International HRMInternational HRM

Defining IHRMDefining IHRM

IHRM is about understanding, researching, IHRM is about understanding, researching, applying and revising all human resource applying and revising all human resource activities in their internal and external contexts activities in their internal and external contexts as they impact the process of managing human as they impact the process of managing human resources in enterprises throughout the global resources in enterprises throughout the global environment to enhance the experience of environment to enhance the experience of multiple stakeholders, including investors, multiple stakeholders, including investors, customers, employees, partners, suppliers, customers, employees, partners, suppliers, environment and society.environment and society.

International HRMInternational HRM

HRM issues and problems arising from the HRM issues and problems arising from the internationalization of business, and the HRM internationalization of business, and the HRM strategies, policies and practices that global firms strategies, policies and practices that global firms pursue in response to the internationalization pursue in response to the internationalization process. process.

HR policies and processes that result from the HR policies and processes that result from the global competitive activities of MNCs and that global competitive activities of MNCs and that explicitly link international HR practices and explicitly link international HR practices and processes with the worldwide strategic goals of processes with the worldwide strategic goals of those companies. those companies.

Outline of ContextOutline of Context

The process of globalization - the integration of markets, new The process of globalization - the integration of markets, new markets (e.g. China and India) increased foreign direct investment markets (e.g. China and India) increased foreign direct investment by MNCs, and cross-border integration of production and by MNCs, and cross-border integration of production and services.services.

The proliferation of interest in both international HRM and The proliferation of interest in both international HRM and comparative HRM springs directly from globalization.comparative HRM springs directly from globalization.

GlobalizationGlobalization Globalization Globalization describes the process by which regional economies, describes the process by which regional economies,

societies, and cultures have become integrated through a global societies, and cultures have become integrated through a global network of political ideas through communication, transportation, network of political ideas through communication, transportation, and trade. and trade.

The term is most closely associated with the term economic The term is most closely associated with the term economic globalization: the integration of national economies into the globalization: the integration of national economies into the international economy through trade, foreign direct investment, international economy through trade, foreign direct investment, capital flows, migration, the spread of technology, and military capital flows, migration, the spread of technology, and military presence. presence.

However, globalization is usually recognized as being driven by a However, globalization is usually recognized as being driven by a combination of economic, technological, sociocultural, political, and combination of economic, technological, sociocultural, political, and biological factors. biological factors.

The term can also refer to the transnational circulation of ideas, The term can also refer to the transnational circulation of ideas, languages, or popular culture through acculturation. languages, or popular culture through acculturation.

Effects of GlobalizationEffects of Globalization

Broader industrial production access to a range of foreign Broader industrial production access to a range of foreign products for consumers and companies.products for consumers and companies.

Access to financial borrowing to expand levels of Access to financial borrowing to expand levels of trade/investments.trade/investments.

Freedom to Economy – exchange of goods and capital.Freedom to Economy – exchange of goods and capital.

Bigger job marketBigger job market

Privatization of health policy with more focused investments Privatization of health policy with more focused investments on health schemes.on health schemes.

Political positioning – rise of leading world powers based on economic Political positioning – rise of leading world powers based on economic growth index.growth index.

Access to informationAccess to information

Language spreadLanguage spread

Increased competitionIncreased competition

Cross-cultural growthCross-cultural growth

Development of social systemsDevelopment of social systems

Technological upgradeTechnological upgrade

Interrelation of religious groupsInterrelation of religious groups

There is nothing in the logic of profit-making There is nothing in the logic of profit-making corporations and capital accumulation to keep corporations and capital accumulation to keep the manufacture of steel, for example, in the manufacture of steel, for example, in traditional local markets. traditional local markets.

MNCs with distinctive competencies can MNCs with distinctive competencies can potentially realize higher profits by applying potentially realize higher profits by applying those competencies in foreign markets, where those competencies in foreign markets, where local competitors lack similar competencies. local competitors lack similar competencies.

Global corporations typically face tension Global corporations typically face tension from two types of business pressure: from two types of business pressure:

On the one hand demands for global cost On the one hand demands for global cost reductions and integration, reductions and integration,

Secondly, demands for differentiation and local Secondly, demands for differentiation and local responsiveness. responsiveness.

