INTERNATIONAL HUMAN RESOURCE

MANAGEMENT
 

Sub Code: 10MBAHR445

MODULE 1
Introduction to IHRM

 Definition, reasons for going global

 Approaches to IHRM
 Difference between IHRM and Domestic HRM
 Reasons for emergence of IHRM
 Models of IHRM-Matching model, Harvard Model, Contextual
Model, 5P Model ­European Model.
 Models of SHRM in Multinational Companies
 Internationalization of HRM: Socio-cultural context, Organizational
dynamics and IHRM: Role of culture in International HRM
 Culture and employee management issues
 Organizational Processes in IHRM
 Linking HR to International expansion strategies
 The Challenges of International Human Resource Management
The Imperative
 The first Industrial Revolution of the mid
18th century
 The second Industrial Revolution –
telecommunication and information
technology
 Lowering & breaking down of trade
barriers
 Globalization of Business & HR
Global
Global
Population
Population
Changes
Changes

Globalizati
Globalizati Global
Global
Global GlobalEconomic
Economic
Communications
Communications on
on Forces
Forces Interdependence
Interdependence

Regional
Regional
Alliances
Alliances
NAFTA,
NAFTA,EU EU
 Types of Global Organizations

Types
Importing and Selling and buying goods and services with
Exporting organizations in other countries

Multinational An organization with operating units located in

Enterprise (MNE) foreign countries.

Global An organization having corporate units in a

Organization number of countries integrated to operate
worldwide.
 Types of Organizations
• International • Global corporation
corporation – Firm that has integrated
– Domestic firm that uses worldwide operations
its existing capabilities through a centralized
to move into overseas home office.
markets. • Transnational
• Multinational corporation
corporation (MNC) – Firm that attempts to
– Firm with independent balance local
business units responsiveness and
operating in multiple global scale via a
countries. network of specialized
operating units.
Definition of IHRM
 Morgan …………
IHRM as the interplay among these three
factors HR activities, types of
employees & countries of operation.
Morgan’s Model
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
Reasons for going global

 Emergence of stronger & more powerful MNCs

 Above has been due to a rapid increase in global activity &
competition
 Effective management of HR globally is fast emerging as a
critical success factor for international business.
 Research evidence shows that
 Shortage of international managers is becoming an increasing problem
 The successful implementation of global strategies depends on the
existence of an adequate supply of internationally experienced
managers
 Business failures in the international arena may often be linked to poor
mgmt of HR
 Expatriate failure continues to be a significant problem for many
international firms
 Differing employee expectations, legal environments
Increasing Importance of Global Human
Resource Understanding
International
International
Mergers
Mergersandand
Acquisitions
Acquisitions

Importance
Importanceof
of
Foreign
ForeignHuman
Human
Global
GlobalHuman
Human Global
Global
Resources
Resources Resources
Resources Competition
Competition
Management
Management

Market
MarketAccess
Access
Opportunities
Opportunities
Approaches to IHRM

Make strategic decision as to level of

standardization desired across locations
 Ethnocentric approach
 Exporting organization’s home country practices and policies
to foreign locations
 Polycentric approach
 Allowing each location to develop own practices and policies
 Regiocentric approach
 Developing standardized practices and policies by
geographic region
 Geocentric approach
 Developing one set of global practices and policies applied at
all locations
 Ethnocentric Approach : the home
country’s culture is sought to be imposed
on subsidiaries.
• few foreign subsidiaries have any
autonomy and strategic decisions are
made at headquarters
• key positions in domestic and foreign
operations are held by headquarters’
personnel
• subsidiaries are managed by staff from
the home country (PCNs).
 Polycentric Approach : MNC adapts the
local cultural needs of subsidiaries. If the
management policy is oriented to suit
local needs, or if a product is customized
to meet customer tastes, it is
polycentricism in practice.
• subsidiary is treated as a distinct
national entity with decision-making
autonomy
• subsidiaries are managed by local
nationals (HCNs)
• HCNs are seldom promoted to positions
at headquarters• PCNs are rarely
 Geocentric Approach
• a global approach to its operations, recognizing that each
part (subsidiaries and headquarters) makes a unique
contribution
• world wide integrated business; nationality is ignored in
favour of ability.
 Advantages
• develops international executive teams and internal pools
of labour
• supports cooperation and resource sharing across units
 Disadvantages
• companies required to provide extensive documentation
• increased training and relocation costs
• compensation structure with standardized international
base pay
• large numbers of PCNs, TCNs, and HCNs need to be sent
 Regiocentric Approach
• reflects the geographic strategy and structure of the MNE
• it utilizes a wider pool of managers but in a limited way
• staff may move outside their countries but only within the
particular geographic region
• regional managers may not be promoted to headquarters
positions but enjoy a degree of regional autonomy

