Nature and Concepts of IHRM

international human resource management

Nature and concepts of IHRM Introduction:

The advent advent of the era of libera liberaliz lizati ation on and globali globalizat zation ion along with with the advance advancemen ments ts in informati information on technology technology (IT) has transferred transferred the world world around us. It has brought to centre centre stage the importance of human resources, more than ever before. The purpose of human resource management management (HR) is to enable appropriate appropriate deployment deployment of human resource resource so that the !uality culture can maintain and satisfy the customers not only in national level but to in global level. In a competitive scenario, effective utilization of human resources has become necessary and the primary tas" of every ev ery organization is to identify, recruit and channel competent human resources into their business operations for improving productivity and functional efficiency. efficiency. #mergency of trade bloc"s with the formation of different economic and political forums li"e #uropean $nion, %orth &merican 'ree Trade &ssociation,&sia acific #conomic conference and epandi epanding ng role role of *orld orld Trade Trade +rgan +rganiza izatio tion n have have now signif significa icantly ntly changed changed the bus busine iness ss environment in terms of competition  liberalization and open end mar"eting opportunity. -usiness environment become global business environment. Internalization of business now eperts influence not only on labour mar"ets and staffing re!uirements but also on HR practices. ulti ulti dom domest estic ic operati operations ons (+s) (+s),, /oint /oint 0entures ntures (/0s) (/0s) and strat strategic egic &llia &lliance nce (1&) (1&) are common forms of business business structure structuress across across regions. regions. 2hanges in organizati organizational onal structure structures, s, relationships with overseas operations, state 3 of 3 the art communications technology and global mar"et now demand different HR approaches for managing %2s. 4lobalization of business has probably touched the HRmanagers more severely than any other functional heads. The HR eecutives needs to give international orientation to what ever he or she does 3 employee hiring, training and development, performance review, remuneration, motivation, welfare, or industrial relati relations ons.. Intern Internati ational onal orient orientati ation on assume assumess greate greaterr releva relevance nce as bus busine iness ss get increa increasin sing g interlin"ed across nations. 1ince an international business must procure, motivate, retain, and effectively utilize services of people both at the corporate office and at the foreign plants, therefore, the process of procuring, allocat allocating ing and effect effective ively ly utiliz utilizing ing hum human an resour resources ces in an intern internati ational onal bus busine iness ss is called called International Human Resource anagement

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Definitions of IHRM: International human resource management is all about the world wide management of human resources 3 rocess of sourcing, allocating, and effectively utilising their s"ill, "nowledge, ideas, plan and perspective in responding to T5. The process of procuring, allocating and effectively utilizing human resources in an international business is called International Human Resource anagement or IHR. International Human Resource anagement is the process of sourcing, allocating and effectively utilizing human resources in a multinational organization.

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Dimensions of IHRM: &ccording to .0. organ6 IHR is the interplay among 7 dimensions6  HR

&ctivities

 Types

of employees

 Types

of 2ountries

imension odel

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imension odel of IHR. 1) -road activities of IHR 3 procurement, allocation and utilization of human resources cover

all the si activities of domestics HR i.e, HR planning, #mployees Hiring, Training and evelopment, Remuneration, erformance anagement and Industrial Relations. 2) The three national or country categories involved in IHR activities are6

8 The host country where subsidiary may be located 8 The home country where the company has its head !uarters and 8 +ther countries that may be sources of labour or finance. 7) The three types of employees of an international business are 3 arent 2ountry %ationals (2%s) , Host 2ountry %ationals (H2%s) and Third 2ountry %ationals (T2%s). 'or eample, I- which employs &ustralian citizens in its &ustralian operations, after sends $1 citizens to &sia acific countries on assignment, and may send some of its 1ingaporean employees to its /apanese operations.

Purpose of IHRM:

To enable the firm , the multinational corporations (%2s), to be a successful globally.

