Chapter 1

Introduction:
The Enduring Context of
IHRM

Chapter Objectives
In this introductory chapter, we establish

the scope of the textbook:

Define key terms in IHRM
Outline the differences between domestic HRM
and IHRM
Identify the variables that moderate these
differences
And discuss trends and challenges in the global
work environment and the enduring context in
which IHRM functions and activities are
conducted, including the way in which forces for
change affect the operations of the
internationalizing firm and have consequences
IBUS 618 Dr. Yang
2
for the management
of people in the

The General Field of HR

Major Functions and Activities
Human resource planning
Staffing

Recruitment
Selection
Placement

Performance management
Training and development
Compensation (remuneration) and
benefits
Industrial relations

History of HRM

History of HRM
Personnel Management

Human Resource

Management

GLOBALIZATION

Stages of Globalization
Domestic

International

Multinational

Reasons for Globalization?

Reasons for
Globalization of
Businesses
Expand Market Share
Cheap labour, Raw material is easily

available
Extensive Global Communication
New technology
To Sustain in Foreign Competition
Trade Agreement like NAFTA

What is an Expatriate?

What is an Expatriate?
An employee who is working and
temporarily residing in a foreign country
They are also called international
assignees
assignees
by some firms.
All three categories of employees, i.e.
PCNs,
TCNs, and HCNs are expatriates
Nationality of the employee is major factor in
determining the persons category

What is an Repatriation?

Transfer of subsidiary
staff back to the parent
country (headquarters)
operations.

International Human Resource

Management

In international HRM, the preceding

activities are broadened to include aspects

pertaining to the national or country
categories
(Host, Home, Other) countries,
and firm employees
HostCountry Nationals (HCNs)
ParentCountry Nationals (PCNs)
Third Country Nationals (TCNs)

WHY TO STUDY IHRM??

Why to Study IHRM?

Recent years have seen a rapid increase

in global activity and global competition.

As the MNCs increase in number and

influence, so the role of international

HRM in those companies grows in
significance.
The effective management of human

resources internationally is increasingly

being recognized as a major determinant
of success or failure in international
business

Differences between Domestic HRM

and IHRM

More HR activities

The need for a broader perspective

More involvement in employees

personal lives

Changes in emphasis as the

workforce mix of expatriates and
locals varies
Risk exposure
Broader external influences

More HR Activities
International taxation
International relocation and

Orientation
Administrative services for expatriates

(AIDS Test Services)

Host-government relations (work

permits..)
Language translation services

The Need for a Broader

Perspective
Designing and administering programs

for more than one national group of

employees (e.g. PCN, HCN, and TCN).

Complex equity issues arise when

employees of various nationalities work

together (expatriate premium to PCN
only)

and the resolution of these issues

remains one of the major challenges in

IHRM field.

Changes in Emphasis as the Workforce

Mix of PCNs and HCNs varies
As the need for PCNs and TCNs declines and

more trained locals become available, resources

previously allocated to areas such as expatriate
taxation, relocation and orientation are
transferred to activities such as local staff
selection, training and management development.

These assignments may require the establishment

of a program to bring high-potential local staff to

corporate headquarters for development
assignments.

The need to change emphasis in HR operations as

a foreign subsidiary matures is clearly a factor

that would broaden the responsibilities of local
HR activities such as human resource planning,
staffing, training and development and
compensation.

More Involvement in employees

Personal Lives
A greater degree of involvement in employees

personal lives is necessary for the selection,

training and effective management of both PCN
and TCN employees.

The HR department or professional needs to

ensure that the expatriate employee understands

housing arrangements, health care and all
aspects of the compensation package provided for
the assignment (cost-of-living allowances,
premiums, taxes and so on)

Many multinationals have an International HR

Services section that coordinates administration

of the above programs and provides services for
PCNs and TCNs such as handling their banking ,
investments and home rentals while on
assignment and coordinating home visits and final
repatriation.

Risk exposure
Expatriate failure (the premature return of

an expatriate from an international

assignment) and underperformance while
on international assignment are potentially
high-cost problems for international
companies.

Direct Costs (salary, training costs and travel and

relocation expenses) per failure to the parent firm
may be as high as three times the domestic salary
plus relocation expenses, depending on currency
exchange rates and location of assignments.

Indirect Costs such as loss of foreign markets

share and damage to key host-country
relationships may be considerable.

Broader External Influence

3 Major External Factors That Influence
IHRM
Type of Government (Host Country

dictation in hiring)

State of Economy
Generally accepted practices of doing

business in each of the various host

countries in which the multinational
operates

Defining IHRM
International HR

Management is the
strategic integration and
alignment of HR practices
with business objectives to
enhance firm and employee
performance around the
globe.