international human resource management

Nature and concepts of IHRM

Introduction:
The advent of the era of liberalization and globalization along with the advancements in
information technology (IT) has transferred the world around us. It has brought to centre stage
the importance of human resources, more than ever before. The purpose of human resource
management (HRM) is to enable appropriate deployment of human resource so that the quality
culture can maintain and satisfy the customers not only in national level but to in global level.
In a competitive scenario, effective utilization of human resources has become necessary and the
primary task of every organization is to identify, recruit and channel competent human resources
into their business operations for improving productivity and functional efficiency.
Emergency of trade blocks with the formation of different economic and political forums like
European Union, North American Free Trade Association,Asia Pacific Economic conference and
expanding role of World Trade Organization have now significantly changed the business
environment in terms of competition / liberalization and open end marketing opportunity.
Business environment become global business environment. Internalization of business now
experts influence not only on labour markets and staffing requirements but also on HR practices.
Multi domestic operations (MDOs), Joint Ventures (JVs) and strategic Alliance (SA) are
common forms of business structures across regions. Changes in organizational structures,
relationships with overseas operations, state of the art communications technology and global
market now demand different HR approaches for managing MNCs. Globalization of business has
probably touched the HRmanagers more severely than any other functional heads. The HR
executives needs to give international orientation to what ever he or she does employee hiring,
training and development, performance review, remuneration, motivation, welfare, or industrial
relations. International orientation assumes greater relevance as business get increasing
interlinked across nations.
Since an international business must procure, motivate, retain, and effectively utilize services of
people both at the corporate office and at the foreign plants, therefore, the process of procuring,
allocating and effectively utilizing human resources in an international business is called
International Human Resource Management

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Definitions of IHRM:
International human resource management is all about the world wide management of human
resources Process of sourcing, allocating, and effectively utilising their skill, knowledge, ideas,
plan and perspective in responding to TQM.
The process of procuring, allocating and effectively utilizing human resources in an international
business is called International Human Resource Management or IHRM.
International Human Resource Management is the process of sourcing, allocating and effectively
utilizing human resources in a multinational organization.

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Dimensions of IHRM:
According to P.V. Morgan: IHRM is the interplay among 3 dimensions:
HR Activities
Types of employees
Types of Countries
Dimension Model

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Dimension Model of IHRM.

1) Broad activities of IHRM procurement, allocation and utilization of human resources cover
all the six activities of domestics HRM i.e, HR planning, Employees Hiring, Training and
Development, Remuneration, Performance Management and Industrial Relations.
2) The three national or country categories involved in IHRM activities are:
- The host country where subsidiary may be located
- The home country where the company has its head quarters and
- Other countries that may be sources of labour or finance.
3) The three types of employees of an international business are Parent Country Nationals
(PCNs) , Host Country Nationals (HCNs) and Third Country Nationals (TCNs). For example,
IBM which employs Australian citizens in its Australian operations, after sends US citizens to
Asia Pacific countries on assignment, and may send some of its Singaporean employees to its
Japanese operations.
Purpose of IHRM:
To enable the firm /, the multinational corporations (MNCs), to be a successful globally.

Objectives of IHRM:
Remaining competitive throughout the world
Efficient
Locally Responsive
Flexible and adaptive
Capable to transforming learning across their globally dispersed units

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Difference Between domestic and IHRM:

