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DIFFERENCES BETWEEN GLOBAL HRM & DOMESTIC HRM

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Divya Lekshmi P. MBA IB

5/23/12

HRM
HRM refers to those activities undertaken by an organization to

effectively utilize its human resources. Human resource planning

These activities would include at least the following:

Staffing

Recruitment

Selection Placement
Performance Training

management (remuneration) and benefits


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and development

Compensation

International managing HRM as a set of activities aimedHRM


organisational human resources at international level to achieve organisational objectives and achieve competitive advantage over competitors at national and international levels . - French
The core aim of HRM remains constant regardless of the

international context. In short, International HRM is concerned with maximising the human capital of the organisation to achieve organisational goals. - Dowling
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A Model of IHRM- Morgan (1986 )


International HRM as the interplay among these three dimensions human resource activities, types of employees, and countries of operation.

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What does IHRM add into the Traditional Framework of HRM?


The three broad HR activities: Procurement, allocation, and

utilization (These three broad activities can be easily expanded into the six HR activities listed above) the host-country where a subsidiary may be located, (2) the homecountry where the firm is headquartered, and (3) "other" countries that may be the source of labor or finance or other inputs. country nationals (HCNs), (2) parent-country nationals (PCNs), and (3) third-country nationals (TCNs).

The three national categories in international HRM activities: (1)

The three types of employees of an international firm: (1) host-

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Parent country nationals (PCNs);


PCN-a person working in a country and temporarily residing in a

foreign country other than their country of origin.

Also referred to as an expatriate. Some firms prefer to call such employees international assignees. Long periods of assignment (perhaps 4 5 years or more) may run

the risk of de facto employee status in the host country, so that labor laws or the host country apply.

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Host country nationals (HCNs)


They are those employees of an organization who are the citizens

of the country in which the foreign subsidiary is located.

Third country nationals (TCNs)


These are the citizens of a country other than the country where

the organization is headquartered and the country that is hosting the subsidiary government or government sanctioned contractor who represent neither the contracting government nor the host country or area of operations.

TCN describes individuals of other nationalities hired by a

This is most often those performing on government contracts in

the role of a private military contractor.

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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

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Variables that Moderate Differences between Domestic HRM and IHRM

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Complexity Involved
The complexity of operating in foreign countries and employing

workers from different countries is a key variable that makes domestic and international HRM different-Peter J Dowling
The complexity of international HR can be attributed to six

factors:

1. 2. 3. 4. 5. 6.

More HR activities The need for a broader perspective More involvement in employees personal lives Changes in emphasis as the workforce mix of expatriates and locals varies Risk exposure Broader external influences
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1. More HR Activities
International HRM addresses a broader range of activities than domestic HRM. These include
International taxation, Coordinating foreign currencies and exchange rates, International relocation, International orientation for the employee posted abroad, Expatriate administrative services Host government relations Language translation services
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2. The Need for a Broader Perspective


Administering programs that are equitable for more than one

group.

Human

resource managers working in an international environment face the problem of addressing HR issues of employees belonging to more than one nationality. Hence, these HR managers need to set up different HRM systems for different locations. Human resource managers in a domestic environment administer HR programmes to employees belonging to a single nationality.

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3. More Involvement in Employees Personal Lives


Ensure expatriates understand
Housing arrangements Healthcare Compensation (cost-of-living allowances, premiums, taxes) Visa requirements Schooling

International HRM requires greater involvement in the personal life of employees. The HR manager of an MNC must ensure that an executive posted to a foreign country understands all aspects of the compensation package provided in the foreign assignment, such as cost of living, taxes, etc. The HR manager needs to assess the readiness of the employees family to relocate, support the family in adjusting to a foreign culture through cross-cultural training, and to help in admitting the children in schools. The HR department may also need to take responsibility for children left behind in boarding schools in the home country by the employees on foreign postings. In the domestic environment, the involvement of the HR manager or department with an employees family is limited to providing family insurance programmes or providing transport facilities in case of a domestic transfer. 5/23/12

