schemes
Conclusion
References

Introduction

Globalization and technological growth have significantly altered the competitiveness of modern businesses. Besides, modern businesses have inclined towards knowledge- based systems, thus, the employees have been pointed out as the key contributors of competitive advantage that most businesses appreciate presently.

Most advanced economies have asserted that, the principles and practices of Human Resource Management, HRM, have taken a center stage in affirming the long-term benefits of businesses in attaining the competitive advantage (Harzing and Ruysseveldt, 2004).

The Human Resource Management practices have not only been part of developed economies, developing economies such as Indonesia has widely embraced the contemporary practices of the same across its major business entities. According to Analoui, HRM entails principles and practices that influences people or human resources who work for a given organization (1998).

Indonesia current economy has achieved significant developments in its Foreign Direct Investment as a result of the entry of multinational companies in its various sectors of the economy. Thus, the strategic HRM structures have become a necessity for these businesses in sustaining its growth (Analoui, 1998).

This, illustrate that a business has to have a sound Human Resource Management strategy which can address the issues of recruitment and selection, employee training and development, performance management strategies and reward schemes among other important aspects practices of an organization.

According to Dash (2007) the importance of Human Resource Management practices and systems varies basing on context and culture. He also argues that national or cultural factors primarily affect the framework in which HR is managed in various nations globally (Harzing and Ruysseveldt, 2004).

This paper aims at highlighting the striking features of Human Resource Management practices which prevails in Indonesia.

Through literature review, the paper advances the understanding of the differences in Human Resource Management practices in, developing and developed economies, hence we can learn that developing and developed economies Human Resources Management practices have similarities in terms of recruitment and selection.

However, differences arising from performance appraisal, training and development and reward management schemes still exist.

Human Resources Practices in Indonesia

Human Resource Management plays a key factor in every business entity. Organizations are established with a goal of managing human necessities. Hollinshead (2009) argues that Human Resource Management practices have continued to grow globally altering business structures and traditional practices that traditionally existed. Thus, In Indonesia, the trend has not been spared either.

Globalization and entry of multinational companies in the country has taken Indonesia to a different stage in the management of its human resources. Various factors such as classical diversity of social, personnel management, cultural, political and economic factors have gained dominant effect on Human Resource Management policies and practices of major companies in Indonesia (Lange, 2010).

According to Lado and Wilson (1994), cultural policies such as power distance still bind the HRM systems to challenges of pecking and administration. These external factors have affected major roles of HRM in distinct ways, which distinguish them from the practices in developed economies of European companies.

Recruitment and Selection

Organization with strong recruitment and selection strategies contribute positively towards its success (Lado and Wilson, 1994). This is important because effective diversity in strategies aid in choosing the ideal candidate for a given post in the company (Jackson and Schuler, 1995).

In developed economies more attention is tailored in planning, designing and implementation of effective recruitment and selection plans. This is because such structures positively link to a company’s overall performance (Schmidtmann, 2008).

However, in Indonesia, Lange (2010) argues in the public sector companies still centers their recruitment and selection practices tied to social, political and status linkage. This indicates that the manifestation of resilient collectivism within work values that emphasizes on hereditary and joint deliberations over realizing higher work efficiency exists.

According to Dash (2007), the employee referral programs are widely ingrained in the Indonesian culture thus, is a favored tool in hiring plan for major Information Technology companies. Hiring using referrals in Indonesia is favored more than any other channels such as bulletin, direct recruitment and through the use of agents.

This is because, hiring through this strategy enhances bonding between an employee and employer (Lange, 2010). However, in developed economies such as Europe and United States this kind of strategy can be seen as a practice encouraging bias in the recruitment and selection process (Lange, 2010). Hence, these differences in perceptions demonstrate the impact of social norms on the recruitment and practices of Indonesia and Europe.

Training and Development

Modern businesses operate in a very competitive environment. Thus, training has become part and parcel of every organization which ought to remain relevant in modern business. Training has a primary goal of sustaining and improving job performance by providing skills and knowledge on how a given task has to be handled presently and in the future.

According to Tayeb (2005), mature economies in Europe recognize training and development of employees as it creates substantial benefits towards attaining business goals. They stress the importance in evaluating training and development practices which implements cost-effective assessment of such practices to determine the accurate financial resources gains on return investments (Tayeb, 2005).