The duality of culture – its pervasiveness yet The duality of culture – its pervasiveness yet its uniqueness – impacts on global business its uniqueness – impacts on global business strategy. strategy.

Pressure to be locally responsive, including Pressure to be locally responsive, including HR practices, arise from consumer tastes and HR practices, arise from consumer tastes and preferences, differences in infrastructure and preferences, differences in infrastructure and the national business system imposed by the the national business system imposed by the host government. host government.

Factors that Influence the Global Work EnvironmentFactors that Influence the Global Work Environment

Role of MNCs in I-HRMRole of MNCs in I-HRM

Crucial/dominant role of MNCs - Eg: Microsoft, HP, Toyota, Crucial/dominant role of MNCs - Eg: Microsoft, HP, Toyota, Sony, IBM, Intel. Sony, IBM, Intel.

Investment in R&D/design of their products – have uniqueness in Investment in R&D/design of their products – have uniqueness in their operation sites, distribution networks, suppliers and across their operation sites, distribution networks, suppliers and across nation customer base.nation customer base.

To operate globally such companies:To operate globally such companies: Negotiate entry into other countriesNegotiate entry into other countries Adjust their operations to comply with the host legal requirements, Adjust their operations to comply with the host legal requirements, Modify their products and services to reflect the local preferences Modify their products and services to reflect the local preferences Deal with numerous accounting, taxation and trade policies. Deal with numerous accounting, taxation and trade policies.

I-HRM ModelI-HRM Model

Morgan presented a model of International HRM in 1986 which Morgan presented a model of International HRM in 1986 which describes 3 key dimensions.describes 3 key dimensions.

The three broad human resource activities of procurement, The three broad human resource activities of procurement, allocation, and utilisation.allocation, and utilisation.

The three national or country categories involved in international The three national or country categories involved in international HRM activities: HRM activities: The host-country where a subsidiary may be located The host-country where a subsidiary may be located The home-country where the firm is headquarteredThe home-country where the firm is headquartered The "other" countries that may be the source of labor or The "other" countries that may be the source of labor or

finance.finance.

The three types of employees of an international firm: Host-country nationals (HCNs) Parent-country nationals (PCNs) Third-country nationals (TCNs)

Thus, for example, IBM employs Australian citizens (HCNs) in its Australian operations, often sends U.S. citizens (PCNs) to Asia-Pacific countries on assignment, and may send some of its Singaporean employees on an assignment to its Japanese operations (as TCNs).

Morgan defines international HRM as the interplay among these three dimensions - human resource activities, types of employees, and countries of operation.

Differences between Domestic HRM and IHRMDifferences between Domestic HRM and IHRM

More HR activities: taxation, culture orientation, administrative servicesMore HR activities: taxation, culture orientation, administrative services

The need for a broader perspective: cater to multiple needsThe need for a broader perspective: cater to multiple needs

More involvement in employees’ personal lives: adjustment, spouses, More involvement in employees’ personal lives: adjustment, spouses, childrenchildren

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

Risk exposure: expatriate failure, terrorismRisk exposure: expatriate failure, terrorism

Broader external influences: government regulations, ways of conductBroader external influences: government regulations, ways of conduct

Diversity of I-HRMDiversity of I-HRM

Variables that Moderate Differences between Domestic HR and Variables that Moderate Differences between Domestic HR and IHRMIHRM

Why I-HRMWhy I-HRM

Cultural Environment:Cultural Environment:

Types of cultural differences observed – Language, food, hygiene, attitude, Types of cultural differences observed – Language, food, hygiene, attitude, greeting styles, email writing styles, emotional expressions, life style, greeting styles, email writing styles, emotional expressions, life style, timings, social networking, spending pattern etc.timings, social networking, spending pattern etc.

Experience of culture by a tourist is perceived mostly like an enjoyable Experience of culture by a tourist is perceived mostly like an enjoyable one, however may lead a culture shock for one who is expected to live and one, however may lead a culture shock for one who is expected to live and work there.work there.

Culture shock leads to questioning nationality & belongingness, Culture shock leads to questioning nationality & belongingness, psychological disorientation, negative feeling about host country, wanting psychological disorientation, negative feeling about host country, wanting to return to home country etc.to return to home country etc.

