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International Human Resource Management

M S Ramesh Session 1

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Agenda
• Introduction to IHRM
– Definition – Globalization
– Some Myths – Reasons for going global

– Reasons for emergence of IHRM – Differences between IHRM and domestic HRM – Approaches to IHRM
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• “Resource” represents the hard aspects such as the strategy link of HRM and the importance of efficient utilization of employees.Introduction to IHRM • Definition of HRM (contd.) • “Human” represents the dimension of HRM which relates to the soft aspects such as commitment of employees through participation and the fact that the most important assets being the employees. • “Management” represents the role of HRM as part of management that implies that it’s not only an administrative function that carries out the formulated policies but also a managerial function that contributes to strategy formulation 3 .

allocating.Introduction to IHRM • Definition of IHRM • International HRM (IHRM) is the process of: • • • • • procuring. while balancing the integration and differentiation of HR activities in foreign locations 4 . and effectively utilizing human resources in a multinational corporation.

then the task of the international HR manager is relatively simple • In global firms HR managers need to achieve two somewhat conflicting strategic objectives • They must integrate HR policies and practices across a number of subsidiaries in different countries so that overall corporate objectives can be achieved. and effectively utilising human resources in a multinational corporation • If the MNC is simply exporting its products. allocating. At the same time. the approach to HRM must be sufficiently flexible to allow for significant differences in the type of HR policies and practices that are most effective in different business and cultural settings • 5 .Introduction to IHRM • Definition of IHRM (contd.) • The process of procuring. with only a few small offices in foreign locations.

Some Myths about Globalization • Myth #1: Global = International • Myth #2: Global strategy means doing same thing everywhere • Myth #3: Globalizing = stateless corporation. no national/community ties • Myth #4: Globalization requires abandoning country images and values • Myth #5: Globalizing means tackling on acquisitions or alliances in other countries. without much integration/change • Myth #6: A strategy must involves sales/operations in another country 6 .

Global & Transnational organizations • International company – transports its business outside home country. need to have a common information systems for accounting. structured geographically.International.g. and involves subsidiary general managers • Companies offering multiple products often find it challenging to remain organized e. Multinational. Most evolve to become multinational companies 7 . and marketing. financial and management controls. each of its operations is a replication of the company's domestic experience.

may be the entire company or one or more of its product lines. Global & Transnational organizations • Multinational company – grows and defines its business on a worldwide basis. but continues to allocate its resources among national or regional areas to maximize the total • Global organizations – treat the entire world as though it were one large country.International. Multinational. may operate with a mixture of two or more organizational structure simultaneously 8 .

Multinational.International. more complex coordination mechanism to provide global integration 9 . Global & Transnational organizations • Transnational organization .Use specialized facilities to permit local responsiveness.

Reasons for Globalization • • • • • Scale Economies Scope Economies Shorter Product Life Cycles Direct Foreign Investment Technology 10 .

Factors that Influence the Global Work Environment 11 .

Forces for Change • Global competition • Growth in mergers. acquisitions and alliances • Organization restructuring • Advances in technology and telecommunication 12 .

Impacts on Multinational Management • • • • Need for flexibility: Local responsiveness: Knowledge sharing: Transfer of competence 13 .

Complexity. Hypercompetition Need to Refocus on Persons.Reasons for emergence of IHRM Uncertainty. Roles and Integration for Global Performance HR Capabilities People Processes Persons in Roles 14 .

firms and employees in them moving all over the world. • Major problems in international operations because of human resource management blunders • Hence Need to understand human resource management in a global perspective • The increasing role of HR in International Operations • Challenges of managing a Multicultural Workforce • Developing Managerial Talent in a Global Business Environment 15 .Reasons for emergence of IHRM • Increasing globalization.

Basic Terms in IHRM • National or Country Categories – Host Country where subsidiary is located – Home Country where the firm headquartered – ‘Other’ or 'Third' Country • Employees of an International Firm – – – – Host Country Nationals (HCN) Parent Country Nationals (PCN) Third Country Nationals (TCN) Expatriates 16 .

Basic Terms in IHRM • Host Country National (HCN): Belongs to the Country where the subsidiary is located • Parent Country National (PCN): Belongs to the Country where the firm has its headquarters • Third Country Nationals (TCN): Belongs to any other country and is employed by the firm 17 .

TCNs transferred to either HQ or another subsidiary.Basic Terms in IHRM • What is an Expatriate? • An employee who is working and temporarily residing in a foreign country • Some firms prefer to use the term “international assignees” • Expatriates are PCNs from the parent country operations. and HCNs transferred into the parent country 18 .

Differences between Domestic HRM and IHRM 03/03/11 .

administrative services • The need for a broader perspective: cater to multiple needs • More involvement in employees’ personal lives: adjustment. culture orientation. children • Changes in emphasis as the workforce mix of expatriates and locals varies: fairness • Risk exposure: expatriate failure. spouses.Differences between Domestic HRM and IHRM • More HR activities: taxation. terrorism • Broader external influences: government regulations. ways of conduct 20 .

Variables • Complexity involved in operating in different countries.Differences between Domestic HRM and IHRM . varied nationalities of employees • The different Cultural Environment • The industry or industries with which the MNC is involved • Attitudes of Senior Management • Extent of reliance of MNC on home country domestic market 21 .

Approaches to Managing and Staffing Subsidiaries • Ethnocentric • Home country approach • Polycentric • Local approach • Regiocentric • Regional approach • Geocentric/Global • Global approach 22 .

The Influence of Managing and Staffing Approaches • Ethnocentric approach • PCN’s usually staff important positions at headquarters and subsidiaries • Polycentric approach • HCN’s generally work in foreign subsidiaries • PCN’s manage headquarters positions 23 .

The Influence of Managing and Staffing Approaches • Regiocentric approach • PCN’s and managers from the region—either HCN’s or TCN’s—staff regional headquarters positions • HCN's primarily staff local subsidiaries • Geocentric approach • Chooses the most suitable person for a position 24 .

25 . • Geocentric: • Ignores nationality in favor of ability and competence needs in a worldwide integrated business strategy.• Ethnocentric: • HQ controls The Influence of Managing and Staffing Approaches • Highly centralized • PCNs dominate. • Polycentric/Regiocentric: • Decentralized • Each subsidiary has some degree of decision making autonomy • HCNs primarily manage subsidiaries.

Choosing an Approach to IHRM • • • • • • • Corporate international strategy Political and legal concerns Level of development in foreign locations Technology and the nature of the product Organizational life cycle Age and history of the subsidiary Organizational and national cultural differences 26 .