In Indonesia, the investment on Human Resource Development practices is made up of two philosophies. One of the philosophies is that such activities support a business to gain more on investment and secondly, it strengthens an employee loyalty and commitment towards achieving the goals of the company (Dash, 2007).

Many companies in Indonesia view training and development as a need focused practice, and consider it as an expensive investment to sustain. Hence, Training and Development practices in Indonesian companies are divided. These divisions demonstrate the similarities and differences observations existing in Indonesian and developed economies.

Performance Appraisal

Performance appraisals play an important role for effective Human Resource Management. According to Hollinshead (2009), performance appraisal entails the process of analyzing an employee performance to guide and improve performance. Performance appraisal that aids an employee development is characterized with various elements.

These include; feedback and support, setting performance goals, identifying training needs and provides an input for the management for pay administration. Consequently, companies embracing performance appraisals can effectively regulate the strategy by identifying major steps involved (Torrington, et al, 2005).

Torrington, et al, (2005) indicate these steps as; identifying key performance areas and establishing annual objectives, identifying major attributes for effective performance, regular or periodic review of performance, discussing with the employee and identifying the training and development needs. These factors can sustain a company in the successful implementation of performance appraisal schemes (Torrington, et al, 2005).

According to Price (2007) the performance management tools such as 360 degrees and assessment schemes can assist organizations to ably monitor the progress, abilities and attitudes of its employees and evaluate them alongside organizational and personal development objectives.

However, possessing a performance appraisal framework is not sufficient in itself for motivating employees and producing the business desired outcomes. For instance, some employees can ignore these systems with assertions that they waste time or are poorly monitored or evaluated (Price, 2007). Most Indonesian companies recognize the importance of having an effective performance management system for its workforce.

Over the years, many modern companies have begun investing in the execution of these systems. According to Makhijani et al (n.d) most Indonesians companies have adopted the Competency Based Human Resource Management, CBHRM.

The CBHRM is a plan which encompasses decision making in relation to process involved in recruitment and selection, placement, employee termination by using linked data based on competency contours and employee abilities. It is done in order to preserve or execute an organization’s goals and objectives (Makhijani, et al, n.d).

The CBHRM idea covers different industry sectors this includes; manufacturing, energy and other service based industries. CBHRM has been instrumental in aiding Human Resource Department in executing global HR practices. The concept is enshrined with technological capabilities comprising of; competency profile and dictionary among others tools.

Specifically, competency profile of the design details different skills required with the inclusion of the competencies needed for loftier performers (Makhijani, et al, n.d). Besides, the strategy has been beneficial especially for oil and gas producing companies, in other words, it has increased service quality, surged performance whereas minimizing the costs linked to Human Resources Management (Lange, 2010).

The system indicates the resources and efforts that are in place in improving the performance management in Indonesian companies’ (Dash, 2007). Hence, it can be noted that, in more than one routine, companies in Indonesia are exploiting and modifying the performance management systems created by developed economies and benefit is noticed by implementing them.

Reward Management Schemes

Reward schemes are activities or practices which enables an organization to understand the motivational factors of its employees and design plan based on these understandings (Jackson and Schuler, 1995). The strategy can comprise of the practices of pay instruments approved by an organization.

However, in a diverse cultural perspective, employees maintain a contrasting approach in relation to pay because of the difference in terms of sensitivities towards monetary and non- monetary rewards. According to Branine, 2011, in Indonesia, the reward schemes are poorly organized. The employees are not only underpaid, but constant reminders for payments are common (Branine, 2011).

Most organizations functions under rigid rules and regulations anchored on organizations structure. In fact, these rules do not afford necessities for rewarding loftier performance or wage structure corresponding to merit.

According to Branine (2011), promotion benchmarks are fixed on seniority and the length of employment of an employee. Hence, the bureaucratic network of organizations is termed as an obstacle in designing an effective reward strategy in Indonesia (Schmidtmann, 2008).

However, as a result of liberal markets, companies in Indonesia like anywhere else are fronting a competitive business advantage with substantial shortage of gifted persons; a surging group of companies has begun recognizing the principle of rewards besides strengthening ethical performance of their employees (Jackson and Schuler, 1995).

Additionally, this has been preceded by the likelihood of paying all-inclusive remuneration packages which are unceasingly revised and adjusted in tandem with the evolving motivational requirements of the modern workforce. In mature economies such as those present in Europe, the reward schemes are organized and timely disseminated. The reward is fixed on a number of factors.

