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International Human Resource Managment

Bino Joseph

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

Model of IHRM
HR Activities
Procure Utilise Allocate

Types of employees

Home country nationals Host country nationals Third country nationals

Countries

Home country Host country Third country

Characteristics of 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

More Human Resource Activities

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

Ability to mix with organisations culture Ethnocentric, polycentric or geocentric staffing approach Selection of expatriates Coping with expatriate failure Managing repatriation process

Training & Development

Emphasis on cultural training Language training Training in manners & mannerisms

Compensation

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

Performance Management

Constraints while operating in host countries need to be considered Physical distance, time differences & cost of reporting system add to the complexity Identification of raters to evaluate subsidiary performance

Industrial Relations

Handling industrial relations problems in a subsidiary Attitude of parent company towards unions in a subsidiary Union tactics in subsidiaries

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 Employees Personal Lives

Changes in Emphasis

More involvement for both parent-country & third-country nationals

Housing arrangements Health care Remuneration packages Assist children left behind in boarding schools

Need for parent-country & third-country nationals decrease as more trained locals become available Resources reallocated to selection, training & management development

Risk Exposure

Physical safety of the employees Terrorism poses a great threat Failure of expatriates to perform well financial losses to the firm Seizure of MNCs assets in a foreign country

External Influence

Dealing with ministers, political figures, economic & social interest groups Hiring procedures dictated by host country Catch up with local ways of doing business

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Reasons for Growing Interest in IHRM

Effective HRM determinant of success in international business Indirect costs of poor performance in international business very costly

Globalisation of Business

Movement to network organisations from traditional hierarchical structures

Significant role in implementation & control of strategies

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Basic Steps in IHRM

HRP
Recruitment & Selection
Training & Development Performance Management Remuneration Repatriation

Employee Relations Multicultural Management

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HR Planning
Key Issues in International HRP Identifying top management potential early Identifying CSF for future international managers Providing developmental opportunities Tracking & maintaining commitment to individuals in international career paths Tying strategic business planning to HRP & vice-versa Dealing with multiple business units while focusing on global & regional strategies

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Recruitment & Selection

Ethnocentric Approach Key management positions held by parent-country nationals Appropriate during early phases P&G, Philips Polycentric Approach Host-country nationals hired to manage subsidiaries Parent-country nationals occupy key positions at corporate HQ HUL Geocentric Approach Seeks best people for key jobs, irrespective of nationality Underlying principle of a global corporation ColgatePalmolive Regiocentric Approach Variation of staffing policy to suit particular geographic areas Provides a 'stepping stone' for a firm wishing to move from an ethnocentric or polycentric approach to a geocentric approach

3 categories of employees can be hired parent country nationals (PCNs), host country nationals (HCNs) & third country nationals (TCNs)

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Advantages & Disadvantages of Using PCNs

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

Advantages & Disadvantages of Using HCNs

Advantages Disadvantages

Familiarity with the situation in host-country Lower hiring costs Locals motivated due to promotional opportunities Responds well to localisation of subsidiarys operations No language barrier HCNs stay longer in positions

Difficulty in exercising effective control over the subsidiarys operations Communication problems with home office personnel No opportunity for home countrys nationals to gain international experience Limited career opportunity outside the subsidiary
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Advantages & Disadvantages of Using TCNs

Advantages Disadvantages

Salary & benefit requirements lower than that of PCNs May be better informed about host country environment Truly international managers

Host country govt. may resent hiring TCNs May not return to their country after assignment Host countrys sensitivity w.r.t nationals of specific countries

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Expatriate Assignment Life Cycle

Determining the need for an expatriate Crisis & Adjustment Reassignment Abroad

Departure

Post-arrival Orientation & Training

Repatriation & Adjustment

Selection Process

Pre-assignment training

Crisis & Failure 18

Expatriate Failure
Premature return of expatriates to their home country Reasons
Inability to adjust to host country culture leads to culture shock Personal & emotional problems Difficulties with the environment Inability to cope with larger international responsibilities Other family reasons
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Culture Shock Cycle

