DIMENSIONS OF INTERNATIONAL HUMAN RESOURCES

MANAGEMENT

Anita Arora
Research scholar, IMSAR Department M.D.University Rohtak.

Ekta Wadhwa
Lecturer, Department of Business administration,
Shah Satnam Ji Institute of Technology and management Sirsa.

ABSTRACT compensation. As a consequence of the globalization

This study attempts to explore the dimensions of
IHRM. The process of procuring, allocating and
effectively utilizing human resources in international
business is called IHRM. As we know the world is
shrinking in all major respects. People, goods, capital
and information are moving around the globe like never
before. With faster communication, transportation
and financial flows the barriers between the nations
have disappeared and the world is becoming a
borderless market. With the opening up of the
economies worldwide coupled with the effects of
globalization, no sector is devoid of the new
challenging business environments. Firms worldwide
are adapting strategy of going global, as companies
are globalizing, labour markets are also globalizing.
But the problem out here is that, though companies
are moving quickly into newer markets they are faced
with the problems of uncertainties. They need to
consider a varied number of perspectives like cultural,
environmental, resource capability and their human
resource management etc. which can influence their
survival and performance in foreign lands. This paper
explores the challenges occurring in the global
management of the employees, various approaches
to the management and recruitment of employees in
subsidiaries that the organizational has established in
different countries are presented. In the light of such
background this study on the "Dimensions of
international HRM" assumes importance.
Key words: - International, Dimensions,
Methodology compensation.
Introduction
Human Resources Management (HRM) can be
described as a series of activities which, firstly
enables working people and the organization which
uses their skills to agree about the objectives and
nature of their working relationship and secondly,
ensures that agreement is fulfilled. HR comprises
the following core functions: organizing, resourcing,
performance, development, employee relations and
process, the number and size of multinational
organizations is increasing and hence, the HR
functions have to accommodate this development.
Following Dowling, and Schuler (2007) "The
complexity of operating in different countries and
employing different national categories is a key
variable of International Human Resource
Management (IHRM), which in broad terms involves
the same functions as domestic HRM". International
Human resources management is about the world
wide management of human resources. The purpose
of IHRM is to enable the multinational enterprise, to
be successful globally. (Schuler et al, (2002).
International HRM defined as, performing HRM and
its related activities and arranging for related and
necessary cultural and immigration facilities for
prospective and current employees by organization
operating in domestic and foreign countries. (Subba
Rao Pulapa)
Morgan (1986) presents a model of international
HRM that consists of three dimensions:
1. The three broad human resource activities are
procurement, allocation, and utilization.
2. The three national or country categories involved
in international HRM activities: (1) the host-
country where a subsidiary may be located, (2)
the home-country where the firm is
headquartered, and (3) "other" countries that
may be the source of labor or finance.
3. The three types of employees of an international
firm: (1) host-country nationals
(HCNs), (2) parent-country nationals (PCNs), and
(3) third-country nationals
(TCNs).3 Thus, for example, IBM employs Australian
citizens (HCNs) in its Australian operations, often
sends U.S. citizens (PCNs) to Asia-Pacific countries
on assignment, and may send some of its Singaporean
employees on an assignment to its Japanese
operations (as TCNs). Morgan defines international
HRM as the interplay among these three dimensions-

