IHRM

Firms are moving outside their domestic business.

IB as become important.
Consequences
Firms fight for markets share against foreign and domestic
competitors.
Large Work Force is there regardless of their national origin.
Managers grapple with complex issues as they seek to gain a
competitive advantage.
Finding and nurturing HR to implement an global strategy gains
critical importance.
Reasons for Going Global
PROACTIVE
Additional resources
Lowered costs
Incentives
New, expanded markets
Exploitation of firm-specific
advantages
Taxes
Economies of scale
Synergy
Power and prestige
Protect home market
REACTIVE
Trade barriers
International customers
International competition
Regulations
Chance
5-2
Reasons for going Global
Reactive (from reaction - to receive information, then
act)
the company is responding to demand it discovers in
another location
it sees it competitors going to a particular place
regulations - environmental/work safety may be easier
overseas
costs of production at home force it to cheaper areas
chance occurrence
Reactive, continued
If a companies customers go international, then it
may be required to follow.
eg. if an auto parts supplier to Maruti sees Maruti beginning to
make some important component in Mexico, then it may also have
to go to Mexico so it can mfg. there and continue to supply Maruti
- it would be too expensive to ship the parts from India
Reasons for going Global

Proactive (to actively look for an opportunity)

strategically seeking out advantages
launch and offense into a new market before competitor
does
power and prestige
incentives
lower costs of labour, production, energy
Proactive, continued
As costs of labour have increased in North America, many
assemblers and component parts mfg. have had to move offshore

Also, another reason to go international is to gain prestige which
can be applied to customers at home - if a company has overseas
offices, it appears to be more impressive at home ie. law firms, CA
firms
What is IHRM?
IHRM can be defined as set of activities aimed
managing organizational human resources at
international level to achieve organizational
objectives and achieve competitive advantage
over competitors at national and international
level.
IHRM includes typical HRM functions such as
recruitment, selection, training and development,
performance appraisal and dismissal done at
international level and additional activities such
as global skills management, expatriate
management and so on.
OBJECTIVES OF IHRM
Create a local appeal without compromising upon
the global identity.
Generating awareness of cross cultural
sensitivities among managers globally and hiring
of staff across geographic boundaries.
Training upon cultures and sensitivities of the
host country.

NEED FOR IHRM
Managing expatriates
Globalization has forced HRM to have
international orientation
Effectively utilise services of people at both the
corporate office and at the foreign plants

FUNCTIONS OF IHRM
RECRUITMENT
SELECTION
EXPATRIATES
PERFORMANCE APPRAISAL
TRAINING AND DEVELOPMENT
COMPENSATION
WOMEN IN INTERNATIONAL BUSINESS
DUAL CAREER GROUPS
INTERNATIONAL INDUSTRIAL RELATIONS
TRADE UNIOUNS
PARTICIPATIVE MANAGEMENT
More HR activities
Need for a broader perspective
More involvement in employee personal lives
Changes in emphasis as the workforce mix of
expatriates and locals vary
Risk exposure
More external influences
Characteristics of IHRM
11
More Human Resource Activities
12
Difficulty in implementing HR in host
countries
Developmental opportunities for
international managers.
Human
Resource
Planning
Ability to mix with organisations culture
Ethnocentric, polycentric or geocentric
staffing approach
Selection of expatriates
Managing repatriation process
Employee
Hiring
Emphasis on cultural training
Language training
Training in manners & mannerisms
Training &
Development
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Devising an appropriate strategy to compensate
expatriates
Minimising difference in pay between parent,
host & third country nationals
Issues relating to the re-entry of expatriates into
the home country
Compensation
Constraints while operating in host
countries need to be considered.

Physical distance, time differences & cost
of reporting system add to the complexity.
Performance
Management
Handling industrial relations problems in a
subsidiary.

Attitude of parent company towards unions
in a subsidiary
Industrial
Relations
Pay issues
Different countries, different currencies
Gender based pay in Korea, Japan, Indonesia
Health insurance for employees & their families
Overtime working Korean & Japanese firms
Promotions based on seniority or merit
Need for Broader Perspective
14
15
More involvement for both parent-country &
third-country nationals
Housing arrangements
Health care
Remuneration packages
Assist children left behind in boarding schools
More
Involvement
in Employees
Personal Lives
Need for parent-country & third-country
nationals decrease as more trained locals
become available.
Resources reallocated to selection, training &
management development
Changes in
emphasis as the
workforce mix
of expatriates
and locals vary
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Physical safety of the employees.

