SHRM Avs Iii Unit

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STRATEGIG HUMAN RESOURCES MANAGEMENT
UNIT – III
CROSS CULTURAL HRM
Domestic Vs International HRM - Cultural Dynamics - Culture Assessment - Cross Cultural

Education and Training Programs – Leadership and Strategic HR Issues in International
Assignments - Current challenges in Outsourcing, Cross border M and A- Repatriation etc -
Building Multicultural Organisation - International Compensation.
Contents
Issues in IHRM ............................................................................................................................................. 3
Barriers or Challenges to effective global HRM.......................................................................................4
3.1.Difference between Domestic & international HRM.............................................................................. 4
3.2. Cultural dynamics................................................................................................................................... 8
3.3.Cultural assessment ..............................................................................................................................12
3.4. Cross cultural education and training programs..................................................................................14
3.5. Strategic HR Issues in International Assignments................................................................................ 15
3.6.Repatriation ..........................................................................................................................................20
3.7. Current challenges in Outsourcing....................................................................................................... 21
3.8. Challenges in cross border M & A........................................................................................................23
Challenges in cross border M & A............................................................................................................... 24
3.9. Building multicultural organization......................................................................................................27
3.10.International Compensation............................................................................................................... 28
3.11. IMPORTANT QUESTIONS .................................................................................................................. 31
1 | This material is proprietary to KV Institute of Management, a Nationally Ranked BSchool in Coimbatore and cannot be copied or duplicated for use outside of KV.
Violators will face infringement proceedings of copyright laws..
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Meaning of IHRM
 Cross cultural or International Human Resource Management(IHRM) is about the worldwide

management of human resources.
 IHRM is “ the process of sourcing, allocating, & effectively utilizing human resources in a
multinational organization.”
Definition
According to Taylor, “Human Resource Management issues, functions and , policies & practices that
results from the strategic activities of MNCs and that impact on the international concerns and goals of
those enterprises.
Features of IHRM
 IHRM involves employment of the right people at the right positions, irrespective of geographic
locations.
 It requires the development of a diversified range of skills for employees, especially for those
who need to work beyond national boundaries.
 It requires the introduction of a well – organized evaluation system to assess the performance of
employees across different locations and nations.
 It is essential to maintain good communication among all the parts and people of the organization
at the global level.
 The perceived value of HR activities generally varies across the different locations of
international companies.
Dimension of IHRM
 Morgan identifies 3 dimensions of IHRM
 Activity Dimensions
 Regional dimension
 Employee group Dimension
Reasons for emergence of IHRM
 Rapid growth of internationalization and global competition.
 Need for effective management
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 Need for international managers
 Traditional hierarchal organizational structures are becoming redundant.
 Developing different organization cultures.
 Strategic alliances, cross- border Mergers and Acquisitions are increasing
 Learning, knowledge acquisition and adaptation..
Factors Affecting IHRM
 Difference in labour market characteristics.
 Cultural differences.
 Differences in regulatory environment.
 Attitude towards employment.
 Differences in condition of employment.
Issues in IHRM
1. Managing international assignments: - the selection, training, compensation and repatriation of
expatriates abound, as do discussion on the causes, cost and frequency of expatriate failures. So expatriate
management as the major concern of HR managers in multinational corporations
2. Employee and family adjustment: - people’s adjustment to expatriate assignments can be extremely
challenging, regardless of the country.
3. Selecting the right person for a foreign assignment:-
This is very critical. Expatriates must be personally adaptable and their families capable of adjusting to
new and unusual challenges. Orientation and training are helping expatriates and their families adjust to
the new culture and learn a new language. Compensation plan for expatriates are usually complex and
expensive because of the taxes, allowances etc.
4. Culture and communication: - International HR professionals are expected to understand the

implications of cultural differences between countries and their interplay with differing corporate
cultures. They often are responsible for seeing that expatriates are trained to adapt to cultural differences
and overcome cultural shock
5. Language and communication: - expatriate managers must learn the foreign language or relay on
local interpreters to communicate with the local workforce. Parent company officials may struggle to
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communicate with local managers in foreign subsidiaries and also they must understand the effective
communication that is important more than speaking same language
6. Legal aspects: - multi-company employment by MNCs IHRM has become more complex. Companies
should carefully analyze the status of employees and subsidiaries to determine whether they are covered
under home country or host country acts
Barriers or Challenges to effective global HRM

1. Variations in country environment:- The world wide variations in social, political and economic
circumstances. An HR practice that works in one country may be unacceptable in another. Government
regulation, job security etc.
2. Perception of HR: - Another global challenge is that the perceived value of HR functions varies across
locations. In one country, HR may be perceived as a true business partner. In another country but within
the same company, HR may be viewed as a transactional personnel department that handles
administrative work
3. Attitude and actions of headquarters towards HR: - These help determine how seriously the HR
function is viewed locally. The position of the corporate chief HR officer also sends a strong signal to
local units on the important of the HR functions
4. Resistance to change:- A major challenge facing global HR practitioners is that different locations have
their own way of doing things and resisting change
5. Cultural differences in learning and teaching styles:- There are fine difference. Eg. The entertaining
instructional style often used in the US might not find a receptive audience in japan
6. Balance: - international companies must try to achieve the appropriate balance between global and
local HR systems and practices
3.1.Difference between Domestic & international HRM

