Global HR Practices

Need for entering into International Business

The factors which motivate or provoke firms to go international may be broadly
divided into two groups, viz. the PULL factors and the PUSH factors.
PULL factors are factors which attracts or pulls a business into its country, whereas,
push factors are compulsions which force a business to extend its operations
beyond the boundary of its country.
1. Increase sales / Growth.
A business can leverage the advantage of a good product by extending the
same to other countries thereby increasing the sales. For example, a
software company can extend its market into France & Germany by adding
a French and German language version of its products.
A number of Indian pharmaceutical companies have achieved a much faster
growth of their foreign business than the domestic. The US market alone
contributes as much as half of the total sales of Ranbaxy.
2. Improve profits.

Businesses move into other countries in order to reduce the cost of

production or other operations. For e.g many of the businesses moved their
production units or set-up new production units in china in order to take
advantage of cheap labour and other government incentives.

In 1995, 6 out of 100 largest US MNCs made more than 100 percent of their
profits from outside the US.

3. Increase innovation.

Extending the customer base internationally can help a business innovate

and finance new product development.

4. Government Incentives

It is common for governments toincentivize their countrys

companies to export. This often results in many companies entering
markets they would otherwise not have tackled.

5. Internal market Problems

Domestic demand constraints may drive a company towards expanding the

market beyond the national border. For. E.g. In the US, the stock of several
 consumer durables like cars, TV etc. exceed the total number of households
ie the market is saturated.

One of the reasons for this could be the fall in birth rates in some countries
leading to negligible growth in the population which adversely affects the
demand in the market.

Particularly when the domestic market is limited, internationalization is the

only way to achieve significant growth. For e.g Nestle derives only 2% of its
total sales from its home market, Switzerland. Similarly Philips derives only
8% of its total sales from Holland.

6. Economies of scale:

The technological advances have increased the size of the optimum scale of
operation substantially in many industries making it necessary for them to
look for newer markets in other countries. For e.g for a certain chemical
product, the minimum economic size of the plantis 35000 tonnes but the
demand for it in India by the end of the century is expected to be less than
10000 tonnes only.

7. Competitive forces:
Liberalization policy pursued by Government has led to the entry of foreign
players thereby increasing the competition for domestic players. Such
situation may become a driving force behind internationalization.
Many companies may also adopt an offensive strategy of counter-
competition. The business will penetrate the home market of the potential
foreign competitor so as to diminish its competitive strength and to protect
the domestic market share from foreign penetration.
For e.g IBM moved early into Japanese mainframe computer market thereby
forcing its competitors Fujitsu and Hitachi to spend its resources to protect its
ground in Japan. Thus they lacked sufficient resources needed to invade the
US market.
8. Government Policies and Regulations:

Government policies and regulations may also motivate internationalization.

There are both positive and negative factors which could cause
internationalization.

It is common for governments to incentivize their countrys

companies to export. This often results in many companies entering
markets they would otherwise not have tackled.
 Sometimes, as was the case in India, companies may be obliged to earn
foreign exchange to finance their imports.

Some companies also move to foreign countries because of certain

regulations like the environmental laws in advanced countries.

9. Monopoly power:

Monopoly power may arise from such factors as monopolization of certain

resources, patent rights, technological advantage, product differentiation etc.
Such monopoly power need not be an absolute one but even a dominant
position may facilitate internalization decision.

10.Spin off (Incidental benefit) of international business:

A company going global may get a spin off too. It may help the company to
improve its domestic business and the image of the company may get a face
lift as it runs business on multinational scale.

The consumers may prefer to buy products from a company which exports its
majority of its products to foreign countries and this factor adds to the good
will of the company.

11.Strategic Vision:

Some companies may keep globalisation of its products as part of their

business policy or strategic management.

What is Globalization?
Globalization is a process of interaction and integration among the people,
companies, and governments of different nations, a process driven by international
trade and investment and aided by information technology. This process has effects
on the environment, on culture, on political systems, on economic development and
prosperity, and on human physical well-being in societies around the world.
Globalization is not new, though. For thousands of years, peopleand, later,
corporationshave been buying from and selling to each other in lands at great
distances, such as through the famed Silk Road across Central Asia that connected
China and Europe during the Middle Ages.
Policy and technological developments of the past few decades have spurred
increases in cross-border trade, investment, and migration so large that many
observers believe the world has entered a qualitatively new phase in its economic
development.
Globalization is deeply controversial, however. Proponents of globalization argue
that it allows poor countries and their citizens to develop economically and raise
their standards of living, while opponents of globalization claim that the creation of
an unfettered international free market has benefited multinational corporations in
the Western world at the expense of local enterprises, local cultures, and common
people.

Dimensions of Globalization
Dimensions may be grouped under the following categories:
economic, political, social, technology and cultural.
The Economic Dimension
The economic dimension of globalization refers to an increasing
interconnectedness and interdependence of enterprises through the world
market. This interdependence results from world trade, foreign and joint
venture investments, world - wide consumer markets, processes of
concentration etc.
According to neo-liberal thinking, the world market efficiently fulfills its allocation
function to guide flows of goods, services, capital information and labor to that
places wherever they are needed. Consumers benefits from this competitive
market by availability of products at low prices.
Interconnectedness of the world is explained in the Technological dimension

The Technological dimension

The technological dimension of globalization refers primarily to the advancements
of (a) ICTs which have fueled the communication and information revolution of
recent years; and (b) new production technologies, which have produced
efficiencies in production and created the so-called "post-Fordist" era of
manufacturing. The technological dynamic of globalization includes everything from
the internet and mobile phones, which have done much to create the
"interconnectedness" of the world, to improved logistics systems, which have
enabled industries worldwide to function more efficiently and profitably, to modern
agronomic practices, which are restoring infertile lands and opening up new
opportunities in agriculture.

The Political dimension

The political dimension refers primarily to the decline of the sovereign state, which
is due in part to the rise of multinational corporations, but also due to globalization's
ties with neoliberalism. Neoliberalism--promoted by the Reagan and Thatcher
governments of the 1980s-- essentially calls for a less interventionist state in both
economic and social arenas, and its adherents, who have been in power at the
World Bank and International Monetary fund for over twenty years, have proposed
and imposed: (a) deregulation and free markets, with less power for the sovereign
state to set economic policies, (b) decentralization of government, shifting power
from the sovereign to the more local, and (c) reduction of the role of the state by
increasing the role of the private sector in most areas of economic and social life.

The Cultural dimension

The cultural dimension of globalization appears at first glance to be a schizophrenic
one. On the one hand, our increasing global interconnectedness has helped to
produce a kind of homogenous mass culture (mostly American and mostly English
language). On the other hand, these same dynamics have led to the mixing of many
different cultures and societies, helping to produce a new multiculturalism.
Strangely, both dynamics seem to be happening at the same time. The cultural
dimension of globalization also deals with gender issues, questions of identity, and
the social construction of reality, as well as the production and consumption of
media. But while the cultural dimension of globalization is certainly a significant
one, the focus here, since we are concerned primarily with sustainable
development, will be more on the economic, technological and political.

The Social dimension

The social dimension of globalization refers to the impact of globalization on the life
and work of people, on their families, and their societies. Concerns and issues are
often raised about the impact of globalization on employment, working conditions,
income and social protection. Beyond the world of work, the social dimension
encompasses security, culture and identity, inclusion or exclusion and the
cohesiveness of families and communities.
Globalization brings new potentials for development and wealth creation. But there
are divergent views and perceptions among people as concerns its economic and
social impact, and indeed widely varying impacts on the interests and opportunities
of different sectors and economic and social actors. Some argue that the present
model of globalization has exacerbated problems of unemployment, inequality and
poverty, while others contend that globalization helps to reduce them. Of course,
these problems predated globalization, but it is clear that for globalization to be
politically and economically sustainable, it must contribute to their reduction. Hence
the goal of a globalization which meets the needs of all people.

Forces influencing Globalization

 The important forces driving globalization are as follows:
1. Liberalisation: One of the most important factors which have given a great
forward thrust to globalisation since the 1980s is the formation of universal
economic policy resulting in liberalisation of economy in many countries. The
immediate result of liberalisation is globalisation of business. Now many business
firms can involve themselves is international trade as the restrictions imposed by
various countries is highly restricted under GATT/WTO.

2. Network of MNCs: The companies which have taken a complete advantage of

trade liberalisation caused under GATT/WTO are MNCs (Multi National
Companies). Sony, Philips, Coco Cola, Pepsi, Procter & Gamble, etc are some
famous examples for MNCs. These companies combine their resources and
objectives to achieve profit in global market. According to the world Investment
Report 1997, there were about 44,500 MNCs in the world with nearly 2.77 lakhs
foregin collaborations. The MNCs leverage their strengths to link global resources
and opportunities and thereby strengthen the globalization trend.
3. Technology: Technology in a powerful driving force of Globalisation. Once a
Technology is developed, it soon becomes available every where in the world. (for
example) A hospital in the USA performs the required diagnostics on patients say an
X ray or MRI or C.T Scan. These diagnostic tests represent technology in medical
field. In the next three minutes, a radiologists in Bangolore, India receives the
scanned images from USA. He then sends his report to USA. This is called as
teleradiology. The entire process, from the time the patient was admitted, has
taken Just 20 minutes. The cost of this work is 30% lower in India compared to the
USA. In short, long distance on line services made possible by the technological
developments have given a forward thrust to globalisation.
4. Transportation and Communication revolutions: Technological revolution
in several spheres, like transport and Communication, has given a great impetus to
globalisation. The Microprocessor in computers has created the flow of information
from one part of the globe to another not only fast but also cost effective. It has
played a pivotal role in reducing space and time. It has made world in to a global
village. Microprocessors coupled with satellite, optical fibre, wireless technologies,
world wide web have made this World in to a global village. The consumers/
customers has become more global. By sitting in front of the computer and logging
on to world wide web the consumer can download any type of information from any
part of the world. Flow of information is business. It determines profit. Hence
technology is a strong driving force for Globalisation.
5. Product development and efforts: The immediate impact of increase of
Technology is the growth of new products due to innovation. The fast technology
hastens product obsolescence. This has made many firms to invest heavily on R&D
activities with cross border alliances . These companies have to stay in business
and survive competition. In order to achieve this, many companies have crossed
their borders and have tie ups to update their products through research and
development with foreign companies. This causes globalisation.
6. Rising aspirations and wants: Because of the increasing levels of education
and exposure to the media, aspirations of people around the world are rising. They
aspire for everything that can make life more comfortable and satisfying. If
domestic firms are not able to meet the wants, they would naturally turn to the
foreign firms to satisfy their aspirations. This promotes Globalisation.
7. World economic trends: The world economic conditions are changing fast.
There, is a great difference in the growth rates of economies/ markets between
developing nations and developed nations. In developed nations the economies
have become stagnant, due to saturation on the otherhand, the developing nations
are experiencing tremendous growth rate in various business sector. Cheap labour,
high investment in research and development, improvements in technology are
some of the factors which have driven the developing nations towards achieving
high growth rate in business. Hence it is very common for the developing nations to
have a strong international trade links with developed nations. Thus difference in
world economies between nation causes gobalisation.
8. Regional Integration: Nowadays many countries are joining hands together to
promote free and fair international trade across the borders. They are forming
separate trade blocks. European Union and North American Free Trade Agreements
are two such classical examples. This promotes globalisation.
9. Leverages: Leverage is simply some type of advantage that a company
enjoys by conducting business in more than one country. A global company can
experience three important types of leverages.
a. Experience transfers: The experience that a company gains by doing
business in one country can be effectively transferred to some other country if the
particular company does business on global scale. This is called experience transfer
(For example) Cocacola first developed a strong marketing strategy to tap tea and
coffee market in India. In 2002 it became a success. From this experience, it then
joined hands with Mc Donalds for marketing hot beverages. The Georgia Gold
brand was thus born and it was first launched in Delhi and Mumbai. This brand is
now available in all Mc Donalds outlets throughout the country. The success of this
business in hot beverages with Mc Donalds promoted Coca-cola to enter into ice-
tea and cold coffee Marketing business in 2003.
Another classical example of experience transfer is provided by Hindustan
Lever Limited.(HLL). The occurrence of Iodine Deficiency Diseases (IDD) is very
common in developing countries. This disease can be easily prevented by taking
micro quantities of iodine along with salt. The salt thus produced is called as
iodised Salt. This new concept of iodised salt was produced by HLL in India. HLL
has now successfully introduced the concept of iodised salt to other countries like
Kenya and Tanzania. The experience gained by HLL in marketing iodised salt in
India has made the company to successfully market the same product in other
African countries.
b. Scale economies: The art of cutting down the cost of production is called as
scale economies. One major cause for scale economies is technology
breakthroughs. Many companies are now heavily infesting in R&D in an attempt to
reduce the cost of production. They are attempting to produce cheaper and more
reliable products. (For example). The replacement of vaccum tubes by transistors
and subsequent development of printed circuit boards greatly reduced the labour
cost required to assemble radios, T.VS and tape recorders. By these technological
changes the cost of production of T.V sets greatly reduced and production of TV sets
greatly increased. Philips are producing more than 3 billion TV sets now in order to
stay in business. So to market such huge volume of production of T.V sets, Philips
needs global application of business.
c. Resource Utilisation: Another strength of global company is its resource
utilisation. It can now successfully outsource its resources globally thereby making
better utilisation of resources.