Advantages
• interaction between executives
• sensitivity to local conditions (staffed by HCNs)
• way to gradually move from a purely ethnocentric or
polycentric approach to a geocentric approach

Disadvantages
• can produce federalism at a regional rather than a country
basis
• improves career prospects at the national levels
Setting Strategic HR Standards
Difference between IHRM and Domestic HRM

 More HR activities
 The need for a broader perspective
 More involvement in employees’
personal lives
 Changes in emphasis as the workforce
mix of expatriates & locals varies
 Risk exposure
 Broader external influences
Difference between IHRM and Domestic
HRM contd….

 More HR Activities
 International taxation: usually have both domestic & home country
tax liabilities; need tax equalisation policies to ensure absence of either
tax incentive or disincentive
 International relocation & orientation: pre-departure training,
providing immigration & travel details, providing housing/medical care,
school information, finalising compensation details.
 Host government relations: important to establish cordial working
relationships with government officials in the host country; especially since
several requirements are sometime ambiguous and complex.
 Language translation services: for internal & external
correspondence
 Administrative services for expatriates: how ethical & legal are
parent country policies & practices in the host country; e.g. AIDS test pre-
requisite for acquiring work permit in the host country where expatriate is
from the parent country, USA
Difference between IHRM and Domestic
HRM contd….

 Broader Perspective
 Design & administer policies for more than one
group of employees; often deal with complex
equity issues as in many multinationals there is
a tendency to extent preferential treatment to
PCN expatriates and not to HCNs and PCNs
 More involvement in personal lives
 In international movements much greater
support & involvement is required; right from
housing arrangements, health care, handling
banking, house rentals; assist in care of school
children left behind in boardings etc
Difference between IHRM and Domestic
HRM contd….

 Broader External Influences:

 Type of government, state of the economy,
accepted practices of doing business; nature
and focus of legal requirements (in developing
vs developed economies)
Reasons for emergence of IHRM

 Emergence of stronger & more powerful MNCs due to a

rapid increase in global activity
 Rapid increase in global competition.
 Effective management of HR globally is fast emerging as
a critical success factor for international business.
 Rapidly developing economies having huge markets.
 Reduce cost reduction.
 Changing demographics.
 Regional trading blocks are adding pace to globalization.
 Declining trade & investment based have vastly
contributed to globalization.
 One of the most powerful instrument “Technology.”
Models of IHRM-Matching model

 Matching Model
 Harvard Model
 Contextual Model
 5-P Model
 European Model
Matching Model

• Highlights the resource aspect of HRM and

emphasizes the efficient utilization of HR to meet
organizational objectives; emphasizes a right fit
between organizational strategy, structure &
HRM systems
Harvard Model
Stress on “human”, soft aspect of HRM more
concerned with the employer – employee
relationship. Highlights the importance of
stakeholders community, shareholders,
management, government, unions etc.
Contextual Model

 Is based on the premise that organisations may

follow a number of different pathways in order
to achieve the same results,
 this is because of the existence of a number of
linkages between external envtal contexts &
internal orgnal context
 – these linkages influence the content of the
organisation’s HRM
5P Model

 Blends 5 HR activities (philosophies, policies,

programs, practices, processes) with strategic
needs,
 shows the inter-relatedness of these activities
& their significance in achieving the org. needs
European Model.