One obvious difference between domestic and international HRM is that staff are moved across
the national boundaries into various roles within the international firms foreign operations
these employees have traditionally been called expatriate. An expatriate is an employee who is
working temporarily residing in a foreign country. However, as pointed out by Dowling (1999)
domestic HRM is involved with employees within only one national boundary; on the other hand
IHRM deals with 3 nationals or country categories (expatriate): PCN, HCN and TCN. So,
broadly there are two major factors therefore which differentiate domestic HRM from IHRM.
1. The complexities of operating in different countries / cultures
2. Employing different nationals and different categories of workers across boarder. It has been
also argued by Dowling (1999) that the complexities of IHRM can be attributed to six factors
that differentiate international from domestic HRM.
These are:
1. A wide range of HR activities
1) The need for a broader perspectives
2) More Involvement in employees personal life.
3) Responsiveness to changes in staffing requirements as international strategy changes.
4) Higher risk exposure
5) More external influences.
However, the international dimension brings with it a host of issues, which the domestic HR
functions would not normally get involved in. The practice of HRM in the international context
is different from its domestic counterpart in a number of ways. These include:
1. Being responsible for a greater number of functions and activities such as selection, training
and management of international assignees.
2. Having to expand ones area of expertise to include a much broader knowledge of foreign
country employment laws and global organization designs.
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3. Having to get much more closely involved with employees lives as the firm moves employees
to foreign assignments. For example, collecting\ information and furnishing to visa authorities
about aids or material status of employees.
4. Being involved with greatly expanded and constantly changing mix of employees (from the
host countries and foreign locals), adding considerable diversity and complexity to the HR tasks.
5. Having no cope with more external influences; for example, having to consider the impact of
foreign cultures and laws.
6. Having to face greater exposure to problems and liabilities (for example, making mistakes in
expatriate assignments can cost as much as US$4 million per assignee). The accumulated direct
and indirect costs can be huge.
7. Additional responsibilities like translation of language, both at headquarters and at the
subsidiary level, organizing schooling and housing for expatriates and providing administrative
services.
8. Management of differential compensation due to variety of allowances and adjustments.
9. More emphasis on activities like international relocation and orientation, both pre departure
and post departure cultural training. Knowledge of international taxation, rate of inflation and
cost of living, including currency fluctuation.
10.Diversity management, like managing people from different cultural and political
backgrounds and gender differences.
11.More contacts with Government officials for obtaining visas, work permits, tax certificates,
fixing of meetings and so on.
12.More coordination and travel to assess performance of expatriates and solve problems.
13.More risk management as threats from terrorists, Kidnappers and protecting intellectual
property rights of firms.
14.More risk management as threats from terrorists, kidnappers and protecting intellectual
property rights of firms.
15.More public relations work to enhance the multinationals image and deal with human rights
and other NGOs and interest group operating in different countries.

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How International assignments create an Expatriate?

TCNs

TCNs
other countries

Here we have to remember that IHRM Department is purely heterogeneous in nature because it
deals the diverse cultures i.e. amalgamation of Global Workforce. (PCN, HCN and TCN). What
types of people required where or which unit it is depends on the following points:
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Availability of useful human resources

Economic Justification / cost effectiveness
Employee motivation and performance
Global exposure for need of the organization
Development of Cross cultural Management
Brand Loyalty or International fame.

Significance of IHRM in International Business:

Scullion (2001) outlined 10 major significance of IHRM in globally business environment. This
significance can categorised in 5 key area

Challenge
Commitment

significance

Cost

Effectiveness
Competence

CHALLENGE:
1. Rapid growth of internalization and global competition has increased the nos. and
significances of MNCs resulting in the increased mobility of human resources.
2. Increasing no. of strategic alliances and cross border mergers and acquisitions has increased
the strategic implementation of IHRM as Global business.
COMMITMENT:

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1. World wide recognition of management of human resources in international business and cross
cultural management.
Other countries Nationals
2. Business Networks and Horizontal communication and HR plays a vital role.
COST EFFECIVENESS:
1. The performance of expatriates. (poor performance of expatriate may affect the market share
and damage to foreign relations)
2. Growing Importance of Expatriates in International Business.
COMPETENCE:
1. Global Strategy Implementation.
2. Success or failure of international business based on effectiveness of management of HR.
CONGRUENCE:
1. Learning, knowledge acquisitions have been identified as important potential sources of
comp. advantages for MNCs. This has also enhanced the role of IHRM to meet the key strategic
challenge of objectives.
2.Knowledge management is an important source of comp. advantage for MNCs, where IHRM is
the key partner and plays a central role.