1. More HR activities
 International taxation – expatriates are subject to international taxation and often have both
home country and host country tax liabilities. Therefore, tax equalization policies must be
designed to ensure that there is no tax incentive or disincentive associated with any particular
international assignment. In recognition of these difficulties, many multinational firms retain the
services of a major accounting firm for international taxation services. This difficulties less in
domestic HRM
 International relocation and orientation:- This involve arranging for pre- departure training,
providing travel details, providing housing, shopping, medical care, recreation and schooling
information etc. so it takes more time to international transfer/relocation compare to domestic
level
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 Administrative services for expatriate- a multinational firm also needs to provide

administrative services for expatriates in the host countries in which it operates. Providing this
can be often be a time-consuming and complex activity because policies and procedures are not
always clear-cut and may conflict with local conditions.
E.g.. Ethical and legal in one country may be unethical and illegal in some country
 Host-government relations: - it represents an important activity for an HR
department, particularly in developing countries where work permits and other
important certificates are often more easily obtained when a personal
relationship exists between he relevant government officials and multinational
managers.
 Language translation services:- provision of language translation services for internal and
external correspondence is an additional international activity for the HR department
2. The need for a broader perspective:
HR managers working in a domestic environment generally administer programs for a single
national group of employees who are covered by a uniform compensation policy and taxed by
one national government. Because HR managers working in an international environment face
the problem of designing and administering programs for more than one national group of
employees, they need to take a broader view of issues
3. More involvement in employee’s personal lives:-
 A greater involvement in employee’s personal lives is necessary for the selection, training, and
effective management for expatriate.
 The HR department needs to ensure that the expatriate employee understands housing
arrangements, health care and all aspects of the compensation package etc
 In the domestic setting, the HR department’s involvement with an employee’s family is limited.
4. Changes in emphasis as the workforce mix of PCNs and HCNs varies:-
As foreign operations mature, the emphases put on various human resources activities change
5. Risk Exposure:-
• Human and financial cost of failure in the international level is higher than domestic business.
Risk exposure relevant IHRM is terrorism, murders etc. e.g.. Norway problem
6. Broader external influences:-
The major external factors that influence IHRM are the type of government, the state of the
economy and the generally accepted practices of doing business in each of the various host
countries in which the multinational operates. In domestic HRM influence of an environment and
factors as political, cultural etc within a country.
7. More activities:-
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a. Human resources planning: – difficulty in implementing HR procedures in host countries,

providing development opportunities for international managers.
b. employee hiring :– ascertain cultural – fit with that of the global organization, selection of
expatriates, coping with expatriate failure, managing repatriation process, managing female
expatriates
c. training & development :- cultural training, language training
d. Compensation :- appropriate strategy to compensate expatriates , minimizing difference in pay

between parent, host and home nationals
e. performance management:- host countries need to be considered, identification of raters to

evaluate performance subsidiary
8. Strategic and co-ordination role:-
 More contact with government officials for obtaining visas, tax certificates, fixing of
meetings and so on. Actively participate in strategic planning and implementation. More
coordination and travel to asses performance of expatriates and solve problems
9. Manage more external pressures and responsibilities:-
Having to cope with more external influences, e.g.. Having to considered the impact of foreign
cultures and laws.
10. Environment: - domestic HRM mostly analysis and scans the domestic environment. International
HRM analysis and scans the relevant international environment
11. Quota: - the quotas imposed by various countries on their exports and imports not directly and
significantly influence domestic countries. The international business has to operate within the quotas
imposed by various countries on their exports and imports
12. Foreign exchange rates: - foreign exchange rates and their fluctuations do not directly and
significantly affect the domestic countries. Foreign exchange rates and their fluctuation directly and
significantly affect the international business.
13. Rule and Regulations: - HR has to learn different rules and regulation in international level. this is
limit in domestic level
14. Working place of the staff: there is a different environmental condition, etc compare to domestic
level
15. Export and import procedures: - domestic business is not normally influenced by export – import
procedures of the country. International business is significantly influenced by export-import procedures
of various countries. They need to follow those procedures
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16. Markets and customers: - domestic business meets the needs of the domestic markets and
consumers. As such, it would be appropriate for them to understand the domestic markets and customers.
International level HR should understand markets and customers of various countries
17. Cultural – cultural awareness: - expatriate have to learn different culture in international level. It is
limit to the domestic HR.
Domestic HRM International HRM
Employees are within one national boundary. Employees are from different countries.
Employees may be grouped on region or zone – Employees are categorized as HCN, PCN & TCN for
wise for convenience of regional language and convenience of language , socio – cultural and food
food habits. habits
Routine work pattern Needs constant attention on adjustment matters in

living conditions and work ethics.
Not much variation or differences in Compensation package need to be re-designed based

compensation. on taxation matters.
Communication is normal Language translator may be required for better

communication.
No administrative support is required. Administrative support is required for visa, driving

license, currency transfer, banking services, etc.,
Organizations do not generally care about children HR department needs to bother about
schooling, arranging medical facilities. housing,entertainment, communicational of foreign
national languages etc.,
Employees can take care of themselves in unusual HR dept to be careful of foreign nationals in case of
and different situations. terrorism, natural calamities, epidemics & agitations.
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3.2. Cultural dynamics

