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International Human Resource Management


International Human Resource ... Lecture Overview International HRM Difference between IHRM and Domestic HRM Basic steps in IHRM Key Issues in International ... – PowerPoint PPT presentation

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Title: International Human Resource Management

Chapter 28 International Human Resource
  • Recap of Previous Lectures
  • Industrial Relations
  • Resolving Disputes
  • Collective Bargaining Process
  • Labour Laws in Pakistan
  • Equal Employment Practices in Pakistan

  • Lecture Overview
  • International HRM
  • Difference between IHRM and Domestic HRM
  • Basic steps in IHRM
  • Key Issues in International Labour Relations

  • International Human Resource Management
  • Globalization has significantly influence HRM
    practices and policies
  • All HRM functions need international orientation
  • MNC operating internationally need to be more
    focused to attract, motivate and transfer
    workforce globally
  • The process of procuring, allocating, motivating,
    training development, and compensating and
    utilizing human resources in international
    business is called international human resource
  • IHRM covers six main functions of domestic HRM
    such as HR planning, recruiting, training and
    development, performance management, compensation
    and labour relations
  • The three countries categories of IHRM are
    country where headquarter is based, country where
    subsidiary is located, and country from where
    workforce and finances come

  • International Human Resource Management
  • The three types of workers in international
    business are host country, parent country and
    third country nationals
  • IHRM differs from domestic HRM on following
  • More HR activities
  • Broader perspective
  • More involvement in employees personal lives
  • Greater workforce diversity
  • Change in Emphasis
  • More risk
  • More external influences

  • International Human Resource Management
  • More HR activities
  • IHRM has boarder scope in dealing with employment
    related issues.
  • For example International taxation, host country
    regulations, home country regulations,
    international orientation of relocating and
    training of employees, and administrative and
    compensation issues of expatriates, and language
    translation services

  • International Human Resource Management
  • Each HR functions has different scope and issues
    in IHRM
  • HR Planning
  • Difficulty in implementation of HR policy and
    procedure in host country
  • Difficulty in aligning business strategy with HR
  • Providing career development opportunities to
    international managers
  • Hiring
  • Matching person and organizational fit (cultural
  • Selection of expatriates
  • Managing expatriates failures

  • International Human Resource Management
  • Training and Development
  • Language training
  • Cultural training
  • Training of expatriates and managers
  • Compensation
  • Deciding compensation of expatriates
  • Deciding compensation of parent, host, and third
    country nationals
  • Performance Management
  • Implementation of performance evaluation system
    in host country

  • International Human Resource Management
  • Industrial Relations
  • Who should deal industrial relations issues in
  • What is attitude and policy of parent company
    toward unions in subsidiary?
  • What should be tactics to deal with unions in
  • 2) Need for Broader Perspective
  • In dealing with compensation issues, HR manager
    in headquarter need to consider different pay
    systems for parent, host, and third country
    nationals, paying in different currencies, and
    change in relative value of currency
  • In deciding fringe benefits, HR managers face
    difficulty, in most countries providing health
    insurance is compulsory, whereas definition of
    dependent varies from country to country, in some
    countries dependent means multiple spouses,
    children, parents, grandparents

  • International Human Resource Management
  • 3) More involvement in employees personal lives
  • In IHRM, there is more involvement of HR
    department in dealing with their personal issues
    for better selection, training, relocation and
    effective management of global workforce
  • HRM department need to ascertain that managers
    selected for foreign assignment understand
    housing, health care, and remuneration package
  • HRM need to have more information about manager
    family, schooling of their children, emotional
    and physical health of their spouse and children
  • International Human Resource Services section
    provide services to managers like handling
    investment, banking, home rental, house
    arrangements, home visits, and repatriation
  • Unlike domestic HRM in International HRM, HR
    manager needs to understand more about their
    personal lives and provide support in relocation
    for foreign assignment even assistance to
    children left behind

  • International Human Resource Management
  • 4) Greater Work force Diversity
  • IHRM requires more emphasis on management of
    global and diversified work force
  • Different work ethics, motivation level, cultural
    compatibility, managing team work are main
    issues that IHRM to handle
  • 5) Change in Emphasis
  • Emphasis has changed from idea of repatriation
    and dependence on third country nationals towards
    development of local managers
  • As more trained local managers are available, the
    issue of training and development of local
    managers come to highlight
  • Designing programs and policies to provide
    development opportunities to local managers by
    placing them in headquarter

  • International Human Resource Management
  • 6) Risk Exposure
  • MNCs operating in different countries need to
    assess the law and order situation and advise or
    provide support to their expatriates or third
    countries employees
  • HR department may also need to have emergency
    evacuation program for their employees working in
    highly risk areas
  • Poor selection decision may result into huge loss
    as in case of expatriate may not perform well
    and recalled
  • If MNCs policies and practices are hostile to
    unions, political party or in violation of host
    country regulations, company can be asked to wind
    up operations or government may seize physical
    and financial assets

  • International Human Resource Management
  • 7) External Influence
  • MNCs operating in host country face more external
    influence as opposed to local company
  • Federal and local government, political figures,
    political and social groups exert great pressure
    on foreign company
  • Subsidiary manager need to know local way of
    doing business, dealing with different
    ministries, political parties, social groups and
    labour unions

  • International Human Resource Management
  • Growing interest in IHRM
  • There are number of reasons for growing interest
    in IHRM
  • Thanks to globalization, more and more entry of
    multinational corporations means greater
    mobilization of human resources
  • In international business human resources
    performance is more critical for success
  • The cost of underperformance in international
    assignment is very high both in financial and
    image terms
  • The international expansion mainly depend on
    availability and utilization of competent human
  • Finally, implementation of strategies is more
    crucial than developing, and implementation is
    dependent upon culture that is developed by HR
    policies and practices