Major Issues in International HRM:

According to Hendry (1994), there are three main Issues in IHRM:
1. The management and development of expatriates- selection, training, compensation and
repatriation of expatriate failures.
2. The internationalization of management through out the organization(host country, parent
country and other third countries)
3. The need to internationalize the whole organization by creating a new corporate culture
reflecting the need for greater international experiences across the whole organization, due to the
increasing frequency of cross cultural interactions of doing business at home as well as abroad
mainly Cultural communication & gauge and Language and communication
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international human resource management

Role of International HRM:

International human resource management is the basis of success of anyglobal multinational
organization. International HRM enhances employees effectiveness to achieve goals of the
organization and meet the needs; to develop employees to assume more diverse tasks,
assignments, face challenging situations and better understand the cultural variations across the
nations. IHRM department deals with heterogeneous functions and has to give additional focus
on various aspects, such as:
1. More involvement in the employees personal life.
2. Deal with different groups of employees i.e. PCN, HCN and TCN for which HR policies and
practices may differ. International HR managers have to understand cultural differentiation in
multicultural environment.
3. Manage external influences, i.e host government authorities, business and other interest
pressure and labour groups, etc.
4. Lay different emphasis on management training to deal diverse workforce, their orientation
and to meet international environment.
5. Provide guidance on taxation and compensation aspects.

Limitations in IHRM:
1. Management is basically the principle based on local cultures, traditions, practices and
needs of the organizational growth. It is not universal for everywhere, specially in the
field of human resources management.

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2. HRM methods and systems developed by one society can not always be transferred and
applied to another.
3. HRM and industrial relations practices differ across countries as these have their historic
origin in countries.
4. Personnel management and industrial relations are embedded in societal rules, norms,
values, ideologies and no MNC can afford to ignore the influence of local culture.

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Major challenges for IHRM

Challenge is always offset by opportunity.Todays widespread market volatility, coupled with
layoffs, talent shortages and rapid shifts in technology, points to heightened challenges for
human resources (HR) organizations. While appropriately leveraging HR has been a key topic of
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discussion for the past decade, organizations still struggle with how to make this strategic shift as
a department.
Facing the Primary Challenge:
Being the Employer of Choice
Becoming and remaining an employer of choice is the top-ranking HR-related challenge
organizations face today. Establishing employer-of-choice status is HRs responsibility, and if
HR does this well, all other practices become subordinate to this goal. The most important
objective on the people side of the business is establishing a place where individuals want to
work and remain working. HR should be concerned with providing potential, current and even
past employees with this environment. Employees need a culture, a place in which to grow and
feel good about their surroundings.
Delineating the Corporate Culture
Corporate culture is a dramatic force behind every employer of choice. Unique to each
organization, culture has many drivers, such as the organizations leadership or the product or
service produced. In cases when there are mergers or acquisitions involved, cultural redefinition
might be required. At the very least, HR should be the designated keeper of the corporate culture.
At its best, HR can be instrumental in creating or maintaining a culture that is truly great. HR
must first clearly identify the kind of culture the company should have, then define that culture
for the workplace and support the environment that emerges. An identifiable culture attracts
employees, gives them a sense of purpose and offers a basis for participation in decision-making.
Whether investigating not-for-profit institutions, government employment, a large banking firm
or start-ups, job seekers continuously evaluate whether or not a prospective employer is the
employer of choice for them. A suitable culture signifies different things to different people
companies attract those who find their culture desirable. This attraction might mean anything
from having a lot of freedom to participating in business decisions to working with a mission to
save lives.
What does it mean to be an ideal or cool for some sectors place to work? While a
number of criteria are involved in answering that question, in general the cultural images
successful companies portray fully address
Using Branding to Promote Culture

