Chapter One An Introduction to International Human Resource Management

Chapter Objectives
Define key terms in IHRM Outline the differences between domestic HRM and IHRM Identify the variables that moderate these differences Discuss trends and challenges in the global work environment and the enduring context in which IHRM functions and activities are conducted And understand the way in which forces for change affect the operations of the internationalizing firm and have consequences for the management of people in the multinational context
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Why International Human Resource Management? Increasing globalization, firms and employees in them moving all over the world. Major problems in international operations because of human resource management blunders Hence need to understand human resource management in a global perspective
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Why International Human Resource Management? (contd) 110 senior human resource and industrial relations managers mentioned the most compelling issues in human resource management The role of HR in International Operations Managing a Multicultural Workforce Developing Managerial Talent in a Global Business Environment
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Globalization, Uncertainty, Complexity and IHRM Globalization and New Technologies

New Environment Increased Environmental Uncertainty More Complexity More Dynamism Less Richness
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Globalization and importance of IHRM

Uncertainty, Complexity, Hypercompetition

Need to Refocus on Persons, Roles and Integration for Global Performance HR

Capabilities People Processes Persons in Roles

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Three Approaches to IHRM

Cross-cultural management
Examine

human behavior within organizations from an international perspective to describe, compare and analyze HRM systems and IR in different countries how HRM is practiced in multinationals
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Comparative HRM and Industrial Relations

Seeks

HRM in multinational firms

Explore

Interrelationships between Approaches of IHRM

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Diversity as an Organizational and HR Challenge in MNE

Source: Marilyn Loden and Judy B. Rosener, Workforce America: Managing Employee Diversity as a Vital Resource, p. 20. 19

A Definition of Human Resource Management

Human Resource Management (HRM)

involves all management decisions and practices that directly affect the people who work for the organization. Human Resources the people who work for the organization.

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A Definition of Human Resource Management (contd)

Human represents the dimension of HRM which relates to the soft aspects such as commitment of employees through participation and the most important assets being the employees. Resource represents the hard aspects such as the strategy link of HRM and the importance of efficient utilization of employees. Management represents the role of HRM as part of management that implies that its not only an administrative function that carries out the formulated policies but also a managerial function that contributes to strategy formulation.
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The General Field of HR

Major Functions and Activities
Human resource planning Staffing
Recruitment Selection Placement

Performance appraisal Training and development Compensation and benefits Industrial relations
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Human Resource Management Functions

Planning for Organizations, Jobs, and People
The Strategic Management of Human Resources Human Resource Planning

Acquiring Human Resources

Selection Recruitment Integration
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Human Resource Management Functions (contd)

Building and Motivating Performance
HR Development Performance Appraisal Compensation Systems

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Human Resource Management Functions (contd)

Maintaining Human Resources
Benefits Safety & Health Collective Bargaining Organizational Exit Employment transitions

Multinational Human Resource Management

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Strategic Decisions and Their Implications for Human Resource Management

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Strategic Decisions and Their Implications for Human Resource Management (contd)

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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
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A Model of IHRM

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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
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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
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International Assignments Create Expatriates:

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The Expatriate Problem

High Expatriate Failure Rates Average cost per failure to the parent firm can be as high as three times the expatriates annual domestic salary plus the cost of relocation Between 16% & 40% of all American employees sent abroad to developed nations, and almost 70% sent to less developed nations return home early
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Reasons for Expatriate Failure

1. 2. 3. 4. 5. Inability of spouse to adjust Managers inability to adjust Other family problems Managers personal or emotional maturity Inability to cope with larger overseas responsibility 6. Lack of technical competence 7. Difficulties with new environment
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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
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Differences between Domestic HRM and IHRM: variables

Complexity involved in operating in different countries, varied nationalities of employees The different Cultural Environment The industry or industries with which the MNC is involved Attitudes of Senior Management Extent of reliance of MNC on home country domestic market
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Variables that Moderate Differences between Domestic HR and IHRM

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The Top Ten Multinationals

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Rio Tinto (UK/Australia) Thomson Corporation (Canada) ABB (Switzerland) Nestl (Switzerland) British American Tobacco (UK) Electrolux (Sweden) Interbrew (Belgium) Anglo American (UK) AstraZeneca (UK) Philips Electronics (The Netherlands)
Source: UNCTAD Index of Transnationality
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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

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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.
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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

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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

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