Restraining forces On Globalisation

There are also several factors which restrain Globalisation trend. They are
1. External Factors
2. Internal Factors
1. External Factors: These are government policies and controls which
prevents cross-border business.
2. Internal Factors: These are collection of factors that exists within the
organisation that prevents Globalisation. One such factor is called as management
myopia or near sightedness. The company with an aim to make immediate profit
engage itself in short-term plan and target local markets for business. This is called
as management myopia. This acts against Globalisation of business.

Stages of Globalization
1. Domestic Company
Market potential is limited to the home country. Production and marketing facilities
are located at home only. Surplus may or may not be exported. There are no overt
efforts to develop foreign markets. It may add new product lines, serve new local
markets but whole planning is limited to national markets only.
Features:
i. Their focus remains with domestic market.
ii. Their productions facilities remain based in home country.Their analysis is
focused on the national market.
iii. They do not think globally and avoid taking risk in going global.
iv. Their top management may have traditional kind of business management
competency and less global expertise.
v. They perceive that there is risk in expanding into global market and thus they try
to play safe and satisfied with whatever gains they are getting in domestic market.
2. International Company
Some ambitious efficient domestic companies after going beyond their domestic
marketing capacities start thinking of expanding their operations in International
Markets.The main strategies for entering international market is:
a) Off-shoring/global outsourcing (seeking cheaper source of raw material or labour)
b) Exporting
c) Licensing
d) Franchising
e) Joint Ventures/Acquisitions
f) Direct Investments
Even though they think of international markets, still they are of ethnocentric or
domestic oriented. These companies adopt the strategy of locating the branches of
their companies in other countries and practice the same domestic operations in
foreign markets,including the same promotion, price, product etc. policies.
Features:
i. Focus on going beyond,domestic
ii. Their management remains ethnocentric with a vision to expand
internationally.They extend their domestic products,domestic prices and other
business practices to foreign countries.
iii. They keep their marketing mix constant and extend their operations to new
countries.
iv. Their management style remains centralized for their home nation and extended
top down to the overseas market country.
3. Multinational Company
After sometime, international companies realize that the domestic model and
practices adopted through extension policies do not serve the purpose. The foreign
customers may not prefer the products that are sold in domestic market. Hence,
these companies respond to the needs of different customers in different countries
and produce such goods and services that will satisfy them.
Features:
i. Companies when they spread their wings to more nations become multinational
companies.
ii. Sooner or later they realize that they have to change their marketing mix
according to the foreign market.
iii. This can also be termed as multi domestic,in which different strategies are
adopted for different market.
iv. The management of such companies remains decentralized and even production
may be in the host country.
v. Performance evaluation is done at different host countries.
4. Global
The global company adopts global strategy for marketing its products.It may
produce either in the home country or in any other single country and market its
products throughout the world.It may also produce the products globally and market
them domestically.
Features:
i. Such companies have a global marketing strategy.
ii. They either produce in home country or in a single country and focus marketing
globally.
iii. They adapt to the market conditions according to the foreign market.
iv. Their performance evaluation is done worldwide.
5. Transnational Company
Transnational Company operates at the global level by way of utilizing global
resources to serve the global markets. It has geocentric orientation and has
integrated network.Its key assets are dispersed and every sub-unit of the company
contributes towards achievement of the company objectives. It produces best
quality raw materials from the cheapest source in the world,process them in the
country wherever it is economical and sells the finished products in those markets
where prices are favourable.
Feature:
i. Transnational companies have a geocentric approach,which means they think
globally and act locally.
ii. Transnational companies collect information worldwide and scan it for use beyond
geographical boundaries.
iii. The vision of such to grow more in a global way.
iv. The R&D,management,product development are shared worldwide.
v. Their human resources procurement and development remains globally.

Distinguish Between Domestic HRM & Global HRM

Domestic HRM
HRM is involved with the management
of employees only in one country
HRM role includes hiring people,
Global HRM
Global HRM is into management of
employees in the three nation
categories i.e. The parent country, The
host country and the Third country
Global HRM plays a key role in the
retaining them, negotiating their salary,
performance management
The HRM department does not have to
deal with cultural differences as
majority of the employees belong to the
same social community
The perspective is narrow as with
respect to the Domestic HR issues only
HRM has less involvement with
employees personal lives
Risk involved in employee placement or
relocation is less
Influence of external environment is
limited
achievement of a balance between the
need for control and coordination of
foreign subsidiaries and the need to
adapt to local environments. In order to
manage human resources across
countries, the functional activities of
human resource departments increase
multi-fold. These activities include
managing expatriation, cross-country
relocation, international taxation, trans-
national labour legislation, etc.
Global HRM department has to
overcome multi-cultural differences to
run a local subsidiary of the parent
country.
The perspective is broader.
Globarl HRM has increased involvement
with employees personal lives as
Managing expatriates involves
relocating their entire families across
countries: this is an important factor in
ensuring employees satisfaction as
satisfied employees are crucial to
effective output.
Since human resource activities involve
relocation of employees and their
families across a country, which
requires substantially higher costs in
terms of their travel, training, and
relocation expenses, the consequences
of under- performance of expatriates or
their premature return from
international assignments is much
higher compared to domestic
assignment.
International managers have to take
into account the cultural differences in
values, expectations, behaviours,
negotiation, and communication styles
of international workforce while
designing organizations and recruiting,
selecting, training, motivating,
compensating, evaluating, and
controlling of employees.
The HR challenges of International Business
According to the research, the senior international HR managers consider three key
factors that affect Human resource management process in an international
environment:
Deployment: It means moving the person with right skills to the suitable positions
irrespective of geographical boundaries.
Knowledge and innovation dissemination: It means spreading the best practices and
knowledge through out the organization negating the place of its origin.
Identifying and developing talent on a global basis: It involves screening those
candidates who can perform well in a global environment and also honing their
abilities.
It is difficult to maintain global staffing needs as it involves addressing various
activities like candidate selection, assignment terms and documentation, relocation
processing and vender management, immigration processing, cultural and language
orientation and training, tax administration, compensation administration, carrier
planning and development and handling of spouse and dependent matters. For
example, in firms like Ford Motor, an HR manager needs to understand different
cultures and the ways to motivate people from different section of the societies.
While in China, special insurance should be provided to cover emergency
evacuations for serious health problems. So for a global HR manager, the job is
challenging not just because of the long distances involved but because of cultural,
political, legal and economic differences among the people of different countries.

How inter country differences affect HRM

In a capitalist economy like the United States, the companies dealing within the
border of the country encounter only a limited set of economic, cultural and legal
variables. In US, there are some differences among the laws affecting HR across
different states but basic federal guidelines help them to solve such matters like
discrimination, labor relation and safety and health easily.
But a company operating globally will encounter heterogeneity. For example, in UK
the minimum legally allocated holidays are 0 while the same are 5 weeks per year
in Luxembourg. In Denmark for a company having more than 30 employees need a
representative on board of directors but the same requirement is not met in Italy.
So, the HR managers need to regularly adapt to the personal policies of different
countries. In general, there are following inter country differences.
Cultural factors: Different countries have different cultures- in other words; they
adhere to different nation's art, social programs, politics and way of doing things.
According to the difference in culture, the management practices vary among
different countries. For example, the study of 330 managers in Hong Kong, the
people's republic of China and the United States found that the US managers are
most concerned about getting their tasks done. Chinese managers were more
focused on maintaining a harmonious environment while the managers from Hong
Kong were somewhere in between these two extremes. There are some other
finding related to cultural differences which affect the HR policies. For example,
Mexican workers expect their managers to keep distance rather than to be close in
comparison to US employees. In Mexico, individualism is valued less than the United
States. So, some workers expect a wider range of services and benefits from their
employers although the lists of cultural differences are endless. For example, in
Germany one is expected to arrive in time and should address the seniors formally.
So the people arriving from different countries need to be oriented in order to avoid
cultural shock.
Economic Systems: The difference of economic systems also affects the HR
practices. For example, France- a capitalist's society- has strict rules regarding the
lay off of workers and also limits the number of hours an employee can work. The
labor costs are also substantially different. For example, in US, the production
workers normally get $21.33 while in Mexico it is $5.41, in United Kingdom it is
$17.47, in Germany it is $25.08 while the same is only $5.41 in Taiwan. There are
also other factors affecting labor costs. For example, the working hours differ across
different nations. For example, annually the Portuguese workers devote 1,980 hours
of work annually but in Germany, the workers average at only 1,648 hours. In other
European economy, the employers are required to pay substantial severance pay to
departing employees that varies from an amount equaling to the salary of last 2
years in United Kingdom to 1 year salary in Germany. In France, the workers get 2
and half days of paid holidays for every month of service per year compared to
yearly 223 weeks vacation in the United States, Italians get around 4 to 6 weeks of
per year while Germans get around 18 vacation days per year after 6 months of
service.
Legal and industrial relations factor: The industrial relations (the relationship among
the work, union and employer) also vary from country to country. For example, in US
it is easy to hire and fire a worker but the same is time consuming and expensive in
Europe. In several European countries, the work councils replace the Union based
system of United States. Work councils are elected by the employees and they meet
once a month to decide policies related to the workers. In some countries like
Germany, there is another principle called co determination. It means that
employees can legally affect the policies of a company. Here, workers have their
own representative in the in the top management of the employer. But in the United
States, the employers decide the wage and benefit according to themselves or by
negotiation with the labor unions.
European Union: in the 1990's the European Union was formed in order to provide a
common market for goods, services, capital and even labor. There were several
advantages like removal of tariffs as well as easy mobility among workers across
different countries. In early 2002 with the arrival of Euro, further removed the
differences among these countries. Now the European Union laws require
multinationals to consult their workers in case of some events like mass lay offs.
After 2008, the companies having more than 50 employees in the EU were required
to consult their workers about all the employee related actions. But the intra EU
differences remain. For example, some countries have minimum wages while the
others do not have the same. There are also differences among the number of
annual holidays, advanced notice of termination, employment contracts. There is
also a different trend related to work contract in between the United States and the
European countries. For example, a letter containing date, job title and initial
compensation for the new hire is sufficient in Untied States, the EU laws ask for a
much detailed statement of the job including the terms and conditions of work
within the first two months of the employment. Even the rules vary within the EU,
for example, in England the work contract needs details on rate of pay, date when
the employment begins, work hours, the vacations entitled, disciplinary rules and
grievance process. But the same is not required in Germany and more emphasis is
paid on the type and condition of work. Also like Germany, the Italy does not require
written job agreements. But with tying these differences will fade away in EU and
the cultural differences will be translated into different management practices.
Global differences and similarities in HR practices
HR practices are different for each country because of the difference in culture,
legal/ political systems and economics. In 1990's, the best human resource scholars
from 13 countries conducted a survey on international human resource
management practices. They did the following analysis.
Personnel selection procedures: The selection criteria for employees are almost
similar around the globe. In United States, the employees are ranked on their ability
and skills to perform the required job as well as some work experience in some
similar job. The same was true for countries like Australia, Latin America but in
Mexico, "having the right connections" were the top priority of being selected or
being hired by employer. In Korea, Indonesia and People Republic of China, for
selection the emphasis is paid on "employee test". But in Japan and Taiwan, the
main consideration for job was "the person's ability to get along well with others
already working here".
The purpose of performance appraisal: Different countries use different methods to
do performance appraisal. For example, in Taiwan, United States and Canada the
employers rank their employees to determine pay but the same is not important in
Korea and Mexico. In Japan and Mexico, the main purpose of the performance
appraisal is "to recognize sub ordinates". In Untied States, Australia and Taiwan the
employers use performance appraisal to evaluate the employee's performance.
Training and development practices: Generally, all the countries share a lot of
similarities when it comes to the purpose of providing training and development
programs. All around the globe, the employers provide training programs in order to
improve the technical abilities of their employees. But there is a variant in the form
of the amount of training to be provided. The training expenditures is highest in
United States with per employee expenditure of $724 followed with Japan $359 and
the least expenditure per employee is for rest of Asia at $241. Like wise, the total
training hours per year for employees in Asia is at 26 but in Europe, it is at 49. All
the employers in the world provide majority of the training as class room training
programs.
The use of pay incentives: In United States, the employers prefer to pay employees
for their performance in comparison to People's Republic of China. Despite of these,
the incentives play only "moderate" role in US pay packages. In China, Japan and
Taiwan, the incentives play a major role in the pay packages.

