Chapter 1

Introduction: The Enduring Context of IHRM

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Chapter Objectives
We will establish the scope of the textbook: Define key terms in IHRM Review expatriate management evolution Outline the differences between domestic HRM and IHRM Identify variables that moderate these differences Discover the increasing complexity and potential challenges of current IHRM, and Discuss trends and emerging challenges in the global work environment in which IHRM functions and activities are conducted
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Three Approaches to IHRM

Cross-cultural management

Examine human behavior within organizations from an international perspective Seeks to describe, compare and analyze HRM systems and IR in different countries Explore how HRM is practiced in multinationals
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Comparative HRM and Industrial Relations

HRM in multinational firms

Figure 1-1

Interrelationships between Approaches to the Field

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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

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Whirlpools Globalization
Where to go among alternative markets?

$23/hr in the U.S. including the benefits $3/hr in Mexico $1/hr in China $32/hr in Germany Acquisition of Phillips N.V. for more than $1 billion in 1991 23,000 in the U.S. 45,000 overseas

Mode of entry?

Whirlpools total employees today:

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Potential Factors to Consider

Types of industry and technology Mode of entry

Time of entry Cost of entry

Types of labor Cost of labor Regional Global

Human resources

Proximity to the market and consumers

Standardization vs. Adaptation

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Whirlpools Global Network

The high-end $1,200 model from Germany

The smaller front loaders from Mexico

Mexican engineers, foremen and supervisors had 18 months training in Germany

Top loading machines made in Ohio for Americans

Microwave ovens engineered in Sweden and

made in China Refrigerators assembled in Brazil and exported to Europe

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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

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Figure 1-2

A Model of IHRM

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What is an expatriate?
An employee who is working and temporarily

residing in a foreign country

Some firms prefer to use the term international assignees Expatriates are PCNs from the parent country operations, TCNs transferred to either HQ or another subsidiary, and HCNs transferred into the parent country

Global flow of human resources

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Figure 1-3

International Assignments Create Expatriates:

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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
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Figure 1-4

Variables that Moderate Differences between Domestic HR and IHRM

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Table 1-1

World top ten non-financial transnational corps., ranked by transnational index

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Table 1-2

World top ten non-financial transnational corps., ranked only by foreign assets

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Figure 1-5

Strategic HRM in multinational enterprises

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Laurents steps to truly international HRM

1.
2.

3.

4. 5.

Recognize that ones own HRM reflects home culture assumptions and values. Recognize that ones own peculiar ways are neither universally better nor worse than others - just different and likely to exhibit strengths and weaknesses, particularly abroad. Recognize that organizations foreign subsidiaries may prefer other ways to manage people ways that are neither intrinsically better nor worse, but possibly more effective locally. Headquarters willingness to acknowledge cultural differences and steps to make them discussable and therefore usable. Build shared genuine belief that cross-cultural learning will result in more creative and effective ways of managing people.
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Chapter Summary (cont.)

We have established the scope of the textbook:

Defined IHRM and the term expatriate. Discussed major differences between domestic HRM and IHRM looking at six factors:

More HR activities 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 and More external influences
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Chapter Summary
Identified four other variables moderating that differences

between domestic and international HRM

Host-country cultural environment Type of the industry Reliance of the MNC on its home-country market

Attitudes of the senior management

This treatment has enabled us to provide an overview of the

field of IHRM and to establish how the general environment affects IHRM. The next chapter examines the organizational context where we explore how IHRM activities are determined by, and influence various internal changes as the firm internationalizes.
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Discussion Questions
1. 2. 3.

4.

5.

What are the main similarities and differences between domestic and international HRM? Define these terms: IHRM, PCN, HCN, and TCN. Discuss two HR activities in which a MNE must engage that would not be required in a domestic environment. Why is a greater degree of involvement in employees personal lives inevitable in many IHRM activities? Discuss at least two of the variables that moderate differences between domestic and international HR practices.
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