International Human Resource

Management
Tribhuvan
tribhu@hotmail.com
Trends in the International Division of
Labor
 The logical consequence of the theories is that a country
would do well to concentrate on the production of those
goods and services in which it has a competitive
advantage.
 Reich’s : In his book the work of nations. Preparing
ourselves for 21st century capitalism.
 The most important objectives for companies including
multinational companies – satisfy market demand and to make
profits.
 Countries that have nothing to offer in international
competition are doomed to lose out badly.
 First world countries that do not have a supply of cheap labor
will have to concentrate on the production of more
specialized products with a high knowledge and capital
content.
 This will result in an increasing demand for highly educated
and creative people
 Proper education for all citizens is absolute prerequisite for
future prosperity in any country
Main reasons for IHRM
 Globalization – increased mobility of HR
 Rapidly developing economies (RDEs)
 Low wage and low cost countries
 Changing demographics
 Regional trading blocks
 Technology
 Effective management of HR – determinant of success or
failure in international business
 Failure in international assignment – costly in human and
financial terms
 Growth in mergers, acquisitions and alliances
Status of IHRM
 In 1980s IHRM was in the infancy stage of development
 Most of the research was focused on international
production and international marketing
 Late 1990, researchers started looking at IHRM
 But most of the research conducted by US researchers
from an American rather than an international
perspective
 IHRM literature suffered from the conceptual and
normative limitations
What is IHRM?
 HRM refers to those activities undertaken by an
organization to utilize its human resources effectively.
These activities would include at least the following:
 Human Resource Planning
 Staffing (recruitment, selection, placement)
 Performance Management
 Training and Development
 Compensation and benefits
 Industrial Relations
 IHRM is the interplay among the three dimensions – HR
activities, types of employees and countries of operation.
 A model developed by Morgan presents IHRM on three
dimensions HR Activities
Utilize
Allocate
Other
Procure

Host-country nationals (HCNs) Home

Parent-country nationals (PCNs) Host

Countries
Third-country nationals (TCNs)

Types of Employees
Terms to be known
 Expatriate
 Repatriate
 Inpatriate
 Transpatriate
 Expatriate
 an employee who is working and temporarily residing in a
foreign country.
 Short-term assignment living in host country while remaining a
citizen of one’s home country
 Repatriate
 When expatriate comes back from foreign assignment
 Inpatriate
 Relocated to the parent country headquarters
 Transpatriate
 PCN, HCN, TCN
 Transferred to international assignment in transnational firms
Approaches to IHRM
 The field of IHRM is characterized by three broad approaches.
 Cross-cultural management - examining human behavior within
organizations from an international perspective
 Comparative industrial relations and HRM – compare and analyze
HRM systems in various countries
 HRM in the Multinational firms