The contemporary definition of organizational culture (OC) includes what is valued, the dominant
leadership style, the language and symbols, the procedures and routines, and the definitions of success
that characterizes an organization. OC represents the values, underlying assumptions, expectations,
collective memories, and definitions present in an organization (Schein, 1992; Cameron & Quinn, 1999).
Cultures change, but they also stay the same. Cultural anthropologists are of the idea that it is important to
study concrete cultural change and define its underlying processes. There are mechanisms through which
cultures change. One example is diffusion. When people from different cultures start working together,
these different cultures merge and a new culture starts emerging out in an organization.
For example the change in the culture and values of Japanese managers.
A study has proved that there is a significant difference in values between Japanese managers who have
attained responsible managerial positions in their organization and the management trainees who have
held lower positions and been employed for less time with the organization. Recently there is increasing
evidence that individualism in Japan is on the rise. Instead of denouncing individualism as a threat to the
society, they are proposing as a necessary solution to many ofthe economic evils.
Cultural dynamics or cultural change can be of two types: change from within and change from outside.
The sources of change can be attributed either to innovation, discovery and invention (“internal change”
or “independent origin”), or diffusion and cultural borrowing (“change from outside”). In todays world
most of the change happens from outside. The ultimate reality in culture change hinges on the fact that
corresponding institutions in two cultures satisfy both their needs in different ways and with different
techniques; but in theprocess they have to use the same human and natural resources and also the
standardized emotions, values, and loyalties specific to each culture.
Cultural contact and change are not a simple fusion or mixing together of two cultures. Malinowski
(1945) has proposed a dynamic of complex modification in which “the two impinge on each other” and
thereby create “the phenomenon of autonomous change resulting from the reaction between two
cultures.” He describes diffusion as dependent on prior cultures but with no precedent in either of them.
The result, he claims, is “new cultural realities” that must be understood, not by direct reference to either
parent culture, but as processes “running on their own specific lines”.
Processes of Cultural Change
Changing the organizational culture is the toughest task one can ever take. As the organizational culture
had been formed over years of interaction between the participants in the organization, one can feel like
rolling rocks uphill. Organizational cultures form for a reason. Perhaps the current organizational culture
matches the style and comfort zone of the company founder. Culture frequently echoes the prevailing
management style. Since managers tend to hire people just like themselves, the established organizational
culture is reinforced by new hires. Organizational culture grows over time. People are comfortable with
the current organizational culture. For people to consider culture change, usually a significant event must
occur.
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To recognize that the organizational culture is the culprit for the organization’s failure and to take steps to
change it, is a tough journey. When people in an organization realize and recognize that their current
organizational culture needs to transform to support the organization’s success and progress, change can
occur. But change is not pretty and change is not easy. Culture change requires understanding,
commitment, and tools.
Steps in Organizational Culture Change
There are three major steps involved in changing an organization’s culture.
1. Understand the current culture
Before an organization can change its culture, it must first understand the current culture, or the way
things are now. Take time to pursue the activities in understanding the mission, vision, beliefs, values and
shared meanings that prevail in the organization. Mission, vision, and values provide a framework for the
assessment and evaluation of the current organizational culture, the organization needs to develop a
picture of its desired future and what does the organization want to create for the future?
2. Decide on new culture
Understanding the current organizational culture, the organization must then , and decide what the
organizational culture should look like to support success. What vision does the organization have for its
future and how must the culture change to support the accomplishment of that vision?
3 .Make individuals understand
Finally, the individuals in the organization must decide to change their behavior to create the desired
organizational culture. This is the hardest step in culture change.
Company Culture
A culture is the values and practices shared by the members of the group. Company Culture, therefore, is
the shared values and practices of the company's employees.
Company culture is important because it can make or break your company. Companies with an adaptive
culture that is aligned to their business goals routinely outperform their competitors. Some studies report
the difference at 200% or more. To achieve results like this for your organization, you have to figure out
what your culture is, decide what it should be, and move everyone toward the desired culture.
Company cultures evolve and they change over time. As employee leave the company and replacements
are hired the company culture will change. If it is a strong culture, it may not change much. However,
since each new employee brings their own values and practices to the group the culture will change, at
least a little. As the company matures from a startup to a more established company, the company culture
will change. As the environment in which the company operates (the laws, regulations, business climate,
etc.) changes, the company culture will also change.
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These changes may be positive, or they may not. The changes in company culture may be intended, but
often they are unintended. They may be major changes or minor ones. The company culture will change
and it is important to be aware of the changes.
Assess the Company Culture
There are many ways to assess your company culture. There are consultants who will do it for you, for a
fee. The easiest way to assess your company's culture is to look around. How do the employees act; what
do they do? Look for common behaviors and visible symbols.
Listen. Listen to your employees, your suppliers, and your customers. Pay attention to what is written
about your company, in print and online. These will also give you clues as to what your company's
culture really is.
Determine the Desired Company Culture
Before you can change the company culture, you have to decide what you want the company culture to
look like in the future. Different companies in different industries will have different cultures. Look at
what kind of a culture will work best for your organization in its desired future state. Review your
mission, vision and values and make sure the company culture you are designing supports them.
Here are some characteristics of company cultures that others have used successfully. Decide which work
for your company and implement them.
 Mission clarity
 Employee commitment
 Fully empowered employees
 High integrity workplace
 Strong trust relationships
 Highly effective leadership
 Effective systems and processes
 Performance-based compensation and reward programs
 Customer-focused
 Effective 360-degree communications
 Commitment to learning and skill development
 Emphasis on recruiting and retaining outstanding employees
 High degree of adaptability
 High accountability standards
 Demonstrated support for innovation
Expatriates
Expatriates are people who move across the national border(s) to another country to pursue their
professional, economic and financial goals. Being an expatriate is not easy and it does involve lot many
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socio-economic and cultural challenges, assimilations and adjustments. These challenges can easily be
related to accepting one guest in the house who is not your family member, relative or friend. Challenges
can be any or all of the following:
1) Acceptance or rejection by the society or people in general

