Chapter Objectives

• Define key IHRM terms

• Review expatriate management evolution
• Outline differences between domestic and
international HRM
• Discover the increasing complexity and
potential challenges of current IHRM
Definition of HRM
HRM involves all management decisions and
practices that directly affect the people who work for
the organization.
“Human Resources” the people who work for the
organization.
Human resource management is the development
and implementation of systems in an organization for
attracting, developing and retaining a high-
performing workforce.
(Maimunah, 2011)
HRM
HRM refers to those activities undertaken by an
organization to utilize its human resources effectively.
Major Functions and Activities
- Human resource planning
- Staffing
Recruitment
- Selection
- Placement
- Performance appraisal
- Training and development
- Compensation and benefits
- Industrial relations
 Planning
• Meshing HR strategy with overall organization strategy
• Forecasting future personnel needs
• Gathering information – including process and outcome data from HR activities and job analysis
 Legal Compliance
• Staffing, including EEO and discharge/downsizing
• Pay and benefits
• Employee rights
• Labor relations
• Privacy
 Staffing
• Recruiting
• Selection
• Career management
• Downsizing / discharge
 Reward Systems
• Pay – including base pay and incentives
• Employee benefits
 Employee Relations
• Employee rights and responsibilities
• Grievances and discipline
• Labor relations

 Several other areas may or may not be included in an organization’s HR department. They may be assigned to a different
department or outsourced; we won’t be looking at these areas.
 OSHA and safety (often a separate function, especially in industrial settings)
 HRIS (Human resource information systems – often outsourced)
 Payroll (sometimes moved to accounting, sometimes outsourced)
Definition of HRD
A set of systematic and planned activities
designed by an organization to provide its
members with the necessary skills to meet
current and future job demands.
 A process of developing human expertise through
training and development and organisational
development for the purpose of improving
performance (Swanson,2001).
 A system and process concerned with an organised
series of learning activities, within specified time
limits, designed to produce behavioural changes in
the HR in such a way that it acquires desired level of
competence for a present or future role. (Bhatia,
Verma & Gary, 1994).
Definition of IHRM
 Broadly cover all issues related to the management of
people in an international context.
Covers a wide range of HR issues facing MNCs in
different parts of their organizations.
Include comparative analyses of HRM in different
countries.
Summarily, IHRM involves the same activities as
demostic (e.g HRP, Staffing & etc). However,
domestic HRM is involved with employees within
only one national boundary.
Why International HRM
Increasing globalization, 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 HRM in a global
perspective
The role of HR in International Operations
Managing a Multicultural Workforce
Developing Managerial Talent in a Global Business
Environment
Three Approaches to IHRM
Cross-cultural management - Examine human
behavior within organizations from an international
perspective
Comparative HRM and Industrial Relations - Seeks to
describe, compare and analyze HRM systems and IR
in different countries
HRM in multinational firms - Explore how HRM is
practiced in multinationals
Types of Organizations
1.International Corporation
– domestic firm that uses its existing capabilities to move
into overseas markets
– focus on a single foreign country and on managing relation
between HQs and that country ( LOW global efficiency)
- Become an expert in one culture (LOW local
responsiveness)
2.Multinational Corporation(MNC)
- Firm with independent business units operating in
multiple countries
- Several subsidiaries operating as stand alone business
units in multiple countries
3.Global Corporation
- Firm that has integrated worldwide operations through a
centralized home office
- Views the world as a single market
4.Transnational Corporation
- Firm that attempts to balance local responsiveness and
global scale via a network of specialized operating units
- Understand worldwide business environment from a
global perspective
- Learn about many cultures
THE INTERNATIONALIZATION OF
BUSINESS – the driving force
Increased travel
Rapid and extensive global communication
Rapid development and transfer of new technology
Free trade
Education
Migration of large numbers of people
Knowledge sharing
Pressure on cost
Search for new markets
Homogenization of cultures
E-commerce
Basic Terms in IHRM
National or Country Categories
- Host Country where subsidiary is located
- Home Country where the firm headquartered
- ‘Other’ Country

Employees of an International Firm

- Host Country Nationals (HCN)
- Parent Country Nationals (PCN)
- Third Country Nationals (TCN)
- Expatriates
Host Country nationals (HCN)
Natives of the host country
A subsidiary
Parent Country Nationals (PCN)
Who are typically defined as citizens of the country of
the HQs of the MNE and employed by the firm in the
country of its HQs.
Third Country Nationals (TCN)
Natives of a country other than the home country or
the host country
‘Others’ countries that may be the source of labor,
finance, and other inputs.
Expatriates
Staffs are moved across national boundaries into
various roles within the international firm’s foreign
operations.

