International Human Resource Management (IHRM) and Labor Relations

Jayadeva de Silva.M.Sc,, FIPM, FITD

Strategic Significance of IHRM The international HRM process involves understanding the strategic context of HRM within the firms overall strategy, recruiting and selecting appropriate managerial personnel, providing necessary training and development, assessing performance, providing compensation, and evaluating managerial retention and turnover.

What are the complications for IHRM compared to HRM? International HR managers face a more complex task than their domestic counterparts because o differing cultures, o levels of economic development, and o legal systems among countries These may require companies to adapt their hiring, firing, training, and compensation programs to each country. o Firms must decide whether managers will be selected from the home country, from the host country or from third countries. o Training and development in an international firm may be more complex than in a domestic firm. o Compensation systems must be adapted to meet the needs of each countrys labor market. IHRM Employee Issues There are two broad categories of Employee facing international human resource managers:
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(1) recruiting, training, and retaining managerial and executive employees; and (2) recruiting, training, and retaining non managerial employees such as blue-collar production workers and white-collar office staff. PA & Compensation for non executives o For non managerial employees, international firms normally adapt their compensation and performance appraisal systems to local laws, customs, and cultures. for example, o U.S. workers appreciate feedback from an appraisal system, o German workers are resentful of feedback. Type of Decision Making o Firms that centralize decision making at headquarters typically favor home-country managers while firms that decentralize decision making to the subsidiary level often employ host country nationals. o Since most companies do not fall at one extreme or the other, most companies have a combination of both home and host country managers. PCNs o Managers can be hired from three groups: parent country nationals; host country nationals; and third country nationals. o Parent country nationals (PCNs) are residents of the international businesss home country who are transferred to one of its foreign operations. Why PCNS o Communications and coordination with corporate headquarters is typically facilitated when PCNs are employed because they normally share a common

culture and education background with headquarters staff. Issues with PCNs o PCNs may however, lack knowledge of local laws, culture, economic conditions, social structure, and political processes. o Moreover, they may be expensive to relocate and maintain the host country. o In addition, because a host country may impose restrictions on the number of employees that can be transferred, a company may not have the freedom to hire whom it wants.

HCNs o Host country nationals (HCNs) are residents of the host country, and are the most common choice for midlevel and lower-level jobs. o Employing HCNs is popular because they are already familiar with local laws, culture, and economic conditions. Why HCNs o Also, HCNs may be cheaper than PCNs because a firm can avoid the costs such as relocation expenses that are associated with PCNs. o However, an HCN may not be familiar with the firms corporate culture nor its business practices. TCNs o Third country nationals (TCNs) are citizens of neither the firms home country nor of the host country. o TCNs are most likely to employed in upper-level or technical positions. TCNs and PCNs are collectively

known as expatriates (people working and residing in countries other than their native country). Ethnocentric Model o An ethnocentric staffing model may be used to help a firm choose among HCNs, PCNs, and TCNs for various positions. o The model indicates that PCNs staff most higher-level positions. Poly Centric & Geocentric Models o Other firms may follow a polycentric staffing model where, based upon the belief that HCNs know the local market best, the use of HCNs is high. o Finally, firms that want to hire the most qualified person for the job, regardless of the individuals nationality, follow the geocentric staffing model. Skills & Abilities Required by IHR Managers The skills and abilities needed by international managers fall into two general categories: o those needed to do the job and o those needed to work in a foreign location.

Issue of Talents o Today, as businesses globalize, the market for executive talent is also globalizing. o Top management teams are increasingly diverse in their members. o While most MNCs do not hire new college graduates to take foreign positions immediately, many hire graduates with the intention of sending them abroad in the future. Expatriate Failure o The selection process in international firms is particularly important because of the high cost of expatriate failure. o Expatriate failure is the early return of an expatriate manager to his or her country because of an inability to perform in the overseas assignment. o The cost of expatriate failure ranges between $40,000$250,000. o Expatriate failure rates may be as high as 20-50 percent in many U.S. companies, higher than for either European or Japanese companies. What is Culture Shock?
o Managers sent on foreign assignments may experience

culture shock, a psychological phenomenon that may lead to feelings of fear, helplessness, irritability, and disorientation. o Acculturation typically proceeds through four phases.
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What should be done ? Because an expatriate suffering from culture shock may be less effective and productive, companies typically take measures to limit its effects such as providing predeparture language and cultural training.

