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 Resource Management
The Imperative
The first Industrial first Industrial Revolution of the mid 18th century The second Industrial second Industrial Revolution – Revolution – telecommunication and information technology Lowering & breaking down of trade barriers
Globalization of Business & HR Global Population Changes
Global Communications
Globalizati on Forces
Regional Alliances NAFTA, EU
Global Economic Interdependence
Types of Global Organizations
Types Importing and Exporting
Selling and buying goods and services with organizations in other countries
Multinational Enterprise (MNE)
An organization with operating units located in foreign countries.
Global Organization
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
• Global corporation
– Domestic firm that uses its existing capabilities to move into overseas markets.
– Firm that has integrated worldwide operations through a centralized home office.
• Multinational corporation (MNC)
• Transnational corporation
– Firm with independent business units operating in multiple countries.
– 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.
Morgan’s Model
What does IHRM add into the Traditional Framework of HRM?
Types of employees
Within and cross-cultural workforce diversity Coordination Communication
Human resource activities Procurement Allocation Utilization of human resources
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
Market Access Opportunities
Global Competition
Approaches to IHRM Make strategic decision as to level of standardization desired across locations
Ethnocentric approach
Polycentric approach
Allowing each location to develop own practices and policies
Regiocentric approach
Exporting organization’s home country practices and policies to foreign locations
Developing standardized practices and policies by geographic region
Geocentric approach
Developing one set of global practices and policies applied at all locations
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
More involvement in personal lives
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
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 industry in which the MNC is primarily involved
The cultural environment Domestic & International activities of the HRM function Extent of reliance of the MNC on its home Attitudes of senior country or domestic management market
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
Market Access Opportunities
Global Competition
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 organisation’s 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 resource “human 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. firm’s competitive Global industries in which the 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 Survival & Horizontal communication 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 nation’s 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 people’s 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
Mgmt Style Participative Consultative Paternalistic Autocratic Authority Structure Decentralised Centralised Org Structure Hierarchical Network Leadership Style Task oriented Employee oriented Employee relationship Contractual Emotional
Specific HRM Issues
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 people’s 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)