One of the factors is rewarding superior performance. According to Jackson and Schuler (1995), European economies reward schemes have been developed to encourage higher performance so that income and pay administration can serve as a strategy to generate satisfaction, initiative and boost capacity building.

Detailed job description and performance standards are outlined to assist in the analysis of work and rewarding of employees for growth performance. Consequently, career planning and development strategies in Europe have been strengthened. Career planning involves the managerial and technical skills that employees gather in order to fulfill their line of profession.

Career plan for most European employees is advanced accordingly; it gives them a future opportunity prediction in relation to promotion serves as an influential feature for performance and progress of talents (Jackson and Schuler, 1995). Hence, one can sum up that reward management structure in Indonesia differs with that offered by developed economies such as Europe.

Conclusion

Human Resource Management practices contribute to the success of companies. It has grown overtime and presently acts as a backbone of most organizations ranging from small and medium sized enterprises, SME, to large corporations. Hence, it serves as a guarantee warrantying competitive advantage for most organizations.

Organizations in developing economies like Indonesia are continuously shaping its practices to be tandem with current globalization. Major progress is being addressed in terms of planning and implementing functional Human Resource Management systems to accomplish business success. Initiatives like incorporation of technology such as CBHRM are an explicit example.

However, according to Dash (2007) the Human Resource systems tend to vary basing on the contextual factors. The culture differences prevalent in different countries have regulated the system in which people management concerns are handled.

As aforementioned, Human Resource Management practices such as; employee recruitment and selection, performance appraisal, training and development of emerging economies such as Indonesia, have been underscored with reference to available literature.

Successively, these practices have been contrasted with those present in developed economies such as Europe to provide more understanding. However, in definite facets, similarities have been traced within Human Resource Management practices found in Indonesia and in developed economies.

This is in terms of recruitment and selection activities. It has been noted that; these practices endeavors to illustrate some aspects of partiality to a given extend, the existence of which can be related to demonstration of collectivism culture existing at the workplace of Indonesian companies.

Moreover, Training and development is also still an indispensable area where organizations have not invested heavily. However, only the Information Technology sector in Indonesia has encouraged massive investments in training and development practices for employees.

Hence, it is anticipated that Indonesian companies would consume more in this practice in the future, when economy expands. Consequently, substantiation shows that performance appraisal is increasingly becoming a vital aspect where most companies have begun to allocate more resources.

Additionally, the reward management schemes in Indonesian companies seem to differ with those available in developed economies companies.

This paper has successfully accomplished to delineate expedient understandings in distinguishing characteristics of Human Resource Management practices in organizations functioning in Indonesia by differentiating and matching with options in which the systems are implemented in developed economies such as Europe.

References

Analoui, F., 1998. Human Resource Management Issues in Developing Countries, Ashgate, Aldershot.

Branine, M., 2011. Managing Across Cultures: Concepts, Policies and Practices, SAGE Publications Ltd, California

Dash, A., 2007. International Human Resource Management, Tata McGraw-Hill Education, New Delhi

Harzing, A., W., and Van Ruysseveldt, J., 2004. International Human Resource Management, Sage, London

Hollinshead, G., 2009. International and Comparative Human Resource Management, McGraw-Hill, Basingstoke

Jackson, S., E., and Schuler, R., S., 1995. Understanding Human Resource Management in the Context of Organizational and their environment, Annual Review. psychology. (460, pp. 237-64

Lado, A., & Wilson, M., 1994. Human Resource Systems and Sustained Competitive Advantage: A competency based perspective. Academy of Management Review, (19), pp.699-727

Lange, J., S., 2010. Human Resource Management in Indonesia: Important Issues to Know Before Establishing a Subsidiary in Indonesia, Diplomica Verlag, Hamburg

Makhijani, N., Rajendran, K., Creelman, J., n.d, Managing Human Capital in Indonesia, Pustaka Alvabet, New Delhi

Price, A., 2007. Human Resource Management in a Business Context , Thomson Learning. California

Schmidtmann, L., 2008. Global Marketing and Global Human Resources Management GRIN Verlag, Munich

Tayeb, M., H., 2005. International Human Resource Management: A Multinational Company Perspective, Oxford University Press, Oxford

Torrington, D., Hall, L., and Taylor, S., 2005. Human Resources Management, FT Prentice Hall, London

Click Here To Order Now!