International Human Resource Management MGMT414

Introduction to International Human Resource Management How the world is changing, Importance of globalization, IHRM as a key factor in the success of international business. An overview of domestic HRM and discussion on what is different in IHRM.

Questions to consider What are the key elements of “best practice” in HRM? Can the best practices be applied on a global level? To what extent are the principles of managing people universal and to what extent culture specific?

STRATEGIC PERSPECTIVES IN MNCs AN EVOLVING MANAGEMENT MENTALITY “ INTERNATIONAL” PERSPECTIVE - DOMESTIC COMPANIES WITH FOREIGN APPENDAGES - OPPORTUNISTIC APPROACH TO FDI - PORTFOLIO APPROACH TO MANAGEMENT OF FOREIGN OPERATIONS “ MULTI-NATIONAL” PERSPECTIVE - INCREASED REALIZATION OF IMPORTANCE OF INTERNATIONAL MARKETS - MANAGE OVERSEAS OPERATIONS AS A FEDERATION OF INDEPENDENT COMPANIES “ GLOBAL” PERSPECTIVE - GROWING CONCERN ABOUT INTERNATIONAL COMPETITION AND INEFFICIENCIES OF MULTI-NATIONAL RESPONSE - DRIVE FOR COST COMPETITIVENESS THROUGH PRODUCT STANDARDIZATION AND ORGANIZATIONAL CENTRALIZATION - MANAGE WORLWIDE OPERATIONS AS SINGLE ENTITY “ TRANS-NATIONAL” PERSPECTIVE - NEED TO RESPOND TO HOST COUNTRY PRESSURES AND GLOBAL COMPETITIVE DEMAND SIMULTANEOUSLY - MANAGEMENT CHALLENGE TO COORDINATE RESPONSIVE NATIONAL UNIT IN A GLOBALLY EFFICIENT SYSTEM Irwin/McGraw-Hill

Strategies of international, multinational, global & transnational organizations International company – transports its business outside home country; each of its operations is a replication of the company's domestic experience; structured geographically; and involves subsidiary general managers Companies offering multiple products often find it challenging to remain organized e.g. need to have a common information systems for accounting, financial and management controls, and marketing. Most evolve to become multinational companies Copyright 2003-2006, Chris Chan

Strategies of international, multinational, global & transnational organizations Multinational company – grows and defines its business on a worldwide basis, but continues to allocate its resources among national or regional areas to maximize the total. Copyright 2003-2006, Chris Chan

Strategies of international, multinational, global & transnational organizations Global organizations – treat the entire world as though it were one large country; may be the entire company or one or more of its product lines; may operate with a mixture of two or more organizational structure simultaneously. Copyright 2003-2006, Chris Chan

Strategies of international, multinational, global & transnational organizations Transnational organization - Use specialized facilities to permit local responsiveness; more complex coordination mechanism to provide global integration Copyright 2003-2006, Chris Chan

Global efficiency and local responsiveness of different types of firms High Global Transnational International Multinational Global efficiency Low Local responsiveness High Copyright 2003-2006, Chris Chan

Key Trends 63,000 transnational companies account for more than half (2/3) of world trade. The top 100 companies account for 14% of worldwide sales, 12% of assets, and 13% of employment. Physical location of value creation is very difficult to determine. Much of the force of globalisation comes through mergers and acquisitions.

Impact of globalisation on the nature of work Outsourcing to low labor countries First manufacturing, then processing services, now white collar work. (Reading suggestion: “The World is Flat” by Thomas Friedman)

Questions for HR professionals Do we have a strategy for becoming an international firm? What type of managers will we need to be successful? How can I find out about the way that HRM is conducted in other countries (laws, trade unions, labor market). What will be the impact of cultural norms on our HR policies. How will we choose whether to send expatriates or use local employees. How do we move people to different locations How do we manage transfer of knowledge across borders

International Versus Domestic HRM More functions to perform (taxation, culture orientation, relocation, admin services for expats) Broader perspective (cater to needs of PCNs, HCNs, TCNs) Greater involvement in the personal lives of employees Greater risk exposure (expat failure, family problems, terrorism) More external influences (government regulations, local ways of doing business, code of conduct)

Approaches To International Human Resource Management ETHNOCENTRIC: Highly centralized HQ control. Home country national POLYCENTRIC:Decentralized. Each subsidiary has some degree of decision making autonomy. Host country national GEOCENTRIC:Ignores nationality in favor of ability needs a worldwide integrated business strategy.