Perspectives of International HRM

Some of the most important perspective of international HRM are as follows:

1. Cultural Factors 2. Economic Conditions 3. Labour Cost Factors 4. Labour
Relations Factors.
Perspective influences practices. That the perspective of international HRM will
differ from the indigenous one, the delineation of the former seems in the fitness of
the context. The major factors that form perspective for international HRM and, in
turn, influence HRM practices are scanned as cultural, economic, political, labour
cost and industrial relations. These are discussed below:
1. Cultural Factors:
Culture means shared beliefs, values, norms, and moral by the people.
Organisational culture means a pervasive underlying set of beliefs, assumptions,
values, shared feelings and perceptions, which influence the behaviour of people in
the organisation. The same distinguishes one organisation from another.
Similarly, at macro level too, wide ranging cultural differences exist across the
nations/countries. For example, the eastern culture widely varies from the western
one. Just to quote, the incentive plans in Asia (Japan) tend to focus on the work
group, while in the west the more usual prescription is still to focus on individual
worker incentives.
The research work of Geert Hofstede undertaken into IBM using the responses of
managers from 66 different countries produced some interesting evidences on
cultural differences. In his study Hofstede found that societies differ on four primary
dimensions which he called: power distance (PDI), uncertainty avoidance (UAI),
individuality (INV) and masculinity (MASC).
A brief discussion of these follows:
Power Distance (PDI):
By power distance Hofstede means the extent to which members of a society
accept that power in institutions and organisations is and should be distributed
equally. Accordingly, the distance between the government and the governed is
narrower in democratic societies like India than in dictatorial ones like Philippines.
This means, Hofstede concludes, the workers in India will have far more chances of
influencing decisions of the government than would the workers in Philippines.
According to him, the same applies to organisations also.
Uncertainty Avoidance (UAI):
In simple terms, uncertainty avoidance means the creation of set of rules and
structures to eliminate ambiguity in organisations and support those beliefs that are
promising for certainty and conformity. Differences abound among countries from
this point of view also For example, while at work place, the Indians, Germans and
the French feel a much greater need for rules and regulations than do the Swedes
and the British. The attitude of uncertainty avoidance is much frowned on in high
PDI countries like Philippines and Germany.
Individualism (INV):
In simple terms, individualism means the degree of preference of individuals
expected to look after themselves and their immediate families. Just reverse is
collectivist. From this stand point, USA and Britain score high on the individual index
and Indonesia and Pakistan score low. What these mean is the preference for living
and working in individual and collectivist ways respectively.
Masculinity (MASC):
By masculinity, Hofstede means the extent to which the society values
assertiveness (masculinity) and caring (femininity). In simple terms, masculinity
pertains to those societies in which social gender roles are clearly distinct, that is,
men are supposed to be assertive tough and focused on material success.
Femininity pertains to societies in which women are supposed to be more modest,
tender and caring for the quality of life.
As per this index, Japan and Australia ranked high in masculinity, while Denmark
and Sweden ranked low. It is also important to note that in Japan, the most
masculine country, women seem to retain their feminine values. However, in
Sweden, the least masculine country as per the index, feminine values applies also
to men.
2. Economic Conditions:
Like cultural differences, there abound economic differences among
nations/countries. Differences n economic conditions or systems cause inter-country
differences in HR practices. For example, in case of a country with free enterprise
systems, the need for efficiency tends to favour HR practices and policies that
encourage productivity, efficient workers, etc. On the other side, when one moves
along the scale toward more socialist systems, HR practices tend to shift toward
different direction like preventing unemployment. It may do so even at the expense
of sacrificing efficiency.
3. Labour Cost Factors:
HR practices are also influenced by differences in labour costs existed in different
countries. If the labour cost is high, it can require more focus on labour efficiency
which, in turn, can influence HR practice to shift toward improving labour
performance. Labour may get remuneration as per performance i.e., pay-for-
performance.
Evidences are available to mention the inter-country differences in labour costs.
Labour cost is quite more in U.K. than in India, for example. Wide gaps in hours
worked also exist among the countries which also need to be considered while
studying HR practices in a particular country.
Intra-country differences in hours worked exist across organisations. For example, in
India, there is 5 days week (work) in the central government departments, while its
6 days week in the state government departments. This affects HR practices such
as vacations between the two types of organisations in the same country.
4. Labour Relations Factors:
Labour relations or industrial relations i.e., relationship between employees,
employers and the government that vary from country to country and have an
enormous bearing on affecting HR practices. For instance, in Germany,
codetermination is the rule. Here, the employees enjoy legal right to have their
voice in the matters of their company.
On the other hand, in India and many countries, the State has its role to play in the
relations between employees and employers. In India, for instance! HR policies on
most matters such as compensation (wages/salary) and retirement benefits are set
by the government. The government does so by enactment of the various Acts such
as the Minimum Wages Act, 1948, The Payment of Gratuity Act, 1972, the Payment
of Bonus Act, 1965, etc. The HR policies are determined accordingly. As seen above,
wide inter-country differences in culture, economic systems, labour costs, and
industrial relations systems affect HR practices. Hence, HR managers need to
consider these impacts and evolve HR practices for business operations conducted
globally.

Dimensions of International HRM

According to P.V. Morgan: IHRM is the interplay among 3 dimensions:
HR Activities
Types of employees
Types of Countries

1. Broad activities of IHRM procurement, allocation and utilization of human

resources cover all the six activities of domestics HRM i.e, HR planning,
Employees Hiring, Training and Development, Remuneration, Performance
Management and Industrial Relations.

2. The three national or country categories involved in IHRM activities are:

a. The host country where subsidiary may be located

b. The home country where the company has its head quarters and
c. Other countries that may be sources of labour or finance.
3) The three types of employees of an international business are Parent Country
Nationals (PCNs) , Host Country Nationals (HCNs) and Third Country Nationals
(TCNs). For example, IBM which employs Australian citizens in its Australian
operations, after sends US citizens to Asia Pacific countries on assignment, and
may send some of its Singaporean employees to its Japanese operations.

Expatriate : A Parent country national sent on a long-term assignment to the host-

country assignment
Inpatriate : A host country national or third country national assigned to the hoem
country of the company where it is headquartered.
Repatriate : An expatriate coming back to the home country at the end of a foreign
assignment

Significance of IHRM in International Business

Scullion (2001) outlined 10 major significance of IHRM in globally business
environment. This significance can categorised in 5 key areas:

CHALLENGE:
1. Rapid growth of internalization and global competition has increased the
nos. and significances of MNCs resulting in the increased mobility of human
resources.
2. Increasing no. of strategic alliances and cross border mergers and
acquisitions has increased the strategic implementation of IHRM as
Global business.
COMMITMENT:
1. World wide recognition of management of human resources in
international business and cross cultural management.
2. Business Networks and Horizontal communication and HR plays a vital role.
COST EFFECIVENESS:
1. The performance of expatriates. (poor performance of expatriate may
affect the market share and damage to foreign relations)
2. Growing Importance of Expatriates in International Business.
COMPETENCE:
1. Global Strategy Implementation.
2. Success or failure of international business based on effectiveness of
management of HR.
CONGRUENCE:
1. Learning, knowledge acquisitions have been identified as important
potential sources of comp. advantages for MNCs. This has also
enhanced the role of IHRM to meet the key strategic challenge of
objectives.
2. Knowledge management is an important source of comp. advantage for
MNCs, where IHRM is the key partner and plays a central role.
Creating a Balanced Score card for HR

The starting points of the balanced scorecard are the vision and the strategy that
are viewed from four perspectives: the financial perspective, the customer
perspective, the internal business processes and learning & growth.
As the name suggests, the equilibrium or balance is an important principle in the
balanced scorecard model.
There must be a balance between the short-term and the long-term objectives,
financial and non-financial criteria, leading and lagging indicators and external and
internal perspectives.
It is about cohesion in which an improvement in one perspective must not be an
obstacle in another perspective.
This cohesion is reflected in the model through the mutually connected arrows
between the four perspectives.
The implementation of the balanced scorecard consists of a number of steps.
The first step in this is that senior management sets up a mission, vision and
strategy.
This strategy is linked to a number of objectives which are referred to as strategic
objectives. Then middle management is informed about the mission, vision and the
strategic objectives.
In an open discussion, managers can express their opinions, indicate the critical
success factors per perspective and they can point out or set up indicators
themselves so that these can be monitored in the future.
For the financial and customer perspectives within the balanced scorecard it is
possible to carry out a survey or conduct interviews among the (potential)
shareholders or customers to assess what their expectations are.
This could provide an insight into the direction of the objectives the necessary
objectives.
In consultation with middle management and senior management several
objectives are formulated in which the different critical success factors are indicated
per objective, the indicators are used to measure this, specific values such as
targets and initiatives are meant to achieve these objectives.
It is possible to go one step further by linking personal objectives to the objectives
of middle management.
As a result, all personal initiatives will contribute to the chosen strategy of the
organization. The implementation of the balanced scorecard model can be carried
out in different manners.
Broadly, this could include the following steps:
1. Set up a vision, mission and strategic objectives.
2. Perform a stakeholder analysis to gauge the expectations of customers and
shareholders.
3. Make an inventory of the critical success factors
4. Translate strategic objectives into (personal) goals
5. Set up key performance indicators to measure the objectives
6. Determine the values for the objectives that are to be achieve
7. Translate the objectives into operational activities.
It is important to mention that achieving strategic objectives is a continuous
process: plan-do-check-act (see PDCA- or Deming circle).
Setting up and implementing the balanced scorecard model is therefore not a one-
off action!
Using the area of recruiting as an example, a balanced scorecard would look
something like this:
Objective: Reduce turnover costs.

Description: Develop effective recruiting methods and new-hire orientation

methods to optimize the retention of new hires.
Actions:

o Identify key attributes of successful employees who stay at the

company for two or more years.
o Utilize technology more effectively for recruiting and screening
applications.
o Identify selection methods that will contribute to successful hires.

o Integrate branding efforts into recruiting.

o Revise the orientation program to ensure new-hire retention.

Measures:

o Cost-per-hire (financial).

o Turnover rates and costs (financial).

o Time-to-fill (business process).

o Customer satisfaction with new-hire performance (customer).

o New-hire satisfaction with orientation (learning and growth).

o Supervisor satisfaction with orientation (learning and growth).

When it is successfully executed, the HR scorecard can be an extremely useful

method of aligning HR with the companys strategic plan. The key to success is
careful planning and execution.

Why Is it Important for HR Management to Transform From

Administrative to Strategic Contributors?
Human resource management can be approached in two fundamentally different
ways. Human resources employees can fill purely administrative roles, simply
facilitating the paperwork involved for tasks such as hiring new employees and
handling workers' compensation insurance. Or HR employees can become strategic
contributors to company success. Transforming the HR function into a strategic
contributor can take your workforce strategies to the next level, increasing the
value of your human capital to accrue distinct competitive advantages.
Competitive Advantages
Strategic human resource management is all about creating a competitive
advantage through a company's workforce. Employing dedicated, experienced,
motivated and well-trained employees can increase efficiency and productivity in
operations, as well as enhancing product quality and the customer experience.
Strategic HR managers are concerned with hiring employees with high potential for
professional growth, then giving employees ample opportunity to learn and grow in
their job roles. Developing employees with top-level expertise in their fields can
grant you access to the brightest minds in the industry, putting you on the leading
edge of innovation.
Executive Succession
Small business success can be inseparably tied to the expertise, passion and
personal contacts of company owners. Because of this, executive succession
planning can be vital in small businesses. Purely administrative HR managers do not
think about a replacement for top managers or company owners until it is too late.
Thus an interim manager may have to step in while company ownership is formally
transferred. Strategic HR managers work with company owners to spot potential
successors early, grooming them through years of experience, advancement and
mentorship to be ready to take the reins of the company when the owner passes
away or decides to retire. Strategic succession planning can keep a company
heading in the right direction after a major leadership change.
Labor Cost-Efficiency
Administrative HR departments dispense pay raises almost as a matter of course,
using arbitrary metrics such as the number of years an employee has been with the
company to determine compensation. Strategic HR departments learn to promote
and compensate their top performers -- those who contribute the most to
organizational goals and long-term company success. A strategic HR philosophy
ensures that the highest compensation is being paid to employees with the largest
contributions to the firm, rather than those who have warmed a chair in the office
longer than others.
Legal Compliance
Purely administrative human resources departments handle legal issues reactively,
putting policies in place to prevent costly incidents from re-occurring. Strategic HR
managers proactively put policies in place to keep their companies on the right side
of employment laws, including workplace discrimination issues and equal
employment opportunity laws. A strategic HR department would identify the fact
that a building does not provide access for handicapped individuals before a
problem arises, for example.
Dave Ulrich's idea was that the HR function should be divided into three:
what are normally called shared service centres (SSCs), groups that deliver the
traditional HR services (and do jobs that can often be easily outsourced);
something described as centres of expertise (COEs), which house the designers of
remuneration packages that ensure an organisation can attract the people that it
needs;
business partners, HR people whose job it is to do high falutin' strategic thinking.
The role of business partners has been subject to a wide range of interpretations.
Some companies have chosen to appoint hundreds of them; others have appointed
just a few. One large organisation with 60,000 employees has 350; another, with
some 50,000 employees, has just two. A 2004 study of 20 large American
companies by PricewaterhouseCoopers's Saratoga Institute found a median ratio of
one HR business partner for every 1,000 employees.