Reasons for IHRM EvolutionReasons for IHRM Evolution

Increased Travel – familiarity with foreign products and services – develops Increased Travel – familiarity with foreign products and services – develops global demand for these products and services.global demand for these products and services.

Global Communication – Rapid & Extensive – Sat-TV, DVDs, Internet/WWW, Global Communication – Rapid & Extensive – Sat-TV, DVDs, Internet/WWW, Global print media and websites – gives easy access to information across the Global print media and websites – gives easy access to information across the globe.globe.

Transfer/adaptation to new technology from other countries – iphones, ipads, Transfer/adaptation to new technology from other countries – iphones, ipads, ipods, xbox, home theatre etc.ipods, xbox, home theatre etc.

Growing Trade / exposure to foreign competitor. (Internationalization of Growing Trade / exposure to foreign competitor. (Internationalization of business)business)

Improving EducationImproving Education

Large number of ImmigrationLarge number of Immigration

Approaches To International Human Resource Approaches To International Human Resource ManagementManagement

Ethnocentric: Ethnocentric: Highly centralized. Highly centralized. HQ controls/PCNs dominate. HQ controls/PCNs dominate.

Polycentric: Polycentric: Decentralized. Decentralized. Each subsidiary has some degree of decision making autonomy. Each subsidiary has some degree of decision making autonomy.

HCNs manage subsidiaries.HCNs manage subsidiaries.

Geocentric: Geocentric: Ignores nationality in favor of ability and competence needs in Ignores nationality in favor of ability and competence needs in

a worldwide integrated business strategy.a worldwide integrated business strategy.

Developing IHRM in an organizationDeveloping IHRM in an organization

Find (recruit/train) HR managers who may have been raised and Find (recruit/train) HR managers who may have been raised and experienced in one culture but can effectively interact/manage experienced in one culture but can effectively interact/manage people raised in one or more different cultures, and can develop people raised in one or more different cultures, and can develop effective HRM practices and policies of various business effective HRM practices and policies of various business environment. Location of the HR Manager also matters for biases.environment. Location of the HR Manager also matters for biases.

Setting up IHRM team depends on:Setting up IHRM team depends on: Maximum workforce strength’s location for IHRM operations.Maximum workforce strength’s location for IHRM operations. Proportion of international assignees versus local employeesProportion of international assignees versus local employees Recruitment and compensation plan.Recruitment and compensation plan. Tailoring of HRM practices/policiesTailoring of HRM practices/policies

Nestle, Unilever, Royal Dutch Shell, Kodak, Ford Motors, IBM Nestle, Unilever, Royal Dutch Shell, Kodak, Ford Motors, IBM etc are the oldest practitioners of IHRM.etc are the oldest practitioners of IHRM.

Global role of IHR ManagersGlobal role of IHR Managers

Cannot assume this role without learning about the fundamentals Cannot assume this role without learning about the fundamentals of global business. of global business.

Should have expertise in global environment and should have Should have expertise in global environment and should have acceptance and understanding of cultural relativity of various HR acceptance and understanding of cultural relativity of various HR practices.practices.

Understanding of their global competitor’s HR plans and strategy, Understanding of their global competitor’s HR plans and strategy, tool and methods they use to build their competencies etc.tool and methods they use to build their competencies etc.

Characteristics of successful IHRM based companiesCharacteristics of successful IHRM based companies

Has strong support of top management team.Has strong support of top management team.

High expectations from IHR team on formulation and High expectations from IHR team on formulation and implementation of global strategies.implementation of global strategies.

Cultural diversity is encouraged as a natural way.Cultural diversity is encouraged as a natural way.

Competent and credible IHR staff.Competent and credible IHR staff.

IHRM - Key ChallengesIHRM - Key Challenges

How does HRM fit in and contribute to an international strategy?How does HRM fit in and contribute to an international strategy?

HRM Practice designs – by whom – setting up team – location of HRM Practice designs – by whom – setting up team – location of teams etc.teams etc.

Consistency in HR policy – which ones only for local/global or Consistency in HR policy – which ones only for local/global or both.both.

Which nationality should be represented by the key managers at Which nationality should be represented by the key managers at HQ and branches.HQ and branches.

Expatriation options – PCN to HCN, HCN to PCN, TCN.Expatriation options – PCN to HCN, HCN to PCN, TCN.

