International Human Resource Management

International Human Resource Management

• Globalization has significantly influence HRM practices and
policies

• All HRM functions need international orientation

• MNC operating internationally need to be more focused to

attract, motivate and transfer workforce globally

• The process of procuring, allocating, motivating, training &

development, and compensating and utilizing human
resources in international business is called international
human resource management

• IHRM covers six main functions of domestic HRM such as

HR planning, recruiting, training and development,
performance management, compensation and labour
relations

• The three countries categories of IHRM are country where

headquarter is based, country where subsidiary is located,
and country from where workforce and finances come
International Human Resource Management
• The three types of workers in international business are
host country, parent country and third country nationals

• IHRM differs from domestic HRM on following points

1. More HR activities

2. Broader perspective

3. More involvement in employees’ personal lives

4. Greater workforce diversity

5. Change in Emphasis

6. More risk

7. More external influences

International Human Resource Management

1) More HR activities

• IHRM has boarder scope in dealing with employment related

issues.

• For example: International taxation, host country

regulations, home country regulations, international
orientation of relocating and training of employees, and
administrative and compensation issues of expatriates, and
language translation services
International Human Resource Management
• Each HR functions has different scope and issues in IHRM

HR Planning

• Difficulty in implementation of HR policy and procedure in

host country

• Difficulty in aligning business strategy with HR strategy

• Providing career development opportunities to international

managers

Hiring

• Matching person and organizational fit (cultural match)

• Selection of expatriates

• Managing expatriates failures

• Managing repatriation process

International Human Resource Management
Training and Development

• Language training

• Cultural training

• Training of expatriates and managers

Compensation

• Deciding compensation of expatriates

• Deciding compensation of parent, host, and third country

nationals

Performance Management

• Implementation of performance evaluation system in host

country

• Physical distance, time difference, and reporting cost

• Raters to evaluate subsidiary performance

International Human Resource Management
Industrial Relations

Who should deal industrial relations issues in subsidiary?

What is attitude and policy of parent company toward unions

in subsidiary?

What should be tactics to deal with unions in subsidiary?

2) Need for Broader Perspective

In dealing with compensation issues, HR manager in

headquarter need to consider different pay systems for
parent, host, and third country nationals, paying in different
currencies, and change in relative value of currency

In deciding fringe benefits, HR managers face difficulty, in

most countries providing health insurance is compulsory,
whereas definition of dependent varies from country to
country, in some countries dependent means multiple
spouses, children, parents, grandparents
International Human Resource Management
3) More involvement in employees’ personal lives

In IHRM, there is more involvement of HR department in

dealing with their personal issues for better selection,
training, relocation and effective management of global
workforce

HRM department need to ascertain that managers selected for

foreign assignment understand housing, health care, and
remuneration package

HRM need to have more information about manager family,

schooling of their children, emotional and physical health of
their spouse and children etc.

‘International Human Resource Services’ section provide

services to managers like handling investment, banking,
home rental, house arrangements, home visits, and
repatriation issues

Unlike domestic HRM in International HRM, HR manager needs

to understand more about their personal lives and provide
support in relocation for foreign assignment even
International Human Resource Management
4) Greater Work force Diversity
IHRM requires more emphasis on management of global and
diversified work force

Different work ethics, motivation level, cultural compatibility,

managing team work are main issues that IHRM to handle

5) Change in Emphasis
Emphasis has changed from idea of repatriation and
dependence on third country nationals towards
development of local managers

As more trained local managers are available, the issue of

training and development of local managers come to
highlight

Designing programs and policies to provide development

opportunities to local managers by placing them in
headquarter
International Human Resource Management
6) Risk Exposure

MNCs operating in different countries need to assess the law

and order situation and advise or provide support to their
expatriates or third countries employees

HR department may also need to have emergency evacuation

program for their employees working in highly risk areas

Poor selection decision may result into huge loss as in case of

expatriate may not perform well and recalled

If MNC’s policies and practices are hostile to unions, political

party or in violation of host country regulations, company
can be asked to wind up operations or government may
seize physical and financial assets
International Human Resource Management

7) External Influence

MNCs operating in host country face more external influence

as opposed to local company

Federal and local government, political figures, political and

social groups exert great pressure on foreign company

Subsidiary manager need to know local way of doing

business, dealing with different ministries, political parties,
social groups and labour unions
International Human Resource Management
Growing interest in IHRM

There are number of reasons for growing interest in IHRM

Thanks to globalization, more and more entry of multinational

corporations means greater mobilization of human
resources

In international business human resources performance is

more critical for success

The cost of underperformance in international assignment is

very high both in financial and image terms

The international expansion mainly depend on availability and

utilization of competent human resources

Finally, implementation of strategies is more crucial than

developing, and implementation is dependent upon culture
that is developed by HR policies and practices
Managing International HR Activities
HR Planning