How Does HR Add Value to an Organization?

For companies that consider employees their most valuable assets, human
resources has extreme value. In the most general sense, HR serves to motivate
employees to top performance and maintain an organizational culture of high
morale. In the early 21st century, strategic HR has emerged as a prominent view of
the role this functional area plays in building and developing a strong organization.
People and Performance
In a March 2011 McKinsey Quarterly article, Nora Gardner, Devin McGranahan and
William Wolf explained that more companies are finally coming around to the
common-sense understanding that HR manages a key link to company success --
people and performance. The long-term success and financial performance of a
company is usually directly correlated to the talents, motivation and
accomplishments of its people. People make and sell products, work with customers
and collaborate on decisions. A primary way HR adds value to a company is by
promoting this link and persuading company leaders to train and develop
employees and reward strong performance.
Talent Acquisition and Retention
Hiring and retaining top talent is a foundation of high-performing companies. HR is
largely responsible for building and managing the systems that recruit, attract, hire,
train, motivate and retain a company's best employees. This includes establishing
strong job designs and hiring the right employees to match. It also involves building
strong interviewing and screening processes, planning orientation and training,
developing successful employee evaluation tools and constructing motivating
compensation programs.
Legal Protection
One of the less-heralded ways HR adds value to a business is through legal
protection from discrimination and wrongful termination lawsuits. HR professionals
must be continually up to speed on employee laws and educate company
executives and managers. They must also design hiring and promotional systems
that promote fairness and equality. Interview questions that align specifically to a
job, for instance, minimize risks of a discrimination claim. This element of HR
becomes increasingly valuable as workplaces become more diverse.
Planning
As proactive HR strategies have overtaken reactive responses to employment
conditions, HR professionals play a stronger role in planning. HR directors commonly
serve on company management teams and participate in strategic planning. This
includes assessments of company strengths and weaknesses and projections of
opportunities and threats. HR participants contribute the current view and future
expectations of people and resource needs, discussion of compensation and training
changes and research on emerging opportunities and threats.

What is the impact of Globalization on HRM?

A powerful force impacting organisations worldwide is the process of globalization,
which refers to the intensification of worldwide economic and social inter
dependencies and the multiplicity of linkages and interconnections between states,
societies and organisations.
Globalization describes the process by which events, decisions and activities in one
part of the world come to have significant consequences for individuals and groups
in distant parts of the globe. Processes of globalization accelerate change, lead to
turmoil in the markets in which organisations operate and set the stage for intra-
and inter-organisational change as a reflection of the turbulent environment.
As a result , domestic and international competition has increased and so the
human resource management is being given a key role. The following changes in
human resource policies and programmes are observed.
(1) With manpower costs going up, and the need to bring product prices down to
meet competition, manpower productivity has become a central issue in
organizations. Human resource professionals will have to play a critical role to fulfill
this need.
(2) Another area of intervention would be in the case of joint ventures where
professional will have to predict and manage culture-fit policies. Companies are
focusing on people with the right profiles as also those who are more capable.
(3) There is increasing emphasis on training, retraining, and to tap latent talent and
its retention.
(4) Companies have started paying attention to career growth and career planning
for employee.
(5) Companies are showing increasing willingness to retain talent and redeploys
manpower when necessary.In some industries, Indian employees are being sought
after abroad. This, coupled with competition for employees among Indian
companies, has led to an alarming attrition rate for some companies. To meet
ambitious career aspirations and salary expectations, human resource departments
are using industry-wise benchmarking for salary revisions.
(6) Employee compensation is being linked and programmes are becoming more
focused, responsive and are also constantly reviewed against the external
environment.
(7) Contemporary practices, policies and programmes are becoming more focused,
responsive and are also constantly reviewed against the external environment.
(8) Globalization has resulted in an influx of foreign managers to India. There is
evidence of greater mobility both within India and abroad. Furthermore, there is
greater integration with world market dynamics and practices.

(9) Corporate restructuring and redefining of roles are areas also under focus.
(10) As many organisations are expanding into markets outside their national bases,
research into conflict around work and organisations needs to address both cross-
border ventures and cooperation in multinational teams within domestic
organisations. By entering into cross-border Greenfield investments, joint ventures,
cross-border alliances, mergers and acquisitions, organisations seem to be severing
their geographical ties with one national economy and are transforming into
multinational or even transnational corporations. While advantages of such moves
are an increase in scale, organisational growth and innovation, increased risks of
conflict and failure have a countervailing effect. Market failure arising from
asymmetric information in different environments, clashing legal systems and
cumbersome bureaucracies, as well as miscalculations caused by unfamiliar
business practices and cultural differences, are more likely in the case of cross-
border transactions than in purely domestic transactions.

Much depends on the ways in which members of the organisations in question

respond to the fact that such challenges upset intra-organisational management
practices, work routines, group cohesion and identification. In sum, multinational
cooperation in cross-border ventures and multinational teams implies intra- and
inter-organisational change with a potential for conflict at different levels.
At the contextual level, it manifests itself in complex relationships between
multinational organisations and their socio-economic and political environments.
At the institutional and professional level, it manifests itself through the
rearrangement of work units and the formation of new teams, comprising staff from
different professional backgrounds, levels of training and experience, and
organisational cultures and sub cultures.
At the social and cultural level, it manifests itself in terms of increasing diversity
within organisations with teams including individuals who represent different ages,
gender and ethnic, religious and cultural groups.
Human Resource Management has been affected by a number of trends including
globalization, changes in technology, demographics of the workforce, ethical issues
and pressures to show that its practitioners add value to the organization.
Globalization has resulted in specific challenges to HRM including
(i) How to enhance global business strategy,
(ii) How to align HRM with business strategy,
(iii) How to design and lead change,
(iv) How to build global corporate culture
(v) How to develop leaders.

(11) Changes in technology have affected how traditional HRM activities are
managed.
(11 (i)) For example, payroll and information systems can be more effectively and
efficiently handled through better technology.
(11(ii)) The use of web recruiting and e-learning has grown tremendously. This
increased use of technology and speed is evidenced by the greater usage of
technological learning opportunities such as online journaling , blogs, wikis as well
as web discussions and online simulations.
As trends have emerged, HRM professionals have been expected to occupy new
roles, and some have suggested that the former functional HRM role has been
supplanted by a more strategic role which requires new competencies. Many new or
enhanced roles for HRM practitioners have been described by numerous writers,
and although many of these roles overlap, there are some that do stand out. For
example, one key role for practitioners seems to be that of change manager,
learning to better assist organizational managers to deal with change. Also, HRM
practitioners must begin to act as a business ally, by taking roles as strategist
and continuing to show how HRM adds value to the organization HRM practitioners
are under pressure to show how they add value to the firm.
Thus HRM practitioners must become competent in the use of Return On Investment
tools, develop skills in influencing others (especially key decisions makers), show
how meeting the needs of diverse firm stakeholders adds value, and create an
action plan that prioritizes those needs.

Explain the International Perspectives of HRM

Globalisation has made us a multi-cultural society which has implications on human

resource management. There are four theoretical frameworks that explore the
influences on HRM across international boundaries, including: cultural, institutional,
universal and contingency perspectives.
The cultural perspective suggests there are clear cultural differences between
nationalities and these should be recognised. Multi-national corporations which
accept and recognise these cultural differences in managing employees through HR
practices will be successful in their host countries.
The institutional perspective accepts there are differences that need to be
understood and recognised within societies and these have an impact on the HR
practices, but it rejects the concept that certain practices, such as recruitment and
selection, performance management and reward lead to improved organisational
performance as these practices may mean different things within different
societies.
The universal perspective approach claims that certain HR practices, such as
performance management, recruitment and selection and reward lead to higher
organisational performance. Marchington and Wilkinson (2012) further highlight that
in their belief that HR practices that are successful in the home country should be
adopted into the host country. A criticism of this viewpoint is that it does not take
into account internal and external factors, such as the characteristics of the
organisation or the culture of its host country.
Finally, the contingency perspective depends on both the internal and external
factors of an organisation for the take up of HR practices. The key features for HRM
are the location of the organisation, the product market, the organisations life cycle
stage and if the organisation is privately owned or a joint venture. Each of these
factors will have an effect on HRM, for example where the organisation is based will
depend on the HR practices and policies it deploys.
Influences and Implications on HRM
Marchington and Wilkinson (2012) argue that the influences and implications on
HRM in multi-national corporations depends on the type of organisation, its product
life cycle and the core belief of its hierarchy. Edwards (2011) takes this view further
and outlines that the influences are categorised into home country/country of origin
effects, dominance effects, international integration effects and host country
effects.
The home country/country of origin view supports the enforcing of headquarter HR
practices from the home country across all countries where there is a subsidiary. All
countries where there is a subsidiary for the multi-national corporation will adopt a
single approach to HR practices, such as recruitment and selection, reward and
performance management. Using this model means the MNC doesnt take into
account local culture and practice when implementing HR practices.
The dominance effect supports a standard approach of HR practices across all
countries for the multi-national corporation as this is seen to be best practice
internationally. Again this doesnt take into account local culture and practices in
which the MNC operates.
The international integration effect relates to the extent at which the multi-national
corporations build closer relationships across different boarders. MNCs may move
their headquarters from their home country to other regional countries, adopting
their exiting HR policies whilst also bringing some best practice from the home
country.
The host country effect adopts the HR practices and policies of the host country in
which the multi-national corporation operates in. This could be due to it being too
difficult to enforce the home country HR practices and policies due to cultural
differences or the practices and policies in place do not need to be changed.
Globalisation is seen to be a complex and controversial subject with many
supporters and critics. The implications on HR for multi-national corporations are
dependent on a variety of factors. Market pressures and local influences, such as
culture, have strong implications on HR practices implemented by multi-national
corporations with research supporting the view of the complexities and different
influences. It can be argued therefore that there is no one best fit for HR practices
for all organisations across the globe, but there are some best fit processes that can
be incorporated along with the local culture and business practice.
Organisations are becoming more international and having systems, policies and
process in place to be able to deal with this changing landscape of workforce is
paramount. A system for employees which supports multiple language and different
date formats will help improve engagement as they can manage their own data in
their native language. This also enables organisations to roll out employee self-
service access to other countries, as well as providing other country employees to
use the application in their chosen language

Implications of Global Market with respect to HR functions

Globalization, the process of integrating a business's operations and strategies
across a wide array of cultures, products and ideas, is having an impact on the role
of human resource managers. Once concerned with the impact of local issues on
employees, human resources must now consider the effects of workforce diversity,
legal restrictions and the interdependence between training and professional
development on the organization. As such, the five main functions of global human
resource management are vital concepts to the strategic operation of a business.
Recruitment
Attracting, hiring and retaining a skilled workforce is perhaps the most basic of the
human resources functions. There are several elements to this task including
developing a job description, interviewing candidates, making offers and
negotiating salaries and benefits. Companies that recognize the value of their
people place a significant amount of stock in the recruitment function of HR. There
is good reason for this -- having a solid team of employees can raise the company's
profile, help it to achieve profitability and keep it running effectively and efficiently.
Training
Even when an organization hires skilled employees, there is normally some level of
on-the-job training that the human resources department is responsible for
providing. This is because every organization performs tasks in a slightly different
way. One company might use computer software differently from another, or it may
have a different timekeeping method. Whatever the specific processes of the
organization, human resources has a main function in providing this training to the
staff. The training function is amplified when the organization is running global
operations in a number of different locations. Having streamlined processes across
those locations makes communication and the sharing of resources a much more
manageable task.
Professional Development
Closely related to training is HR's function in professional development. But whereas
training needs are centered around the organization's processes and procedures,
professional development is about providing employees with opportunities for
growth and education on an individual basis. Many human resource departments
offer professional development opportunities to their employees by sponsoring
them to visit conferences, external skills training days or trade shows. The result is
a win-win: it helps the employee feel like she is a vital and cared-for part of the
team and the organization benefits from the employee's added skill set and
motivation.
Benefits and Compensation
While the management of benefits and compensation is a given for human
resources, the globalization of companies in the twenty-first century has meant that
HR must now adapt to new ways of providing benefits to an organization's
employees. Non-traditional benefits such as flexible working hours, paternity leave,
extended vacation time and telecommuting are ways to motivate existing
employees and to attract and retain new skilled employees. Balancing
compensation and benefits for the organization's workforce is an important HR
function because it requires a sensitivity to the wants and needs of a diverse group
of people.
Ensuring Legal Compliance
The final function of human resource management is perhaps the least glamorous
but arguably of utmost importance. Ensuring legal compliance with labor and tax
law is a vital part of ensuring the organization's continued existence. The federal
government as well as the state and local government where the business operates
impose mandates on companies regarding the working hours of employees, tax
allowances, required break times and working hours, minimum wage amounts and
policies on discrimination. Being aware of these laws and policies and working to
keep the organization completely legal at all times is an essential role of human
resources.