HRM in Comparative
Cross-cultural
multinational HR and IR
management
context systems
 Domestic and International HRM
Factors IHRM HRM
HR Activities
Taxation Domestic & International Domestic
Relocation and Arranging for pre-departure Less time is required than
orientation training, providing immigration IHRM
and travel details, providing
housing, shopping, medical care
etc.,
Administrative Time-consuming and complex Policies and procedures are
services activity because policies and clear and less conflict
procedures are not always clear-
cut and may conflict with local
conditions
Government Work permits and other Not essential unless for
Relations important certificates international assignments
Language To provide translation services Not required
translation to all foreign operation
departments within the
multinational
 Factors IHRM HRM
Broader Perspective International perspective National / domestic
Ex: employees are covered by perspective
complex compensation policy Ex: employees are covered
by uniform compensation
policy
Involvement in Necessary for the selection, training Limited
employees personal and effective management
lives Ex: some governments require the
presentation of a marriage
certificate before granting a visa to
an accompanying spouse.
Risk exposure Expatriate failures Limited
Terrorism
Broader External Government, economy etc., Limited
influences
Models of IHRM
 HRM has generally been viewed from two different
perspectives:
 Hard and Soft models
Hard model
 According to Hard model, reflecting utilitarian (useful)
instrumentalism (predictions)
 HRM is used to drive the strategic objectives of the
company
 It is argued that it ignores fundamental differences
between people and other resources
 Production resources can be moved around, shuffled,
reduced, increased, transformed and discarded.
 But humans have emotions, interests and attachments and
perform their tasks if they are satisfied. They cannot be easily
discarded and shuffled around against their wish.
Soft Model
 According to Soft Model, HRM is developmental
humanist (dignity and worth of individual) view
 Treating employees as valued assets
 Proactive inputs in production processes and capable of
development
 Many companies employ both soft and hard models
 Ex: managers, core employees and skilled workers may be
treated according to the soft model and casual or unskilled
workers according to hard model.
 Hard model - when economic downturns and high
unemployment
 Soft model – full employment
Other Models
 Matching Model
 Harvard Model
 Contextual Model
 5-P Model
 European Model
 Matching Model
 Highlights the resource aspect of HRM
 Emphasizes the efficient utilization of HR to meet
organizational objectives
 ‘Right fit’ between organizational strategy, organizational
structure and HRM systems
 Harvard Model
 Stresses the soft aspect of HRM
 More concerned with the employer-employee relationship
 It highlights the interests of different stakeholders in the
organization and how their interests are related to the
objectives of management
 Contextual Model
 Based on the premise that organizations may follow a number
of different pathways in order to achieve the same results.
 This happens because organizations has a number of linkages
between external and internal environment
 These linkages contribute directly to forming the content of an
organizations HRM
 5-P Model
 HR activities
 Philosophies
 Policies
 Programmes
 Practices
 Processes
 This model shows interrelatedness of these activities and
explains their significance in achieving the organizations needs
 European Model
 Based on the argument that European organizations are
constrained at both international and national level by national
culture and legislation
 These constraints need to be accommodated while forming a
model of HRM
Models of SHRM in Multinational
Companies
 There is a growing need for a better understanding of the
relationship between international strategy and HRM
 It has been argued that the fundamental strategic problem
for top managers in international firms is balancing the
economic need for integration with the pressures for
local responsiveness
 The central issue for MNCs is not to identify the best
IHRM policy but rather to find the best fit for the firms
strategy, structure and HRM approach.
 International human resources are a strategic resource,
which should affect strategy formulation as well as its
implementation.
 We have two classic models of Strategic International
Human Resource Management
 Adler and Ghadar’s Phases of Internationalization
 De Cieri and Dowling integrative framework of strategic HRM
in MNC’s
Adler and Ghadar’s Phases of
Internationalization
 This model is based on Vernon’s Life cycle.
 First Phase (high tech) focuses on the product, R&D
 Second Phase (growth and internationalization) concentrates on developing
and penetrating markets
 Third Phase (maturity) intense efforts are made to lower prices by
implementing cost control measures.
 According to Adler and Ghadar, the average length of the PLC after the
second world war was 15-20 years
 Now it is 3-5 years. For some products, it is as short as 5 months
 This resulted to fourth phase (differentiation and integration) way to
develop and penetrate markets and to achieve cost control
 This model is linked to culture and HRM
 De Cieri and Dowling Model
 IHRM activities in MNCs are influenced by both structure
(endogenous) and strategy (exogenous).
Exogenous Factors
Industry characteristics
Country-regional characteristics

Inter-organisational networks

Endogenous Factors Strategic HRM MNC concern and goals

MNC Structure HR function strategy Competitiveness
•Structure of international HR Practices Efficiency
operations Balance of global integration
•Intra-organisational networks and local responsiveness
•Mechanisms of co-ordination Flexibility
•Organisational and industry life
cycle
•International entry mode
MNC strategy
•Corporate-level strategy
•Business-level strategy
•Experience in managing
international operations
•Headquarters international

orientation
Internationalization of HRM
The evolution of management
thoughts and theories shows that:
 in the early parts of the 20th centaury – organizations
operated and argued for a universalistic ‘one best way’
of organizing work is – Bureaucracy
 in 1950s and 1960s – researchers of management
challenged this universalistic view – human relations
 Next, there were challenges on the grounds that different
technologies require different styles of management –
contingency theory – survival of an organization
depends upon its efficient and effective performance –
organization responds and adapts to its environmental
demands.
 But still national culture is significant and cannot be
ignored – organizational performance
Culture
 Customs
 Beliefs
 Norms
 Do’s and Don’t’s
 Binding
 Passed on from GENERATION to GENERATION
 Dominant Culture
 National
 Sub Culture
 Regional
 Organization Culture
 Organizational
 Occupational Culture
 Professional
National Culture
 Culture refers to values and attitudes that people
belonging to a given society
 Values learned and shared by the members of a given
community
 Cloth, food, ways of greeting and meeting, ways of
working together, ways of communicating etc.,
Culture and Employee Management
Issues

 Attitude to Power and authority

 Tolerance for ambiguity and attitude to risk
 Interpersonal trust
 Individualism and collectivism
 Leadership behaviors
Attitude to power and authority
 In any culture, there is inequality of power between
people, based on many factors
 Wealth
 Education
 Political
 Social positions
 At macro level – class, caste and feudal systems
 At micro level – the extent to which individuals
might be willing to challenge the authority of people
in senior positions
 The degree to which the inequality between
members exists or is accepted in a society
 All humans are unequal but some are more unequal than others by
George Orwell
 One could place various nations at one end of which are
located high-inequality cultures and at the other low-
inequality ones, with others somewhere between these
two extreme poles
High-inequality Cultures

