INTERNATIONAL HUMAN RESOURCE MANAGEMENT

Sub Code: 10MBAHR445/10MBAIB465 MODULE 1

Introduction to IHRM

Definition, reasons for going global Approaches to IHRM Difference between IHRM and Domestic HRM Reasons for emergence of IHRM Models of IHRM-Matching model, Harvard Model, Contextual Model, 5P Model European Model. Models of SHRM in Multinational Companies Internationalization of HRM: Socio-cultural context, Organizational dynamics and IHRM: Role of culture in International HRM Culture and employee management issues Organizational Processes in IHRM Linking HR to International expansion strategies The Challenges of International Human Resource Management

The Imperative

The first Industrial Revolution of the mid 18th century The second Industrial Revolution telecommunication and information technology Lowering & breaking down of trade barriers

Globalization of Business & HR

Global Population Changes

Global Communications

Globalizati on Forces

Global Economic Interdependence

Regional Alliances NAFTA, EU

Types of Global Organizations

Types
Importing and Exporting Multinational Enterprise (MNE) Global Organization Selling and buying goods and services with organizations in other countries An organization with operating units located in foreign countries. An organization having corporate units in a number of countries integrated to operate worldwide.

Transition to Global Organizations

Transition to Global Organizations

Types of Organizations

Managing Across Borders

International corporation
Domestic firm that uses its existing capabilities to move into overseas markets.

Global corporation
Firm that has integrated worldwide operations through a centralized home office.

Multinational corporation (MNC)

Firm with independent business units operating in multiple countries.

Transnational corporation
Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units.

Definition of IHRM
Morgan IHRM as the interplay among these three factors HR activities, types of employees & countries of operation.

Morgans Model

What does IHRM add into the Traditional Framework of HRM?

Types of employees

Within and cross-cultural workforce diversity Coordination Communication Procurement Allocation Utilization of human resources

Human resource activities

Nation/country categories where firms expand and operate

Host country Parent country Third country

Reasons for going global

Emergence of stronger & more powerful MNCs Above has been due to a rapid increase in global activity & competition Effective management of HR globally is fast emerging as a critical success factor for international business. Research evidence shows that

Shortage of international managers is becoming an increasing problem The successful implementation of global strategies depends on the existence of an adequate supply of internationally experienced managers Business failures in the international arena may often be linked to poor mgmt of HR Expatriate failure continues to be a significant problem for many international firms

Differing employee expectations, legal environments

Increasing Importance of Global Human Resource Understanding

International Mergers and Acquisitions

Foreign Human Resources

Importance of Global Human Resources Management

Global Competition

Market Access Opportunities

Approaches to IHRM
Make strategic decision as to level of standardization desired across locations

Ethnocentric approach

Exporting organizations home country practices and policies to foreign locations Allowing each location to develop own practices and policies Developing standardized practices and policies by geographic region Developing one set of global practices and policies applied at all locations

Polycentric approach

Regiocentric approach

Geocentric approach

Setting Strategic HR Standards

Difference between IHRM and Domestic HRM

More HR activities The need for a broader perspective More involvement in employees personal lives Changes in emphasis as the workforce mix of expatriates & locals varies Risk exposure Broader external influences

Difference between IHRM and Domestic HRM contd.

More HR Activities

International taxation: usually have both domestic & home

country tax liabilities; need tax equalisation policies to ensure absence of either tax incentive or disincentive International relocation & orientation: pre-departure training, providing immigration & travel details, providing housing/medical care, school information, finalising compensation details. Host government relations: important to establish cordial working relationships with government officials in the host country; especially since several requirements are sometime ambiguous and complex. Language translation services: for internal & external correspondence Administrative services for expatriates: how ethical & legal are parent country policies & practices in the host country; e.g. AIDS test pre-requisite for acquiring work permit in the host country where expatriate is from the parent country, USA

Difference between IHRM and Domestic HRM contd.

Broader Perspective

Design & administer policies for more than one group of employees; often deal with complex equity issues as in many multinationals there is a tendency to extent preferential treatment to PCN expatriates and not to HCNs and PCNs
In international movements much greater support & involvement is required; right from housing arrangements, health care, handling banking, house rentals; assist in care of school children left behind in boardings etc

More involvement in personal lives

Difference between IHRM and Domestic HRM contd.

Broader External Influences:

Type of government, state of the economy, accepted practices of doing business; nature and focus of legal requirements (in developing vs developed economies)

Moderating Variables
(which accentuate or diminish the difference between domestic & international HRM)

The cultural environment Domestic & International activities of the HRM function Extent of reliance of the MNC on its home country or domestic market

The industry in which the MNC is primarily involved

Attitudes of senior management

Complexity involved in operating in diff countries with employees of diff nationalities.

Reasons for emergence of IHRM

Emergence of stronger & more powerful MNCs Above has been due to a rapid increase in global activity & competition Effective management of HR globally is fast emerging as a critical success factor for international business. Research evidence shows that

Shortage of international managers is becoming an increasing problem The successful implementation of global strategies depends on the existence of an adequate supply of internationally experienced managers Business failures in the international arena may often be linked to poor mgmt of HR Expatriate failure continues to be a significant problem for many international firms

Differing employee expectations, legal environments

Increasing Importance of Global Human Resource Understanding

International Mergers and Acquisitions

Foreign Human Resources

Importance of Global Human Resources Management

Global Competition

Market Access Opportunities

Models of IHRM-Matching model

Hard vs the soft approach Matching Model Harvard Model Contextual Model 5-P Model European Model

Matching Model

Highlights the resource aspect of HRM and emphasises the efficient utilisation of HR to meet organisational objectives; emphasises a right fit between organisational strategy, structure & HRM systems

Harvard Model
Stresses the human/soft aspect & is more concerned with employee-employer relationship; highlights the interests of different stakeholders in the organisation & how their interests are related to the objectives of the management

Contextual Model
Is based on the premise that organisations may follow a number of different pathways in order to achieve the same results, this is because of the existence of a number of linkages between external envtal contexts & internal orgnal context these linkages influence the content of the organisations HRM

5P Model
Melds 5 HR activities (philosophies, policies, programs, practices, processes) with strategic needs, shows the inter-relatedness of these activities & their significance in achieving the org. needs

European Model.