Western vs. Non-Western Values

Individualism Achievement Equality Winning Internal self-control Pride Respect for results Respect competence Time is money

Collectivism/ group Modesty Hierarchy Harmony External control Saving face Respect for status Respect elders Time is life

Critical Cultural Variables

Urgency
Power
Extent to which power is distributed

Authority, responsibility & accountability

Time
The view of and way time is used

Culture

Structure
Extent to which uncertainty creates discomfort

Communication
The way and style information is shared

Individual/group
Whether individual or group takes precedence

Commitment Agreements & contracts Risk-taking Conflict

humantalents

Work Goals Work goals USA Interesting work Good pay Good interpersonal relations Good job security A good match between you and your job A lot of autonomy Opportunity to learn A lot variety Convenient work hours Good physical working Germany 3 1 4 2 5 8 9 6 6 7 9 8 1 3 5 6 9 5 6 4 4 8 2 2 7 3 Japan 1

conditions Promotion Phases in Acculturation

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11 11

10 10

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Honeymoon> Disillusionment>Adaptation> Biculturalism Difficulties in adapting In most cases, expatriates fail to complete their foreign assignments because of an inability of the expatriate manager, or his or her spouse and family, to adapt to the new location. What is Repatriation? o Firms are now beginning to pay more attention to repatriation--bringing a manager back home after a foreign assignment has been completed.

o Individuals that successfully adapted to the foreign environment may experience culture shock upon returning to their own country. Non cultural Issues Regarding non-cultural issues leading to success or failure overseas, managers tend to be more successful in foreign assignments when 5 conditions are met: 1. they can freely decide whether or not to accept a foreign assignment 2. they have a realistic understanding of the new job and assignment 3. they have a realistic expectation of a repatriation assignment 4. they have a mentor in the parent firm who will look out for their careers 5. there is a clear link between the foreign assignment and the managers long-term career path. Issues of Compensation Compensating expatriate managers can be a complex process because factors such as differences in currency valuation, standards of living, lifestyle norms, and so forth must be taken into consideration. Allowances o A cost-of-living allowance may be given to managers to offset differences in the cost-of-living in the home and host countries. o A hardship premium (also known as a foreign service premium) may be paid to mangers who accept assignments in relatively unattractive locations. Special benefits o Special benefits packages that may be provided to expatriate managers include housing, education, medical treatment, travel to the home country, and club memberships.

Comparison with locals! o In many cases the total compensation package offered to an expatriate is much more lucrative than the package offered to his or her local counterpart. Not to take anything for granted The simplest and most useful advice for those considering an overseas assignment is to carefully weigh the flip side of all the issues just mentioned, from your perspective. And, to not take anything for granted about how conditions will be when you arrive (doing ones homework pays). What do you mean by Labor Relations? Process through which management and workers identify and determine the job relations that will be in effect at the workplace Specific approaches to labor relations varies from one country to another Labor Relations in Other Countries

U.S. Approach to Labor Relations Collective bargaining Process whereby formal labor agreements are reached by union and management representatives Involves negotiation of wages, hours, and conditions of employment and the administration of the labor contract Germany Unions and management have been cooperative in the past Labor harmony not adversely affected by unification of East and West
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 Union power is still quite strong Rights of workers addressed more carefully by management Japan Unions and management have cooperative relationships Contracts tend to be general and vague Disputes regarding the labor contract usually settled amicably Unions most active during the spring and end of the year Factors Affecting Labor Relations o A countrys laws, culture, social structure, and economic conditions may impact labor relations. for example that the role of unions varies greatly among countries. o In the U.S. membership in unions has been steadily decreasing, but over half the worlds workforce outside the U.S. belong to unions. EU & Japan o Unions in the European countries tend to be aligned with political parties, but in Japan are created and run by the firms themselves. o In fact, labor relations in Japan are so cordial that strikes are rare. Industrial Democracy & Codetermination o The premise of industrial democracy--the belief that workers should have a voice in how businesses are run--is an important influence in labor unions in Europe. o In fact, in Germany an approach called codetermination provides for cooperation between management and labor in running a business. Social Charter

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o The EUs implementation of its social charter (or