4.Risk Exposure
There is heightened exposure to risks in international

assignments. These risks include the health and safety of the employee and family. A major aspect of risk relevant to IHRM today is possible terrorism. Several MNCs must now consider this factor when deciding on international assignments for their employees. Moreover, human and financial consequences of mistakes in IHRM are much more severe than in domestic business. For example, if an executive posted abroad returns prematurely, it results in high direct costs as well as indirect costs.
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Expatriate failure

5. Broader External Influences


Government Economy Labour standards and costs Taxation Health and safety Laws, compliance regulations, codes of conduct

International HRM has to deal with more external factors than domestic HRM. For example, government regulations about staffing practices in foreign locations, local codes of conduct, influence of local religious groups, etc. If an American organization is sanctioned license by the Indian government to set up its subsidiary in India, the American company is under legal obligations to provide employment 5/23/12

II.

The Cultural Environment

Defining culture
a shaping process overtime that generates relative stability,

reflecting a shared knowledge structure that accentuates variability in values, behavioural norms, and patterns of behaviour.

Defining culture shock


many adjustments to new cultural environments in short periods of

time, challenging peoples frames of reference in that their sense of self (nationality) comes into question.

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Prior rather than posthoc Do national differences represent cultural differences? Emic etic aspects of concepts or behaviour
Emic culture specific (specificity/divergence) Etic culture common (universality/convergence) cultural awareness cultural differences differences in work-related values
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III.

Industry Type

build shared genuine belief that cross-cultural learning will result in more creative and effective ways of managing people

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IV.

Reliance of the Multinational on its Home Country Domestic Market

NAFTA

UNCTAD

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V.

Attitudes of Senior Management to International Operations

Fostering a global mindset


Think globally Globally oriented staff

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The first and most basic premise is that domestic HRM is

conducted at a national level, whereas international HRM is conducted globally. The impaction from this is that International HRM is often more strategic in nature because it considers how core employees from around the world will work together. concerned with managing employees at a national level, whereas international HRM requires the management of up to three types of employees; local, national and host.

Secondly, domestic HRM can be introverted and is only

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Thirdly, domestic HRM is generally concerned with a limited

number of activities at a local or national level such as recruitment and selection and training and development. In contrast, international HRM is concerned with more complex matters such as expatriate management and relocation. from the external environment. IHRM is very complicated as it is affected heavily by external factors such as cultural distance and institutional factors

Fourthly, domestic HRM is less complicated due to less influence

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Domestic Human Resource Management Staffs are placed within the national boundaries. Less number of Rule and Regulations to be managed.- mostly employment and taxation rules of the home country. There is uniform policy in administration

International Human Resource Management Staffs work outside their national boundaries. Very high number of rules and regulations which are related to taxation, employment rules, language translating services, work permit etc. Broader Perspective- Management has to be done according Host Country Nationals (HCNS) , Parent Country Nationals (PCNS) and Third Country Nationals.(TCNS) Special attention to personal life of expatriate employees- cultural training, schooling of children, employment opportunity for spouse. IHRM management has to be ready to face challenges like underperformance of expatriate employees, diplomatic relationships between host country and parent country, currency exchange rates which are variable and may impact the benefits of TCNS and PCNS. Special Training for expatriates so that they might not face unnecessary hassles in the alien socio cultural environment.

No special attention into the personal life. Confined to crche and cultural interactions. Challenges are confined to the situation of a particular country.

Special Training is not required for Socio Cultural adaptation.

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Conclusion
The complexity involved in operating in different countries and

employing different national categories of employees is a key variable that differentiates domestic and international HRM, rather than any major differences between the HRM activities performed. moderate (that is, either diminish or accentuate) differences between domestic and international HRM. These variables are the cultural environment; the industry (or industries) with which the multinational is primarily involved; the extent of reliance of the multinational on its home-country domestic market; and the attitudes of senior management.
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In addition to complexity, there are four other variables that

References
Human Resources Management; The Key Concepts - By Chris

Rowley, Keith Jackson Dowling

International business - By Frank McDonald, Fred Burton, Peter International Human Resource Management: Managing

People in a Multinational- By Peter Dowling, Marion Festing, Allen D. Engle

Human Resource Management - By Durai

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