Parent-country Nationals(PCN) Disadvantages HCNs promotion opportunities are limited. Adaptation to host country may take a long time. PCNs may impose an inappropriate HQ style. Compensation differences between PCNs and HCNs may cause problems. Advantages Control and co-ordination by HQ is maintained. Promising managers get international experience. PCNs may be the best people for the job. Assurance that the subsidiary will comply with company objectives policies etc.

Host-country Nationals (HCN) Advantages No problems with language and culture. Reduced hiring costs. No work permits required. Continuity of management improves since HCNs stay longer in positions. Govt. policy may force hiring of HCNs. Promotional opportunities not limited - so higher morale among HCNs. Disadvantages HQ may have less control over operations. HCNs may still have limited career opportunities outside the subsidiary. Hiring HCNs limits opportunities for PCNs to gain overseas experience. Hiring HCNs may encourage a federation of disintegrated national units rather than one integrated global unit.

Third-country Nationals (TCN) Disadvantages Transfers must consider national animosities. Host government may resent TCNs as much as PCNs. TCNs may not comply with HQ style of management. TCNs may not want to return after assignment. Advantages Salary and compensation may be lower than for PCNs. May be more familiar with host country than the PCNs.

International Recruitment and Selection A selection program for international assignments involves assessing prospective candidates on certain criteria thought to be associated with assignment effectiveness. In order to have a successful selection program there needs to be a broad range of prospective candidates from which to choose criteria of effectiveness and valid procedures for assessing candidates on them.

Characteristics needed to be effective on overseas assignments empathy flexibility patience openness reliability confidence emotional stability communication skills tolerance for differences humor resourcefulness sensitivity teaching skills ability to handle alcohol curiosity positive regard for others acceptability of assignment desire to be abroad non ethnocentrism high motivation courtesy adaptability tolerance for ambiguity language skills interest in host culture

International Training and Development Empirical literature give guarded support to the proposition that cross cultural training has a positive impact on cross cultural effectiveness. Cultural awareness training is not just for the employee going overseas. It has numerous applications domestically that will increase organizational effectiveness. Findings indicate that it should be a regular part of personnel training especially management development. The realities of a more pluralistic society and international business make this a necessity.

International Training and Development Area studies programs  Culture assimilator programs  Language training programs  Sensitivity training programs Field experience programs

International Compensation If compensation is high then problems may be encountered on return to head office. If compensation is not adequate then there may be no incentive to go for the international assignment given the hardships that are usually involved in doing so.

International Compensation Expatriation Premium Cost of Living Allowance   Shelter Allowance Educational Allowance Home Leave The local managers are aware that their career prospects are limited therefore they are only concerned with the security and stability of only the local operation disregarding the broader goals of the global firm. When the expatriate receives many rewards to convince them to go abroad the local employees feel discriminated against.

Repatriation Virtually all repatriated personnel experienced some personal difficulty in reintegrating on return home. The main complaints were loss of status, loss of autonomy, lack of recognition of the value of the experience and lack of career direction.

Repatriation: Reverse Culture-shock JOB RELATED FACTORS “Out of sight out of mind” International experience devalued Loss of status and pay relatively peaking Changes in the HQ SOCIAL FACTORS Expat assignment - different type of social interaction (going from a very close expat community to where everyone is very busy with their own lives) Problems of spouse returning to the workforce Lack of peer support for teenagers