Summer Internship Society Volume III Issue-1 April 2012 58

human resource activities, types of employees, and
countries of operation.
Rationale of the study
People play a key role in all business activities, but
their role has become very critical in the global
environment. Therefore, how multinationals manage
their human resources (acquire, allocate, utilize and
reward) has become an important field of study and
analysis.
Objectives
1. To analyze how multinational companies manage
their human resources.
2. To analyze the cultural issues of Human
Resource Management in the international
context.
Methodology
This research is descriptive in nature. Secondary data
is used for this research, books, journals and websites
are used for collecting the data.
Managing Human Resources in International
Context
Human resource planning: - Human resource
planning from international human resources
management point of view is rather difficult and
complex compared to that of domestic human
resource management. This is due to the fact that
international human resource planning should consider
a number or additional issues like language, culture,
spouse and family adaptability in addition to job skills,
talents and knowledge requirement. MNCs have to
consider not only the current job and country
requirements, but also the future assignments in
various other countries where the MNC is currently
operating and /or propose to operate in future. In
addition, MNCs should also consider the possible
alliances like joint ventures, mergers and
amalgamations where human element is also a pivotal
factor, in their human resource planning. Added to
this the international business environment is relatively
volatile compared to domestic business environment.
Therefore, its influence on MNCs sometimes, is
beyond comprehension and predication. Thus, the
human resource demands/ requirements or MNCs
are complex and consequently the human resource
planning process of MNCs is rather critical. In
addition, forecasting the supply of human resource
of international market is also critical compared to
domestic labour market due to the problems in
collection of human resource data across the world.
Further, international labour market is highly dynamic
due to the variations in quantity and quality of human
resources available in various countries at different
Summer Internship Society Volume III Issue-1
times, levels of human resource participation in
employment in different countries, the quality and
extent or educational faculties available for different
segments of population in various countries and
occupational and industrial structure of employment
in various countries. For example Indians work in
the USA as software professionals and medical
doctors while various foreigners including Americans
have preferred to work in India.
Recruitment and selection: - Recruitment is the
process of identifying and attracting potential
candidates from within and outside an organization
to begin evaluating them for future development. Once
candidates are identified, an organization can begin
the selection process. This includes collecting,
measuring, and evaluating information about the
candidates' qualifications for specified positions.
Organizations involved in international HRM are
basically two types (a) multinational companies and
(b) domestic companies. These companies search
prospective employees both from within the country
operation and outside the country. Recruitment
sources at macro level include ethnocentric approach,
polycentric approach and geocentric approach.
An Ethnocentric Approach: - In this approach all
important positions in MNCs are filled by PCNs in
the early stage of internationalizing. Under
ethnocentric approach MNCs at their headquarter
formulate mission, objectives, strategies and product
design etc. and also make important decisions for
the subsidiaries and expect the subsidiaries to
implement them and report back to all functional/line
managers at headquarters.
A polycentric approach: - A polycentric staffing
policy requires host country nationals to be recruited
to manage subsidiaries, while parent country national
occupy key positions at corporate headquarters.
The Geocentric approach: - In this approach
regardless of nationalities, the best talents is recruited
by the MNCs for key job throughout the organization.
This policy has a number of advantages. First it
enables the firm to make the best use of its human
resources. Second and perhaps more important, a
geocentric policy enable the firm to build a cadre of
international executives' who feel at home working
in a number of cultures. It is helpful in building culture
and informal management networks.
Training and Development: - Selection is just first
step in matching a manager with a job. The next step
is training the manager to do with specific job. An
intensive training programme might be used to give
expatriate manager the skills required for success in
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a foreign posting. Management development is much
broader concept. It is intended to develop the
manager's skills over his career with the firm. Hence
as part of management development programme a
manager might be sent on overall foreign posting over
a number of years to build his cross cultural sensitivity
and experience. Two most common reasons for
expatriate failure were the inability of a manager's
spouse to adjust to a foreign environment and the
manager's own ability to adjust to a foreign
environment. Training can help the managers and
spouse to cope up with these problems. Cultural
training, language training and practical training all
seem to reduce expatriate failure.
Cultural training: - Cultural training seeks to foster
