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Approaches to International HRM

Globalization of business has created complexity of issues

Three broad approaches:
Cross-cultural Management approach

(human behavior in international perspective) Comparative Industrial relations (HRM systems in various countries) Multinational firms (HRM aspects)

Defining International HRM

HRM functions:
Human resource planning Staffing

Performance management
Training and development Compensation and benefits

Labor relations

Model of IHRM by Morgan

Three dimensions:
Human resource activities (procure, allocate,

utilize) Type of employees ( HCNs, PCNs, TCNs) Countries ( Host, Home, Other)

Morgan defines IHRM as the interplay among these three dimensions

The complexities of operating in different

countries and employing different national categories of workers is a key variable that differentiates domestic and international HRM, rather than any major differences between the HRM activities performed. Complexity of international HR can be attributed to six factors that differentiate international from domestic HRM.

1. More HR activities:

such as international taxation, international relocation and orientation, administrative services for expatriates, host government relations and language translation services 2. The need for a broader perspective: due to diverse nationality of the employees, equity issues

More involvement in employees personal lives; 4. Changes in emphasis as the workforce mix of expatriates and locals varies; 5. Risk exposure such as expatriate failure that involves a very high (direct and indirect) cost; and terrorism

6. More external influences

the type of government, the state of the economy and generally accepted practices of doing business in host countries

Moderating variables
In addition to complexity, there are four other variables that moderate (i.e. either diminish or accentuate) differences between domestic and international HRM such as: The Cultural Environment: The culture is defined as a shaping process; that is, members of a group or society share a distinct way of life with common values, attitudes and behaviors that are transmitted over time in a gradual yet dynamic process.

In the context of culture, one has to be aware of the distinction between national differences and cultural differences Emic-Etic distinction:

Emic is derived from Phonemic system that documents meaningful sounds specific to a given language. Thus emic refers to culture-specific aspects of concepts or behavior.

Etic is derived from phonetic system that organizes all sounds that have meaning in any language.

Thus referring to culture-common aspects. An example of etic approach is the convergence hypothesis dominating the western research in 1950s and 60s. It is based on two key assumptions: Principles of sound management hold regardless of national environments Universality of management practices would lead to societies becoming more and more alike in the future

Kuhn used the terminology of divergence hypothesis.

Child made the point that there is evidence for both convergence and divergence. The majority of the convergence studies focus on Macrolevel variables ( e.g. structure and technology used by firms across cultures) and the majority of the divergence studies focus on Microlevel variables ( e.g. the behavior of people within the firms).

His conclusion was that although firms in different countries are becoming more alike (an etic or convergence approach) the behavior of the individuals in these firms is maintaining its cultural specificity ( an emic or divergence

approach). Culturally insensitive attitudes or behaviors stemming from ignorance or from misguided beliefs are not only inappropriate but often cause international business failure.

Activities such as hiring, promoting, rewarding or dismissal will be determined by the practices of the host country based on the value system of that countrys culture. Coping with cultural differences and recognizing

how and when these differences are relevant is a constant challenge for the expatriate employee and helping them to prepare for the cultural differences is a key activity for HR departments of the multinationals.

Industry Type is the second moderating variable is the. Multidomestic industry: in which competition in each country is independent of competition in other countries (e.g. retailing, distribution and

insurance). Global industry: in which firms competitive position in one country is significantly influenced by its position in other countries (e.g. commercial aircrafts, copiers and other industrial goods).

Porters value-chain model

HRM is one of the four support activities for the five primary activities of the firm. HRM function cuts across the entire value chain of a firm. In multidomestic industry, the role of the HR department will be more domestic in structure and orientation. In a global industry however, HRM function would be structured to deliver the international support required by the primary activities of the multinational.

Coordination Issue
According to Laurent, in order to build, maintain and

develop their corporate identity, multinationals need to strive for consistency in their way of managing people on worldwide basis. Yet, in order to be effective locally they also need to adapt those ways to the specific cultural requirements of different societies.

Truly international conception of HRM

would require a recognition and an acceptance of a variety of ways of managing people in different cultures and societies; and consequently initiating a concerted effort to build a coordination of these activities through strategic approach to the role of HRM.

Reliance of the multinational on its

home-country domestic market is the third moderating variable Index of transnationality developed by the United Nations Conference on Trade and Development (UNCTAD) is an average of ratios of foreign assets to total assets, foreign sales to total sales and foreign employment to total employment.

Attitude of senior management to international


If senior management does not have a strong international orientation, the importance of international operations may be underemphasized (or even ignored) in terms of corporate goals and objectives. Fostering a global mindset is necessary to formulate and implement HR policies that facilitate the development of globally oriented staff.

The enduring context of IHRM

Forces for change:
Global competition Growth in mergers. acquisitions and alliances Organization restructuring Advances in technology & telecommunications

Require MNE to have: Flexibility Local responsiveness Knowledge sharing Competence transfer

Managerial responses: Developing global mindset Information control mechanisms Horizontal communication Cross-border and virtual teams International assignments Lead to survival and growth