2) Political acceptance (Political stability, relations between the two governments, differences in
economic growth between two countries, and facilities provided by respective government to their
nationals and citizens, also possesses challenges for expatriates).
3) Cultural fitment (particularly then when the culture of your country of origin or society and that of the
country you are moving into are not similar).
Workplace Relations – Building Trust at Workplace

Introduction
Relations at workplace are different from those that we create and develop in our day to day life. Just like
our personal relations, our professional relations are also based on trust, faith, and respect. Both types of
relations require investment of time. However, basic differences between our personal and professional
relations are as follows:
Traits and Behaviors that affect the trust

Trust is the building block for gaining the admiration of your employees, building positive work
relationships within your team and enabling staff to handle stress and uncertainty in the work
environment. It may be tempting for new managers to believe that trust will grow naturally toward their
leadership; however, effective managers don't take trust for granted. Trust is something that is given or
earned not demanded.
Walk the talk and keep your words: - Conversely, don't make promises you can't keep. This also
ensures the credibility in relation. It is important for you to build a character for being a trustworthy
source of information and support.
Fast, Free and honest communication: - Keep employees honestly informed. Provide as much
information as you can comfortably divulge as soon as possible in any situation. However, it has been
noted that a message or communication (whether positive or negative) that is not delivered on time hold
little value. Most of the time delay in communication causes more damage than the content of message.
Those managers, department-heads and business leaders that lack vision and goals and do not wish to take
accountability of their action spend lot of time in fixing the blame.
Believe in your organization and its vision: - Make certain that you believe in the organization's values,
mission, strategy and what it stands for because if you're not comprehensible about what they are and
your dedication to them, you cannot expect anyone else to be. It is imperative for business leadership and
senior managers of an organization to have clear vision for the organization, set specific goals for
organization and values it stands for.
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Consistency and Reliability: - Managers who act inconsistently can generate significant bewilderment
and distress among team members. Effective managers will tend to act in consistent ways because they
are anchored in their beliefs and their vision of what is preeminent for the team.
Frequent and Fair feedbacks: - Encourage and promote a questioning attitude, regular feedbacks and
criticism. It is just not fair to complain or criticize or just raise a question/query, provide solution as well.
Suggest ways to improve. Employees will not be able to trust you or your intellectual proficiency, if you
reject a proposal, suggestion or idea of someone without providing apposite logical reasoning or if you
criticize the work of someone without giving suggestions to improve that work.
Integrity: - Integrity involves the adherence to ethical, principled values and practices. Team members
seldom trust managers or leaders who are ambiguous and do not appear committed to the team's or
organization’s best interests. Business leaders without integrity may be perceived as manipulative, basing
their decisions and behaviors on fulfillment of personal agendas.
Leaders and managers who show staff that they have strong ethical standards and values and are
willing to behave in ways that support them will foster trust within the team. Current behavior and actions
are perceived by employees as the basis for predicting future behavior. Managers and Leaders who act as
if they are worthy of trust will more likely be followed with fewer complaints.
Believe in talent, knowledge and experience of your team-members and employees: - Persuade your
employee or team-member to take accountability and responsibility. Begin by encouraging open and
blame-free conversation in your team. Get everyone to contribute their thoughts, ideas, and fears for the
future. Make sure everyone understands and shares the same set of values for your work. Also, make sure
everyone understands what their job is. Publish accountability. Treat mistakes as opportunities for
learning and not occasions for blame. Make rewards for success proportionate and immediate.
Commitment: - Employees will trust a manager or leader who is committed to them as individuals and to
the success of the team and who is willing to sacrifice time and energy to formulate things that are
achievable as well as viable. Managers often lead by example, and a strong sense of commitment can be
contagious. Commitment can include showing interest and empathy in your staff, being willing to
address—rather than avoid—problems and issues, and demonstrating the ability to articulate your vision
for the team and stick by it the best you can.
3.3.Cultural assessment
A popular study of culture by GEERT HOFSTEDE suggests that societies vary in levels of what he calls
individualism/collectivism, power distance, uncertainty avoidance, masculinity/femininity, and long-term
versus short-term orientations
Assessing Culture: Hofstede’s Cultural Differences Dimensions
INDIVIDUALISM OR COLLECTIVISM
 Individualism is the opposite of collectivism.
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 This dichotomy refers to the degree to which individuals look after themselves or operate in
groups.
 People from highly individualistic societies, such as the United States, Australia, and Great
Britain, attach more importance to freedom and challenges in jobs, individual decision making,
self-started activities, and individual achievement and initiative than do their counterparts from
collectivist societies.
 Individuals from more collective societies, such as Panama, Ecuador, and Guatemala, may prefer
working in groups, team-based pay, and group-based decision making instead of individual-based
decision making.
POWER DISTANCE
 Power distance refers to the extent to which less powerful members of society accept and expect
that power is distributed unequally.
 Individuals from societies high in power distance, such as Mexico, Malaysia, and Panama, may
prefer centralized decision structures, tall organization pyramids, a wide salary range between the
top and bottom of the organization, and a large proportion of supervisory personnel.
 Individuals from societies low in power distance, such as Austria, Israel, and Denmark, tend to
prefer the opposite.
 With the exceptions of France and Israel, individualist societies tend to be low in power distance,
while collectivist societies tend to be high in power distance.
UNCERTAINTY AVOIDANCE
 Uncertainty avoidance refers to whether members of society feel comfortable in unstructured