an appreciation for host country's culture. The belief
is that understanding a host country's culture will help
the manager empathize with the culture, which will
enhance her effectiveness in dealing with host country
nationals. It has been suggested that expatriates
should receive training in the host country's culture,
history, policies, economy, religion, social and business
practices. If possible it is also advisable to arrange
for a familiarization trip to the host country before
the formal transfer, as this seems to ease culture
shock.
Language training: - English is the language of
world business. It is possible to conduct business all
over the world using only English.
Practical training: - Practical training aimed at
helping the expatriate manager and family ease
themselves into day to day life in the host country.
The sooner a routine is established the better are the
prospects that expatriate and her family will adapt
successfully. One critical need is for a support
network of friends for the expatriate.
Performance Appraisal: -. The multinational
require an effective system for managing the
performance of its global operations. Monitoring
performance and ensuring conformance to agreed
standards are important elements of a multinational's
managerial control system. Performance appraisal
systems are used to evaluate the performance of
managers against some criteria that the firm judges
to be important for the implementation of strategy
and the attainment of a competitive advantage. A
firm`s performance appraisal system is an important
element of its control system. Unintentional bias
makes difficult to evaluate the performance of
expatriate managers objectively. In many cases, two
groups evaluate the performance of expatriate
managers-host country managers and home- office
Summer Internship Society Volume III Issue-1
managers, both are subject to bias. The host nation
managers may be biased by their own cultural frame
of reference and expectations. For example, Oddou
and Mendenhall report the case of U.S. manager
who introduced participative decision making while
working in an Indian subsidiary. The manager
subsequently received a negative evaluation from host
- country managers because in India, the strong social
stratification means managers are seen as experts
who should not have to ask subordinates for help.
The local employees apparently viewed the U.S.
manager's attempt at participatory management as
an indication that he was incompetent and did not
know his job. Several things can reduce bias in the
performance appraisal process. First most expatriates
appear to believe more weight should be given to an
on- site manager's appraisal than to an off- site
manager's appraisal. Due to proximity, an on- site
manager is more likely to evaluate the soft variables
that are important aspects of an expatriate's
performance. The evaluation may be especially valid
when the on-site manager is of the same nationality
as the expatriate, since cultural bias should be
alleviated. In practice home - country managers often
write performance evaluations after receiving input
from on - site managers. When this is the case, most
experts recommend that a former expatriate who
served in the same location should be involved in the
appraisal to help reduce bias.
Compensation:-
Compensation may be defined as the financial
remuneration the employees receive in exchange for
their labour. Compensation management deals with
wages, salaries, pay increase, and other monetary
issues. The compensation system is designed to
reward employees in an equitable manner and to
serve as an inducement for the attraction and
retention of good workforce. Cherrington writes that
compensation decisions should achieve five critical
objectives.
1. Be legal: compensation decisions should be
consistent with federal state and local laws and
regulations.
2. Be adequate: Compensation should be
sufficient to attract qualified job applications and
retain them.
3. Be motivating: compensation should be
sufficient to provide the necessary incentives
to motivate employees to high performance
levels.
4. Be equitable: Employees should be made to
feel that the compensation system is equitable.
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5. Provide Security: Employees should be made
to feel that their income is secure and
predictable.
When developing international compensation policies,
a firm seeks to satisfy several objectives. First, the
policy should be consistent with the overall strategy
structure and business needs of the multinational.
Second the policy must work to attract and retain
staff in the areas where the multinational has the
greatest needs and opportunities. Third, the policy
should facilitate the transfer of international
employees in the most cost effective manner for the
firm. Fourth, the policy must give due consideration
to equity and ease of administration.
Cultural Issues in International HRM
As organizations becoming global in their operations,
which is evident from the above discussion, cross
cultural management becomes crucial to their
operations. It explains the behavior of people in the
organization around the world and shows people, how
to work in organization with employee and client
population of many different cultures (Dowling et.
Al., 1999, Pucik, 1992). The aim of cross cultural
management is therefore, to describe organizational
behavior within countries and cultures and to compare
them and finally to understand and improve the
interactions of co- Workers, managers and other
stakeholders from around the world. To understand
how work behavior gets affected by cross cultural
settings, it is necessary to understand what culture is
and how cultures vary which have telling effects on
business operations. Anthropological literature