When PCNs are transferred

(posted/assigned/relocated) to another country, to
work in a foreign subsidiary or other type of operation
(JV @ alliance) of the MNE for more than one year,
they are generally referred to as
expatriates/international assignees.
Advantage of Different Sources for
Overseas Managers
INTERNATIONAL ORIENTATION
Types
 Ethnocentric
 Polycentric or Regiocentric
 Geocentric
Ethnocentrism
Managers are most likely to use a home country
standard as a reference in managing international
activities
Centralized decision making and high control over
international operations that are centered in the HQs
Likely to follow an international strategy of
replicating home country systems, procedures and
structure abroad
Extensive use of expatriates from HQ to establish and
manage the subsidiary operations.
all key management positions are filled by parent company
nationals
Common practice in early stage of internationalization
Due to lacks qualified individuals the host country
nationals
Need to maintain good communication with corporate HQ
May see this as the best way to maintain a unified
corporate culture
May believe it is the best way to transfer core
competencies to a foreign operation
Can lead to “cultural myopia” – failure to understand host
country cultural differences that require different
approaches to management & marketing
Polycentrism or regiocentrism
Polycentric – Requires host country nationals to be recruited to
manage subsidiaries, while parent country nationals occupy
key positions at corporate HQ
Extended to include a num. of similar countries in a region
HR practices tend to be decentralized and local
subsidiaries tend to be much more likely to be left alone,
managed by a local HR manager who will follow local HR
practices
Eliminates language barriers and adjustment problem for
expatriates
Less expensive
Compatible with a multi-domestic strategy
HR managers in the foreign subsidiaries tend to be local and
relatively autonomous from HQ
Disadvantages
Host country nationals have limited opportunities to
gain experience outside their own country & can’t
progress to senior positions -> resentment
Gap can form between host country managers & parent
country – isolating HQ staff from various foreign
subsidiaries
Lack of management transfers can lead to lack of
integration -> a federation of largely independent
national units with only nominal links to HQ
Difficult to transfer core competencies or realize
experience curve & location economies
Geocentrism
 Geocentric – seeks the best people for the job throughout the
company, regardless of nationality
 HR practices will include extensive use of expatriates and inpatriates
with a broad global sharing of HR practices and adoption of the best
practices
 Enables firm to make the best use of its human resources
 Enables the firm to build a cadre of international executives who are
at home working in a number of cultures
 Build a strong unifying corporate culture & informal management
network – required for global & transnational strategies
 Better able to create value from the pursuit of experience curve &
location economies and from the multidirectional transfer of core
competencies
 Reduce cultural myopia & enhance local responsiveness
 Compatible with both global & transnational strategies
Disadvantages
Immigration laws can require the employment
of host-country nationals
Expensive to implement – training & relocation
costs
Need a compensation structure with a
standardized international base pay level higher
than national levels in most countries
A Model of IHRM
Differences between international
and domestic HRM
More HR functions and activities
- HR Deprt. must engage in a no. of activities that would
not be necessary in a domestic environment.
- The management of international assignees which
includes such things as foreign taxes, work visas, and
assistance with international relocations.
- Intern. relocation & orientation involves: arranging for
pre-departure training, providing immigration and
travel details, housing, shopping, medical care,
compensation and etc.
Differences between international
and domestic HRM
- Host govern. relations represent an important activity
for a HR deprt. in developing countries where work
permits and other important certs. are required.
A broader expertise and perspective
-HR managers working in a domestic
environment generally administer programs for a
single national group of employees who are
covered by a uniform C&B policy and taxed by one
national govern.
- knowledge about foreign countries, their
employment laws and practice and cultural
differences
Differences between international
and domestic HRM
- Because HR managers working in an international
environment face the problem of designing and
administering programs for more than one national
group of employees (e.g PCN, HCN & TCN employees.)