situations.
 Individuals from societies with high levels of uncertainty avoidance, such as Germany, Greece,
Portugal, Finland, and Guatemala, tend to have a strong task orientation, prefer stability and
security and well-established rules and procedures, and feel a strong loyalty to their employer.
 Those from societies with low levels of uncertainty avoidance, such as Singapore, Jamaica, and
Denmark, have a strong relationship orientation and feel less loyalty to their employer.
MASCULINITY/FEMININITY
 A Masculine society is one that is more aggressive, assertive & focused on achievements; the
feminine society emphasizes interpersonal relationships and sensitivity toward the welfare and
well being of others.
 Masculinity/femininity refers to different expectations about gender roles in society.
 Some researches have substituted quantity of life for masculinity and quality of life for
femininity.
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3.4. Cross cultural education and training programs

 A challenge relates to the necessity of adequate cross-cultural training for expatriates and
accompanying families.
 Organizations invest significant time and resources preparing individuals and their families for
international assignments.
 Such preparation may include cross-cultural training.
A classic study by Rosalie Tung suggests that expatriates should be provided with the following forms of
cross-cultural training:
(1) Training on factual information about geography, climate, housing, and schools;
(2) Cultural orientation training, which provides information related to the cultural institutions and value
systems of the host country;
(3) Cultural assimilation training, which provides brief episodes describing intercultural encounters;
(4) Language training;
(5) Sensitivity training, so trainees can develop some attitudinal flexibility; and
(6) a field experience, where candidates are sent to the host country or a “micro culture” nearby and can
undergo some of the stress of living and working with people abroad.
3 components of cultural training programs
 Cognitive: what does the person know about the other culture?
 Emotional: How does the person view other cultures and how much sensitivity exists to cultural
customs and issues?
 Behavioral: How does the person act in intercultural situations?
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3.5. Strategic HR Issues in International Assignments

 Strategic management of global assignments
1. Establish specific purpose for assignment
2. Select appropriate employee for assignment
3. Organizational & individual purposes for assignment must be identified & matched
4. Assess adaptability to host culture of both employee & any family members who will be
accompanying employee
5. Provide appropriate training for employee & family members
6. Simultaneous training should be conducted for headquarters staff
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Strategic HR Issues
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Training
Managing Experts
 Performance management
 Compensation
 Employee & labor relations
 Ongoing training
Determining Expatriate Compensation
Balance sheet method
Expatriate salary is based on home country pay and additional expenses associated with relocation and the
assignments are accounted for, plus hardship and incentives to determine the overall reimbursement and
compensation level.
Higher-of-home-or-host method
Employee’s salary at home is adjusted upward to account for a higher cost of living in the host country.
Localization approach
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Employee’s salary is converted to the host country’s equivalent when the employee is on permanent
assignment.
Four Approaches to IHRM

Make strategic decision as to level of standardization desired across locations
Ethnocentric approach
Exporting organization’s home country practices & policies to foreign locations
Polycentric approach
Allowing each location to develop own practices & policies
Regiocentric approach
Developing standardized practices & policies by geographic region
Geocentric approach
Developing one set of global practices & policies applied at all locations
Setting Strategic HR Standards
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Causes of Expatriate Assignment Failure
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3.6.Repatriation
 Repatriation is the process of returning a person back to one's place of origin or citizenship.
 The final issue in managing global HRM is repatriation of returning employees
 Org. should
1. Integrate the valuable experience with what is happening in the home?
2. Allow co-workers to learn of the repatriate’s experience.
Issues to be addressed in a repatriation process
Career Issues:
Resolving CAREER ANXIETY by helping employee. by finding an appropriate place with career path
in the future.
ORGANISATION. REACTION- is the repatriate feel welcome?
AUTONOMY- some consideration must be given to the level of autonomy the repatriate enjoyed
overseas.
ADAPTATION- Employee needs to be assisted in adapting to the changes to facilitate max performance
in the new assignment.
Personal Issues:
 Logistics- personal savings- transferred & currency converted. Personal belongings- inventoried
& shipped. Automobiles & home- purchased & sold. School transfers arranged.
 Readjustment – readjustment & integration into the community for the emp. can be facilitated.
 Readjustment & integration of the family
Repatriation process
Preparation
Physical relocation
Repatriation
process Transition
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3.7. Current challenges in Outsourcing

 Outsourcing is defined as hiring another firm or service provider to perform a business process.
 Organizations have been outsourcing IT for many years.
 With the advent of remote access, reduced telecommunications cost and significant IT savvy
resource pools at reduced rates, IT outsourcing was one of the first-movers in the outsourcing
market.
 IT outsourcing continues to dominate in the industry; however, today’s global marketplace is