produced a great variety of discussions with regard
to understanding cultural systems; around the worlds
which have major implications for managers working
outside their native country, culture is viewed in many
ways. In the 1870, Edward Taylor defined culture as
that complex whole which includes knowledge belief
art, morals, law, custom, and other capabilities
acquired by man as a member of society. Geert
Hofstede (1980) an expert on cross cultural
differences and management, defined culture as the
collective programming of the mind which
distinguishes the members of one human group from
another culture, in this sense includes systems of
values; and values are among the building blocks of
culture. According to him, each orientation leads to a
value with behavioral and attitudinal implications. For
example, in U.S, cultural orientation, which is highly
individualistic, training and development will be more
emphasized to facilitate individual learning. In
contrasting culture, emphasis will be on selection and
Summer Internship Society Volume III Issue-1
best fit approach where employees once employed
are not expected to change too much in their behavior.
In U.S, 'doing' or 'achieving' is more important and
thus employees work hard to prove themselves. In
contrasting cultures, 'being' is more important and
therefore employees may not be concerned only
about achieving the target but also the relationship
with the peers and the boss.
Hofstede's cultural Dimensions
Hofstede identified four cultural dimensions around
which countries have been clustered with people in
each group exhibiting identical behaviors.
Power distance concerns how a culture deals with
inequality. He suggests that a country can be high on
power distance or low on the same. In the former,
inequality is accepted and even taken as good. Low
power distance cultures are found in societies that
seek to play down such inequalities as much as
possible.
Uncertainty avoidance: - This relates to norms,
values, and beliefs with regards to their tolerance for
ambiguity. Again, society may be high or low on this
dimension.
Individualism: - The spirit of individualism focuses
on the relationship between the individual and the
group. Societies may be individualistic or collectivist.
Individualistic culture view people as unique.
Collectivist societies view people largely in terms of
the group which they belong.
Masculinity: - masculinity represents the overall
tendency of a culture to support the traditional
masculine orientation. Here too societies can be high
or low. High masculinity cultures have norms, beliefs
and values such as men are assertive and dominant.
In low masculinity societies sex roles are less sharply
distinguished, and little difference is made between
men and women in the same job.
How all these do are relevant to IHR professional?
Hofstede's cultural model helps the HIR manager
apply culture specific approach to HR practices. For
example, in societies with high power distance culture,
selection of executives is based on the social class to
which the aspirants belong and their elite educational
qualifications. In low power distance cultures,
educational achievement is the main criterion.
Leadership styles in high power distance societies
are authoritarian but are participative in low power
distance cultures. Executives are hired on the basis
of seniority and expected loyalty in high uncertainly
avoidance societies but the criteria for such selections
in low uncertainty avoidance cultures are education
and past job performance. Leadership styles in the
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foreign societies are task oriented and relations
oriented in the latter category of cultures. Leaders,
in general, tend to appeal to subordinates to perform
in collectivist societies, but in individualistic cultures,
leadership believes in rewarding achievers and
punishing non-performers. In collectivist cultures,
executive selection is based on group affiliation but it
is geocentric in individualistic cultures. Similarly,
managerial selection is independent of gender and
leadership is participative in feminine cultures. In
masculine cultures, men are mainly preferred for jobs
and leadership tends to be authoritarian. In addition,
staffing policies ethnocentrism, polycentricism or
geocentricism depends on whether a host country is
known for high power distance, low uncertainty
avoidance or feminine orientation. Where power
distance is high, staffing is influenced by ethnocentric
orientation, so also when a host country believes in
high uncertainty avoidance.
Conclusion
This study is an attempt towards understanding, how
multinational companies manage their human
Summer Internship Society Volume III Issue-1
resources .IHRM requires much broader perspective
as compared to domestic HRM. Even the most
common HR activities have to be handled in different
ways in IHRM, because HR managers working in
the global environmental face the problem of designing
and administrating problems for more than one
country. People in different nations have different
perceptions about different things. MNCs operating
in these countries need to aware of the varied
perceptions.
References
Charles W L Hill,Jain, K.Arun,(2009) "International
Business"Tata Mc-Graw hill
Dowling,P.J and Schuler,R.S.(2002). "International
Dimensions of Human Resources Management".
Gerry Desseler(2009) "Human Resources Management"
eleventh edition, Person.
Dowling,P. J, and Weich Denice E.(2010), "International
Human Resources Management" Managing people
in a multinational context, 4th Edition.
P. Subba Rao (2009), "International Human Resources
Management" Himalaya Publishing House Pvt. Ltd.
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