European Model
Is

based on the argument that European organisations are constrained at both international & national level by national culture & legislation.; also constrained at the org level by patterns of ownership and at the HRM level by trade union involvement & consultative arrangements. These constraints need to be accommodated while forming a model of HRM.

Models of SHRM in Multinational Companies

Strategic IHRM is human resource management issues, functions and policies and practices that result from the strategic activities of multinational enterprises and that impact on the international concerns and goals of those enterprises. Key challenges
Closer regional & global integration & co-ordination Local responsiveness, flexibility and speed Multicultural nature of the workforce Constant interaction of internal & external contextual factors

Internationalization of HRM: Socio-cultural context

Culture is a shaping process Members of a group or society share a distinct way of life with common values, attitudes & behaviours that are transmitted over time in a gradual but dynamic process. Subtle process, one is not always conscious of its effect on values, attitudes & behaviours Culture shock results from differences which require one to adapt or get used to in a relatively short period of time.

Internationalization of HRM: Socio-cultural context contd.

Because international business involves movement of people across cultures and requires people of different cultures to work together; an appreciation of cultural differences becomes essential for success. Coping with cultural differences and knowing when & how they become relevant are a constant challenge for HR managers.

Organizational dynamics and IHRM:

Patterns of international competition vary from industry to industry

Multi domestic industries in which competition in each country is essentially independent of competition in other countries. Role of HR is likely to be more domestic in orientation and structure. Global industries in which the firms competitive position in one industry is significantly influenced by its position in other countries. HR function is structured to deliver international support required by the primary activities of the multinational.

Factors Influencing Global Work Environment

Change forces: Global competition Mergers & Acqstns Organisational Restr Tech & telecomm

MNCs need to be: Flexible Locally responsive Share Knowledge Transfer Competence

Managerial Response Need global mindset Informal control mechanism Horizontal communication Survival & Growth Virtual teams International Assignments

Cultural Environment of International Business

Culture and employee management issues

Two broad meanings

In anthropological & sociological terms, refers to the shared values, beliefs, attitudes that people belonging to a group/society hold Outside the academic world, it includes the fine arts and literature

Hofstede defined culture as the collective programming of the mind based on a broad tendency to prefer certain states of affair over others.

Culture and employee management issues contd.

A nations culture or national character is shaped by historical, geographical and philosophical factors One is not born with a specific culture culture is a set of man made norms commonly ascribed to by a group of individuals and passed on from generation to generation Recognition of cultural differences between peoples is essential and helps us understand the motives and behaviours of those with whom we interact.

Major Cultural Influencers

Attitude to power & authority Tolerance for ambiguity & uncertainty Attitude to risk & risk taking Individualism, self orientation Collectivism, group orientation Acceptance of responsibility Interpersonal trust Attitude to other peoples opinion Attitude to sharing information & knowledge Recognition of the rights of others to be consulted with Preference for certain leadership styles Preference for independence & autonomy Achievement orientation, ambition Work ethic, honesty

Culture and employee management issues contd.

There needs to be a fit between what is imported from abroad and the local environment for any policy/practice to be successful and permanent. The concept of recontexctualising of imported practices and concepts is therefore, also applicable to HRM.

HRM Susceptibility to Cultural Influences

Employee Mgmt Issues

Specific HRM Issues

Mgmt Style Participative Consultative Paternalistic Autocratic Authority Structure Decentralised Centralised Org Structure Hierarchical Network Leadership Style Task oriented Employee oriented Employee relationship Contractual Emotional

Staffing Policies Recruitment & selection process Remuneration Motivation Job expectation T &D Performance Appraisal Promotion Retirement Redundancy & lay off Industrial Relations Foreign Assignment

Major Cultural Influencers

Attitude to power & authority Tolerance for ambiguity & uncertainty Attitude to risk & risk taking Individualism, self orientation Collectivism, group orientation Acceptance of responsibility Interpersonal trust Attitude to other peoples opinion Attitude to sharing information & knowledge Recognition of the rights of others to be consulted with Preference for certain leadership styles Preference for independence & autonomy Achievement orientation, ambition Work ethic, honesty

Organizational Processes in IHRM

Linking HR to International expansion strategies

The Challenges of International Human Resource Management

High failure rates of expatriation and repatriation Deployment getting the right mix of skills in the organization regardless of geographical location Knowledge and innovation dissemination managing critical knowledge and speed of information flow Talent identification and development identify capable people who are able to function effectively Barriers to women in IHRM International ethics Language (e.g. spoken, written, body)

The Challenges of International Human Resource Management contd.

Different labour laws Different political climate Different stage(s) of technological advancement Different values and attitudes e.g. time, achievement, risk taking Roles of religion e.g. sacred objects, prayer, taboos, holidays, etc Educational level attained Social organizations e.g. social institutions, authority structures, interest groups, status systems