Challenges for human resource management and global business strategy

• The globalized workforce

• Guiding corporate strategic decision-making
• Preparing for the future
• Staying within laws
Global human capital trends
• Organizational design
• Organizational culture
• Leadership
• Digital HR
• Learning
Introduction and Overview

HR activities
• Human resource planning
• Staffing
Recruitment
Selection
Placement
• Training and development
• Compensation (remuneration) and benefits
• Performance Management
• Industrial relations
Differences between domestic and international 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 and locals varies
• Risk exposure
• Broader external influences
More Human Resource activities: The scope of IHRM is much broader than managing domestic
HR activities. There are issues connected with international taxation, international orientation and
relocation and administrative services for expatriates, host-government regulations, and
language translation services.

Each function of HR has new dimensions in IHRM as shown below:

1. Human Resource Planning :

 Difficulty in implementing HR procedure in host countries.

 Difficulty in aligning strategic business planning to HRP and vice-versa.
 Providing developmental opportunities for international managers.

2. Employee Hiring :

 Ability to mix with organization’s culture.

 Ethnocentric, polycentric or geocentric approach to staffing.
 Selection of expatriates.
 Coping with expatriate failure.
 Managing repatriation process.

3. Training and Development :

 Emphasis on cultural training.

 Language training.
 Training in manners and mannerisms.

4. Compensation:

 Devising an appropriate strategy to compensate expatriates.

 Minimizing discrepancies in pay between parent, host and third country nationals.
 Issues relating to the re-entry of expatriates into the home country.

5. Performance management :

 Constraints while operating in host countries need to be considered.

 Physical distance, time differences and cost of reporting system add to the complexity.
 Identification of raters to evaluate subsidiary performance.

6. Industrial Relations :
  Who should handle industrial relations problem in a subsidiary ?
 What should be the attitude of parent company towards unions in a subsidiary.
 What should be union tactics in subsidiaries ?

Thus the list goes on. Be it employee selection, training or compensation, IHRM adds to new
dimensions which are not being felt or being observed inn DHRM.

Need for broader perspective : When compared to domestic HRM, IHRM requires a much
broader perspective on even the most common HR activities. For example, while dealing with pay
issues, the corporate HR manager must co-ordinate pay systems in different countries with
different currencies that may change in relative value to one another over time. While handling
fringe benefits too, complications tend to arise. It is a common practice in most countries to provide
health insurance to employees and their families. The family in some countries is understood to
include the employee’s spouse and children. In other countries, the term family may encompass a
more extended group of relatives-multiple spouses, aunts, uncles, grandparents, nephews, and
nieces. It is a difficult task for an international business to deal with the different definitions of family.
Any activity of IHRM needs a broader perspective because HR managers working in the global
environment face the problem of designing and administering programs for more than one country.

More involvement in Employee’s personal lives : A greater degree of involvement in the

employee’s personal lives is necessary for the selection, training and effective management of
both parent-country and third-country nationals. The HR department needs to ensure that the
expatriate employee understands housing arrangements, health care, and all aspects of
remuneration packages provided for the foreign assignment. Many international businesses
maintain an “international Human Resource Service” section that co-ordinates administration of
the above programs and provides service for the parent-country and third country nationals such
as handling their banking, investments, home rental while on assignment, coordinating home visits,
and final repatriation. Involvement of the Hr department in the personal lives of the employees is
limited in domestic HRM. The firm may, for example provide employee insurance program, or when
a transfer is involved, the HR department may provide some assistance in relocating the employee
and his or her family. But in the international setting the HR department must involve itself more
and understand the personal lives of employees to provide the servicer and support needed by
them. For example, some governments task to submit a marriage certificate before granting visa
to an accompanying spouse. Thus, marital status could become an important consideration in the
selection process. In such a situation the HR department should advise all candidates being
considered for the positions of the host-country’s visa requirement with regard to marital status
and allow each candidate to decide whether he or she wishes to remain in the selection process.
Apart from providing suitable housing and schooling in the assignment location, the HR department
may also need a assist children left behind at boarding schools in the home country. These issues
do not figure in domestic HR management.

Changes in emphasis : As an international; business matures, the emphasis placed on various

HR activities change. For example, as the need for parent-company and third-country nationals
declines and more trained locals become available, resources previously allocated to areas such
as expatriate taxation, relocation and orientation transferred to activities such as staff selection,
training, and management development. The latter activity may require establishment of a
program to bring high- potential local staff to corporate headquarters for development
assignments. The need to enhance emphasis in HR activities, as a design subsidiary matures, is
clearly a factor that broadens the responsibilities of local HR activities.

