International HRM: Culture and Policy in Australia/Indonesia

This report analyzes the challenges faced by an Australian technology company's subsidiary in Indonesia due to cultural differences, particularly in the context of international human resource management (HRM). It examines the impact of Hofstede's cultural dimensions on organizational cultur...Read More

Running head: INTERNATIONAL HUMAN RESOURCE MANAGEMENT
INTERNATIONAL HUMAN RESOURCE MANAGEMENT
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Author’s Note

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Executive Summary
This study highlights the importance of human resource management in an organization
operating in international market. It focuses on the Hofstede approach on enterprise culture and
the divergence of cultural dimensions among three nations such as Australia, New Zealand and
Indonesia. The problem regarding adoption of same HR policies among the subsidiaries of
Australian technology organization due to cultural difference is also explained in this study. This
situation is also linked with Hofstede approach of cultural dimension. Furthermore,
recommendations are also given to this organization due to problems faced by the HR managers
in implementing policies.

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Table of Contents
Introduction......................................................................................................................................3
Hofstede approach on enterprise cultural dimensions.....................................................................3
Problems faced by the subsidiary of the Australian enterprise operating in Indonesia...................6
Relating the present scenario with the Hofstede approach of organization culture.........................7
Recommendations on the problems faced by Australian subsidiary while operating in Indonesia 9
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
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.
Hofstede approach on enterprise cultural dimensions
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

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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-
Power Distance
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.
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.
Individualism
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

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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.
Masculinity vs Feminity
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.
Uncertainty avoidance
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.

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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.
Long term orientation
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.
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.
Problems faced by the subsidiary of the Australian enterprise operating in Indonesia
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

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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.
Relating the present scenario with the Hofstede approach of organization culture
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,

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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.
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

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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.
Recommendations on the problems faced by Australian subsidiary while operating in
Indonesia
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

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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.

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References
Alvesson, M. (2012). Understanding organizational culture. Sage.
Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management
practice. Kogan Page Publishers.
Binder, J. (2016). Global project management: communication, collaboration and management
across borders. Routledge.
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.

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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.
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https://www.hofstede-insights.com
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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).
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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.

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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.