Failure of expatriates to perform well
financial losses to the firm
Risk
Exposure
Dealing with ministers, political figures,
economic & social interest groups
Hiring procedures dictated by host
country.
Catch up with local ways of doing
business.
External
Influence
Approaches to I HRM
Cross Cultural Management ( Examining Human Behaviour Within
organization from an international perspective).
Comparing and analyzing HRM Systems in various countries.
Focusing on aspects of HRM in MN Firms.
IHRM is defined as the interplay between three dimensions of HRM
Types of employees
HR Activities
Country of Operation.
Types of Employees
HCN (Host Country Nationals)
PCN (Parent Country Nationals)
TCN ( Third Country Nationals)
HRM Activities
HRP, PM, Compensation Benefits, Staffing, T&D, Labor Relations.
Country of Operations
Host Country (Where Subsidiary may be located)
Home Country ( Firm is Headquartered)
Other Country ( Source of labour or finance)
Complexities of operating in different countries and employing
different nationals , categories of workers is a key variable that
differentiate domestic and IHRM.
Causes for Failure in MN Ventures
Lack of understanding of the essential difference in managing HR at
all levels in foreign environments.
Certain management philosophies and techniques have proved
successful in the domestic environment their application in a foreign
environment too often leads to frustration and failure.
These human considerations are as important as the financial and
marketing criteria upon which so many decisions to undertake MN
ventures depend.
Organizational factors influenced by HR activities.
Stages of Internationalization
Mode of operations used in various foreign markets.
Method of control and coordination.
Strategic importance of the overseas operations to total corporate
profitability.

I HRM Approaches
Ethnocentric
Polycentric
Geocentric
Regiocentric

Ethnocentric
Key positions at the domestic and foreign operations are held by HQ
management personnel ( Subsidiaries are managed by expatriates
form the home country (PCN).
Reasons
a) Perceived lack of qualified Host Nation Employees.
b) Need to maintain good communication, coordination and control
with CHQ.
Disadvantages
Limits promotion opportunities of HCN which may lead to decline in
productivity and high labour turnover. In the process company may
lose competent people.
PCN being placed in Host Country takes lots of time in
understanding the local dynamics leading to faulty decisions.
Salary Structure of PCN creates a feeling which id much better than
its employees in other countries, discrimination and frustration
among the employees of Host country.

E.g. An U.S MNC (Parent Company) posting an U.S employee in
India (Host Country) and giving salary in dollars.

Polycentric Approach
MNE treats each subsidiary as a distinct national entity with some
decision making autonomy. Subsidiaries are managed by (HCN) who
are seldom promoted to positions in HQ.
Advantages
No language barrier. Local dynamics can well be taken care of by
local people.
Managing local parties and administration is easier.
Less expensive than ethnocentric.
Disadvantages
oMaintaining an understanding between the CHQ and subsidiary
becomes very difficult.
oOrganizational culture of the company cannot be imbibed.
oOpportunities for HCN to get exposure and experience outside their
country is not there this will minimize their growth and development in
organization beyond their own country.


Geocentric Approach
Employing people in key positions throughout the organization without
the consideration of any nationality. Addresses the disadvantage of
both ethnocentric and polycentric competent people are available in
any part of the globe.
It helps the organization to develop core competency taking the best
talents in the core team.
Disadvantages
Paper work involved in hiring foreign nationals.
Problems of obtaining work permits
Expensive in terms of the investment towards training and
development of the individual.
Benchmarking of salaries with international compensation package.
Regiocentric Approach
Based on diversion of operations on the basis of some geographical
region and allows the transfer if employee within a particular region.
Many companies have regional division like Europe, America and Asia
pacific.
Advantages
Allows interaction between executives transferred to regional HQ from
subsidiaries and PCN posted to the regional HQ.
Also reflects some sensitivity to local conditions.
Effective for an MNC to move purely ethnocentric to geocentric.
Disadvantages
It can produce federalism at a regional rather than country basis.

