International Human

Resource
Management
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
3
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
4
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
Characteristics of IHRM
5
More Human Resource Activities
Difficulty in implementing HR in host countries
Aligning strategic business planning to HRP &
vice-versa
Developmental opportunities for international
managers.
Human Resource Planning
Ability to mix with organisations culture
Ethnocentric, polycentric or geocentric staffing
approach
Selection of expatriates
Coping with expatriate failure
Managing repatriation process
Employee Hiring
Emphasis on cultural training
Language training
Training in manners & mannerisms
Training & Development
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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
Compensation
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
Performance
Management
Handling industrial relations problems in a subsidiary
Attitude of parent company towards unions in a subsidiary
Union tactics in subsidiaries
Industrial
Relations
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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
8
More Involvement in Employees
Personal Lives
More involvement for
both parent-country &
third-country nationals
Housing arrangements
Health care
Remuneration packages
Assist children left behind
in boarding schools



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


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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
Risk
Exposure
Dealing with ministers, political figures,
economic & social interest groups
Hiring procedures dictated by host
country
Catch up with local ways of doing
business
External
Influence
10
Reasons for Growing Interest in
IHRM
Globalisation of
Business
Effective HRM
determinant of
success in
international business
Indirect costs of poor
performance in
international business
very costly
Movement to network
organisations from
traditional hierarchical
structures
Significant role in
implementation &
control of strategies
11
Basic Steps in IHRM
HRP
Recruitment & Selection
Training & Development
Performance
Management
Remuneration
Repatriation
Employee Relations
Multicultural
Management
12
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
13
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
Colgate-
Palmolive
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
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3 categories of employees can be hired parent country nationals (PCNs), host
country nationals (HCNs) & third country nationals (TCNs)
Advantages & Disadvantages of
Using PCNs
Advantages
Familiarity with home
office, goals, practices
Easy organisational control
& coordination
International exposure to
promising managers
PCNs

special skills &

experiences

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
15
Advantages & Disadvantages of
Using HCNs
Advantages
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

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

Disadvantages
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
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Determining the
need for an
expatriate
Selection
Process
Pre-assignment
training
Departure
Post-arrival
Orientation &
Training
Crisis &
Adjustment
Crisis & Failure
Repatriation &
Adjustment
Reassignment
Abroad
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
20
Expatriate
Selection
Family
Reqments
Cross-
cultural
Suitability
MNC
Reqments
Language
Country-
cultural
Reqments
Technical
Ability
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Individual Situation
Training & Development
Cross Cultural
Training
Language
Training
Practical
Training
Management
Development
& Strategy
22
HCN Training
Gaining knowledge
about parent
organisation
Technical know-
how specific to
organisation
Role of the
subsidiary in the
MNC
General awareness
of the parent
country cultural
norms
23
Expatriate Performance
Management
Linkage to
organisational
strategy
Setting individual
performance goals
Identifying
variables impacting
performance
Appraising the
performance
Providing regular
feedback on
progress towards
goals
Providing
opportunities for
improvement
Linking results with
rewards
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Link unit goals to
individual/team goals
This will offer benchmarks
for employees to strive
towards excellence
Setting
Individual
Performance
Goals
Compensation packages
Type of task
Moral & physical support
Host environment
Multicultural adjustability
Variables
Impacting
Performance
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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
Base salary
Benefits
Allowances
Incentives
Taxes
Tax equalisation
Tax protection
Factors Influencing Compensation
Internal Environment
Goal Orientation
Capacity to pay
Competitive strategy
Organisational culture
Internal workforce composition
Labour relations
Subsidiary role
External Environment
Parent nationality
Labour market characteristics
Local culture
Home & host country govts role
Industry type
Competitors strategies
27
Approaches to Designing the Pay
Package
Balance-sheet approach
Going-rate approach
Lumpsum method
Cafeteria approach
Regional approach
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Repatriation
Preparation
Physical
Relocation
Transition
Readjustment
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
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Types of Assignments
Business
Visits
Short-term Commuter Long-term
Min. Duration 1-30 days 1-3 months Returns home
at regular
intervals
6-12 months
Max. Duration 183 days 6-12 months 2-4 years 3-5 years
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Short term assignments

Advantages
Employee less restricted by family
concerns
Spouses career unaffected
Generally less expensive
Disadvantages
Family split
Identical benefits taxed differently
in home & host
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Commuter assignments

Advantages
Childrens education
undisturbed
Spouses career unaffected
Disadvantages
Big strain on family
relations if more than 1
year
Long term assignments

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
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
employment
32
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
Functions of IHR manager
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
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Power Distance Uncertainty avoidance
Individualism Masculinity
Hofstedes
Cultural
Dimensions
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