Objectives of IHRM: 9 Remaining competitive throughout the world 9 #fficient 9 :ocally Responsive 9 'leible and adaptive 9 2apable to transforming learning across their globally dispersed units

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Difference Beteen domestic and IHRM: +ne obvious difference between domestic and international HR is that staff are moved across the national boundaries into various roles within the international firm;s foreign operations 3 these employees have traditionally been called >>) domestic HR is involved with employees within only one national boundary? on the other hand IHR deals with 7 nationals or country categories (epatriate)6 2%, H2% and T2%. 1o, broadly there are two ma@or factors therefore which differentiate domestic HR from IHR. =. The compleities of operating in different countries  cultures A. #mploying different nationals and different categories of wor"ers across boarder. It has been also argued by owling (=>>>) that the compleities of IHR can be attributed to si factors that differentiate international from domestic HR. These are6 =. & wide range of HR activities =) The need for a broader perspectives A) ore Involvement in employee;s personal life. 7) Responsiveness to changes in staffing re!uirements as international strategy changes. B) Higher ris" eposure C) ore eternal influences. However, the international dimension brings with it a host of issues, which the domestic HR functions would not normally get involved in. The practice of HR in the international contet is different from its domestic counterpart in a number of ways. These include6 =. -eing responsible for a greater number of functions and activities such as selection, training and management of international assignees. A. Having to epand one;s area of epertise to include a much broader "nowledge of foreign country employment laws and global organization designs. 5


7. Having to get much more closely involved with employees lives as the firm moves employees to foreign assignments. 'or eample, collectingD information and furnishing to visa authorities about aids or material status of employees. B. -eing involved with greatly epanded and constantly changing mi of employees (from the host countries and foreign locals), adding considerable diversity and compleity to the HR tas"s. C. Having no cope with more eternal influences? for eample, having to consider the impact of foreign cultures and laws. E. Having to face greater eposure to problems and liabilities (for eample, ma"ing mista"es in epatriate assignments can cost as much as $1FB million per assignee). The accumulated direct and indirect costs can be huge. G. &dditional responsibilities li"e translation of language, both at head!uarters and at the subsidiary level, organizing schooling and housing for epatriates and providing administrative services. . anagement of differential compensation due to variety of allowances and ad@ustments. >. ore emphasis on activities li"e international relocation and orientation, both pre departure and post departure cultural training. nowledge of international taation, rate of inflation and cost of living, including currency fluctuation. =J.iversity management, li"e managing people from different cultural and political bac"grounds and gender differences. ==.ore contacts with 4overnment officials for obtaining visas, wor" permits, ta certificates, fiing of meetings and so on. =A.ore coordination and travel to assess performance of epatriates and solve problems. =7.ore ris" management as threats from terrorists, idnappers and protecting intellectual property rights of firms. =B.ore ris" management as threats from terrorists, "idnappers and protecting intellectual property rights of firms. =C.ore public relations wor" to enhance the multinationals image and deal with human rights and other %4+s and interest group operating in different countries.

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Ho Internationa! assi"nments create an #$patriate%

T2%s

T2%s

ot&er countries

Here we have to remember that IHR epartment is purely heterogeneous in nature because it deals the diverse cultures i.e. amalgamation of 4lobal *or"force. (P'N( H'N and 'N) . *hat types of people re!uired where or which unit it is depends on the following points6 7


9 &vailability of useful human resources 9 #conomic /ustification  cost effectiveness 9 #mployee motivation and performance 9 4lobal eposure for need of the organization 9 evelopment of 2ross cultural anagement 9 -rand :oyalty or International fame.

*i"nificance of IHRM in Internationa! Business: 1cullion (AJJ=) outlined =J ma@or significance of IHR in globally business environment. This significance can categorised in C "ey area

2hallenge

2ommitment

si"nificance

2ost

#ffectiveness

2ompetence

2H&::#%4#6 =. Rapid growth of internalization and global competition has increased the nos. and significances of %2s 3 resulting in the increased mobility of human resources. 2. Increasing

no. of strategic alliances and cross border mergers and ac!uisitions has increased

the strategic implementation of IHR as 4lobal business.

2+IT#%T6

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=. *orld wide recognition of management of human resources in international business and cross cultural management. +ther countries %ationals A. -usiness %etwor"s and Horizontal communication and HR plays a vital role.

2+1T #''#2I0#%#116 1. The

performance of epatriates. (poor performance of epatriate may affect the mar"et share

and damage to foreign relations) 2. 4rowing

Importance of #patriates in International -usiness.

2+#T#%2#6 1. 4lobal 2.

1trategy Implementation.

1uccess or failure of international business based on effectiveness of management of HR.

2+%4R$#%2#6 1.