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A Model of IHRM
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Forces for Change
Global competition
Growth in mergers, acquisitions and alliances
Organization restructuring
Advances in technology and telecommunication
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Impacts on Multinational
Management
Need for flexibility
Local responsiveness
Knowledge sharing
Transfer of competence

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Managerial Responses
Developing a global mindset
More weighting on informal control mechanisms
Fostering horizontal communication
Using cross-border and virtual teams
Using international assignments
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Factors that Influence the Global Work
Environment
Variables that moderate difference between DHRM and IHRM
Domestic and International
Activities of the HRM Function
Industry within which
The MNC is primarily involved
Cultural Environment
Attitudes of Senior
management
Complexity involved
in operating in different countries
& employing different
National categories of
employees
Extent of reliance of
MNC on its home country
or domestic Market
Cultural Environment
What is Culture?
Cultural Differences.
Cultural Shock
Role of HR Professionals
It is a shaping process. i.e members of a group or society share a
distinct way of life with common values, attitudes, behaviours etc.

In England to table a subject means to put it on the table for
present discussion. In the US, it means to postpone discussion of a
subject, perhaps indefinitely.

In the US, information flows to a manager. In cultures in which
authority is centralized (Europe & South America), the manager
must take the initiative to seek out the information.

In Japan, there are sixteen ways to avoid saying no.

When Something is inconvenient to Chinese, it is most likely
downright impossible.

Non Verbal Communication in different Cultures
Calling a Waiter
In the US, a common way to call a waiter is to point upward with the
forefinger. In Asia , a raised forefinger is used to call a dog or other
animal. To get the attention of a Japanese waiter, extend the arm
upward, palm down, and flutter the fingers. In Africa knock on the
table. In the Middle East, clap your Hands.

Insults
In Arab Countries, showing the soles of your shoes is an insult. Also,
an Arab may insult a person by holding a hand in front of the
persons face

A-Okay Gesture
In the US, using a index finger and the thumb to form a o while
extending the rest of the fingers is a gesture meaning Okay or fine. In
Japan, however the same gesture means money. Nodding your head in
agreement if a Japanese uses this sign during your discussion could
mean you are expected to give him some cash. In Brazil the same
gesture is considered a seductive sign to woman and an insult to a
man.

Eye Contact
In western and Arab Cultures, prolonged eye contact with a person is
acceptable. In Japan on the other hand, holding the gaze of another is
considered rude. The Japanese generally focus on a persons neck or
tie Knot.

Handshake and Touching
In most countries, the handshake is an acceptable form of greeting. In
the middle east and other Islamic countries, however, the left hand is
considered the toilet hand and is thought to be unclean. Only the right
hand should be used for touching.

Scratching the Head
In most western countries, scratching the head is interpreted as lack of
understanding or no comprehension. To the Japanese, it indicates
anger.

Handshake and Touching
In most countries, the handshake is an acceptable form of greeting. In
the middle east and other Islamic countries, however, the left hand is
considered the toilet hand and is thought to be unclean. Only the right
hand should be used for touching.



Scratching the Head
In most western countries, scratching the head is interpreted as lack
of understanding or no comprehension. To the Japanese, it indicates
anger.

Industries with which MNC is primarily involved
Global Industry: Series of linked domestic industries.
Rivals compete with each other on a truly world wide basis.

In a global industry a firm must integrate its activities on a world wide
basis to capture the linkages among countries.

The HR department has to deliver the international support by
involving in the primary activities of the companies

Extent of Reliance of MNC on its Home Country Markets.
MNC relies on its performances in its home country market when it
comes to determine the international strategies. This factor plays a
major role in determining the HR policies of the organization. E.g A
very large domestic market influence not only all aspects of how an
MNC organize its activities through its international division, but also
influence the attitude of senior management.
Attitude of Senior Management
If the senior management does not have international orientation the
importance of international operations may not be adequately
emphasized.
The lack of realization of difference between the two distinct functions
of international and domestic HR practices will create disturbances in
the international operations. Role of HR Manager is crucial here in
changing the mindset of the top management towards global
orientation.