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Family Reqments Technical Ability

Individual Situation

Crosscultural Suitability Expatriate Selection MNC Reqments

Countrycultural Reqments Language

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Training & Development

Cross Cultural Training Language Training

Practical Training

Management Development & Strategy

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HCN Training
Gaining knowledge about parent organisation Technical knowhow specific to organisation General awareness of the parent country cultural norms

Role of the subsidiary in the MNC

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Expatriate Performance Management

Linkage to organisational strategy

Setting individual performance goals

Identifying variables impacting performance

Providing opportunities for improvement

Providing regular feedback on progress towards goals

Appraising the performance

Linking results with rewards

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Setting Individual Performance Goals Variables Impacting Performance

Link unit goals to individual/team goals This will offer benchmarks for employees to strive towards excellence

Compensation packages Type of task Moral & physical support Host environment Multicultural adjustability

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Paying Expatriates
Objectives to be achieved
Attract qualified & interested employees Facilitate movement of expatriates between subsidiaries Consistent & reasonable relationship between pay levels Cost-effective

Problems faced in deciding remuneration package

Discrepancies in pay between parent, host & third country nationals Vary compensation based on family situation of expat Remuneration when re-entering parent-country organisation Must accommodate changes in international business environment

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Components of Remuneration Package

Factors Influencing Compensation

Internal Environment

Base salary Benefits Allowances Incentives Taxes

Tax equalisation Tax protection

Goal Orientation Capacity to pay Competitive strategy Organisational culture Internal workforce composition Labour relations Subsidiary role Parent nationality Labour market characteristics Local culture Home & host country govts role Industry type Competitors strategies

External Environment

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Approaches to Designing the Pay Package

Balance-sheet approach Going-rate approach Lumpsum method Cafeteria approach Regional approach

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Repatriation
The activity of bringing the expat back to the home country Can cause re-entry shock or reverse culture shock Reasons
Posting period over Childrens education Not happy with overseas assignment Failure to do a good job
Preparation

Physical Relocation

Transition

Readjustment 29

Types of Assignments
Business Visits Min. Duration 1-30 days Short-term 1-3 months Commuter Long-term Returns home 6-12 months at regular intervals 2-4 years 3-5 years

Max. Duration 183 days

6-12 months

Short term assignments

Advantages

Disadvantages

Employee less restricted by family concerns Spouses career unaffected Generally less expensive

Family split Identical benefits taxed differently 30 in home & host

Commuter assignments

Advantages Childrens education undisturbed Spouses career unaffected

Long term assignments

Disadvantages Big strain on family relations if more than 1 year

Advantages Family remains together All emoluments subject to a single tax legislation

Disadvantages Spouses career affected Childrens education disturbed Loss of support from relatives & friends

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International Labour Relations

Handling Labour Issues Delegated to foreign subsidiaries Labour relations centralised when inter-subsidiary production integration is present Depends on nationality of ownership of subsidiary More intervention when subsidiary is of strategic importance Union Tactics Strike most common tactic International Trade Secretariats (ITS) Lobbying for restrictive national legislations Intervention of ILO, UNCTAD, EU & OECD Principles of ILO Freedom of associations Right to organise & collectively bargain Abolition of forced labour Non-discrimination in 32 employment

Multiculturalism

Culture customs, beliefs, norms & values that guide behaviour of people in a society or passed on from one generation to the next Multiculturalism people from many cultures (countries) interact regularly Benefits
Greater creativity & innovation Sensitivity in dealing with foreign customers Possibilities of hiring best talent Superorganisational culture Universally acceptable HR policies & practices Possess strong personal identity Have knowledge of beliefs & values of different cultures Display sensitivity Communicate clearly according to the cultural group Cultivate cosmopolitan outlook & attitudes

Functions of IHR manager

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Power Distance

Uncertainty avoidance

Hofstedes Cultural Dimensions

Individualism

Masculinity
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