:earning, "nowledge ac!uisitions have been identified as important potential sources of

comp. advantages for %2s. This has also enhanced the role of IHR to meet the "ey strategic challenge of ob@ectives. A.nowledge management is an important source of comp. advantage for %2s, where IHR is the "ey partner and plays a central role.

Major Issues in Internationa! HRM: &ccording to Hendry (=>>B), there are three main Issues in IHR6 =. The management and development of epatriates8 selection, training, compensation and repatriation of epatriate failures. A. The internationalization of management through out the organization(host country, parent country and other third countries) 7. The need to internationalize the whole organization by creating a new corporate culture reflecting the need for greater international eperiences across the whole organization, due to the increasing fre!uency of cross cultural interactions of doing business at home as well as abroad mainly 2ultural communication K gauge and :anguage and communication 9


Ro!e of Internationa! HRM : International human resource management is the basis of success of anyglobal multinational organization. International HR enhances employee;s effectiveness to achieve goals of the organization and meet the needs? to develop employees to assume more diverse tas"s, assignments, face challenging situations and better understand the cu ltural variations across the nations. IHR department deals with heterogeneous functions and has to give additional focus on various aspects, such as6 =. ore involvement in the employee;s personal life. A. eal with different groups of employees i.e. 2%, H2% and T2% for which HR policies and practices may differ. International HR managers have to understand cultural differentiation in multicultural environment. 7. anage eternal influences, i.e host government authorities, business and other interest pressure and labour groups, etc. B. :ay different emphasis on management training to deal diverse wor"force, their orientation and to meet international environment. C. rovide guidance on taation and compensation aspects.

+imitations in IHRM: =. anagement is basically the principle based on local cultures, traditions, practices and needs of the organizational growth. It is not universal for everywhere, specially in the field of human resources management.

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A. HR methods and systems developed by one society can not always be transferred and applied to another. 7. HR and industrial relations practices differ across countries as these have their historic origin in countries. B. ersonnel management and industrial relations are embedded in societal rules, norms, values, ideologies and no %2 can afford to ignore the influence of local culture.

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Major c&a!!en"es for IHRM 2hallenge is always offset by opportunity.Today;s widespread mar"et volatility, coupled with layoffs, talent shortages and rapid shifts in technology, points to heightened challenges for human resources (HR) organizations. *hile appropriately leveraging HR has been a "ey topic of

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discussion for the past decade, organizations still struggle with how to ma"e this strategic shift as a department.

Facing the Primary Challenge: Being the Employer of Choice -ecoming and remaining an employer of choice is the top8ran"ing HR8related challenge organizations face today. #stablishing employer8of8choice status is HR;s responsibility, and if HR does this well, all other practices become subordinate to this goal. The most important ob@ective on the people side of the business is establishing a place where individuals want to wor" and remain wor"ing. HR should be concerned with providing potential, current and even past employees with this environment. #mployees need a culture, a place in which to grow and feel good about their surroundings.

De!ineatin" t&e 'orporate 'u!ture

2orporate culture is a dramatic force behind every employer of choice. $ni!ue to each organization, culture has many drivers, such as the organization;s leadership or the product or service produced. In cases when there are mergers or ac!uisitions involved, cultural redefinition might be re!uired. &t the very least, HR should be the designated "eeper of the corporate culture. &t its best, HR can be instrumental in creating or maintaining a culture that is truly great. HR must first clearly identify the "ind of culture the company should have, then define that culture for the wor"place and support the environment that emerges. &n identifiable culture attracts employees, gives them a sense of purpose and offers a basis for participation in decision8ma"ing. *hether investigating not8for8profit institutions, government employment, a large ban"ing firm or start8ups, @ob see"ers continuously evaluate whether or not a prospective employer is the employer of choice for them. & suitable culture signifies different things to different people companies attract those who find their culture desirable. This attraction might mean anything from having a lot of freedom to participating in business decisions to wor"ing with a mission to save lives. *hat does it mean to be an ideal L or McoolN for some sectors L place to wor"O *hile a number of criteria are involved in answering that !uestion, in general the cultural images successful companies portray fully address ,sin" Brandin" to Promote 'u!ture

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-randing promotes culture. In the past branding was assigned to public relations or mar"eting, but it is indeed an HR function because of its power to attract and retain employees. *or"ing together with mar"eting, HR must develop a compelling brand image for the wor"force. 4reat companies do not create an eternal brand for customers and an internal brand to attract employees. Instead, they leverage their eternal brand for internal recruiting. 1outhwest &irlines is an ecellent eample of this L it advertises around low8fare, no8frills, humorous service, and its employee population loves to have fun with customers. 1outhwest does an ecellent @ob of branding for its customers and leveraging that same image to draw li"e8minded employees.

