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An Introduction to IHRM



Introduction Ice breaker Myths!!! International orientation (IB?) Strategic IHRM Reasons to go for IHRM IHRM model Differences between HRM & IHRM Challenges of IHRM

Important lessons for global firms

The need to manage change The need to respect local cultures The need to understand a corporations culture The need to be flexible The need to learn
Copyright 2003-2006, Chris Chan

Increasing Importance of Global Human Resource Understanding

International Mergers and Acquisitions

Foreign Human Resources

Importance of Global Human Resources Management

Global Competition

Market Access Opportunities

Figure 151

Types of Organizations

Managing Across Borders

International corporation
Domestic firm that uses its existing capabilities to move into overseas markets.

Global corporation
Firm that has integrated worldwide operations through a centralized home office.

Multinational corporation (MNC)

Firm with independent business units operating in multiple countries.

Transnational corporation
Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units.

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.

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

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

Reasons for 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


What does IHRM add into the Traditional Framework of HRM?

Types of employees
Within and cross-cultural workforce diversity Coordination Communication Procurement Allocation Utilization of human resources Host country Parent country Third country

Human resource activities

Nation/country categories where firms expand and operate


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


Models of IHRM

Matching Model Fomburn, 1984

Highlights the right fit between Human resource systems with organizational strategy, structure.

Harvard Model Beer et al, 1984

Stresses Human Concerned about employer employee relationship High lights the interests of various stakeholders both internal and external Match between stakeholders interest and organizational objective

Contextual model Hendry & Pettigrew, 1988

It concentrates on organizations may follow no of pathways in order to achieve results. External environment socio economical, politico legal, technological & competitive Internal enviornment culture, structure, leadership, technology & business output.

5 P model- Schuler, 1992

Five HR activities Philoshopy Policy Programmes Practices Processes with strategics needs of organization

European model Brewster, 1993 &1995

Constrained between internatioanl (European union) and national level by national culture and legislation. Patterns of ownership, HRM practices in union, consultative arrangements.

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

Main challenges in IHRM

High failure rates of expatriation and repatriation Deployment getting the right mix of skills in the organization regardless of geographical location Knowledge and innovation dissemination managing critical knowledge and speed of information flow Talent identification and development identify capable people who are able to function effectively Barriers to women in IHRM International ethics Language (e.g. spoken, written, body)
Copyright 2003-2006, Chris Chan


Major differences between domestic HRM and IHRM

Business activities e.g. taxation, international relocation, expatriate remuneration, performance appraisals, cross-cultural training and repatriation Increased complexities e.g. currency fluctuations, foreign HR policies and practices, different labor laws Increased involvement in employees personal life e.g. personal taxation, voter registration, housing, childrens education, health, recreation and spouse employment Complex employee mix cultural, political, religious, ethical, educational and legal background Increased risks e.g. emergency exits for serious illness, personal security, kidnapping and terrorism

Copyright 2003-2006, Chris Chan


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

Variables that Moderate Differences between Domestic HR and IHRM


Main challenges in IHRM

Different labor laws Different political climate Different stage(s) of technological advancement Different values and attitudes e.g. time, achievement, risk taking Roles of religion e.g. sacred objects, prayer, taboos, holidays, etc Educational level attained Social organizations e.g. social institutions, authority structures, interest groups, status systems
Copyright 2003-2006, Chris Chan


Chris Chan, Introduction to IHRM, BUSN3025 seminar, 2003. Peter J Dowling, Denice E Welch,International Human Resource Management, Cengage Learning.