Risk Exposure : Risk exposure is high in domestic HRM. unfair hiring practices may result in a
firm being charged with the violation of the constitutional provisions and be liable for penalties.
Failure to maintain relations with unions may result in strikes and other forms of labor unrest, in
addition to these risks, there are other hazards that are unique and more threatening. Depending
on the countries where the MNC operates, the headquarters and subsidiary Hr managers may
have to worry about the physical safety of the employees.

External influence : The HRM activities are influenced by a greater number of external factors
than are domestic HRM functions. Because of the visibility that the international businesses tend
to have in host countries (particularly in developing countries), the subsidiary HR managers may
have to deal with ministers, political figures, and a grater variety of economic and social interest
groups than domestic HR managers would normally encounter. A host-country government can
dictate hiring procedures as is the case in Malaysia. During the 1970 s, the Malaysian government
introduced an injunction according of which foreign firm must comply which an extensive set of
affirmative action rules designed to provide additional employment opportunities for the
Malaysians.

In develop countries, labor is more expensive and better organized than in less develop countries,
governments require compliance with guidelines on issues such as labor relations, taxation, health
and safety. These factors shape the activities of the subsidiary manager considerably. The
subsidiary HR manager also need to spend time learning and interpreting the local ways of doing
business and the general code of conduct regarding activities such as giving gift. It is also likely
that the subsidiary HR manager will become more involved in administering benefits such as
housing, education, and other facilities that are readily available in the host country.

Cultural Differences
That culture played a major role in IHRM as it involves understanding and handling a
new culture and a new social system. what aspects should an international HR
manager should focus on and how he should respond to cultural differences in an
international arena. But the topic had lot more to offer than what I initially
anticipated.

Culture is the way in which a group of people solves problems and reconciles
dilemmas (Trompenaars & Turner, 2002, p.g.02). There are so many elements in a
culture and there is no one way of understanding or defining a culture. But it was
evident that having a thorough knowledge about it was essential for those who are
engaged in IHRM.

Hofstede’s five dimensions: He developed a model that focused ways of measuring

a national culture and how these measures might work differently in different
context. The cultural values that are important in a national culture, could be
reflected in the way business within that country are operated and organized
(Hofstede, 2006).

According to the Hofsted’s there are 5 cultural damnations.

Power distance – this is the extent to which power is distributed unequally among
the employees in between the higher positions and the lower positions. Eg- India is a
high power distance culture ( even have a cast system) and USA is a lower power
distance culture.

Individualism vs collectivisms

In a individualistic country people would priorities them self ( USA) where as

collectivism country people would priorities group needs.

Uncertainty avoidance

People would try to minimize risk they face in a situation ( avoiding paralysis through
analysis ) usually countries with long history and traditions have a high uncertainty
avoidance. Countries such as USA well come higher risks.

Masculinity / femininity

Masculine- tough value dominant Eg; success, money, satiates, competition

Feminine- tender values dominant such as personal relationships, care for other’s,
quality of life etc. When we take Sri Lanka for a example I think we have feminine
culture even though have many masculinity futures. The best example for this is
during the tsunami situation whole county get together to help the tsunami victims
within ours.

This is an excellent model where you can get a quick idea about something complex
as a national culture. we believe this simplicity itself is the major short coming of this
model. Hofstede selected a country and gave marks to each dimension, thinking that
the culture is static. But we all know that in today’s context culture is anything but
static, it changes at a rapid pace, thus a country which was once collectivist could
now be individualistic due to many reasons such as economic pressure, government
policies etc.

And also Hofstede never took into account the complexity of the task. For an
example USA is an individualistic culture, but certain complex projects and
operations may force an individual to work as a group to succeed in that particular
project. Thus the complexity of the task has forced someone with individualistic
character to be collectivistic.

But overall the model is excellent to get a glimpse of what an unknown culture would
look like, but we do not believe that you can make sound business decisions based
on this model.

Now we had understanding about how to analyze a national culture, and also the
importance of culture to employees and international HR managers. It was evident
that this should be the starting point of any international HR plan. Decisions should
be taken where culture is kept at the center, as the success of implementation will
depend on how well international employees accept your plans.