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Branding promotes culture. In the past branding was assigned to public relations or marketing,
but it is indeed an HR function because of its power to attract and retain employees. Working
together with marketing, HR must develop a compelling brand image for the workforce.
Great companies do not create an external brand for customers and an internal brand to attract
employees. Instead, they leverage their external brand for internal recruiting. Southwest Airlines
is an excellent example of this it advertises around low-fare, no-frills, humorous service, and
its employee population loves to have fun with customers. Southwest does an excellent job of
branding for its customers and leveraging that same image to draw like-minded employees.
Staying Attuned to Changing Demographics
The workforce has changed and will continue to do so. Employers of choice recognize and
understand the dynamics of the new workforce, where for the first time four distinct groups of
workers labor together under one virtual roof. The over-50 baby-boomers lend themselves to
loyalty and sacrifice, those in their 40s believe hard work will take them to the top, 30somethings seek a balance between work and home, and new workers in their 20s are realists
wired for technology. However, todays employees are even now experiencing a metamorphosis.
The role of women and other minorities is expanding, median age is increasing and there is a rise
in the contingent workforce. Organizations are changing as well, creating widespread shifts in
work attitudes across age groups. HRs task is to stay attuned with the changing workforce and
changing company values and make sure company culture is appropriate to the desired workers.
For example, because Ford Motor Company benefits from loyalty as do most employers of an
older workforce its culture and branding do not support rapid change and high turnover.
Likewise, companies based in Silicon Valley are concerned with development and production
speed, and turnover is often higher than average. HRs challenge is to strategically match the
employee population with that of the organizations culture.

Winning the War for Talent

An employer of choice has already come a long way toward winning the war for talent, which is
another significant HR challenge. There is no truce in this war, regardless of economic
conditions.
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Recruiting and Retaining Over Time

Given suitably competitive offerings with respect to compensation, culture is an organizations
number one recruitment and retention tool. In an employer-of-choice environment, it is not
necessary to pay top dollar if other key factors are in place. Great companies know not to stop
seeking the best talent in a downturn. When the stock market is down, many people are afraid to
invest but that is the best time to do so. The job market is similar.
Customer relationship management (CRM) is a good model for human capital management
(HCM). The steps involved in attracting and retaining customers parallel the activities involved
in the war for talent. Where millions are spent on the customer relationship, has a similar
emphasis been placed on employees
Understanding the Workforce
Statistics show that the size of the workforce is diminishing when the economy comes back,
there will be fewer candidates from which to choose. Although there is an economic slowdown
now, in the next 10 years demand will outstrip the supply. During a downturn, if companies that
are not hiring eliminate their focus on recruitment, they can miss golden opportunities to secure
the high performers who might be instrumental in the future. Winning the war for talent requires
knowing the workforce. For example, by 2050 there will be fewer people available to work, and
the majority of these will be older than 50. The contingent workforce will also be more critical in
the future. Therefore, why not innovate by creating a temporary or part-time environment in
which the 50-plus population will want to work? What about giving the new mom or dad the
opportunity to balance hours at work and at home?
Leveraging an Indispensable
Player: Technology
Meeting todays HR challenges would be impossible without technology, a critical practice
in and of itself. Most people want to work for companies that have good technology. For
example, college graduates accustomed to using the internet for their work, research, thesis, and
case studies expect the latest technology on the job. Given the widespread availability of
technology, a company lacking in this component will not qualify as an employer of choice for
the emerging workforce.
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Using Technology as a Facilitator