HR Roles in Internationalization

Managing International Human Resource Activities

The top six ways for managing international human resource activities are: 1.
Staffing 2. Recruitment and Selection 3. Managing Expatriates 4. Training and
Development 5. Performance Management 6. Compensation.
1. Staffing:
Staffing refers to the process of determining the organizations current and future
human resource requirements to meet the organizational goals and taking
appropriate steps so as to fulfil those requirements. The process involves identifying
the human resource requirement of an organization, and recruitment, selection, and
placement of human resources.
Human resource planning refers to the process of forecasting supply and demand
for the organization and the action plan to meet its human resource requirements. It
is the decision-making process as to what positions a firm has to fill and how to fill
them and places optimally the human resource systems in the organization.
The process by which an organization estimates its future human resource needs is
termed as human resource forecasting.
International companies need to assess their human resource requirements, assess
availability of right type of manpower, decide upon the form and type of
international assignments, evaluate pros and cons of alternative sources of
personnel for international staffing, and select an appropriate approach for
international staffing.
Manpower availability:
Availability of desired manpower affects a firms decision to hire locals or
expatriates. MNEs often hire locals for lower level jobs except for some countries
such as in the Middle East which import people even for labour and other low-paid
jobs.
However, for most skilled and professional assignments, quality of educational
system, availability of scientists and engineers, and quality of management schools
play an important role in a firms decisions to hire locals or expatriates.
Based on organizational goals and objectives, various forms of international
assignments may be classified as follows.
Filling up job positions:
Trans-national companies often fill up job positions through expatriates when host
country nationals with required skill-base are not available. Foreign postings are
often required for filling up key positions or technical positions even at a middle or
lower level.
Besides, international assignments are strategically needed in order to maintain
better co-ordination and higher level of control over foreign operations through
international transfers.
Management development:
Foreign assignments facilitate development of managers and prepare them to take
up higher responsibilities at the international level.
Organizational development:
Increasing use of expatriates to fill up key positions facilitates development of a
team of global managers with strong communication networks at the international
level.
Types of international assignments:
Depending upon the purpose of assignments and nature of tasks, MNEs often
transfer their employees internationally. Based on the duration of stay, international
assignments may be classified as
Short-term (up to three months):
Assignments related to small project work, machinery or plant repairing, or an
interim arrangement till a suitable permanent arrangement is made
Extended (up to one year):
Involving similar activities as for short-term assignments for a relatively longer
duration
Long-term (one to five years):
Also referred to as traditional expatriate assignment, involve a well-defined role in
foreign operations. Assignments, such as production or marketing manager or a
managing director of a subsidiary

Within the above categories of international assignments, there may be

non-standard assignments as well:
Commuter assignments:
Special arrangements where a person travels from one country to another for work.
For instance, a professor residing in New Delhi travels to Washington or Singapore
once in a fortnight or a month to take classes and teach a course.
Rotational assignments:
An arrangement where the employees travel from home country to a foreign
country either on rotational basis or with breaks in-between. For instance, an
institute runs a long-duration management programme in a foreign country and
professors travel to take different courses related to their areas of competence on
rotational basis.
Besides, such rotational assignments are used in certain areas of international
project management, such as oil-rigs.
Contractual assignments:
When a specialized skill is vital to managing a project or is required for a short
duration, contractual assignments are often preferred over permanent assignments
as they offer little long-term liability on part of the organization. Such assignments
are common in teaching, research and development, and project management.
Virtual assignments:
It refers to assigning international responsibilities to home base managers for
organizing foreign activities. Such virtual assignments are often used either due to
cost reasons or scarcity of mobile employees willing to accept long-term foreign
assignments.

Sources of Human Resources for International Staffing:

Multinational companies can source human resources from the following major sources.

Local citizens or HCNs:

Local employees hired by an MNE of the host country are known as HCNs. A large number of
MNEs engage host country citizens for middle and lower level jobs.

Pros:

i. Conversant with the host country business environment

ii. Familiarity with host country culture and language

iii. Often less expensive compared to PCNs

iv. Increases morale of HCNs due to greater prospects of career growth

v. Longer duration of stay in the MNE by HCNs leads to continuity of management and
improvements

Cons:

i. MNEs often fear lack of effective control and coordination over subsidiaries by appointing
HCNs at key positions

ii. HCNs may have difficulty in communication with headquarters

iii. HCNs have limited career opportunities outside the subsidiary

iv. Hiring HCNs may lead an MNE to become federation of national units rather than a truly
global organization

Expatriates:

Employees who temporarily reside and work outside their home country are commonly known
as expatriates or expats.

Expatriates are often used as agents of direct control, socialization, networking, and gathering
business intelligence. Expatriates may be either PCNs or third country nationals (TCNs) as
discussed below.

Parent country nationals (PCNs):

Employees who are citizens of the country where the MNE is headquartered are known as PCNs
or home country nationals. Historically, MNEs filled up key positions in their foreign affiliates
with PCNs.

Pros:

i. Familiarity with parent companys objectives, strategies, policies and practices

ii. Facilitates higher level of organizational control and coordination

iii. Availability of highly talented managers with special skills and experiences

iv. Promising managers from parent headquarters are deputed for international assignments

Cons:

i. Employing PCNs is often more expensive compared to HCNs or TCNs

ii. Difficulty in adapting to foreign country environment in terms of foreign languages and socio-
economic and cultural issues

iii. Appointing PCNs at key positions by MNEs is often perceived by HCNs as blocking their
career growth opportunities within the organization

iv. Tendency of PCNs to impose the headquarters style on its subsidiaries often overlooking the
local needs

v. Differences in compensation packages between PCNs and HCNs is often perceived as

discriminatory by HCNs

Third country nationals (TCNs):

Employees, who are citizens of countries other than the country in which they are assigned to
work or the country where the MNE is headquartered, are often referred to as TCNs.

In countries with lower level of skill base, such as African and Latin America, MNEs often
employ TCNs from countries with cost-effective availability of skilled manpower and
professionals from countries such as India rather than from their home country where the
workforce is relatively more expensive.

Pros:

i. It is easier to find TCNs as global managers with high level of skills and competence
ii. Cost of employing TCNs is generally lower compared to PCNs

iii. Trans-national relocation of personnel creates opportunities for career advancement and
motivates employees

iv. Cross-country transfers contribute to build up a truly global work-force leading to a global
corporation

Cons:

i. Reluctance and resentment by host country government towards hiring TCNs

ii. Diplomatic sensitivity of host country in employing personnel from certain nationalities

iii. Some TCNs may be reluctant to return home after a foreign assignment

Inpatriates:

As opposed to expatriates, employees assigned to work in the MNEs home country who are
citizens of either a host country of firms operation or a third country are termed as inpatriates.
In order to meet international competition, MNEs increasingly make use of inpatriates. This
facilitates MNEs to develop their global core competencies.

MNEs often use a mix of personnel based on the company need, its HR strategy, and availability
of right type of employable workforce. For instance, Microsoft employs Indian citizens (HCNs)
for its Indian operations, often sends US citizens to its Japanese operations (PCNs), and sends
British citizens to its Middle East operations (TCNs).

Off-Shoring:

Off-shoring refers to transferring jobs to foreign countries which were previously carried out
domestically. The breakthroughs in information and communication technology have made it
possible to off-shore various service activities too.

The human resource department has the prime responsibility to identify low cost, high quality
personnel abroad and equip them with company information to carry out their assigned tasks
efficiently.

Besides, an effective supervisory and management structure is also to be put in place so as to

carry out screening, provide necessary trainings, and monitor their performance. The motivation
level of employees located at vast geographical distances is also to be maintained by way of
conducive working conditions, compensation, and benefits so as to get maximum output and
curb attrition.
International Staffing Approaches:

Since an MNE has to operate under cross-country business environment, its strategic approaches
to international staffing may be categorized into four broad categories, as elucidated in Exhibit
17.1 such as ethnocentric, polycentric, regiocentric, and geocentric.
2. Recruitment and Selection:
Recruitment refers to the process by which an organization attracts the most
competent people to apply for its job openings whereas selection refers to the
process by which organizations fill their vacant positions.
The process of recruitment and selection varies widely among countries. For
instance, extensive formal testing and screening techniques are often employed in
Asian countries where people are highly test-oriented and comfortable with formal
tests.
Testing is often discouraged in the US due to its negative impact on equal
employment opportunities and affirmative action efforts. Europeans test
considerably more than Americans but not as much as Asians. Rigorous staffing
practices such as formal testing are used even less in Canada where equal
employment and human rights legislation is even more restrictive compared to the
US.
Characteristics of global managers:
Traditionally, managers used to specialize not only in their functional area but also
in the geographic region of their operations so as to effectively respond to its
specific business demand.
However, during recent years, rapid rise in globalization of businesses has led to the
emergence of a new breed of global managers with multi-lingual and multi-cultural
skills and trans-national experience. The common traits of global managers are
summarized here.
Global mind-set:
To pursue global business strategies of a firm, its managers need to understand the
interdependence of rapidly changing business environment on firms activities. The
global mind-set is characterized by identifying similarities across countries and
adapting business strategies to local conditions. It calls for managers to think
globally, but act locally.
Strategic vision and long-term perspective:
Global managers should have a strategic vision and be persistent to pursue the
long-term goals of the organization.
Ability to work in diverse cultures:
International managers are often required to work with people with diverse cultural
backgrounds. Therefore, they should be able to develop a quick understanding of
different cultures and deliver results under multicultural environments.
Willingness to relocate for international assignments:
Depending upon the requirements of an MNE, international mangers should be
willing to relocate across countries for taking up the challenges of new assignments.
Ability to manage change and transition:
International managers often come across novel business situations in different
countries which require innovative solutions. Therefore, the ability to manage
organizational change and transition is key to the success of international
managers.
Selection criteria for international assignments:
An MNE needs to decide upon the factors to select personnel for international
assignments. Depending upon the companys experience of its international
operations and culture, a firm may choose one or more factors from those discussed
below and adopt a model by assigning those appropriate weights.
Technical and managerial competence:
Most companies place high priority on technical and managerial skills to determine
suitability of potential managers for international assignments. Academic
background, job experience, skills acquired, and past performance of the employees
within the company and their previous jobs often serve as useful measures to
assess their competence for international assignments.
Ability to perform under cross-cultural environments:
Managers selected for international assignments should have the ability to operate
under diverse cultural environments and work with various stakeholders, such as
fellow-employees, customers, and government officials.
Sensitivity to foreign cultures and respect towards their value systems, customs,
traditions, religions, besides emotional maturity and empathy are some of the key
attributes required to successfully perform under cross-cultural situations.
Family attitude towards international assignments:
Support of family members, especially the spouse, is crucial for optimal
performance of an employee at job. This becomes extremely important for taking
up an international assignment and performing overseas.
The willingness of family varies significantly across their apprehensions regarding
housing, safety, childrens education, spouses career prospects, and also the fear
of the unknown. Most studies suggest that adjustment of the spouse is highly co-
related to the adjustment and the performance of an expatriate.
Most western cultures separate work from employees private lives and therefore
western MNEs are often reluctant to include the spouse either formally or informally
in the expatriates selection process. In certain countries, such as Australia, MNEs
fear inclusion of spouse in the formal selection process could evoke issues related to
individual civil liberties.
Suitability of potential expatriates family for an overseas assignment may be
appraised through adaptability screening which evaluates how well the family is
likely to stand up to the rigors and the stress of overseas life.
Regulatory framework in host countries:
For international postings, it is essential to get work-permits for the selected
candidates. MNEs need to look into the restrictions imposed by host countries on
citizens of certain nationalities. Host country restrictions on relocation of families
and freedom to take up any job by the spouse also restrict employees decision to
accept a foreign assignment.
For instance, free mobility among nationals in the European Union speeds up the
relocation process for citizens of member countries within the European Union.
Certain Middle Eastern countries do not issue a work permit to single women.
Language:
Working knowledge of foreign languages, especially those of the host country, offers
an added advantage while selecting managers for international assignments. It
facilitates communication of expatriates with the locals in a foreign country.

