An Introduction to International Human Resource Management

Why International Human Resource Management? Increasing globalization, firms and employees in them moving all over the world. Major problems in international operations because of human resource management blunders Hence need to understand human resource management in a global perspective Morgan defines IHRM as an interplay of 3 dimensions :HR activities,types of employees & countries of operations.

Why International Human Resource Management? (cont’d) The role of HR in International Operations Managing a Multicultural Workforce Developing Managerial Talent in a Global Business Environment Reasearch done shows 3 global pressures: 1. Deployment, 2. Knowledge & innovation dissemination 3. Identification & development of talent on a global basis.

Globalization, Uncertainty, Complexity and IHRM Globalization and New Technologies New Environment – Increased Environmental Uncertainty More Complexity More Dynamism Less Richness Environment is more complex, dynamic & with less knowledge, awareness & experience regarding the new environment with increased uncertainity.

Globalization and importance of IHRM Uncertainty, Complexity, Hypercompetition Need to Refocus on Persons, Roles and Integration for Global Performance HR Capabilities People Processes Persons in Roles

Three Approaches to IHRM Cross-cultural management Examine human behavior within organizations from an international perspective Comparative HRM and Industrial Relations Seeks to describe, compare and analyze HRM systems and IR in different countries HRM in multinational firms Explore how HRM is practiced in multinationals Approaches based on human behaviour & HRM systems and practices.

Interrelationships between Approaches of IHRM

Diversity as an Organizational and HR Challenge in MNE DUERR POINTS OUT:International problems are created by people and also solved by them. Source: Marilyn Loden and Judy B. Rosener, Workforce America: Managing Employee Diversity as a Vital Resource, p. 20.

A Definition of Human Resource Management Human Resource Management (HRM) involves all management decisions and practices that directly affect the people who work for the organization. “Human Resources” the people who work for the organization.

A Definition of Human Resource Management (cont’d) “Human” represents the dimension of HRM which relates to the soft aspects such as commitment of employees through participation and the most important assets being the employees. “Resource” represents the hard aspects such as the strategy link of HRM and the importance of efficient utilization of employees. “Management” represents the role of HRM as part of management that implies that it’s not only an administrative function that carries out the formulated policies but also a managerial function that contributes to strategy formulation.

The General Field of HR Major Functions and Activities Human resource planning Staffing Recruitment Selection Placement Performance appraisal Training and development Compensation and benefits Industrial relations

Human Resource Management Functions Planning for Organizations, Jobs, and People The Strategic Management of Human Resources Human Resource Planning Acquiring Human Resources Selection Recruitment Integration

Human Resource Management Functions (cont’d) Building and Motivating Performance HR Development Performance Appraisal Compensation Systems

Human Resource Management Functions (cont’d) Maintaining Human Resources Benefits Safety & Health Collective Bargaining Organizational Exit Employment transitions Multinational Human Resource Management

Strategic Decisions and Their Implications for Human Resource Management

Strategic Decisions and Their Implications for Human Resource Management (cont’d) Other complex issues are foreign competiton,nurturing HR,Formulation & Implementation of global strategy,Top mgt. Priority for I.Business and international expansion for small/medium firms.

What does IHRM add into the Traditional Framework of HRM? Types of employees Within and cross-cultural workforce diversity Coordination Communication Human resource activities Procurement Allocation Utilization of human resources Nation/country categories where firms expand and operate Host country Parent country Third country

A Model of IHRM

Some Terms Defined Host Country National (HCN): Belongs to the Country where the subsidiary is located Parent Country National (PCN): Belongs to the Country where the firm has its headquarters Third Country Nationals (TCN): Belongs to any other country and is employed by the firm

What is an expatriate? An employee who is working and temporarily residing in a foreign country Some firms prefer to use the term “international assignees” Expatriates are PCNs from the parent country operations, TCNs transferred to either HQ or another subsidiary, and HCNs transferred into the parent country Global flow of HR: more complexity in activities and more involvement in employees' lives

International Assignments Create Expatriates:

The Expatriate Problem High Expatriate Failure Rates Average cost per failure to the parent firm can be as high as three times the expatriate’s annual domestic salary plus the cost of relocation Between 16% & 40% of all American employees sent abroad to developed nations, and almost 70% sent to less developed nations return home early

Reasons for Expatriate Failure Inability of spouse to adjust Manager’s inability to adjust Other family problems Manager’s personal or emotional maturity Inability to cope with larger overseas responsibility Lack of technical competence Difficulties with new environment

Differences between Domestic HRM and IHRM More HR activities: taxation, culture orientation, administrative services The need for a broader perspective: cater to multiple needs More involvement in employees’ personal lives: adjustment, spouses, children Changes in emphasis as the workforce mix of expatriates and locals varies: fairness Risk exposure: expatriate failure, terrorism Broader external influences: government regulations, ways of conduct

Differences between Domestic HRM and IHRM: variables Complexity involved in operating in different countries, varied nationalities of employees The different Cultural Environment The industry or industries with which the MNC is involved Attitudes of Senior Management Extent of reliance of MNC on home country domestic market

Variables that Moderate Differences between Domestic HR and IHRM

Forces for Change Global competition: Growth in mergers, acquisitions and alliances: Organization restructuring: Advances in technology and telecommunication:

Impacts on Multinational Management Need for flexibility: Local responsiveness: Knowledge sharing: Transfer of competence:

Managerial Responses Developing a global “mindset”: More weighting on informal control mechanisms: Fostering horizontal communication: Using cross-border and virtual teams: Using international assignments:

Factors that Influence the Global Work Environment

Approaches To International Human Resource Management Ethnocentric: Highly centralized. HQ controls PCNs dominate. Polycentric: Decentralized. Each subsidiary has some degree of decision making autonomy. HCNs manage subsidiaries. Geocentric: Ignores nationality in favor of ability and competence needs in a worldwide integrated business strategy.

Convergence or Divergence? Large corporations’ preference for consistent worldwide systems Smaller companies’ desire for more professional systems Need to follow local HRM laws Development of unique techniques and practices to suit local cultural and legal requirements

Choosing an Approach to IHRM Corporate International Strategy Political and Legal Concerns Level of Development in Foreign Locations Technology and the Nature of the Product Organizational Life Cycle Cultural Differences

Thank You