INTERNATIONAL HUMAN RESOURCE MANAGEMENT

GROUP MEMBERS: GITIKA - 59 HIMANSHI - 29 JASPREET - 14 MEGHA - 15 TANU CHATURVEDI - 17 SHILPI - 35

DEFINITION OF IHRM
Employers rely on International Human Resource Management (IHRM) to deal with global HR challenges. Thus IHRM can be defined as:

Model of IHRM

Differences between Domestic HRM and IHRM

More HR activities

Need for 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

More Human Resource Activities

HR Planning
Difficulty in implementing HR procedure in host countries. Providing developmental opportunities for international managers.

Employee Hiring
Ethnocentric, polycentric or geocentric approach to staffing. Selection of expatriates. Managing repatriation process.

Training & Development

Cultural training. Language training. Training in manners and mannerisms.

More Human Resource Activities

Compensation
Devising appropriate strategy to compensate expatriates. Minimizing discrepancies in pay b/w parent, host & third country nationals.

Performance Management
Constraints while operating in host countries need to be considered. Identification of raters to evaluate subsidiary performance.

Industrial Relations
Handling of industrial relations problem in a subsidiary. Union tactics in subsidiaries. Attitude of parent company towards unions in a subsidiary.

Need for Broader Perspective

Broader perspective is required on even the most common HR activities. For e.g.,
Gender Based Pay

Korea, Singapore, Japan & Indonesia believes that a family man should be paid more for the same job than a single woman.

Nepotism

Earlier hiring relatives was an accepted practice especially in small businesses. However, this is changing as can be seen in Hong Kong & Singapore.

Overtime

Australian & Singaporean firms add staff when workload increases. Korean & Japanese firms insists on existing staff working long hours.

Promotions

Countries also differ on basis of promotion, i.e., length of service, merit or other factors.

More Involvement in Employees Personal Lives

For effective management of both parent country & third-country nationals. Housing arrangements, health care, and all aspects of remuneration packages for foreign assignments.

Changes in Emphasis

Need for parent country and third-country nationals declines, more trained locals become available. Resources reallocated to staff selection, training and management development.

Risk Exposure

Employees physical safety. Kidnapping & Terrorism. Poor performance represents huge financial losses for firms. Seizure of MNCs assets if HR policies antagonize with host country.

External Influence

The Subsidiary HR managers have to deal with ministers, political figures, and a greater variety of economic and social interest groups.

Basic Steps in IHRM

Human Resource Planning Recruitment & Selection Training & Development

Repatriation

Remuneration

Performance Management

Employee Relations

Multicultural Management

Human Resource Planning

Identifying top management potential early Tracking & maintaining commitment to individuals in international career paths

Identifying critical success factors for future international managers

Tying strategic business planning to HRP and vice- versa

Providing developmental opportunities

Dealing with multiple business units while attempting to achieve globally & regionally focused strategies

Recruitment & Selection

3 approaches to staffing are:Ethnocentric Approach Polycentric Approach Geocentric Approach

All key management positions are held by parent country nationals. This may be apt for the early stages of international business. E.g., Philips, Procter & Gamble.

Parent country nationals occupy key positions at corporate headquarters. Host country nationals hired to manage subsidiaries. E.g., HUL

This approach seeks the best people for key jobs throughout the organization, regardless of nationality. E.g., ColgatePalmolive

Classifying Employees
Parent country nationals (PCNs) Are employees from the country in which the organization is based (Headquarters) Host country nationals (HCNs) Are employees from the country in which the subsidiary is based i.e. A French person working in an organization based in France Third country nationals (TCNs) Are employees who are working in a different country (i.e. Not a PCN or TCN)

Advantages & Disadvantages of using PCNs

Advantages Familiarity with the parent organisations goals, objectivities, policies and practices Disadvantages Difficulties in adapting to the foreign language and the socioeconomic, political, cultural and legal environment

Technical and managerial competence

Excessive costs involved in selecting and developing expatriate managers

Effective liaison and communication with parent country staff

Family adjustment problems

Advantages & Disadvantages of using HCNs

Advantages Familiarity with the socioeconomic, political and legal environment and with business practices in the host country Lower costs incurred in hiring staff in comparison to PCNs and TCNs Provides opportunities for advancement and promotion to local nationals and increases their commitment and motivation Responds effectively to the host countrys demands Disadvantages Difficulties in exercising effective control over the subsidiary's operation

Communication difficulties in dealing with the parent company Lack of opportunities for the home countrys internationals to gain international and cross cultural experiences

Advantages & Disadvantages of using TCNs

Advantages Perhaps the best compromise between securing needed technical and managerial expertise and adapting to a foreign cultural environment Disadvantages Host countrys sensitivity with respect to nationals of certain countries

TCNs are usually career international business managers with a wealth of experience

Local nationals are impeded in their efforts to upgrade their own ranks and assume responsible positions

TCNs are usually less expensive to maintain than PCNs

TCNs may be better informed about their host environment than PCNs

Expatriates
Expatriates are employees who go to work in another country. They can either work for the organization already in their home country or can be recruited externally. Their assignments can vary in length and purpose. From short visits of days/weeks to longer terms of months/years. The cost of using expatriates is high so it is essential that they are carefully selected and developed. Effective pre-departure training is essential to support the employee to adapt to a new culture and country as well as a new job.