3. Managing Expatriates:
People working out of their home countries, also known as expatriates, form an
integral part of a firms international staffing strategy, especially for higher
management positions. Beside identifying and recruiting the right personnel with
desired skills for international assignments, it is also extremely important to provide
them with a conducive environment to get their optimum output.
Expatriates also contribute significantly to international remittances. Worldwide
remittances are estimated to have exceeded US$318 billion in 2007, of which
developing countries received US$240 million.
India had been the largest receiver of foreign remittance in absolute terms with
US$27 billion, as shown in Fig. 17.11, followed by China (US$25.7 billion), Mexico
(US$25.0 billion), Philippines (US$170 billion), France (US$12.5 billion), Spain
(US$8.9 billion), Belgium (US$7.2 billion), Germany (US$70 Billion), UK (US$70
billion), Romania (US$6.8 billion), Bangladesh (US$6.4 billion), and Pakistan (US$6.1
billion) in 2007.
However, due to the massive size of Indian and Chinese economies, the share of
remittances in GDP was only 2.8 and 0.9 per cent respectively in 2006.
The US has been the top remittance sending country with US$42.2 billions, followed
by Saudi Arabia (US$15.6 billion), Switzerland (US$13.8 billion), Germany (US$12.3
billion), and the Russian Federation (US$11.4 billion) whereas the remittance sent
by Japan, China, and India in 2006 were US$3.5 billion, US$3.0 billion, and US$1.6
billion, respectively.
The principal concepts in managing personnel for foreign assignments, i.e.,
expatriate failure, expatriate adjustment process, and repatriation are discussed in
the ensuing sections.
Expatriate Failure:
Premature return of an expatriate before completion of a foreign assignment is
termed as expatriate failure. Expatriate failure represents faulty selection process,
often compounded by ineffective expatriate management policy.
Major reasons for contributing to expatriate failure include:
i. Inability to adjust in alien cultures
ii. Career apprehensions on repatriation
iii. Relocation anxieties
iv. High costs of living and income gaps
v. Problems related to lifestyle adjustments, such as uncomfortable living conditions
vi. Family problems, such as spouse dissatisfaction, childrens education, and safety
concerns
vi. Health and medical concerns
vii. Adaptation problems to different management styles
Such failures have considerable implications on MNEs, both in terms of direct and
indirect costs. Direct costs include airfare of employees and their families, relocation
expenses, salaries, and training costs. Besides, there are considerable indirect costs
involved, although difficult to quantify, both for the employer and the employee.
Since many expatriate positions are required to interact with local government
officials, customers and other stakeholders, expatriate failure results in difficulty in
dealing with host-government officials, productivity losses, and often a demoralizing
effect on the local staff.
Moreover, failure to perform and adjust in an overseas assignment leads to loss of
self-esteem, self-confidence, and ones reputation among colleagues which may
also hamper the employees future performance.
Expatriate adjustment process:
Expatriates and their families often find it difficult to adjust to a foreign
environment. The series of phases expatriates undergo while adjusting to a foreign
culture is termed as expatriate adjustment process. As there are considerable
psychological upheavals in the adjustment process in a foreign culture, it is also
referred to as culture shock cycle.
Culture shock refers to the pronounced reactions to psychological disorientation
that is experienced in varying degrees when spending an extended period of time in
a new foreign environment. Although the duration and extent of culture shock may
vary from individual to individual, depending upon the nature of assignment and
environmental differences.
The expatriate adjustment process may broadly be categorized under the following
four heads, as depicted in Fig. 17.12.
Initial euphoria:
In the initial stage of foreign assignments, also referred to as the honeymoon or
tourist phase, expatriates often experience upswing in their mood and a great deal
of excitement in the new culture. International travellers who visit foreign countries
for a shorter duration have a luxury of experiencing the new cultural excitement
and remain only in the euphoric stage.
Cultural shock:
With the passage of time, the novelties of foreign assignment tend to dwindle, and
the realities of every-day life in the foreign country become increasingly
challenging. Homesickness sets in; expatriates often enter into a phase of disillu-
sionment with heightened irritation, hostility, and mood downswing.
This leads to disruption in the established patterns of the expatriates behaviour.
This phase is the most critical in determining an expatriates success in a foreign
assignment.
Adjustment:
If the cultural shock phase is handled carefully and successfully, the expatriate
enters into the next phase of coping with the new environment, known as
adjustment phase. After the crisis of cultural shock is over, the expatriate begins to
develop a more positive attitude towards the new culture, and begins to lead a
more satisfying and rewarding life.
Re-entry:
Once an expatriate stays with family in a foreign environment over an extended
period, she/he gets adjusted to the culture and faces a reverse cultural shock on
return. She/he may suffer from maladjustment which may adversely affect her/his
performance level and job satisfaction. She/he needs to be supported by the
company so as to minimize its detrimental impact.
Repatriation:
The process of returning home by an expatriate after completion of foreign
assignment is known as repatriation. The ability to attract potential expatriates
also depends considerably on a firms effective managing of the repatriation
process.
The repatriation process may be divided as follows:
Preparation:
It refers to planning for future posting and gathering all information about the new
assignments. Companies generally provide a check-list of tasks to be completed
before returning home, for instance settling bills, closing bank-accounts, and other
tasks associated with relocation of the expatriates family.
Physical relocation:
The actual movement of expatriates and their families along with their household
belongings to the next place of posting, usually the home country, is referred to as
physical relocation. Comprehensive HR policies to assist in relocation considerably
reduce the hassles, disruptions, and associated apprehensions, not only for
expatriates but also for their families.
Transition:
Once the expatriate returns to his/her home country after completion of an overseas
assignment, provisional arrangements are to be made for accommodation and other
household tasks, including opening or reviving bank accounts, getting insurance
and driving license, etc.
Re-adjustment:
It is the coping phase where expatriates face reverse cultural shock on their
returning home. Loss of career-growth and direction, fear of loss of income, status,
and autonomy are some of the other problems associated with re-entry into the
home organization.

4. Training and Development:

Training refers to the process by which employees acquire skills, knowledge, and
abilities to perform both their current and future assignments in the organization.
Training aims at altering behaviour, attitude, knowledge, and skills of personnel so
as to increase the performance of employees.
The need for imparting pre-departure training to spouse and children, besides the
employee, is increasingly recognized by MNEs. Pre-departure training is aimed at
smooth transition of expatriates and their families to a foreign location. It includes:
Cultural sensitization programmes:
Expatriates and their families need to be sensitized on cultural issues at the place of
work so as to facilitate their smooth transition to an alien culture (Fig. 17.13). It also
helps expatriates deal with other employees in the host country location and
manage effectively. The type and extent of such training varies, depending upon the
country of assignment, duration of stay required, nature of posting, and the training
provider.

Preliminary visit:
Sending employees on a preliminary trip to the host country for orientation often
provides a useful insight into their suitability and interest in the overseas
assignment. Such pre-departure visits constitute a useful component of pre-
departure training along with culture sensitization programmes.
It also facilitates during the initial adjustment process of expatriates and helps in
reducing the costs associated with expatriate failure.
Language training:
Although English is generally accepted as the language of global business, it is
always desirable for international managers to develop linguistic abilities in the
foreign languages of the host country. Ability to understand and speak local
languages enhances expatriates effectiveness to deal with local personnel and
their ability to negotiate.
However, the degree of fluency of foreign language required also depends on the
level and nature of the foreign assignment and the need for interaction with local
stakeholders, such as clients, government officials, and other host country
nationals.
Moreover, language skills on the country of operation also help the expatriates and
their family members develop social contacts with local communities and evolve
their own social support networks.
MNEs from non-English speaking countries tend to use the language of the parent
country for intra-firm communications. With the geographical dispersion of its
activities, often a common corporate language is evolved which facilitates
standardization of information and reporting systems.
As a result, fluency in corporate language also becomes a pre-requisite for effective
performance at an overseas assignment. Therefore, pre-departure training should
include developing expatriates proficiency both in the host country and corporate
languages.
Practical training:
To assist expatriates and their families relocate overseas, the corporate HRM
division often provides information on practical aspects for adaptation to the new
environment.
It includes brief working information on the host-country, such as its historical
background and geography, economic and legal environments, social and cultural
etiquettes, political environment, and the relationship between the two countries
and religious beliefs and their impact on daily life and current affairs.
Some MNEs also employ a relocation specialist to provide practical assistance to its
expatriates such as in finding accommodation and schools for children, etc. Skill
development is a lifetime process that enhances ones job performance.
Management development programmes (MDPs) are long-term efforts aimed at
training and developing the managers to harness their fullest potential at job. Type
and duration of MDPs vary, depending upon the nature of job, hierarchy level,
career and organizational goals.

5. Performance Management:
Performance management is a comprehensive term that refers to the process that
enables a firm to evaluate the performance of its personnel against pre-defined
parameters for their consistent improvements so as to achieve organizational goals.
The system used to formally assess and measure employees work performance is
termed as performance appraisal.
Evaluation of an employees performance is required for assessing employees
contribution to achieve organizational goals, facilitate administrative decisions
related to compensation, promotion or transfer, etc.
Determination of the evaluation criteria, the choice of the evaluators, and the
delivery of timely and culturally sensitive feedback constitute the principal
challenges related to the performance evaluation of expatriates.
In the international context, performance appraisal becomes more complex due to
possible conflict between the objectives of an MNEs headquarters and subsidiaries,
non-comparability of information between the subsidiaries, the volatility of
international markets, and differences in levels of market maturity.
Therefore, international HR managers need to reconcile the differences between the
need for universal appraisal standards and the specific objectives of the local
subsidiaries, and to recognize that more time may be needed to achieve results in
markets, which enjoy little supporting infrastructure from the parent company.
MNEs need to evolve systematic processes for evaluation of employees from
different countries who work in different environments. Developing consistent
performance evaluation methods often conflicts with the diverse cultural factors of
the host countries.
For instance, it may be appropriate in a country with low-context culture like the US
to precisely point out an employees shortcomings directly whereas public criticism
in high-context cultures, such as China, Japan, and to some extent, India may prove
counterproductive; in such cultures the opportunity to save ones face is extremely
important.
Praise is often given in groups in appraisal process in Japan, whereas it is given
individually in the US.
Besides, the Western system of performance appraisal, especially in the US,
emphasizes merit, fairness, and short- term orientation whereas in Eastern cultures
perceived loyalty to the superior or the employer, ability to function in groups,
attitude, seniority, etc., carry considerable weightage.
The criteria for assessing employees effectiveness in a foreign subsidiary may be
totally different compared to home country.
For instance, for long-term success of a firm in emerging markets like China and
India, projecting a positive company image, developing relationship with suppliers
and the local government authorities is much more important compared to growth
in profitability and market share during the review period.
As indicated in Exhibit 17.1 an MNE applies home standards worldwide to evaluate
employees performance under the ethnocentric approach, whereas under the
polycentric approach, performance evaluation varies from country to country. Global
corporations often monitor employees performance based on the firms global
objectives and goals.
6. Compensation:
Compensation refers to the financial remuneration that employees receive in
exchange of their services rendered to the organization. It includes wages, salaries,
pay rise, and other monetary issues.
A good compensation system should be designed within the regulatory framework
of the country of operation of an MNE and should be able to attract and retain the
best available talent. Besides, it should be equitable among employees and
motivate them to achieve high levels of performance.
Wages only become meaningful in relation to price, i.e., what can be bought with
the money earned. The relationship between wages and prices at different places
becomes clearer by comparing global standard products like the Big Mac burger,
bread, or rice, as shown in Table 17.1. On a global average, 35 minutes of work buys
a Big Mac, 22 minutes a kilo of bread, and 16 minutes a kilo of rice.

However, the duration of time required to work to buy one Big Mac or a kilo of bread
or rice varies significantly across places. It takes just 5 minutes of work to buy a kilo
of bread in London whereas it takes 16 minutes in New York and Tokyo, 22 minutes
in Delhi, 49 minutes in Bangkok, and 53 minutes in Mexico City.
Therefore, buying power needs to be taken into consideration while determining
wages for employees in different countries.
Culture also plays a significant role in determining compensation. In most Western
companies, the compensation is determined by the nature of job and individual
performance whereas in Japan, compensation is based on the traditional Oyabun-
Kobun, or parent-child relationship, in which pay and promotions are determined
almost entirely by seniority.
Key components of international compensation systems:
Base salary:
Generally, an expatriates base salary is in the same range for a similar position in
the home country but in the international context, it often serves as a benchmark
for other compensation elements. The base salary may be paid either in home
country currency or the local currency.
Foreign Service premium:
To accept a foreign assignment, an extra pay is often offered to expatriates as an
inducement, known as Foreign Service premium. Such extra premium is paid to
compensate the expatriate for living in an unfamiliar country isolated from friends
and family.
Allowances:
It refers to the payments made to expatriates for extra costs required to be incurred
for residing overseas. Various types of allowances that form part of expatriate
compensation package are discussed below.
Hardship allowance:
It is paid when an expatriate is posted in a difficult location that has grossly
deficient level of basic amenities, such as healthcare, schools, transport, and safety
compared to the expatriates home country.
Quality of life index, as given in Fig. 17.14, provides a useful tool to carry out
comparison between various international locations. Zurich ranked as the worlds
top city in terms of quality of life with a score of 108.1 in 2007, followed by
Germany, and Vancouver whereas Baghdad ranked at the last.

Cost of living allowance:

Cost of living allowance (COLA) is paid based on the differences in the price of food,
transport, clothes, household goods, entertainment, etc., between expatriates
home country and place of overseas posting. Since it is difficult to precisely
determine the COLA, MNEs may make use of information provided by specialist
organizations.
Companies often make use of secondary information from the UN, World Bank, IMF,
or private publications, such as UBS, Mercer, or EIU surveys.
Cost of living computed on the basis of a weighted shopping basket of Western
European consumer habits containing 122 goods and services, including rent,
considering an index of 100 for New York reveals that London is the most expensive
place in the world with an index of 120.2 as shown in Fig. 17.15, followed by Oslo
(112.3) whereas Copenhagen has index value of 102.6, Geneva 96.0, Tokyo 94.4,
Paris 92.8, Sydney 82.2, Dubai 72.8, Moscow 71.2, Singapore 70.5, Mumbai 49.6,
Nairobi 46.3, Shanghai 43.2, New Delhi 41.4, and Kuala Lumpur 31.0.