social policy) whereby employment conditions and practices will be standardized throughout the community is addressing issues such as maternity leave, job training, and pension benefits. Globalization.. o Finally, labor unions have had their bargaining power reduced by globalization. o However, there is very little coordination between unions in different countries to counter that reduction in bargaining power. Demographic Challenges for IHRM Educational attainment of workers o Higher education levels coupled with high literacy rates o Implications: productivity, safety Aging workforce o Growing % of workforce is in higher age categories o Implications: retirement, job design, re-training, benefits, work schedules, etc. More part-time and contingent workers o Accounts for about 15% of all employment o Implications: more flexibility for organizations but raises issues of pay inequity, reduced employee loyalty Cultural (Values) Challenges for IHRM Attitudes toward work o Different expectations re: work and leisure o People want more flexibility, holiday time, etc. Ethnic diversity o Immigration from numerous countries
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o Potential for conflicts of values, etc. but also opportunity to learn, expand Attitudes toward government o Negative attitudes toward those in power effects employment relationships Legal Challenges o Numerous laws influence organizational (and HR) activities o Employment equity o Human rights laws o Charter of rights and freedoms o Safety legislation Managing Diversity o Diversity o The differences among people o Protected-Group Concerns o Perceived hostile organizational cultures o Stereotyping Age Issues and Diversity Management o Job Opportunities for Older Workers o Discrimination against overqualified older employees in hiring o Instances of age discrimination in the workforce reduction when layoffs impact largely older workers o Older Workers Benefit Protection Act (OWBPA-USA) of 1990 and equal treatment of older workers o Attracting, retaining, and managing older workers Sex Discrimination in Jobs and Careers o Nepotism -The practice of allowing relatives to work for the same employer. o Job Assignments and Nontraditional Jobs -Women are increasingly entering jobs traditionally occupied only by men.

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o The Glass Ceiling -Discriminatory practices that have

prevented women and other protected-class members from advancing to executive-level jobs. o Glass Walls and Glass Elevator The tendency for women to advance only in a limited number of functional fields within an organization. What should be done for Breaking the Glass Establishing mentoring programs Providing career rotation Increasing top management and boardroom diversity Establishing goals for diversity Allowing for alternative work arrangements Diversity training-Against stereotyping

o o o o o o

Sexual Harassment and Workplace Relationships o Types of sexual harassment o Quid pro quo means Linking employment outcomes to the harassed individuals granting of sexual favors. o Hostile environment means Allowing intimidating or offensive working conditions to unreasonably affect an individuals performance or psychological well-being. o Legal Standards on Sexual Harassment o Tangible employment actions (e.g., termination) that result from sexual harassment create a liability for the employer.
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o Affirmative defense for employers in dealing with sexual harassment incidents includes: o Establishing a sexual harassment policy o Communicating the policy regularly o Training employees to avoid sexual harassment o Investigating and taking actions when complaints arise International Labour Relations & Trade Unions Definition of Trade union One of the first and earliest definition on trade unions was that of Sidney and Beatrice Webb who described trade unions as: ..A continuous association of wage earners for the purpose of maintaining or improving their working lives. Why do Workers Join Trade Unions? Economic needs: o Strengthen bargaining power over wages o Improve working conditions o Job security: o Protect jobs from dismissal/retrenchments o Protection from unilateral action by management (change terms and conditions) Social Needs: o Comradeship and sense of community Social Welfare: o Accident, death and pension benefits o Unions represented on pension funds o Promote the development of communities o Use investments to benefit members o Self-fulfilment and Development: o Train and develop members o Provide literacy skills to members Political Reasons: o Put pressure on repressive governments
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o Influence labour legislation o Influence government policy on wealth distribution and poverty alleviation Objectives of Trade Unions Goals include: o Equitable wage benefits o Ensure a healthy and safe environment o Promote job security and freedom from arbitrary dismissal o Provide legal and other support to members o Provide political influence and lobby government Methods Used by Trade Unions to Obtain Goals
o Collective Bargaining: An ongoing process with

employers, does not end with wages o Representation: Election of shop steward, who are full time employees, and represent the interests of union members Collective Action: o Workers go on strike o Consumer Boycott: o link with community to boycott products of the company Political Power: o Influence the vote at elections o Lobby government and other state structures o International support: o Getting the support of international trade unions and community organisations Legal action: o Using the protection provided by labour legislation o Media channels: o Promote the view of unions

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Types of Trade Unions 3 Forms or type of trade unions: Craft Unions: o Earliest forms of trade unions o Promote the skilled status of members o Recruit within a particular craft o Membership thru apprenticeship system o Power in skill and ability to control entry into the profession, i.e. control supply of skill General Unions: o Organises all workers regardless of skill or industry o Normally politically motivate and anti-capital o Ideal of one union for the whole country o More success with unskilled and blue collar workers o Weakness not sectorally based Industrial Unions: o Presently most common form of union o Organises all workers in a particular industry o Promotes sectoral based collective bargaining o Strength is in no. of members per sector o Stronger unions due to 1 industry focus International Federations o Autonomous international trade unions linking national unions from different countries: Examples: Educational international International Metal Workers Federation International Transport Workers Federation o Focus: Education, development, solidarity, strategic thinking Other relevant issues in International labour relations

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Stress

Work Life Balance -------------------

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