- Complex equity issues arise when employees of various

nationalities work together and the resolution of these
issues remains one of the major challenges in the IHRM
field.
Differences between international
and domestic HRM
More involvement in people’s lives,
- A greater degree of involvement in employees’ personal
lives is necessary for the selection, training and effective
management of both PCN & TCN employees.
-HR Deprt. needs to ensure the expatriate employees
understands housing arrangements, health care and all
aspects of compensation package provided for the
assignment.
-Many MNC have an ‘International HR Services’ section
that coordinates administration of the above programs
and provides services for assignment, coordinating home
visit and final repatriation.
Differences between international
and domestic HRM
More involvement in people’s lives,
- Some govern. require the presentation of a marriage
certs. before granting a visa to an accompanying spouse.

-Domestic HR Deprt. involves with an employee’s family

is limited and domestic assignment most of these matters
either would not arise or would be primarily the
responsibility of the employees rather than the HR Deprt.
Differences between international
and domestic HRM
Changes as the workforce mix of expatriates and
local varies.
- Foreign operation mature, the emphases put on
various HR activities change.
- The need to change emphasis in HR operations
as a foreign subsidiary matures is clearly a factor t
hat would broaden the responsibilities of local
HR activities such as HRP, staffing, T&D and C&B.
Differences between international
and domestic HRM
Risk exposure
- Human & financial consequences of failure in the
international arena are more severe than in domestic
business.
- The direct cost (salary, training cost and etc) and
indirect cost (loss of mkt. sahre) of failure to the parent
firm may be as high as three times the domestic salary
plus relocation expenses depending on currency
exchange rates and location of assignment.
- Other aspect of risk exposure that relevant IHRM is
terrorism & political climate.
Differences between international
and domestic HRM
A broader external influences
- The major external factors that influence IHRM are the
type of govern. , the state of economy and the generally
accepted practices of doing business in each of the
various host countries in which the multinational
operates.
- E.g host govern. can dictate hiring procedures.
- Developed countries, labor is more expensive & better
organised than in less-developed countries & govern.
Requires compliance with guidelines on issues such as
labour relations, taxation and S&H.
Differences between international
and domestic HRM
- In less developed countries labour is tends to be more
cheaper and less organised and government regulation
is less pervasive.
- These factors shape the activities of the subsidiary HR
manager .
Differences between HRM & IHRM
DOMESTIC HRM
Employees are within one national boundary.
Employees may be grouped on region or zone-wise for
convenience of regional language and food habits.
convenience of regional lltural and food habits.
Routine work pattern. rk pattern.
Not much variation or differences in compensation.
Communication is normal.
No administrative support required.
Organizations do not normally care about children
schooling, arranging medical facilities.
Locals can take care of themselves in unusual and
difficult situations.
Public relations work taken care by employees
themselves.
INTERNATIONAL HRM
Employees are from different countries.
Employees are categorized as HCN, PCN and TCN for
convenience of language, socio-cultural and food
habits.
Needs constant attention on adjustment matters in
living conditions and work ethics.
The compensation package need to be re-designed
based on taxation matters and parity of emoluments
with equivalents in the organization
Language translator may be required for better
communication.
Administrative support required for visa, driving
license, currency transfer, banking services, etc.
HR department needs to bother about housing,
entertainment, communication of foreign nationals.
HR department to be extra careful of foreign nationals
in case of terrorism, natural calamities, epidemics and
ethnic agitations
Administrative support felt necessary to get school
admissions for employee’s children. Similarly the
medical services to be provided.
VARIABLES THAT MODERATE DIFFERENCES
BETWEEN DOMESTIC HR & IHRM
Enduring Context of IHRM
Conclusion
As in present scenario the globalization is on top of
its level and world has became a global a global
village.
So managing such a diverse workforce is a big deal for
the organizations that’s why the MNCs have focused
on the IHRM.