Housing allowance:
Expatriates are often provided company accommodation or housing allowances to
maintain their living standard at home country level.
Home leave allowances:
MNEs often provide paid leave and travel costs to expatriates and their families so
as to enable them to visit their home country usually once in a year as a part of
their compensation package.
Education allowances:
Allowances for education of expatriates children are often an integral part of
expatriates compensation package so as to ensure that their children receive the
same level of education as in the home country. It may include enrolment fee,
tuition fee, fee for language classes, costs of books and stationary, transport, etc.
Relocation allowances:
MNEs often provide travel costs of expatriates and their families and cost of
transporting household belongings overseas. Transit accommodation in a company
guest house or a hotel overseas is often provided till final housing arrangements are
made and the arrival of household goods. It may also include some perquisites,
such as car, club membership, domestic help, etc.
Assistance for tax equalization:
Tax equalization refers to an adjustment to expatriate pay to reflect tax rate in the
home country. Expatriates face two potential sources of income tax liabilities, both
from host and home country. Although most countries exempt their citizens on
foreign income, it is also taxed in some countries, such as the US, subject to certain
exemptions.
Expatriates may have to pay income tax to both host and home country
governments, unless there is a reciprocal tax treaty between the two. Generally
MNEs pay expatriates income tax in the host country when a reciprocal tax treaty is
not in force. Sometimes international firms also make up the difference when the
income tax rate in host country is higher which may otherwise reduce expatriates
take home pay.
Other benefits:
Benefits are usually monetary in nature, such as insurance, pensions, medical and
educational benefits and are monitored closely with compensation management.
Such benefits may also include vacations and special leaves, provisions for
emergency leaves, and free air fare for the home country for expatriates and their
family in case of emergency.
Most firms ensure that expatriates receive the same level of benefits abroad as in
their home country. Sometimes it can be much costlier for the firms as such benefits
may not be tax deductible for the firm out of the country unlike in the home country.
Strategic approaches to international compensation:
An MNE may follow either home-, or host-country-based compensation systems or a
hybrid of the two, as summarized in Exhibit 17.3.
Home-country-based compensation system:
Under this system, expatriates base salary is linked to the salary structure of the
home country. For instance, salary of an Indian manager posted to the US would be
based on the Indian rather than the US level.
It is also known as balance sheet approach, which aims at maintaining the home
country living standard for expatriates and their families, besides providing some
financial inducements to work overseas. It is designed to equalize the purchasing
power of expatriates at comparable position levels at the host and the home
country and to provide incentives to offset qualitative differences between the job
locations.
Host-country-based compensation system:
Expatriates base salary is linked to the pay structure in the host country. However,
other allowances and benefits are linked to the home country salary structure. It is
also known as the going rate approach, under which the base salary of an
expatriate is linked to the prevailing salary structures in the host country.
It is based on information obtained through compensation surveys of locals (HCNs),
expatriates of same nationality, or expatriates of all nationalities. However, the
basic pay and benefits may be supplemented by additional payments in low-pay
countries.
Hybrid compensation system:
It combines the features of both the home- and host-country-based compensation
approaches to create a global workforce. It is based on the principle that all
expatriates regardless of their country of origin belong to one nationality.

Approaches to International Compensation

Compensation packages should attract, retain and motivate employees, while at the
same time balancing these costs with the expected returns for the organization,
which is not an easy task.
Although different situational factors such as the attractiveness of the assignment
destination and the number of potential candidates require flexibility in
compensation practices, some general guidelines and methods exist. Broadly
speaking, we can differentiate between two different approaches to expatriate
compensation: the balance sheet approach and the going rate approach (see
Reiche, Harzing & Garcia 2009).
The balance sheet approach is the most widely used approach by organizations and
its main idea is to maintain the expatriates standard of living throughout the
assignment at the same level as it was in his/her home country. In other words, it is
about ensuring the same purchasing power, which helps to maintain the home
countrys lifestyle. Another important notion is that the balance sheet approach
implies matching the expatriates salary with home-country peers, not with the
host-country colleagues. On top of the home-country salary, host-country cost of
living adjustments are usually made. As argued by Sims and Schraeder (2005) in
their recent review of expatriate compensation practices, such adjustments are
made using the no loss approach: expatriate compensation is adjusted upward for
higher costs of living, but is not adjusted downward if the cost of living in the host
country is less than in the home country.
Contrary to the balance sheet approach, there is a second approach, the going rate
approach, which is also known as the localization, destination or host country-
based approach (Sims & Schraeder 2005). As these names suggest, the core of this
approach lies in linking the expatriate compensation to the salary structure of the
host country, taking into account local market rates and compensation levels of
local employees. The going rate method aims to treat the expatriate employee as a
citizen of the host country, encouraging a when in Rome, do as the Romans do
mentality (Sims & Schraeder 2005).
Thus, the two approaches have different foci and hence also different advantages
and disadvantages (see the following table):

Apart from the stated differences in the two approaches and the related benefits
and drawbacks, the going rate approach seems to be more cost-effective than the
balance sheet approach. In other words, going local may reduce the host-country
market adjustment costs, which may be especially tempting for Western
multinationals sending people to countries with lower salary levels. Despite these
advantages, the balance sheet approach continues to be the most widely used
method. According to the Brookfield Global Relocation Trends survey, 62% of
respondents used a home-country approach (i.e. balance sheet approach) to
determine compensation for long-term assignments, only 6% a host-country
approach and 32% various combinations of home/host-country approaches. This
suggests that attraction/motivation of potential candidates for assignments is
clearly more important than cost saving.
However, no matter which compensation approach is used, the certain basic needs
of expatriates should be still met. Organizations should not forget about the daily
life challenges faced by employees in a foreign country, and hence there is a need
for extra attention to security, medical care, housing, education of children, spouse
matters and home trips.
In the end, it is important to consider the concept of wholeness with regard to the
goals of compensation packages. The concept refers to the organizations desire to
ensure that the expatriate does not experience an overt gain or loss when all
elements of the compensation package are combined (Wentland, 2003). While
finding a balance between the organizations and expatriates perceptions of
wholeness can sometimes be difficult, the intentions of keeping the employee as a
whole by not letting expatriates experience drastic lifestyle changes are
paramount.

A Learning Organization and its Characteristics

A learning organization is the term given to an organization which facilitates the
learning of its employees so that the organization can continuously transforms
itself. Learning organization develops as a result of the pressures which are being
faced by the organizations these days for enabling them to remain competitive in
the present day business environment. The learning organization concept was
coined through the work and research of Peter Senge and his colleagues. The
learning organization encourages to a more interconnected way of thinking. Such
organization becomes more like a community for which employees feel a
commitment to. Employees work harder for the organization since they are
committed to it.
The concept of the learning organization is commonly hailed as panacea for
organizational success in a dynamic global economy. The concept of learning
organization is increasingly relevant given the increasing complexity and
uncertainty of the organizational environment. In the words of Senge: The rate at
which organizations learn may become the only sustainable source of competitive
advantage.
People have found the idea of a learning organization to be inspiring, yet difficult to
implement. It frequently involves deep change in the mind sets of employees as
well as the culture of the organization and the society. Such change does not occur
overnight.
Definitions of learning organization
The following are some of the available definitions of the learning organization.
Peter Senge has defined the learning organization as the organization in
which you cannot not learn because learning is so insinuated into the fabric
of life. According to him the learning organizations are organizations
where people continually expand their capacity to create the results they
truly desire, where new and expansive patterns of thinking are nurtured,
where collective aspiration is set free, and where people are continually
learning to see the whole together.
Learning organization can also be defined as an Organization with an
ingrained philosophy for anticipating, reacting and responding to change,
complexity and uncertainty.
 McGill and his colleagues had defined the learning organization as a
company that can respond to new information by altering the very
programming by which information is processed and evaluated.
A learning organization is one that is able to change its behaviours and mind-
sets as a result of experience. This may sound like an obvious statement, yet
many organizations refuse to acknowledge certain truths or facts and repeat
dysfunctional behaviours over and again.
A learning organization is an organization that actively creates, captures,
transfers, and mobilizes knowledge to enable it to adapt to a changing
environment.
An organization needs to learn to survive and prosper in changing and uncertain
environment. It needs its managers to make right decisions through skill and sound
judgment. Successful decision-making requires the organization to improve its
capability of learning new behaviours over a period of time. This learning in the
organization is a fighting process in the face of swift pace of change. In this battle
managers are responsible for increasing the awareness and the ability of the
organizational employees to comprehend and manage the organization and its
environment. In this way they can make decisions that continuously secure the
organization to reach its goals.
However, most managers know how to ensure the organizational learning, but fail to
understand how to make their organization a learning organization.
Individuals and groups learn, and when conditions and systems are well designed. In
a learning organization, their learning can be shared across the organization and
incorporated into its practices, beliefs, policies, structure and culture.
The role of a leader in the learning organization is that of a designer, teacher, and
steward who can build shared vision and challenge prevailing mental models. He is
responsible for building in which the employees are continually expanding their
capabilities to shape their future that is, leaders are responsible for learning.
The basic rationale for a learning organization is that in situations of rapid change
only those that are flexible, adaptive and productive will excel. For this to happen, it
is argued, the organization needs to discover how to tap employees commitment
and capacity to learn at all levels
The learning organization aims to bring new ideas, debate issues, introduce
innovative methods and offer case studies to others.
Over time, the notion of learning organization as an idealized and apolitical end-
state rather than as a process, has increasingly gained uncritical acceptance.
The key ingredient of the learning organization is in how the organization processes
its managerial experiences. A learning organization learns from the experiences
rather than being bound by its past experiences. In the learning organization, the
ability of the organization and its managers is not measured by what it knows (that
is the product of learning), but rather by how it learns the process of learning.
Management practices encourage, recognize, and reward with openness, systemic
thinking, creativity, a sense of efficacy, and empathy.
While all the employees have the capacity to learn, the structures in which they
have to function are often not conducive to reflection and engagement.
Furthermore, the employees may lack the tools and guiding ideas to make sense of
the situations they face. Hence the learning organization which is always aspiring
for success in its operation is to create a future that requires a fundamental shift of
mind among its employees.
The dimension that distinguishes a learning organization from more traditional
organizations is the mastery of certain basic disciplines or component
technologies. The five main characteristics (Fig 1) that Peter Senge had identified
are said to be converging to innovate a learning organization. These are (i) Systems
thinking, (ii) Personal mastery, (iii) Mental models, (iv) Building shared vision, and
(v) Team learning.