*ta-in" .ttuned to '&an"in" Demo"rap&ics

The wor"force has changed and will continue to do so. #mployers of choice recognize and understand the dynamics of the Mnew wor"force,N where for the first time four distinct groups of wor"ers labor together under one virtual roof. The over8CJ baby8boomers lend themselves to loyalty and sacrifice, those in their BJ;s believe hard wor" will ta"e them to the top, 7J8 somethings see" a balance between wor" and home, and new wor"ers in their AJ;s are realists wired for technology. However, today;s employees are even now eperiencing a metamorphosis. The role of women and other minorities is epanding, median age is increasing and there is a rise in the contingent wor"force. +rganizations are changing as well, creating widespread shifts in wor" attitudes across age groups. HR;s tas" is to stay attuned with the changing wor"force and changing company values and ma"e sure company culture is appropriate to the desired wor"ers. 'or eample, because 'ord otor 2ompany benefits from loyalty L as do most employers of an older wor"force L its culture and branding do not support rapid change and high turnover. :i"ewise, companies based in 1ilicon 0alley are concerned with development and production speed, and turnover is often higher than average. HR;s challenge is to strategically match the employee population with that of the organization;s culture.

/innin" t&e /ar for a!ent

&n employer of choice has already come a long way toward winning the war for talent, which is another significant HR challenge. There is no truce in this war, regardless of economic conditions. 14


Recruitin" and Retainin" Over ime

4iven suitably competitive offerings with respect to compensation, culture is an organization;s number one recruitment and retention tool. In an employer8of8choice environment, it is not necessary to pay top dollar if other "ey factors are in place. 4reat companies "now not to stop see"ing the best talent in a downturn. *hen the stoc" mar"et is down, many people are afraid to invest L but that is the best time to do so. The @ob mar"et is similar. 2ustomer relationship management (2R) is a good model for human capital management (H2). The steps involved in attracting and retaining customers parallel the activities involved in the war for talent. *here millions are spent on the customer relationship, has a similar emphasis been placed on employees

,nderstandin" t&e /or0force

1tatistics show that the size of the wor"force is diminishing L when the economy comes bac", there will be fewer candidates from which to choose. <hough there is an economic slowdown now, in the net =J years demand will outstrip the supply. uring a downturn, if companies that are not hiring eliminate their focus on recruitment, they can miss golden opportunities to secure the high performers who might be instrumental in the future. *inning the war for talent re!uires "nowing the wor"force. 'or eample, by AJCJ there will be fewer people available to wor", and the ma@ority of these will be older than CJ. The contingent wor"force will also be more critical in the future. Therefore, why not innovate by creating a temporary or part8time environment in which the CJ8plus population will want to wor"O *hat about giving the new mom or dad the opportunity to balance hours at wor" and at homeO

+evera"in" an Indispensab!e P!a-er: ec&no!o"-

eeting today;s HR challenges would be impossible without technology, a critical practice in and of itself. ost people want to wor" for companies that have good technology. 'or eample, college graduates accustomed to using the internet for their wor", research, thesis, and case studies epect the latest technology on the @ob. 4iven the widespread availability of technology, a company lac"ing in this component will not !ualify as an employer of choice for the emerging wor"force. 15


,sin" ec&no!o"- as a aci!itator

4reat companies "now how to use technology. Instead of accumulating an ecess of technology for technology;s sa"e, they invest in technology specifically as it facilitates accomplishment of their ob@ectives. 'or eample, an employer of choice will leverage the company website to add momentum to branding efforts.The best companies also wield an educated vision, establishing cutting8edge solutions such as pure8internet systems that provide longevity and interoperability with future advancements. referred for ease of collaboration, pure8internet systems re!uire only a browser L no code on the wor"station L and support a number of standards. *eb8based solutions are ideal foundations for portals, self8service, and collaboration because they

#nterin" t&e Porta! atea-

2ritical to the employer of choice, portals provide organized, efficient access to the customized content, "nowledge, reporting structures, analytics capabilities, and transactions each employee needs. &n enterprise portal is the gateway to all company functions and offers personalized, role8 based access with respect to who employees are, where they are located, what they do, and why they do it. Third8party sources of content such as salary surveys or @ob boards can also be accessed through a portal.