seeing an increasing number of companies, both multi-nationals and service providers, heading
into the BPO arena.
 Many business processes are being outsourced such as transaction processing, accounting,
corporate identity design, promotional material, human resources, help desk support, call centers,
multimedia and customer support.
Challenges in outsourcing
 Both large and small firms agree that there are many benefits to outsourcing.
 Companies are able to realize such benefits as reduced costs, improved business focus and access
to resources not available internally.
 With these benefits, however, there are also challenges.
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 It is interesting to see that almost the very same benefits (e.g. On-going management, Selecting
the right vendor and properly structured contract) that the respondents identified as success
factors are also the challenges identified
1. Managing relationship
 In the outsourcing business, as the employees’ have to deal with people from other cultures, the
communication, language, etc poses a great threat to the employees.
 Understanding the culture and managing the relationship with the vendor as well as the end
customer is a big challenge. Training on these aspects is necessary.
 Cross cultural understanding with emphasis on language is one of the main areas of training that
has to be imparted.
2. Managing process
 The process that is being outsourced may be a complicated process which has to be understood by
the vendor as well as by the service provider.
 As the information flow is through many channels, it poses a challenge to the service provider.
 Understanding the new process and accustoming the new process is essential for a successful
outsourcing.
3. Self Identity
 As in some cases the client needs the service in his native touch, the service provider has to
change his or her language, accent, mannerism, and some times name to serve the customer.
 This leads to the situation of self-identify confusions.
 After the service, the employee is in confusion whether to be in the native culture or to be in the
other culture.
 In recent days this has become a social issue.
4. Vendor Selection
 The business is being selected taking many criteria in to account.
 Even after doing many analysis sometimes the vendor selection proves to be a costly fault.
 Hence caution should be taken in the choice of vendors.
5. Change management
 There is a lot of change that has happened in the field of outsourcing.
23
 The working rules are being changed on daily basis. No more restrictions on work timings.
 Outsourcing has made the work timings so flexible in such a way that according to the client need
the work hours are being fixed.
 As the client changes the work hours of the employee is being changed.
 Similarly, the wage component has also changed because of outsourcing.
 The average age of the employees in the organizations where outsourcing is the main business,
keeps on coming down. Managing the young workers is also a problem.
6. Structuring of Contract
 International contracts are bound by many legal restrictions.
 The contract between the vendor and the service provider must be drafted in such a way that it
takes of care of even the unexpected occurrences, otherwise one or both the parties have to incur
loses.
 As many of the vendors are US based, the unexpected fall or rise in the dollar value can be dealt
with care while structuring the contract.
3.8. Challenges in cross border M & A

Merger & Acquisition
 A Merger is a combination of two companies to form a new company, while an Acquisition is the
purchase of one company by another in which no new company is formed.
 A merger or an acquisition has a profound affect on the people of both companies, and managing
this impact is an important part of managing a successful transition to a unified leadership,
business model, and organization.
 By recognizing and responding appropriately to the impact of the deal on each employee, HR
managers can set the tone for long-term success or failure of the new company.
Joint ventures
It means the creation of a new organisational entity by two or more partner organisations. They
are formed for a variety of reasons, such as: Intention to expand their domain overseas; to deal
with the growing world market integration; the intensified degree of international competition;
the increasing importance of new technologies; leverage the resources of firms; reduce
manufacturing cost; and for diffusing new technologies.
Culture shock
24
Culture shock is the term used for the pronounced reactions to the psychological disorientation
that is experienced in varying degrees when spending an extended period of time in a new
environment.
Challenges in cross border M & A

1. Restructuring
 We are all aware of both the opportunities and obstacles inherent in the strategic restructuring
process in Mergers and acquisitions.
 Any significant structural transition will impact the people at all levels of the organization.
 As a result, a particular area of consideration that holds both promise and peril is that of human
resources, or hr.
 A highly integrative restructuring - anything from a joint venture to a merger - is all about
transitions, and the needs, perceptions, concerns, fears and possibilities of people all become
magnified during transitions.
 Thus while these concepts are applicable to all forms of strategic restructuring, it is more
important for the HR managers.
2. Change Agent
 An effective HR function with developed expertise should provide the guidance and the process
skills necessary to plan the challenges of a merger.
 The biggest challenge is that the HR function tends to be underdeveloped in relation to the
programmatic and finance functions in many organizations.
 HR has typically evolved out of the finance office, and is given the mandate of keeping things
legal, keeping the records, and meeting the increasing external demands.
 HR in order to have real impact must be able to take the lead in proposing, creating, and
integrating best practices with regard to people, culture, rewards and performance.
3. Creating Culture
 Overlooking the differences between organizational culture of the partners, and spending
insufficient time on creating a new, integrated culture is the biggest challenge for the HR
managers in international mergers and acquisitions.
 Cultural integration is critical for the success of merger and acquisition.
 Aspects of cultural integration include: respect what was, keep the best, create what you want,
address fears; deal with neutral-zone issues etc.
25
 Replicating in the new organizations the processes and functions that existed in the previous
entities by the employees is a main issue that has to be addressed while working on a cultural
integration.
4. Communication
 During M&A the biggest challenge is fear of, and resistance to change from the part of
employees.
 Not knowing the role to be played in the newer organization, not sure of compensation benefits. If
the communication process takes time the organization will loose competent employees.
 Multiple communication approach would be the most effective and lowest risk strategy during M
& A.
 Plans and processes are to be communicated to the employees.
 Also it is important to make the employees know how they could help themselves, and what help
they could expect from the company.
 Workshops for managers and a program of people management workshops can be put in place to
support the communication of the new processes.
5. Winning hearts and minds
 What is important is to try and reach the hearts and minds of the staff and to realize that this
would be the single hardest part of the entire exercise.
 Employee surveys can be used for this process.
 The surveys will help to identify how people are feeling and to gauge general sentiment and
morale.
 Survey also helps to know how effective the strategy is and which elements need more work. The
survey findings can be fed into the next stage to develop a new career path together with a full
coaching and mentoring program which an form the basis of Performance Management System
(PMS), which allows individuals to understand which skills and training they need to follow a
certain career stream.
6. Framing policies and practices
 The merger will present an opportunity to undertake an objective review of HR policy and
services across the newly created business and establish the best practice.
 More importantly, it provides a chance to implement HR initiatives that would enable