 European Model
 Is based on the argument that European
organisations are constrained at both
international & national level by national
culture & legislation.;
 also guarded at the org level by patterns of
ownership and at the HRM level by trade
union involvement & consultative
arrangements.
 These constraints need to be
accommodated while forming a model of
HRM.
SHRM (Strategic Human resource management)
in Multinational companies:

SHRM refers to the process of developing practices,

programs and
policies that help achieve organizational objectives. The
foundation
of sound SHRM practices can be summarized as follows.
• A clear & concise understanding of the nature & scope

of the business that the MNC is engaged in.

• A good understanding of global challenges what the

particular business or industry is facing. What needs

drive the organization to go global? Which country did it
choose to set up its operation & why? what are the host
country HR challenges?
• Knowledge about the sources of competitive
advantage that the MNC have over its
competitors.
Strategic HR activities can be globalized or
localized to perfectly match with MNC’s
Strategies. Strategies of an organization
comprises:
1. Defenders (Low cost producers)

2. Prospectors (product innovators &

differentiators)
3. Analyzers (imitators of successful prospectors)

4. Reactors (companies with dysfunctional

strategies)
 External
Reactors
Prospectors
•Retrenchment
* hire talent & then
•Passive
spend on training
recruitment
•High turnover
•Retention of core
•Result based PA
Sources of talent
•Frequent layoffs
labour
Defenders
Analysers
* employees hired
• Heavy investment
at entry level
on trg but talents
•Lot of emphasis on
are also brought
T&D
• Low turnover
Internal •Making & not
• Dismissal for poor
buying to fill
performance
vacancies.

Group Assignment of Individual

contribution promotion criteria
contribution
1. Low cost producer (Defenders): Focus is on cost
control. With the cost control as primary focus,
predictability & short term focus are valued. They
provide G & S at low cost maintain quality &
provide customer service. Globally, the HR
activities that are relevant to this context are T&D
as employees are hired in entry level, high level
position are filled through promotions. Employees
are expected to stay with the organization for
long period.
2. Companies pursuing prospectors strategy look
for innovation. They design & produce new
products & Deploy resources from discontinued
products to development of new ones. Innovation
being the key approach, organizations that foster
risk taking, cooperation, creativity, & long term
perspective are valued. Globally talented
individuals are hired & training is mainly on the
job.
3. Analyzers is another strategy that organization
often seek to pursue. These companies are of
hybrid type, they are innovators as well as
competitors in long run. Such countries are
constantly looking to countries that provide
constant global growth. The HR policies of these
organizations fall between the
defenders & prospectors. Organizations spend
heavily on trg but talents are “brought” to fill
higher level positions. These companies both
promote(make) as well as hire(buy) HR.
• 4. Reactors strategy are highly
competitive markets & are the slaves of
their envt. Decisions to globalize is
driven by the market conditions. Give
more importance to retention of core
talent and there are frequent layoffs.
 Internationalization of HRM: Socio-
cultural context

 Culture is a shaping process

 Members of a group or society share a
distinct way of life with common values,
attitudes & behaviours that are transmitted
over time in a gradual but dynamic process.
 Subtle process, one is not always conscious
of its effect on values, attitudes & behaviours
 Culture shock results from differences which
require one to adapt or get used to in a
relatively short period of time.
 Internationalization of HRM: Socio-cultural
context contd….