,sin" ec&no!o"- as a aci!itator

4reat companies "now how to use technology. Instead of accumulating an ecess of technology for technology;s sa"e, they invest in technology specifically as it facilitates accomplishment of their ob@ectives. 'or eample, an employer of choice will leverage the company website to add momentum to branding efforts. The best companies also wield an educated vision, establishing cutting8edge solutions such as pure8internet systems that provide longevity and interoperability with future advancements. referred for ease of collaboration, pure8internet systems re!uire only a browser L no code on the wor"station L and support a number of standards. *eb8based solutions are ideal foundations for portals, self8service, and collaboration because they

#nterin" t&e Porta! atea-

2ritical to the employer of choice, portals provide organized, efficient access to the customized content, "nowledge, reporting structures, analytics capabilities, and transactions each employee 16


needs. &n enterprise portal is the gateway to all company functions and offers personalized, role8 based access with respect to who employees are, where they are located, what they do, and why they do it. Third8party sources of content such as salary surveys or @ob boards can also be accessed through a portal.

&in0in" !oba!!-( 'omp!-in" +oca!!-

#ven small organizations deal increasingly with customers and employees on a global basis. 4reat companies "now how to thin" globally and comply locally. They act li"e a global organization, yet an understanding of the local environment permeates every relationship. a"ing global differences a part of corporate culture is a valuable endeavor. Indeed, diversity itself is a source of greatness. +rganizational head!uarters that have the attitude that Mcorporate "nows bestN will have a difficult time instilling a viable culture. #ducation and awareness ma"e all the difference, especially in the following areas6

+e"a! and re"u!ator- issues L It is important to be familiar with laws and regulations in

locations where the organization has a presence. 'or eample, in some countries trac"ing religion is mandatory, while in others it is illegal.

Data securit- and data f!o L +rganizations must not only obey regulations with respect to

data, but they must also be aware of how sensitive and important the security of personal data is in most of the world. 'u!ture L #ach country has a differing set of cultural values apart from company culture. 'or

eample, some base their attitudes on lovehate polarities, while others use approvaldisapproval. It is very important for smooth global operations that HR understands discrepancies between country culture and company culture and implementsthe appropriate processes. 'u!ture3based motivation L Incentive programs for people of different cultures should present

true incentives by offering valued rewards. *hile pay for performance motivates $1 wor"ers, in 4ermany title is motivational. In /apan, Mthe nail that stic"s up gets hammered,N so individual performance is valued less, while efforts toward achieving group goals receive stronger reinforcement. To help an organization efficiently leverage the global wor"force, HR must 17


ac"nowledge that one size does not fit all. *hile legal compliance is critical and can be greatly assisted by a global portal, the main focus is cultural awareness and sensitivity.

Incorporatin" !e$ibi!it- and .daptabi!it-

'or years companies have been moving away from hierarchical, structured environments because they are neither effective for organizing nor comfortable for employees. HR needs to mirror this movement by allowing employees L particularly managers L to be fleible, adaptable, and nimble. 'or eample, instead of restricting a creative re!uisition that strays from an eact, predefined @ob description and salary range, HR can allow for variances that fit special circumstances. 4uidelines, rules, and benchmar"s are important,but fleibility is even more critical, particularly where people are concerned. 2ollaboration with all constituents re!uires adaptability. +rganizations today are less about physical structure than logical structure supported by technology. -efore doing anything else, HR must create a fleible environment where top prospects see" to be employed. This is a place where employees loo" forward to coming to wor", en@oy wor"ing while they;re there, feel they play an important role in the company, and want to stay because the company is continuing to develop them and care about them.

'onc!usion:

Thus it has been observed that effective internationalization of human resources management and IRs remains blea". The degree of adaptation on International HR to local customs in various subsidiaries of %2s will be remaining on the strategic agenda. and managing International HR activities is an elaborate and comple tas" for to day;s manager.

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Nature and Concepts of IHRM

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