International Human

Resource Management
Definition
• The process of procuring, allocating and effectively
utilising human resources in an international
business is called international human resources
management (IHRM).

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

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Definition:-
 IHRM consists of a collection of policies and
practices that a multinational enterprise uses
to manage the local and non-local employees
it has in countries other than their home
countries.

-Dowling, Schuler & Welch 1994

 Morgan defines international HRM as the
interplay among the three dimensions-
human resource activities, types of
employees, and countries of operation.
P.Morgans Model of IHRM
International Assignments Create
Expatriates
 Who 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
 Characteristics of IHRM
(Differences b/w Domestic & IHRM)

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

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More Human Resource Activities
Human • Difficulty in implementing HR in host countries
Resource • Aligning strategic business planning to HRP & vice-versa
• Developmental opportunities for international managers.
Planning

Ability to mix with organisation’s culture

Employee
•
• Ethnocentric, polycentric or geocentric staffing approach
Selection of expatriates
Hiring
•
• Coping with expatriate failure
• Managing repatriation process

Training & • Emphasis on cultural training

• Language training
Development • Training in manners

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 • Devising an appropriate strategy to compensate expatriates
• Minimising discrepancies in pay between parent, host & third
Compensation country nationals
• Issues relating to the re-entry of expatriates into the home
country

• Constraints while operating in host countries need to be

Performance considered
• Physical distance, time differences & cost of reporting system
Management add to the complexity
• Identification of raters to evaluate subsidiary performance

Industrial • Handling industrial relations problems in a subsidiary

• Attitude of parent company towards unions in a subsidiary
Relations • Union tactics in subsidiaries

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Need for Broader Perspective

Pay issues
• Different countries, different currencies
• Gender based pay in Korea, Japan, Indonesia

Health insurance for employees & their families

Nepotism common in small businesses in Asia Pacific region

Overtime working – Korean & Japanese firms

Promotions based on seniority or merit

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More Involvement in
Employee’s Personal Lives
Changes in Emphasis
 More involvement for  Need for parent-
both parent-country & country & third-
third-country nationals country nationals
◦ Housing arrangements decrease as more
◦ Health care trained locals become
◦ Remuneration packages available
◦ Assist children left behind  Resources reallocated
in boarding schools
to selection, training &
management
development

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 Risk • Physical safety of the employees
• Terrorism poses a great threat
Exposur • Failure of expatriates to perform well 
financial losses to the firm
e • Seizure of MNC’s assets in a foreign country

External • Dealing with ministers, political figures,

Influenc economic & social interest groups

• Hiring procedures dictated by host country

e
• Catch up with local ways of doing business

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Advantages & Disadvantages of Using
PCNs
Advantages Disadvantages
 Familiarity with home  Difficulty in adapting to
office, goals, practices foreign country
 Excessive cost of selecting,
 Easy organisational training & maintaining
control & coordination expatriates
 International exposure  Promotional opportunities
to promising managers limited for HCNs
 May try to impose
 PCNs  special skills & inappropriate HQ style
experiences  Compensation differences
for HCNs & PCNs
 Family adjustment problems

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Advantages & Disadvantages of Using
HCNs
Advantages Disadvantages
 Familiarity with the  Difficulty in exercising
situation in host-country effective control over the
 Lower hiring costs subsidiary’s operations
 Locals motivated due to
 Communication problems
promotional opportunities with home office personnel
 No opportunity for home
 Responds well to
country’s nationals to gain
localisation of subsidiary’s international experience
operations  Limited career opportunity
 No language barrier outside the subsidiary
 HCNs stay longer in
positions

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Advantages & Disadvantages of Using
TCNs
Advantages Disadvantages
 Salary & benefit  Host country govt. may
requirements lower resent hiring TCNs
than that of PCNs  May not return to their
 May be better informed country after
about host country assignment
environment  Host country’s
 Truly international sensitivity w.r.t
managers nationals of specific
countries

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Main challenges in IHRM
 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)
Main challenges in IHRM
 Different labor 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, taboos,
holidays, etc
 Educational level attained
 Social organizations e.g. social institutions, authority
structures, interest groups, status systems
 Expatriate Assignment Life Cycle
Determining the
Crisis & Reassignment
need for an
Adjustment Abroad
expatriate

Repatriation
Post-arrival
& Adjustment
Departure Orientation &
Training

Selection Pre-assignment Crisis &

Process training Failure

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Culture Shock Cycle

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