Expatriate Assignment Life Cycle

Determining the need for an expatriate Crisis & Adjustment OR Reassignment Abroad

Departure

Post-arrival Orientation & Training

OR Crisis & Failure

Repatriation & Adjustment

Selection Process

Pre-assignment training

Reasons of Expatriate Failure

Culture shock
Culture shock is a sense of discomfort brought about by the inability to interpret the world around you, to predict what will happen next, and to know how to appropriately respond.

Culture Shock Cycle

High
Tourist/ Honeymoon Stage Adapting or Adjustment Stage Mood Disillusionment Stage

Low

Months in a new culture

Training and Development

Its belief is understanding the host countrys culture will help the manager empathize with the culture. English is the primary Lang in all countries. Speaking only English can be a disadvantage for country like CHINA.

Cross Cultural Training

Language Training

Practical Training
It seeks to help the expatriate manager and family feel AT HOME in the host country.

Management Development & Strategy

In- house training prog helps new managers to socialize & imbibe the values n norms of the firm.

HCN Training
Focuses on:
Gaining knowledge about the parent organization and its global presence and objectives. Acquisition of technical know- how specific to organization. Role of subsidiary in the MNCs road map both from technological as well as corporate culture perspective. General awareness of the parent country cultural norms.

Expatriate Performance Management

Steps in Expatriate Performance Management:
Linkage to organisational strategy
Setting individual performance goals

Identifying variables impacting performance

Providing opportunities for improvement

Providing regular feedback on progress towards goals

Appraising the performance

Linking results with rewards

Paying Expatriates
Salary

Taxes: -Equalisation

-Protection

Expat Compensation

Benefits

Incentives

Allowances

Approaches to Designing the Pay Package

Balance-sheet approach

Going-rate approach

Lump sum method

Cafeteria approach

Regional approach

Repatriation

Benefits
Imbibed global culture and also have understood local culture Understanding how the company is perceived in other countries Understand both the operations of home as well as host countries

Reasons
Period of positioning got over

Not happy with their overseas assignments

Childrens education

Repatriation Process

Preparation

Physical Relocation

Transition

ReAdjustment

Employee 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
30

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 Super organisational culture Universally acceptable HR policies & practices

Power Distance

Individualism

Hofstedes Cultural Dimension

Uncertainty avoidance

Masculinity

Assessing Culture

CASE STUDY OF IHRM IN A MNC

This study evaluates the benefits and difficulties of setting up an operation base in India which will carry the same responsibilities and functions as the other operation bases. Russia as another location option is examined and compared with India in terms of meeting the business objectives and management expectations. Culture difference & similarities, Hofstedes model is used to select the better location for the new operation base and generate recommendations on recruitment and selection. It is concluded that India is the better location for the new operation. A recommendation of how to manage staffing successfully is given based on the choice of India.

Operation Bases USA JAPAN FRANCE CHINA

Industry Electronics & Telecommunications

Products 1. Mobile phones 2. Other cutting-edge telecommunication products; 3. Microchips & Memory products for utilisation with mobile telecommunications

Functions 1. R&D; 2. Manufacturing, Marketing, Distribution, Sales of the products to each particular base country; 3. Manufacturing, Marketing, Distribution to the countries in its allocated geographic region.
Responsible Regions: USA--America, Australia, India and UK JAPAN--Europe & Pacific Rim (except Australia) FRANCE--France, Africa and Middle East CHINA--Far east(except Japan) Sales Branches: The MNC (Multinational Corporation) also has branches in the majority of the countries where it sells its products, however they are only responsible for the sales and minor servicing of the products.

 . Plans for the new operation base

Project Schedule: The new operation base will firstly function as a production base for certain products and be responsible for its domestic market, as well as the other regional markets. After those operations are securely established, certain R&D facilities will be introduced. Human Resources Management: the human resource structure for the new operation base would be 40% local employees, 60% mixed from at least two bases of the existing four bases.

 . Criteria for choosing the new operation location:

After the preliminary research based on PESTEL analysis (Political, Economic, Social, Technological, Environmental and Legal), the new location is to be in either Russia or India. By choosing one from these two, there are four main criteria that should be considered. First, the new operation base must be similar or complementary to the existing four bases. Second, it should be able to add values to the MNC as a part of its globalization on culture, knowledge, HR, logistics and markets. Third, it should be easier for the non-local employees to adapt the local culture and business style. Fourth, it should take less time to generate profit, ensure the productivity, efficiency and market penetration to meet the development of MNC. From the four criteria its clearly shown that the purpose of setting up a new operation base is for sufficiently supplying products for the local & neighbouring regions and developing local markets, therefore local market development, productivity and logistics become the highest priority.