 Because international business involves

movement of people across cultures and
requires people of different cultures to
work together; an appreciation of
cultural differences becomes essential
for success.
 Coping with cultural differences and
knowing when & how they become
relevant are a constant challenge for HR
managers.
Organizational dynamics and IHRM:

 Patterns of international competition vary

from industry to industry
 Multi domestic industries in which competition
in each country is essentially independent of
competition in other countries. Role of HR is
likely to be more domestic in orientation and
structure.
 Global industries in which the firm’s
competitive position in one industry is
significantly influenced by its position in other
countries. HR function is structured to deliver
international support required by the primary
activities of the multinational.
 Factors Influencing Global Work
Environment

Change forces:
Global competition
Mergers & Acqstns
Organisational Restructure
Technology

MNCs need to be: Managerial Response

Flexible Need global mindset
Locally responsive Informal control mechanism Survival &
Horizontal communication Growth
Share Knowledge
Virtual teams
Transfer Competence International Assignments
Culture and employee management issues

 Two broad meanings

 In anthropological & sociological terms, refers
to the shared values, beliefs, attitudes that
people belonging to a group/society hold
 Outside the academic world, it includes the fine
arts and literature
 Hofstede defined culture as the collective
programming of the mind based on a
broad tendency to prefer certain states of
affair over others.
Culture and employee management issues
contd….

 A nation’s culture or national character is

shaped by historical, geographical and
philosophical factors
 One is not born with a specific culture –

culture is a set of man made norms commonly

ascribed to by a group of individuals and
passed on from generation to generation
 Recognition of cultural differences between

peoples is essential and helps us understand

the motives and behaviors of those with
whom we interact.
 Major Cultural
Influencers
• Attitude to power & authority
• Tolerance for ambiguity & uncertainty
• Attitude to risk & risk taking
• Individualism, self orientation
• Collectivism, group orientation
• Acceptance of responsibility
• Interpersonal trust
• Attitude to other people’s opinion
• Attitude to sharing information &
knowledge
• Recognition of the rights of others to
be consulted with
• Preference for certain leadership
styles
• Preference for independence &
autonomy
• Achievement orientation, ambition
• Work ethic, honesty
Culture and employee management issues
contd….

 There needs to be a fit between what is

imported from abroad and the local
environment for any policy/practice to be
successful and permanent.
 The concept of “recontexctualising” of
imported practices and concepts is
therefore, also applicable to HRM.
(Recontextualisation is a process that extracts text,
signs or meaning from its original context in order to
introduce it into another context).
Major Cultural Influencers
 Attitude to power & authority
 Tolerance for ambiguity & uncertainty
 Attitude to risk & risk taking
 Individualism, self orientation
 Collectivism, group orientation
 Acceptance of responsibility
 Interpersonal trust
 Attitude to other people’s opinion
 Attitude to sharing information & knowledge
 Recognition of the rights of others to be consulted with
 Preference for certain leadership styles
 Preference for independence & autonomy
 Achievement orientation, ambition
 Work ethic, honesty
Linking HR to International expansion strategies

 STRATEGIES mean actionable directions set by management for the

company. It consists of competitive moves and business approaches to
produce successful performance.

 It is important because it helps to set up

-game plan for running the business
-strengthening the co.'s competitive position
-set up vision direction
-set up mission statement
-setting objectives
-crafting operating strategies
-implementation strategy
etc.

IT HELPS TO ANSWER 3 QUESTIONS

1. WHERE ARE WE NOW
2.WHERE DO WE WANT TO BE IN 'X' YEARS
3.HOW DO WE GET THERE.
 Solutions to the problems of linkage.
-TOP MANAGEMENT SUPPORT
-SENIOR MANAGEMENT COLLABORATION
-HRM INITIATIVES / COORDINATION
 Merits of Linkage. FROM A HR point of view

-effective HR planning
-effective MANPOWER planning
-quantity of personnel
-effective & sufficient training
-effective/ efficient selection / recruitment
-competitive compensation package
-effective sucession planning
-effective career planning
-timely promotions
-effective/ timely performance management
etc etc
which leads the company to a successful outcome
-productivity gain
-profitability gain.
 Future Trends in Business Strategies.
-more customer orientation
-more technology based
-globalization
-HR outsourcing
etc etc
The Challenges of International Human Resource Management

 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)
The Challenges of International Human Resource Management contd….

 Different labour 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,, holidays, etc
 Educational level attained
 Social organizations e.g. social institutions,,
interest groups, status systems