International career managementInternational career management

MNCs – Multinational CorporationsMNCs – Multinational Corporations

A A multinational corporationmultinational corporation (MNC) or (MNC) or enterpriseenterprise (MNE) is a (MNE) is a corporationcorporation or an enterprise that manages or an enterprise that manages productionproduction or delivers or delivers servicesservices in more than one country. in more than one country.

It can also be referred to as an It can also be referred to as an international corporationinternational corporation. .

The The International Labour OrganizationInternational Labour Organization (ILO) has defined an (ILO) has defined an MNC as a corporation that has its management headquarters in MNC as a corporation that has its management headquarters in one country, known as the one country, known as the home countryhome country, and operates in several , and operates in several other countries, known as other countries, known as host countrieshost countries. .

The The Dutch East India CompanyDutch East India Company was the first multinational was the first multinational corporation in the world and the first company to issue corporation in the world and the first company to issue stockstock. It . It was also arguably the world's first was also arguably the world's first megacorporationmegacorporation, possessing , possessing quasi-governmental powers, including the ability to wage war, quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies. negotiate treaties, coin money, and establish colonies.

The first modern multinational corporation is generally thought to The first modern multinational corporation is generally thought to be the be the East India CompanyEast India Company. Many corporations have offices, . Many corporations have offices, branches or manufacturing plants in different countries from where branches or manufacturing plants in different countries from where their original and main headquarters is located.their original and main headquarters is located.

Some multinational corporations are very big, with budgets that Some multinational corporations are very big, with budgets that exceed some nations' exceed some nations' GDPsGDPs. Multinational corporations can have a . Multinational corporations can have a powerful influence in local economies, and even the powerful influence in local economies, and even the world economyworld economy, and play an important role in , and play an important role in international relationsinternational relations and and globalizationglobalization..

MNCs possess competitive threat to local products and services MNCs possess competitive threat to local products and services with aggressive marketing strategies / lower prices.with aggressive marketing strategies / lower prices.

A Transnational Corporation (TNC) differs from a traditional A Transnational Corporation (TNC) differs from a traditional MNC by little, in that it does not identify itself with one national MNC by little, in that it does not identify itself with one national home. home.

Whilst traditional MNCs are national companies with foreign Whilst traditional MNCs are national companies with foreign subsidiaries, TNCs spread out their operations in many countries subsidiaries, TNCs spread out their operations in many countries sustaining high levels of local responsiveness. sustaining high levels of local responsiveness.

TNC is an MNC that operates worldwide without being identified TNC is an MNC that operates worldwide without being identified with a national home base. It is said to operate on a border less with a national home base. It is said to operate on a border less basis.basis.

An example of a TNC is Nestlé who employ senior executives An example of a TNC is Nestlé who employ senior executives from many countries and try to make decisions from a global from many countries and try to make decisions from a global perspective rather than from one centralised headquarters. perspective rather than from one centralised headquarters.

However, the terms TNC and MNC are often used interchangeably.However, the terms TNC and MNC are often used interchangeably.

Transnational FirmsTransnational Firms

An integrated pattern of human knowledge, An integrated pattern of human knowledge, belief, and behavior that depends upon the belief, and behavior that depends upon the capacity for symbolic thought and social capacity for symbolic thought and social learning.learning.

The set of shared attitudes, values, goals, and The set of shared attitudes, values, goals, and practices that characterizes an institution, practices that characterizes an institution, organization or group.organization or group.

CultureCulture

Culture refers to the cumulative deposit of knowledge, experience, Culture refers to the cumulative deposit of knowledge, experience, beliefs, values, attitudes, meanings, hierarchies, religion, notions beliefs, values, attitudes, meanings, hierarchies, religion, notions of time, roles, spatial relations, concepts of the universe, and of time, roles, spatial relations, concepts of the universe, and material objects and possessions acquired by a group of people in material objects and possessions acquired by a group of people in the course of generations through individual and group striving. the course of generations through individual and group striving. Culture is the systems of knowledge shared by a relatively large Culture is the systems of knowledge shared by a relatively large group of people. group of people.

Culture is the sum of total of the learned behavior of a group of Culture is the sum of total of the learned behavior of a group of people that are generally considered to be the tradition of that people that are generally considered to be the tradition of that people and are transmitted from generation to generation. people and are transmitted from generation to generation.