motivational and productive working environments across all operations, regardless of location.
26
7. Bigger work force
 Because of the merger and acquisitions, the organizations grow big and thereby the work force
increases, which is a big challenge to be addressed.
 Beyond the undisputed logic of the merger lay the pragmatic challenge of integrating and
managing people across the world.
 Retaining and developing those skills which were the strengths of the organizations before
merger was a key priority.
 Retaining and recruiting is critical to the future performance of the new (merged) organization.
8. The pre-planning phase
 The more work that could be done before the merger was completed would help in the swift
implementation of new processes and procedures, as well as identifying key individuals within
the new structure.
 It was important during this pre-planning phase to build a new HR strategy that would not only
establish best practice for the future, but also honor the past of both companies.
 Every employee had a history of working at either one or the other organization and will be very
passionate about their roots and both companies’ successes.
9. Quick Reaction
 It was also acknowledged that failure to act quickly and create a new organization and structure
that every employee could identify with, could have detrimental effects on the company’s long-
term vision.
10. Setting key priorities
 Underpinning all of the activities undertaken at the time of M & A and identifying a set of key
priorities which allows everyone involved to focus their energies and efforts on the right areas is a
challenge for HR managers.
 These priorities included:
∗ Building a new ethos and culture for the company which staff could connect with;
∗ Speed and clarity of communication;
∗ Establishing a common framework; and
∗ Ensuring equality and openness.
27
3.9. Building multicultural organization
 Now a days the organizations have diverse work force that is, its employees differ in race, sex
and ethnic background.
 An organization that operates effectively in utilizing its diverse work force can be described as a
multicultural organization.
Characteristics of a multicultural organization
 Multicultural organization actively seeks to capitalize on the advantages of its diversity-rather

than attempting to stifle or ignore the diversity.
 Organizational resources (key jobs, income, perquisites, access to information, etc.) are
distributed equitably and are not determined or affected by cultural characteristics such as race or
sex.
 The ability to influence decisions and the way they are carried out is shared widely, not
differentially by cultural characteristics.
 The organizational culture is pluralistic in that it recognizes and appreciates diversity; it

acknowledges both the need for “BEING THE SAME” in some ways to work together effectively
and the need for “BEING DIFFERENT” in some ways to recognize individual and group
interests, concerns, and backgrounds.
 Institutional policies, practices, and procedures are flexible and responsive to the needs of all
employees.
Principles for building multicultural organizations
1. Heterogeneity
 We live in a culturally pluralistic society and the organization’s employees are products of that
culturally pluralistic society.
 All groups making up the organization must be seen as integral parts of it, rather than “extra
groups” that have been added on.
 Diversity must be recognized and managed, rather than ignored, and must be viewed as providing
opportunities to be utilized rather than headaches to be tolerated or avoided.
2. People as individuals and as group members
 Every person is an individual with a unique set of strengths, weaknesses, and needs.
28
 To deal with each other on the basis of accurate information, we must be able to perceive others
in the work force as a range of individuals rather than as groups distinguished by race, sex, or
other characteristics;.
At the same time, the race, sex, and other groups to which individuals belong often affect their
experiences, other people’s expectations of them, the way they are dealt with, the pressure on them, and
their job performance
3. Shared responsibility
 Maintaining the effectiveness of the multicultural organization is a responsibility shared by

everyone in the organization.
 All employees must be actively involved in a continuing review and refinement of organizational
norms, climate, practices, and patterns of behavior so that they will be supportive of the goals of a
multicultural organization.
 The principle of shared responsibility requires that the organization formally declare that no
groups will be victimized or left out, and that addressing the needs felt by some sub-group will
strengthen the entire organization.
4. Problem analysis
 In a multicultural organization, people must be able to analyze performance or interpersonal

problems in terms of both cultural factors and other types of factors.
 This requires increased penetration of problems before action is taken.
5. Accountability
 Accountability means being responsible for achieving results, for making things happen.
 Managers in a multicultural organization must be held accountable for initiating, directing, and
controlling the processes that help to make individuals and groups effective in achieving
multicultural goals and objectives.
3.10.International Compensation
• Defined as the provision of monetary and non-monetary rewards, including base salary, benefits,
and perquisites, long- and short-term incentives, valued by employees in accordance with their
relative contributions to MNC performance.
• Its broad HRM purpose is to attract, retain and motivate those personnel required throughout the
MNC currently and in the future
• Contingency and resource-based theories offer some insight to international compensation
29
• Contingency approach suggests there are variables that impact on compensation

policies and practices to make them more or less appropriate and effective – Balance
sheet approach and in more recent global models of international compensation to this
field where there is a need to consider particular contingencies or situations such as host
country preferences, when devising and implementing international compensation
• Resource-based theory analyses conditions in which organizations can gain positions of

competitive advantage through having human resources which are valuable, rare, and
difficult to imitate or replace (such as employees with knowledge gained through specific
international experience and organizational experience)
Components of International Compensation
 Four major components.
 base salary—the amount of cash compensation that will be provided to an individual

each pay period
 foreign service inducements/hardship premium—monetary payments above and

beyond base salary that companies offer in order to encourage employees to accept
expatriate assignments
 Allowances—additional money given to expatriates for housing expenses, educational

expenses, relocation expenses, spouse assistance, etc.
 benefits—indirect forms of compensation that are intended to maintain or improve

quality of life for employees
Approaches to Compensation Package
 Balance sheet method
 Expatriate salary is based on home country pay and additional expenses associated with
relocation and the assignments are accounted for, plus hardship and incentives to
determine the overall reimbursement and compensation level.
 Higher-of-home-or-host method
 Employee’s salary at home is adjusted upward to account for a higher cost of living in the
host country.
 Localization approach
 Employee’s salary is converted to the host country’s equivalent when the employee is on
permanent assignment.
Variables influencing International Compensation Strategy