Fig 1 Five characteristics of a learning organization

Systems thinking
The idea of the learning organization developed from a body of work called systems
thinking. This is a conceptual framework that allows people to study businesses as
bounded objects. Learning organization uses this method of thinking when
assessing the organization and has information systems that measure the
performance of the organization as a whole and of its various components. Systems
thinking states that all the characteristics must be apparent at once in an
organization for it to be a learning organization. If some of these characteristics are
missing then the organization falls short of its goal. However some believes that the
characteristics of a learning organization are factors that are gradually acquired,
rather than developed simultaneously. Systems thinking is the conceptual
cornerstone of a learning organization. It is the discipline that integrates all the
employees of the organization, fusing them into a coherent body of theory and
practice. Systems thinking ability to comprehend and address the whole and to
examine the interrelationship between the parts provides for both the incentive and
the means to integrate various disciplines in the organization.
Personal mastery
Organizations learn only through individuals who learn. Individual learning does not
guarantee organizational learning. But without it no organizational learning occurs.
Personal mastery is the discipline of continually clarifying and deepening
employees personal vision, of focusing their energies, of developing patience, and
of seeing reality objectively. It goes beyond competence and skills, although it
involves them.
The commitment by an individual to the process of learning is known as personal
mastery. There is a competitive advantage for the organization over other
competiting organizations if the employees of the organization can learn more
quickly. Individual learning is acquired through employees training, development
and continuous self-improvement, however learning cannot be forced upon an
individual who is not receptive to learning. Research shows that most learning in the
workplace is incidental, rather than the product of formal training. Therefore it is
important to develop a culture in the organization where personal mastery is
practiced in daily life. A learning organization has been described as the sum of
individual learning, but there must be mechanisms for individual learning to be
transferred into organizational learning.
People with a high level of personal mastery live in a continual learning mode. They
never arrive. Sometimes, language, such as the term personal mastery creates a
misleading sense of definiteness, of black and white. But personal mastery is not
something you possess. It is a process. It is a lifelong discipline. People with a high
level of personal mastery are acutely aware of their ignorance, their incompetence,
and their growth areas. They are always deeply self-confident.
Mental models
Mental models are deeply ingrained assumptions, generalizations, or even pictures
and images that influence how we understand the world and how we take action.
The assumptions held by individuals and organizations are called mental models. To
become a learning organization, these models must be challenged. Individuals tend
to espouse theories, which are what they intend to follow, and theories-in-use,
which are what they actually do. Similarly, organizations tend to have memories
which preserve certain behaviours, norms and values. In creating a learning
environment it is important to replace confrontational attitudes with an open
culture that promotes inquiry and trust. To achieve this, the learning organization
needs mechanisms for locating and assessing organizational theories of
action. Unwanted values need to be discarded by the process called unlearning.
The discipline of mental models starts with turning the mirror inward; learning to
unearth our internal pictures of the world, to bring them to the surface and hold
them rigorously to scrutiny. It also includes the ability to carry on learningful
conversations that balance inquiry and advocacy, where people expose their own
thinking effectively and make that thinking open to the influence of others.
If the organization is to develop a capacity to work with mental models then it is
necessary for the employees to learn new skills and develop new orientations. For
this there need to be institutional changes in order to foster such change. There
need to have openness in the organization. It also involved seeking to distribute
organizational responsibly far more widely while retaining coordination and control.
Building shared vision
If any one idea about leadership that has inspired organizations for thousands of
years, is the capacity to hold a share picture of the future the organizations seek to
create. Such a vision has the power to be uplifting and to encourage
experimentation and innovation. Crucially, it is argued, it can also foster a sense of
the long-term vision, something that is fundamental
The development of a shared vision is important in motivating the employees to
learn, as it creates a common identity that provides focus and energy for
learning. The most successful visions normally build on the individual visions of the
employees at all levels of the organization. The creation of a shared vision can be
hindered by traditional structures where the organizational vision is imposed from
above. Therefore, a learning organization tends to have flat, decentralized
organizational structure. The shared vision is often to succeed against a competitor
for which there can be transitory goals. However there should also be long term
goals that are intrinsic within the organization.
When there is a genuine vision (as opposed to the familiar vision statement),
employees excel and learn, not because they are told to, but because they want to.
But many leaders have personal visions that never get translated into shared
visions that galvanize the organization. What has been lacking is a discipline for
translating vision into shared vision not a cookbook but a set of principles and
guiding practices.
The practice of shared vision involves the skills of unearthing shared pictures of the
future that foster genuine commitment and enrolment rather than compliance. In
mastering this discipline, management is to learn the counter-productiveness of
trying to dictate a vision, no matter how heartfelt it is.
Visions spread because of a reinforcing process. Increased clarity, enthusiasm and
commitment rub off on others in the organization. As people talk, the vision grows
clearer. As it gets clearer, enthusiasm for its benefits grow. There are limits to
growth in this respect, but developing the sorts of mental models can significantly
improve matters. Where the organizations can transcend linear and grasp system
thinking, there is the possibility of bringing vision to fruition.
Team learning
The accumulation of individual learning constitutes team learning. The benefit of
team or shared learning is that the employees grow more quickly and the problem
solving capacity of the organization is improved through better access to knowledge
and expertise. A learning organization has structures that facilitate team learning
with features such as boundary crossing and openness. Team learning requires
individuals to engage in dialogue and discussion. Therefore team members must
develop open communication, shared meaning, and shared understanding. A
learning organization typically has excellent knowledge management structures,
allowing creation, acquisition, dissemination, and implementation of this knowledge
in the organization.
Team learning is viewed as the process of aligning and developing the capacities of
a team to create the results its members truly desire. It builds on personal mastery
and shared vision but these are not enough. Employees need to be able to act
together. When teams learn together then not only there are good results for the
organization but the team members also grow more rapidly which could not have
happened otherwise.
The discipline of team learning starts with dialogue, the capacity of members of a
team to suspend assumptions and enter into a genuine thinking together.
The notion of dialogue amongst team members helps them to become open to the
flow of a larger intelligence. When the dialogue is joined with systems thinking,
there is the possibility of creating a language more suited for dealing with
complexity, and of focusing on deep-seated structural issues and forces rather than
being diverted by questions of personality and leadership style.
Benefits of a learning organization
A learning organization does not rely on passive or ad hoc process in the hope that
organizational learning will take place through serendipity or as a by-product of
normal work. A learning organization actively promotes, facilitates, and rewards
collective learning. The main benefits of a learning organization are as follows.
Maintaining levels of innovation and remaining competitive

Being better placed to respond to external pressures

Having the knowledge to better link resources to customer needs

Improving quality of outputs at all the levels

Improving the corporate image of the organization by becoming more people

oriented
Increasing the pace of change within the organization

Organizational learning
Organizational learning is defined as occurring under two conditions. First, it occurs when an
organizational reached the goals it was trying to achieve. In that case, there is a match between
the proposed actions and the outcome. Second, learning occurs when we identify the mismatch
between intentions and outcome and correct it. In this case a mismatch is turned into a match.
These are illustrated in figure 4.

Single-Loop Learning
Following the rules
Single and double-loop learning-concepts have been developed by Chris Argyris and
Donald Schn. These theories are based upon a theory of action perspective
designed by Argyris.
Single-loop learning (illustrated in figure 1 below) is one kind of organizational
learning process. In single-loop learning, people, organizations or groups modify
their actions according to the difference between expected and reached outcomes.
In other words, when something goes wrong or does not happen like we would like,
most of us would consider how the situation could be fixed. Single-loop learning can
also be described like to be situation in which we observe our present situation and
face problems, errors, inconsistencies or impractical habits. After that we adapt our
own behavior and actions to mitigate and improve the situation accordingly.

There are few problems with single-loop learning. The biggest problem with it is that
acting like that we only remove the symptoms, while root causes are still remaining.
That is not a good thing because we will have new problems in the future. Instead of
that we should examine, and find out the root causes and also challenge our
underlying beliefs and assumptions. By using only single-loop learning we end up
making only small fixes and adjustments. That is the main reason why we also need
double- and triple-loop learning. These two topics will be discussed later on this
blog.
The other problem with single-loop learning is that it assumes problems and their
solutions to be close to each other in time and space. However, this is not true
generally. In this kind of learning, individuals or groups are primarily observing their
own actions and methods. This will lead to small changes in specific practices,
behaviors or methods which are based on what has or has not been working before.
In summary it can be said that single-loop learning is operative level and it answers
to the question Are we doing things right?
Double-loop learning
Changing the rules
The previous post was all about single-loop learning. Now it is time to consider
double-loop learning. As I have described earlier, double-loop learning is a part of a
theory of action designed by Chris Argyris. In single-loop learning characterized by
the fact that we changed our action or behavior to fix or avoid mistakes. Whereas in
double-loop learning we also correct or change the underlying causes behind the
problematic action.
There could me many different underlying causes. Underlying causes may be, for
example, organizational norms, policies, ways to work or individuals motives,
assumptions or even informal and ingrained practices which prevent inquiry on
these causes.
In double-loop learning (illustrated in figure 2 below) we are forced to think about
our actions in the framework of our operating assumptions. That is an important
thing because we need to start thinking and analyzing our own processes. We
should ask ourselves what is going on here? and what are the patterns?. That
information is needed if we want to understand the pattern. Double-loop learning
will lead to deepen understanding of our assumptions and better decision-making in
our everyday operations. We also need to notice that double-loop learning leads to
organizational learning. That is very important because organizational learning is
one of the most important factors nowadays. Without organizational learning we
have serious troubles.

Basically, double-loop learning requires three skills:

1. self-awareness
2. honesty or candor
 3. taking responsibility
At first we need self-awareness to identify what is often unconscious or habitual.
After that we need honesty or candor to recognize mistakes and discuss with other
people to find out and establish root-causes. Finally we need to take responsibility
for how we need to change our action or methods and how we can learn from the
incident.Chris Argyris himself is described the process of single and double-loop
learning in the context of organizational learning as follows:
When the error detected and corrected permits the organization to carry on its
present policies or achieve its presents objectives, then that error-and-correction
process is single-loop learning. Single-loop learning is like a thermostat that learns
when it is too hot or too cold and turns the heat on or off. The thermostat can
perform this task because it can receive information (the temperature of the room)
and take corrective action. Double-loop learning occurs when error is detected and
corrected in ways that involve the modification of an organizations underlying
norms, policies and objectives.
In summary, by using double-loop learning we examine the underlying assumptions
behind the actions and behavior and learn from those mistakes and incorrect
methods. By doing this we are able to remove the root causes that makes us to
behave or action in a certain, poor or costly way. While single-loop learning was
more like an operative level, double-loop learning is rather a tactical level. Double-
loop learning should answer to question Are we doing the right things?.

Triple-loop learning
Learning about learning
The origin of the triple-loop learning is not well-known. It is clear that triple-loop
learning is inspired by Argyris and Schn (developers of single- and double-loop
learning) but the term does not appear explicitly in their published works. In triple-
loop learning (illustrated in figure 3 below) we learn how to learn by reflecting how
we learned in the first place. In this kind of learning organizations, individuals or
groups should reflect on how they think about rules and not only think that rules
should be changed. Triple-loop learning helps us to understand more about
ourselves or our organization. One defining for triple-loop learning is double-loop
learning about double-loop learning.
All in all it can be said that triple-loop learning encompasses both single- and
double-loop learning and much more than that. This means that triple-loop learning
focuses on the ability to utilize both single- and double-loop learning. It challenges
existing learning framework as well as models and assumptions. The learning goes
be beyond insight and patterns to context. With triple-loop learning we get to known
new ways of learning and new commitments.
This kind of learning challenges us to understand the overall picture and how the
problems and solutions are linked together even when separated widely by time and
place. It is also important to notice that with triple-loop learning we should able to
understand how our previous actions created the conditions that led us to our
current situation and problems.
Organizations can benefit from triple-loop learning in many ways:
The relationship between organizational structure and behavior will change
fundamentally because the organization learns how to learn
Organization learn new ways to comprehend and change its purpose

Organization get a better view of understanding of how to respond to its

environment
Get a deeper comprehension of why our organizations chose to do things we
do
In summary, while single-loop learning all about correcting errors without
questioning underlying assumptions and double-loop learning detects errors,
questions underlying assumptions behind the actions and behavior and also learn
from these mistakes, triple-loop learning is operating at a higher level; it develops
the organizations ability to learn about learning. Triple-loop learning should answer
to question how do we decide what is right?
e-HRM & HRIS

Organisations have in recent years heavily invested in information and

communication technology (ICT) for the support of different business functions. The
human resources (HR) functions of organisations are no exception. The combination
of the need to work more effectively and efficiently on the one hand and the
possibilities of current ICT on the other, has resulted in the rapid development of
electronic HR systems and applications .
Although a variety of definitions exist for e-HRM, ranging from those based on
system functionality to those that see it as an overall approach to HR management,
for the purposes of this paper, e-HRM will be defined as the administrative support
of the HR function in organizations by using information technologies, aiming at
creating value within and across organisations of the targeted employees and
management . Strohmeier (2007) defines e-HRM as the application of information
technology for networking and supporting at least two individual or collective actors
in their shared performing of HRM activities. He notes that in e-HRM, technology
serves both as a medium, connecting spatially segregated actors, and as a tool for
task fulfilment, as it supports actors by substituting for them in executing HRM
activities.
There is a fundamental difference between HRIS (human resource information
system) and e-HRM lies in the fact that HRIS are directed towards the HR
department itself . Users of these systems are mainly HR staff. These types of
systems aims to improve the processes within the HR department itself (Alshibly,
2011). With e-HR, the target group is not the HR staff but people outside this
department: the employees and management. HRM services are being offered
through an intranet for use by employees. The difference between HRIS and eHRM
can be identified as the switch from the automation of HR services towards
technological support of information on HR services. e-HR is the technical unlocking
of HRIS for all employees of an organization.
The literature on e-HRM suggests that, overall, the four goals in introducing e-HRM
are reducing administrative costs, improving HR services, speeding response times,
and improving decision making, thus helping HRM to become more strategic,
flexible, cost-efficient, and customer-oriented. The e-HRM technology supports the
HR activities to comply with the HR needs of the organisation through web-
technology based channels. The e-HRM technology provides a portal which enables
managers, employees and HR professionals to view extracts or other information
which is necessary for managing the HR of the organization. e-HRM and its self-
service characteristics can be the cheapest and fastest way to provide specific HR
activities. With e-HRM, managers can access relevant information and data, conduct
analyses, make decisions and communicate with others and they can do this with a
click of the mouse.
Academics and practitioners alike consider e-HRM applications to be a valuable tool.
However, researchers have not demonstrated a consistent relationship between
information systems (IS) investment and organizational performance. In order for e-
HRM applications to be used effectively in an organization, we need dependable
ways to measure the success and/or effectiveness of the e-HRM system. While a
considerable amount of research has been conducted on IS success models, little
research has been carried out to address the conceptualization and measurement of
e-HRM success within organizations. Whether or not traditional IS success models
can be extended to assessing e-HRM success is rarely addressed. There is a need to
investigate whether traditional information systems success models can be
extended to investigating e-HRM.