The Organizational Context

But in practice it is not the culture that influences the structure most but the
objectives and the task of the organization (manufacturing companies are more
centralized while service oriented companies are decentralized). An organizations
structure is the spine that allows it to stand still, the HR activities of the organization
and all other activities will depend on the support it gets from the structure. Thus HR
has a greater responsibility in designing the structure, the structure should be strong
enough not only to stand still against the internal environment but also against the
external environment as well. That is why in IHRM we look at aspects such as national
cultures, work practices, ethics, norms, behaviors etc. So that HR managers can
design a structure that is suitable for the external environment

Recruitment and Selection for International

Assignment
When recruiting and selection you asked your self was what should be so different in
selecting a domestic manager and an international manger. After all if you’re
successful as a domestic manger you just have to apply the same thing abroad with a
bunch of foreigners. This time we was completely wrong, we soon found out that
there was a significant difference in selecting a domestic manager and an
international manager.

The first thing we realized about an international manager is that his task is lot more
complicated than of a domestic manager. There is a lot expected from an expatriate,
he will have to perform in an unfamiliar environment, he will have to play different
roles in different situations (e.g-: an interpreter, a boundary spanner, an agent, a
negotiator etc.), the support of the family and friends maybe absent, he is expected
to be flexible and adopt to the host country situations quickly etc.

An important point we want to understand, “expatriate failure”. We found it very

interesting because we was unaware of this term and also when we looked deep in
to it; it is something practically experienced by many MNE’s. Expatriate failure is
defined as the premature return of an expatriate (that is, a return home before the
period of assignment is completed) (Dowling & Welch, 2004, p.g.86).

There were several reasons highlighted for expatriate failure, the most common
issues are the inability of the expatriate to adapt to the host country and family
concerns. Why we say is that when an expatriate is selected, the organization makes
sure that he has performed well domestically. This certifies that he has the necessary
technical competencies. So the reason for not performing internationally is not
because he lacks technical skills, it’s just that he doesn’t know how apply his
knowledge to that particular culture.

And also humans are social animals; they always want to be a part of a group and a
community. But when an expatriate is send abroad he gets cut off from his
community and gets isolated. This adds tremendous physiological pressure on the
expat. That is why we believe that these two factors are the most common reasons
for expatriate failure.

Compensation

People work because they know that at the end of the day they are paid a decent
amount. So if an organization wants to keep its best employees intact it must make
sure that they compensate accordingly. We thought that this same rule applied in
IHRM. We knew that international mangers are paid much better than local mangers,
and our understanding was that it is because the task they handle is difficult. But
compensating in IHRM is lot more complicated than in HRM.

First of all we want to discuss about a topic that we found very interesting. There are
two ways an organization can compensate an employee. The going rate approach is
where the salary structure is in parallel with the host country standards (Dowling &
Welch, 2004, p.g.144). The balance sheet approach is where the salary structure
would be similar to home country standards (Dowling & Welch, 2004, p.g.146).

Our understanding is that the salary structure is always designed to benefit the expat.
For an example if an Australian manager is transferred to Sri Lanka, they would adapt
the balance sheet approach since Australians are paid better than Sri Lanka. If a Sri
Lankan manager was to go to Australia then they would adapt the going rate
approach.

The reason for this as we understand is that most expats are sent to handle senior
management positions, and it is most likely that they would have to start lot of
things from starch such as accommodation, schooling, furniture etc. Thus, the
organization must make sure that not only they are paid better than their
subordinates but also it should be equal or better than what they’re paid in their
parent country. Otherwise an organization will not be able to attract talented
individuals.

The important thing to understand as we feel is that it is very difficult for someone to
accept an international assignment. There is change in culture, living standards,
family issues, re location issues, fear of moving into uncertain territory, career issues
are some of the things that an international manager will have to face. Despite all
this, if an organization wants an individual to accept an international assignment the
best way of breaking the above barriers is by compensating them accordingly. we
believe that is the reason why expats always gets the benefit when it comes
designing their salary structure.

Another important area in compensation as we found out was allowances. As we

want to understand it has two purposes. Firstly an allowance makes the remuneration
package attractive, thus managers will be attracted in accepting international
assignments. Secondly it will help to increase the living standards of an international
manager. Especially senior managers have a certain image to maintain, they reflect
not only their standard but the standard of the entire firm. Hence an allowances will
help senior managers to protect that image.

Business Etiquettes and Social Customs

There were always something new to learn in etiquettes, because every culture has
their own unique way of conducting business.

The important thing that we want to understand that no matter how qualified and
well equipped a manager maybe he can mess the whole thing up by just doing
something that is not excepted in that culture. That is how important etiquettes are.
By doing things according to the host’s culture you show that you respect them and
their culture.

Handling these etiquettes should be one of the factors discussed in the expatriate
training programs. As it will help the future expats to handle business smoothly, since
then they know what they should do and what they shouldn’t.

The interesting part is that you can damage a relationship by doing something, or by
not doing as well.