30
Idealized Influence:: Transformational leaders are a source of charisma and enjoy the admiration
of their followers. They enhance pride, loyalty, and confidence in heir people, and they align
these followers by providing a common purpose or vision that the latter willingly accept.
Inspirational Motivation:: these leaders are extremely effective in articul
articulating
ating their vision,
mission, and beliefs in clear cut ways, thus providing an easy to understand sense of purpose
regarding what needs to be done.
Intellectual Simulation:: These leaders are able to get their followers to question old paradigms
and to acceptt new views of the world regarding how things now need to be done.
Individualized Consideration:: These leaders are able to diagnose and elevate the needs of each
of their followers through individualized consideration, thus furthering the development of these
th
people.
31
3.11. IMPORTANT QUESTIONS

PART – A
1. Define: (a) International Corporation (b) Global Corporation (c)

Multinational Corporation (d) Transnational Corporation.
2. How International companies affect the world economy?
3. Distinguish between Domestic HRM and International HRM.
4. Distinguish between Expatriation and Repatriation.
5. What is cultural dynamics?
6. What are the forces driving global pay?
7. What are the selection criteria for selecting global managers?
8. Define Competence.
9. What is Outsourcing?
10.What is cross border M&A?
11.How to build a Multicultural Organization?
12.What is International compensation?
PART – B
1. Explain in detail the concept of Cultural Dynamics.

2. Elaborate on the cultural environment of International business.
3. Explain the selection criteria of Expatriates.
4. Discuss the strategic issues in International assignments.
5. What are the factors affecting International human resource management?
Discuss each one of them.
6. Discuss the current challenges in outsourcing, M&A and Expatriation in
detail.
7. What are the current challenges in outsourcing? Why is India a favorite
destination for outsourcing? Explain.
8. What does ‘Outsourcing’ mean? What are the implications and advantages
of outsourcing under globalization conditions?
9. Discuss the relevance and effectiveness of various leadership models in
present context.
10.Discuss briefly about the International compensation.
32
11.Explain cross cultural education and training programs.

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1

STRATEGIG HUMAN RESOURCES MANAGEMENT

CROSS CULTURAL HRM

Domestic Vs International HRM - Cultural Dynamics - Culture Assessment - Cross Cultural

 Cross cultural or International Human Resource Management(IHRM) is about the worldwide

 Morgan identifies 3 dimensions of IHRM

 Employee group Dimension

Reasons for emergence of IHRM

 Rapid growth of internationalization and global competition.

 Need for effective management

 Need for international managers

 Traditional hierarchal organizational structures are becoming redundant.

 Developing different organization cultures.

 Strategic alliances, cross- border Mergers and Acquisitions are increasing

 Learning, knowledge acquisition and adaptation..

Factors Affecting IHRM

 Difference in labour market characteristics.

 Differences in regulatory environment.

 Attitude towards employment.

 Differences in condition of employment.

3. Selecting the right person for a foreign assignment:-

4. Culture and communication: - International HR professionals are expected to understand the

Barriers or Challenges to effective global HRM

3.1.Difference between Domestic & international HRM

 Administrative services for expatriate- a multinational firm also needs to provide

4. Changes in emphasis as the workforce mix of PCNs and HCNs varies:-

6. Broader external influences:-

a. Human resources planning: – difficulty in implementing HR procedures in host countries,

c. training & development :- cultural training, language training

d. Compensation :- appropriate strategy to compensate expatriates , minimizing difference in pay

e. performance management:- host countries need to be considered, identification of raters to

8. Strategic and co-ordination role:-

9. Manage more external pressures and responsibilities:-

Domestic HRM International HRM

Routine work pattern Needs constant attention on adjustment matters in

Not much variation or differences in Compensation package need to be re-designed based

Communication is normal Language translator may be required for better

No administrative support is required. Administrative support is required for visa, driving

3.2. Cultural dynamics

Processes of Cultural Change

Steps in Organizational Culture Change

There are three major steps involved in changing an organization’s culture.

1. Understand the current culture

2. Decide on new culture

3 .Make individuals understand

Assess the Company Culture

Determine the Desired Company Culture

1) Acceptance or rejection by the society or people in general

Workplace Relations – Building Trust at Workplace

Traits and Behaviors that affect the trust

Assessing Culture: Hofstede’s Cultural Differences Dimensions

 Individualism is the opposite of collectivism.

 Uncertainty avoidance refers to whether members of society feel comfortable in unstructured

3.4. Cross cultural education and training programs

(4) Language training;

3 components of cultural training programs

 Behavioral: How does the person act in intercultural situations?

3.5. Strategic HR Issues in International Assignments

1. Establish specific purpose for assignment

2. Select appropriate employee for assignment

5. Provide appropriate training for employee & family members

6. Simultaneous training should be conducted for headquarters staff

 Employee & labor relations