Great companies know how to use technology. Instead of accumulating an excess of technology
for technologys sake, they invest in technology specifically as it facilitates accomplishment of
their objectives. For example, an employer of choice will leverage the company website to add
momentum to branding efforts.The best companies also wield an educated vision, establishing
cutting-edge solutions such as pure-internet systems that provide longevity and interoperability
with future advancements. Preferred for ease of collaboration, pure-internet systems require only
a browser no code on the workstation and support a number of standards. Web-based
solutions are ideal foundations for portals, self-service, and collaboration because they
Entering the Portal Gateway
Critical to the employer of choice, portals provide organized, efficient access to the customized
content, knowledge, reporting structures, analytics capabilities, and transactions each employee
needs. An enterprise portal is the gateway to all company functions and offers personalized, rolebased access with respect to who employees are, where they are located, what they do, and why
they do it. Third-party sources of content such as salary surveys or job boards can also be
accessed through a portal.
Using Technology as a Facilitator
Great companies know how to use technology. Instead of accumulating an excess of technology
for technologys sake, they invest in technology specifically as it facilitates accomplishment of
their objectives. For example, an employer of choice will leverage the company website to add
momentum to branding efforts. The best companies also wield an educated vision, establishing
cutting-edge solutions such as pure-internet systems that provide longevity and interoperability
with future advancements. Preferred for ease of collaboration, pure-internet systems require only
a browser no code on the workstation and support a number of standards. Web-based
solutions are ideal foundations for portals, self-service, and collaboration because they
Entering the Portal Gateway
Critical to the employer of choice, portals provide organized, efficient access to the customized
content, knowledge, reporting structures, analytics capabilities, and transactions each employee
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international human resource management

needs. An enterprise portal is the gateway to all company functions and offers personalized, rolebased access with respect to who employees are, where they are located, what they do, and why
they do it. Third-party sources of content such as salary surveys or job boards can also be
accessed through a portal.
Thinking Globally, Complying
Locally
Even small organizations deal increasingly with customers and employees on a global basis.
Great companies know how to think globally and comply locally. They act like a global
organization, yet an understanding of the local environment permeates every relationship.
Making global differences a part of corporate culture is a valuable endeavor. Indeed, diversity
itself is a source of greatness. Organizational headquarters that have the attitude that corporate
knows best will have a difficult time instilling a viable culture. Education and awareness make
all the difference, especially in the following areas:
Legal and regulatory issues It is important to be familiar with laws and regulations in
locations where the organization has a presence. For example, in some countries tracking religion
is mandatory, while in others it is illegal.
Data security and data flow Organizations must not only obey regulations with respect to
data, but they must also be aware of how sensitive and important the security of personal data is
in most of the world.
Culture Each country has a differing set of cultural values apart from company culture. For
example, some base their attitudes on love/hate polarities, while others use approval/disapproval.
It is very important for smooth global operations that HR understands discrepancies between
country culture and company culture and implementsthe appropriate processes.
Culture-based motivation Incentive programs for people of different cultures should present
true incentives by offering valued rewards. While pay for performance motivates US workers, in
Germany title is motivational. In Japan, the nail that sticks up gets hammered, so individual
performance is valued less, while efforts toward achieving group goals receive stronger
reinforcement. To help an organization efficiently leverage the global workforce, HR must
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acknowledge that one size does not fit all. While legal compliance is critical and can be greatly
assisted by a global portal, the main focus is cultural awareness and sensitivity.
Incorporating Flexibility and
Adaptability
For years companies have been moving away from hierarchical, structured environments because
they are neither effective for organizing nor comfortable for employees. HR needs to mirror this
movement by allowing employees particularly managers to be flexible, adaptable, and
nimble. For example, instead of restricting a creative requisition that strays from an exact,
predefined job description and salary range, HR can allow for variances that fit special
circumstances. Guidelines, rules, and benchmarks are important,but flexibility is even more
critical, particularly where people are concerned. Collaboration with all constituents requires
adaptability. Organizations today are less about physical structure than logical structure
supported by technology. Before doing anything else, HR must create a flexible environment
where top prospects seek to be employed. This is a place where employees look forward to
coming to work, enjoy working while theyre there, feel they play an important role in the
company, and want to stay because the company is continuing to develop them and care about
them.

Conclusion:
Thus it has been observed that effective internationalization of human resources management
and IRs remains bleak. The degree of adaptation on International HRM to local customs in
various subsidiaries of MNCs will be remaining on the strategic agenda. and managing
International HR activities is an elaborate and complex task for to days manager.

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