 People are afraid of those in positions of power or too

respectful
 Employees do not challenge their superiors in the
workplace
 Superiors are also reluctant to give employees an
opportunity to do so
 The management style is paternalistic or autocratic
 Organizations are highly centralized with a rigid
hierarchical chain of command
 Instructions flow from the top and obedience is
expected from those in the lower levels
Low-inequality Cultures

 Employees respect their managers but feel able to point

out to them when they do not agree with their views
 Junior employees expect to be consulted with for major
decisions
 Management style – participative or consultative,
hierarchy is flat and flexible
Tolerance for ambiguity and attitude to
risk

 Influences the degree to which people are willing to

make decisions on their own and accept
responsibility for the outcome
 Ex: experiment-based teaching at school

 Employees who have less tolerance for uncertainty

and are unwilling to face ambiguity and risk are more
likely to avoid making decisions on their own and
without direction from above (policies, regulations
etc.)
 High tolerance for uncertainty and willingness to take
risk, people tend to be entrepreneurial, able to handle
uncertainty situations and are prepared to take risky
decision on their own
 Generally have a decentralized structure and the ‘man and
woman’ on the spot is empowered to do the job as he or
she sees fit.
Interpersonal Trust

 Willingness to share power and authority with their

subordinates – depends on level of trust
 Ex: corruption
 If people are honest, high levels of work ethic as well as
required skills and capabilities, in the workplace their
managers tend to trust them to make important
decision on their own
 Managers are likely to delegate decision-making
authority only to a few trusted employees, preferably
their own relatives and friends.
Individualism and Collectivism
 Individualism => self-interest, selfishness
 Collectivism => Self-sacrifice
 Individualist person is at the centre of his or her own
world – belief in one’s own worth, confidence in one’s
own ideas and opinion
 Relationship between employee and the organization is
contractual
 Employees offer their labor for a commensurate pay during their
working hours
 Ex: employees at shop floor, clerks etc., do not work beyond the office
hours without being paid overtime
 Two are completely separate spheres of life (work and life)
 Collectivist culture – person belongs, such as family,
community or even work organization
 Here people put their group’s interests before theirs
 Employees are prepared to work beyond the official working
hours if required without expecting overtime
 Workplace looks after the employees well being and in
return expects loyalty and commitment
Leadership Behaviors

 People living in different parts of the world have

different expectations from those who are in
leadership positions – country ruler, community
leader or a senior member of your family
 These leaders discharge their duties in a compatible
manner with those expectations; if they do not, they
will lose respect and affection of their followers.
 Four broad categories of leadership styles
 Democratic participative
 Democratic consultative
 Benevolent autocratic
 Coercive autocratic
 Democratic participative
 Leader puts the issue before the members and invites for
discussion
 Decision accepted by the majority is the final and everybody
abides by it
 Democratic consultative
 Leader seeks the views and advice of the members but
makes the final decision himself or herself having listened to
all the arguments.
 The final decision is accepted by all
 Benevolent autocratic
 May not necessarily consult people
 Makes the decision which he or she genuinely thinks is right
 Coercive autocratic
 Total disregard what people think and after having made the
decision will force everybody to abide by it, whether they
like it or not
 Japanese
 Spends more time at work compared to official work hours
 Talks with the subordinates frequently about progress
 Evaluates performance on the work of the group as a whole
 If any member experiencing personal difficulties, the supervisor
discusses the matter in the member’s absence with other
members
 Collectivist culture
 British
 May be addressed by first name
 Frequently demonstrates how to use any of the equipment
used by the group
 Discussing about the person absent – unacceptable behavior
or invasion (attack) of their privacy
 Individualism
Organizational Processes in IHRM
 IHRM is influenced by organizational processes like
 Communication
 Motivation
 Leadership
 Decision making
 Inter-cultural communication
 Germans like people who have a formal manner
 Canadians like people who have an open and friendly manner.
Eye contact is direct
 Chinese like people who are respectful. Once they get to know
you, they can be ‘touchy-feely’
 Russians like people who have an informal manner
 Motivation across cultures
 Individual dimension
 Maslow’s hierarchy of needs
 McClelland
 Herzberg’s
 Team dimension
 Collectivist culture
 Ex: quality circle, group appraisals etc
 Leadership
 Global responsibilities
 Leadership competencies
 Self awareness
 Self regulation
 High level of motivation
 Empathy
 Social skills like networking
 Decision-making
 British organizations – highly decentralized
 French managers highly centralized
 Germans codetermination (both manager and workers)
 Japanese – ringisei (consensus)
 Challenge is how to balance DM?
Challenges of IHRM
 Conflicting Pressures
 War and economic depression
 Staffing for international growth
 Organizing for international growth
 Distinctive organizational capability
 Transferring and recombining knowledge