  • Managing International HR Activities

Organizational Effectiveness
HR Planning
Recruitment and Selection
Training and Development
Performance Management
Employee Relations
Multicultural Management
Adopted from Aswathappa. Human Resource
Management, Text and Cases, 2008, p. 664. 333
  • Managing International HR Activities
  • HR Planning
  • HR planning in international business is more
    complex and crucial
  • HRP procedures are difficult to implement in
    different countries. Cultural differences in view
    of planning
  • Identification of top management
  • Identification of critical competencies for
    future managers
  • Providing developmental opportunities
  • Tracking and supporting in pursuing international
    career path
  • Aligning business strategy with HRP and
    vice-versa (European and Asian strategy)

  • Managing International HR Activities
  • Recruitment and Selection
  • Main issue in international hiring is not to
    select competent employee but candidate who could
    mix with culture of organization
  • Ethnocentric Approach
  • All key management positions are held by parent
    country nationals
  • This is good strategy at early stage of new start
    up/operations in host country
  • Polycentric Approach
  • Subsidiary is headed by host country nationals
    and parent country nationals are at the top
    positions in headquarter
  • Some countries have made regulation or exert
    pressure to hire host country nationals for top
    position in subsidiary

  • Managing International HR Activities
  • Geocentric Approach
  • In this staffing approach best people are
    selected to fill vacant positions irrespective of
    their nationality

Staffing approach Advantages Disadvantages
Parent Country Nationals Familiarity with headquarters goals and objectives More organizational control and coordination Competent managers are giving expatriate opportunity Specific skills and experience Difficulty in adjustment foreign language, different culture and political and socio economic system Cost of training, remuneration and family benefits Host countries nationals feel demotivated when they see no further progress PCN can impose unnecessarily HQ culture and style Family adjustment issues
  • Managing International HR Activities

Staffing approach Advantages Disadvantages
Host Country Nationals Familiarity with countrys culture, political system and business practices Low cost of hiring and remuneration Promotional opportunities for locals hence motivated and committed No language barrier Continuity of management Communication problems with home country management Little chance of host country nationals to get international assignments and experience Difficulty in inculcating HQ management philosophy, culture, and best practices
Third Country Nationals Low salary package as compared to PCN They are truly international managers May be more aware of host country culture, political and economic system, language hence easily and quickly adjust Host country may not like to hire TCN TCNs may not return to their country Host country may be sensitive or have hostile attitude toward TCN Resistance from subsidiary employees
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 667 333
  • Summary
  • International HRM
  • Difference between IHRM and Domestic HRM

  • Summary
  • International HRM
  • Difference between IHRM and Domestic HRM
  • Basic steps in IHRM

  • Managing International HR Activities
  • Factors Influencing PCN and HCN Choice

Dimensions Factors
Parent Country Characteristics Cultural distance between HQ and subsidiary, size of operation, research intensity
Industry Characteristics Financial institution, need for control, need to customize
Subsidiary Characteristics Age, acquired or strategic role of subsidiary, performance, ownership
Host Country Variables Educational levels, political risk, cost of hiring
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 668 333
  • Managing International HR Activities
  • Problems of Expatriates
  • Expatriates are those employees who work abroad
    (away from their home country) for a specific
    time period with a planned return to third
    country or home country

Crises and adjustment
Reassignment aboard
Expatriates Assignment life cycle
Need for expatriates
Post arrival training
Repatriation and adjustment
Selection process
Pre assignment training
Crises and failure
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 669 333
  • Managing International HR Activities

Reasons of Expatriate Failure Reasons of Expatriate Failure
US Firms Japanese Firms
Spouse adjustment problem Inability to cope with international responsibilities
Inability of managers to adjust Difficulties with environment
Other family reasons Personal and emotional problems
Personal and emotional maturity of managers Lack of technical competence
Inability to cope with international responsibilities Spouse adjustment problem
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 669 333
  • Managing International HR Activities
  • Expatriate Adjustment Process

Cultural Shock Cycle
Months in new culture
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 670 333
  • Managing International HR Activities

Expatriate Selection Decision
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 670 333
  • Managing International HR Activities
  • Training and Development
  • The common objectives of training and development
    in MNCs are
  • Bridging cultural gap between subsidiary and HQ
  • Orientation challenges are different in HQ and
  • Building united corporate culture
  • Training and development activity IHRM most of
    the time focus on training of candidate likely to
    be posted abroad
  • Expatriates are giving training to reduce
    likelihood of failure in foreign assignment. The
    main components of training of expatriate are
    cross cultural, language and practical training,
    and management development programs

  • Managing International HR Activities
  • Cross Cultural Training
  • Expatriate receives pre-departure training on
    host country culture to make it easy for him/her
    to adjust to new culture
  • Expatriate often receives training on
    repatriation to avoid cross cultural shock

Merits Demerits
More chances of success in foreign assignment May not remove cultural biases
Provides comprehensive global perspective Recipient may not take it serious
Sense of confidence May not make real difference in business
Reduces cultural shock Can not prepare manager to face all real life problem
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 672 333
  • Managing International HR Activities
  • Performance Management
  • In IHRM performance management tend to focus on
    evaluation of performance and continuous
    improvement of individual, subsidiary and
    corporate performance against pre set targets and

Steps in Performance Management of Expatriate
Source Aswathappa. Human Resource Management,
Text and Cases, 2008, p. 674 333
  • Managing International HR Activities
  • Expatriates Compensation