an introduction to international human resource management

An Introduction An Introduction to International to International

Human Human Resource Resource

ManagementManagement

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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? (cont’d)

The role of HR in International OperationsManaging a Multicultural WorkforceDeveloping Managerial Talent in a Global

Business Environment

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Globalization, Uncertainty, Complexity and IHRM

Globalization Globalization and and

New TechnologiesNew Technologies

New Environment – Increased Environmental New Environment – Increased Environmental UncertaintyUncertainty

More ComplexityMore ComplexityMore DynamismMore DynamismLess RichnessLess Richness

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Globalization and importance of IHRM

Uncertainty, Complexity, HypercompetitionUncertainty, Complexity, Hypercompetition

Need to Refocus on Persons, Roles and Need to Refocus on Persons, Roles and

Integration for Global Performance Integration for Global Performance HR

CapabilitiesCapabilitiesPeople ProcessesPeople ProcessesPersons in RolesPersons in Roles

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Three Approaches to IHRM

• Cross-cultural managementCross-cultural management Examine human behavior within organizations

from an international perspective

• Comparative HRM and Industrial RelationsComparative HRM and Industrial Relations Seeks to describe, compare and analyze HRM

systems and IR in different countries

• HRM in multinational firmsHRM in multinational firms Explore how HRM is practiced in multinationals

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Interrelationships between Approaches of IHRM

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Diversity as an Organizational and HR Challenge inMNE

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

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A Definition of Human Resource Management

• Human Resource Management (HRM) Human Resource Management (HRM) involves all management decisions and involves all management decisions and practices that directly affect the people who practices that directly affect the people who work for the organization.work for the organization.

• ““Human Resources”Human Resources” the people who work the people who work for the organizationfor the organization.

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A Definition of Human Resource Management (cont’d)

“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 it’s 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 (cont’d)

• Building and Motivating Performance– HR Development– Performance Appraisal– Compensation Systems

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Human Resource Management Functions (cont’d)

• 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 (cont’d)

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What does IHRM add into the Traditional Framework of HRM?

• Types of employeesTypes of employees– Within and cross-cultural workforce diversity– Coordination– Communication

• Human resource activitiesHuman resource activities– Procurement– Allocation– Utilization of human resources

• Nation/country categories where firms expand Nation/country categories where firms expand and operateand 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)Host Country National (HCN):: Belongs to the Country where the subsidiary is located

• Parent Country National (PCN)Parent Country National (PCN):: Belongs to the Country where the firm has its headquarters

• Third Country Nationals (TCN)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 expatriate’s 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

1.1. Inability of spouse to adjustInability of spouse to adjust

2.2. Manager’s inability to adjustManager’s inability to adjust

3.3. Other family problemsOther family problems

4.4. Manager’s personal or emotional maturityManager’s personal or emotional maturity

5.5. Inability to cope with larger overseas Inability to cope with larger overseas responsibilityresponsibility

6.6. Lack of technical competenceLack of technical competence

7.7. Difficulties with new environmentDifficulties with new environment

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Differences between Domestic HRM and IHRM

More HR activitiesMore HR activities: taxation, culture : taxation, culture orientation, administrative servicesorientation, administrative services

The need for a broader perspectiveThe need for a broader perspective: cater to : cater to multiple needsmultiple needs

More involvement in employees’ personal More involvement in employees’ personal liveslives: adjustment, spouses, children: adjustment, spouses, children

Changes in emphasis as the workforce mix Changes in emphasis as the workforce mix of expatriates and locals variesof expatriates and locals varies: fairness: fairness

Risk exposureRisk exposure: expatriate failure, terrorism: expatriate failure, terrorism Broader external influencesBroader external influences: government : government

regulations, ways of conductregulations, ways of conduct

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Differences between Domestic HRM and IHRM: variables

• Complexity involved in operating in different Complexity involved in operating in different countries, varied nationalities of employeescountries, varied nationalities of employees

• The different Cultural EnvironmentThe different Cultural Environment

• The industry or industries with which the The industry or industries with which the MNC is involvedMNC is involved

• Attitudes of Senior ManagementAttitudes of Senior Management

• Extent of reliance of MNC on home country Extent of reliance of MNC on home country domestic marketdomestic market

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Variables that Moderate Differences between Domestic HR and IHRM

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Forces for Change

• Global competitionGlobal competition::

• Growth in mergers, acquisitions and alliancesGrowth in mergers, acquisitions and alliances::

• Organization restructuringOrganization restructuring::

• Advances in technology and telecommunicationAdvances in technology and telecommunication::

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Impacts on Multinational Management

• Need for flexibilityNeed for flexibility::

• Local responsivenessLocal responsiveness::

• Knowledge sharingKnowledge sharing::

• Transfer of competenceTransfer of competence::

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Managerial Responses

• Developing a global “mindset”Developing a global “mindset”::

• More weighting on informal control More weighting on informal control mechanismsmechanisms::

• Fostering horizontal communicationFostering horizontal communication::

• Using cross-border and virtual teamsUsing cross-border and virtual teams::

• Using international assignmentsUsing international assignments::

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Factors that Influence the Global Work Environment

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Approaches To International Human Resource Management

• EthnocentricEthnocentric: Highly centralized. HQ controls : Highly centralized. HQ controls PCNs dominate. PCNs dominate.

• PolycentricPolycentric: Decentralized. Each subsidiary : Decentralized. Each subsidiary has some degree of decision making has some degree of decision making autonomy. HCNs manage subsidiaries.autonomy. HCNs manage subsidiaries.

• GeocentricGeocentric: Ignores nationality in favor of : Ignores nationality in favor of ability and competence needs in a worldwide ability and competence needs in a worldwide integrated business strategy.integrated business strategy.

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Convergence or Divergence?

Large corporations’ Large corporations’ preference for preference for consistent consistent worldwide systemsworldwide systems

Smaller companies’ Smaller companies’ desire for more desire for more professional professional systemssystems

Need to follow local Need to follow local HRM lawsHRM laws

Development of Development of unique techniques unique techniques and practices to suit and practices to suit local cultural and local cultural and legal requirementslegal requirements

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Choosing an Approach to IHRM

• Corporate International StrategyCorporate International Strategy

• Political and Legal ConcernsPolitical and Legal Concerns

• Level of Development in Foreign LocationsLevel of Development in Foreign Locations

• Technology and the Nature of the ProductTechnology and the Nature of the Product

• Organizational Life CycleOrganizational Life Cycle

• Cultural DifferencesCultural Differences

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Thank You