360 degree comparison between Russia and India

Based on the above narrowed down criteria after the study of the macro and industrial environments in Russia and India, the key question which is left to be answered in terms of decision making should be which location could facilitate MNC to build up the value chain in the shortest time period especially addressing the performance of productivity and marketing. To answer this question the comparisons of the culture, business style, production establishment, local market and logistics are required. According to the culture and business style comparison , it is obvious there are some similarities, complementarities and conflicts between Russia and the existing four bases as well as India. Its impossible to identify which is a better location, although culture differences are crucial for global business development. However from the manufacturing production practice, local market and logistics points of view, India is comparably ideal. Empirically the large mobile phone producers such as Elcoteq, Nokia, LG, Hyundai etc. have invested in mobile phone manufacturing in India since 2005, which indicates India is a better global choice in terms of competitively low labour cost, abundant material resources, favourite political policies, and convenient logistics , while there is none in Russia. In terms of local market , its true that apparently Russia seems to have a big consumer base, however the large population of India provides a solid market resource, and the existing distribution channels explored by the American operation base would facilitate the further local marketing activities. Beside this, other factors include a highly skilled and educated workforce, a growing customer base and comparable costs. Geographically too india is favourable as a location. In terms of political stability and social security which are vital elements in big investment decision making, India is much more reliable than Russia. Chechen terrorists has been a cancer of Russia for years, terrorisms happened recently such as the metro bombing in Moscow.( Moscow Metro hit by deadly suicide bombings , BBC News, 2010).

Recommendations on location and staffing

Due to the logistics convenience, cultural similarity and comparable lower production cost, India should cover the Middle East market instead of France. Choosing India does not mean the expected profit could be obtained easily. Nowadays most businesses are competing more on human resources. Because highly qualified employees, motivating human resource management system and effective managing people practices especially in a multinational environment is a valuable, inimitable, non-substitutable, rare resource for any MNC. Therefore how to staff the facility in India is crucial to the whole project. According to Budhwar & Boyne (2004) study, the HRM(human resource management) practice in Indian organizations are structured and rationalized, which means its special culture contexts do not impact business behaviour as strongly as before.

Create Favourable Organizational Culture

It is helpful and important for a MNC employing people from different cultural backgrounds to create a unique, favourable organizational culture in order to integrate business. Considering the manufacturing nature of the new Indian base, the Role culture is highly recommended to be built as the core culture of the organization. The Role culture means the role a person serves within the organization is considered more important than the personality or individual who occupies that role

Recruitment and Selection

Recruiting the right expatriates and local employees are crucial at the start-up stage, the wrong selection would either slow down or cause the whole project to fail. Due to the culture and business style differences, not everyone who is willing to work in India could be offered a position, even though they might have the right skills. India as a country with its long history and famous ancient civilization has its own unique culture which dominates peoples (employees, competitors, clients) behaviours such as: collectivism, thrift, high power distance, respecting knowledge and education, low uncertainty avoidance etc. , some cultural features are similar to Americans, some are totally opposite; some are similar to French, some are opposite. It is impossible and unnecessary to limit the 60% expatriates within certain countries. It should mainly depend on individual personality as well as considering the individual personal culture. According to Sponys study, individuals from the same culture background could have huge difference on personal preference with respect to tasks and relationships, which is reflected in different work values and communication styles. Therefore the criteria and priority for the selection of expatriates should be based on their personal work values and communication styles that would fit into the Indian culture and their personalities which would fit the position they are being selected for; then working skills should be considered. According to Hendriks et, all the five factor personality inventory is a valid and reliable instrument to compare personalities and that the personality correlates across cultures. (Hendriks et, al 2003) It could be based on the personality fitness assessment. The same approach should be used in recruiting the local employees, the only difference would be the personal culture should lean to the company culture. After all the most crucial and initial HRM achievement should be creating a unique company culture which fits into the Indian culture. There is a common HRM practice that should be noticed that Indian people tend to recruit their relatives. A fixed selection process with detailed and clear criteria and objective measurements and a structured interview are needed in terms of justifying the employee selection.

 4 Training Based on the human resource structure, a normal inprocess employee training and expatriates awareness of culture differences training are required. Although the expatriates are chosen by their personalities and individual culture, training on the host country culture would help them align into the culture more rapidly and smoothly. The normal in-process employee training should include organizational culture, philosophy training and skill & technology training required for the different jobs, such as total quality management, ISO14000 etc. Honda Indias experience proved the company culture training could reduce the culture conflicts. (Saini, 2005, pp.71-81)

 Website link for case study: http://judyzprouse.blogspot.com/2010/07/cas e-study-of-ihrm-of-mnc.html Date of case study: july 2010