Recruitment and

Organizational Effectiveness
Selection

Training and
Development

Performance
Management

Remuneration

Repatriation

Employee Relations

Multicultural
Management
 Managing International HR Activities
HR Planning

• HR planning in international business is more complex and

crucial

• HRP procedures are difficult to implement in different

countries. Cultural differences in view of planning

• Identification of top management

• Identification of critical competencies for future managers

• Providing developmental opportunities

• Tracking and supporting in pursuing international career

path

• Aligning business strategy with HRP and vice-versa

(European and Asian strategy)
 Managing International HR Activities
Recruitment and Selection

• Main issue in international hiring is not to select competent

employee but candidate who could mix with culture of
organization

Ethnocentric Approach
• All key management positions are held by parent country
nationals

• This is good strategy at early stage of new start

up/operations in host country

Polycentric Approach
• Subsidiary is headed by host country nationals and parent
country nationals are at the top positions in headquarter

• Some countries have made regulation or exert pressure to

hire host country nationals for top position in subsidiary
 Managing International HR Activities
Geocentric Approach

In this staffing approach best people are selected to fill vacant

positions irrespective of their nationality
Staffing approach Advantages Disadvantages
Parent Country • Familiarity with • Difficulty in adjustment:
Nationals headquarters goals and foreign language, different
objectives culture and political and socio
• More organizational economic system
control and coordination • Cost of training, remuneration
• Competent managers are and family benefits
giving expatriate • Host countries nationals feel
opportunity demotivated when they see
• Specific skills and no further progress
experience • PCN can impose
unnecessarily HQ culture and
style
• Family adjustment issues
 Managing International HR Activities
Staffing approach Advantages Disadvantages
Host Country • Familiarity with country’s • Communication problems
Nationals culture, political system and with home country
business practices management
• Low cost of hiring and • Little chance of host
remuneration country nationals to get
• Promotional opportunities for international assignments
locals hence motivated and and experience
committed • Difficulty in inculcating HQ
• No language barrier management philosophy,
• Continuity of management culture, and best practices
Third Country • Low salary package as • Host country may not like
Nationals compared to PCN to hire TCN
• They are truly international • TCNs may not return to
managers their country
• May be more aware of host • Host country may be
country culture, political and sensitive or have hostile
economic system, language attitude toward TCN
hence easily and quickly • Resistance from subsidiary
adjust employees
 Managing International HR Activities
Factors Influencing PCN and HCN Choice

Dimensions Factors
Parent Country Cultural distance between HQ and subsidiary, size
Characteristics of operation, research intensity
Industry Characteristics Financial institution, need for control, need to
customize
Subsidiary Characteristics Age, acquired or strategic role of subsidiary,
performance, ownership
Host Country Variables Educational levels, political risk, cost of hiring
 Managing International HR Activities
Problems of Expatriates
Expatriates are those employees who work abroad (away from
their home country) for a specific time period with a
planned return to third country or home country
Expatriates Assignment life cycle Reassignment
Crises and aboard
adjustment
Need for Departure
expatriates
Post arrival
training
Repatriation
Pre assignment or and
Selection adjustment
training
process
Crises and
failure
 Managing International HR Activities

Reasons of Expatriate Failure

US Firms Japanese Firms
Spouse adjustment problem Inability to cope with
international responsibilities
Inability of managers to adjust Difficulties with environment
Other family reasons Personal and emotional
problems
Personal and emotional Lack of technical competence
maturity of managers
Inability to cope with Spouse adjustment problem
international responsibilities
Managing International HR Activities

Expatriate Selection Decision

 Managing International HR Activities

Training and Development

The common objectives of training and development in MNCs

are

• Bridging cultural gap between subsidiary and HQ

• Orientation challenges are different in HQ and subsidiary
• Building united corporate culture

• Training and development activity IHRM most of the time

focus on training of candidate likely to be posted abroad

• Expatriates are giving training to reduce likelihood of failure

in foreign assignment. The main components of training of
expatriate are cross cultural, language and practical
training, and management development programs
 Managing International HR Activities

1) Cross Cultural Training:

• Expatriate receives pre-departure training on host country

culture to make it easy for him/her to adjust to new culture

• Expatriate often receives training on repatriation to avoid

cross cultural shock

Merits Demerits
More chances of success in May not remove cultural biases
foreign assignment
Provides comprehensive global Recipient may not take it
perspective serious
Sense of confidence May not make real difference
in business
Reduces cultural shock Can not prepare manager to
face all real life problem
 Managing International HR Activities
Performance Management

In IHRM performance management tend to focus on evaluation

of performance and continuous improvement of individual,
subsidiary and corporate performance against pre set
targets and objectives
Steps in Performance Management of Expatriate