IHRM AN INTRODUCTION

KIRTI SHIVAKUMAR

Human Resource Management

(HRM)
set of organizational activities aimed at
effectively managing and directing human
resources/labour
towards
achieving
organizational goals.
Typical functions performed by HRM staff
HRA
HRD training and development, performance
management
Dismissal, separation
Motivation and rewards
Compensation and Benefits

IHRM
IHRM can be defined as set of activities
aimed
managing
organizational
human
resources at international level to achieve
organizational
objectives
and
achieve
competitive advantage over competitors at
national and international level.
IHRM includes typical HRM functions such as
recruitment,
selection,
training
and
development, performance appraisal and
dismissal done at international level and
additional
activities
such
as
global
skillsmanagement, expatriate management
and so on.

IHRM
InternationalHRM(IHRM) is the
process of: procuring, allocating,
and effectively utilizing human
resources in a multinational
corporation, while balancing the
integration and differentiation of
HR activities in foreign locations.

 IHRM is concerned about managing human resources

atMultinational Companies(MNC) and it involves
managing 03 types of employees namely,
Home country employees- Employees belonging to
home country of the firm where the corporate head
quarter issituated.
Host country employees- Employees belonging to the
nation in which the subsidiary is situated.
Third country employees- These are the employees
who are not from home country/host country but are
employed at subsidiary or corporate headquarters.
As an example a American MNC which has a
subsidiary at India may employ a French person as
the CEO to the subsidiary.
TheFrenchmanemployedis a third
countryemployee.

International HRM
Differences

Greater Number of Services

Special Services to Unique Group
Compensation Complexity
Foreign Exchange Rate Attention
Language and Cultural Differences

Increasing Importance of Global

Human Resources Understanding
International
Mergers and
Acquisitions

Foreign
Human
Resources

Importance of
Global Human
Resources
Management

Market
Access
Opportunitie
s

Global
Competition

Composition of the Cultural

Environment of International
Business
Language
spoken
written language
official language
linguistic pluralism
language hierarchy
international
languages
mass media

Religion
sacred objects
philosophical
systems
beliefs & norms
prayer
taboos
holidays
rituals

Law
common law
code law
foreign law
home country law
antitrust policy
international law
regulation
Politics
nationalism
sovereignty
imperialism
power
national interests
ideologies
political risk

Technology and
Material Culture
transportation
energy systems
tools & objects
communications
urbanization
science
invention

Values and Attitudes

Toward:
time
achievement
work
wealth
change
scientific method
risk-taking
Education
formal education
vocational training
primary education
secondary
education
higher education
literacy level
human resources
planning
Social Organization
kinship
social institutions
authority structures
interest groups
social mobility
social stratification
status systems

Key Issues in International HRM

1. Worldwide Human Resources Planning

Recruiting and Selection

Expatriate orientation and training
Repatriation
Performance appraisal

2. Compensation

Dealing with inflation and unexpected changes

in exchange rates
Providing sufficient pay to keep individuals
Should company pay hardship allowance?
Dissatisfaction with cost of living allowances

3. Housing (Complex problems at home and

overseas)

Key Issues in International HRM

4. Benefits Planning

Developing equity among employees

Several plans necessary for different categories
of personnel

5. Taxation (Proliferation of new laws)

6. Communication of HR Policies and
Programs Worldwide

Treat communication as a continuous process

Face-to-Face contact frequently
Make policy manuals brief and simple
Be sensitive to needs of receiver
Send regular written explanations of policy
changes
Periodic rotation of overseas HR managers
desirable
Security

International Corporation
Domestic firm that uses its existing
capabilities to move into overseas
markets.

Multinational Corporation
(MNC)
Firm which independent business
units operating in multiple countries.

Global Corporation
Firm that had integrated worldwide
operations through a centralized
home office.

Transnational Corporation
Firm that attempts to balance local
responsiveness and global scale via a
network of specialized operating
units.

Types of Organizations
Global
High

Global
Efficiency

Views the world as a

single market; operations
are controlled centrally
from the corporate office.

International
Low

Transnational
Specialized facilities
permit local
responsiveness; complex
coordination mechanisms
provide global
integration.

Multinational

Uses existing capabilities

to expand into foreign
markets.

Several subsidiaries
operating as stand-alone
business units in multiple
countries.

Low

High
Local Responsiveness

The Multi-National Corporation

(MNC)
Home Country
Employment
External Country
Employment

Managing in a Foreign
Environment
Attitudes Vary
Motivational
Tools are
Distinctly
Different

Cultural Environment
of International Business

Clustering Nations Approach

Geography
Languages
Religion
Job Attitudes
Work
Goals
Values
Needs

Managerial Values

Role of Competition
Role of Blame
Role of Shame
Role of Participation: Japan (hi)
Role of Autocratic: Europe (hi) and
South America (hi)

Sources of Managerial
Talent
Home Country Nationals
(Expatriates)
Host Country Nationals (Natives)
Third Country Nationals (NonHome/Host)

Advantages of Different Sources

for Overseas Managers
Host Country
Less cost
Preference of host
country
government
Knowledge of
environment

Home Country
Talent available
within company
Greater control
Company
experience
Mobility

Language facility
Experience
provided to
corporate
executives

Third Country
Broad experience
International
outlook
Multi-lingualism

SOME OF THE LARGEST U.S.

MULTINATIONALS
AT&T

General Electric

Microsoft

Cisco

General Motors

Procter and Gamble

Citicorp.

Hewlett-Packard

RJR Nabisco

Coca-Cola

IBM

Texaco

DuPont

Intel

United Technologies

Exxon/Mobil Oil

J.P. Morgan

Wal-mart

Ford Motor

Johnson & Johnson

Xerox

Motorola

6 Major Reasons for American Expatriate

Failures in Foreign Environment

Inability of the managers spouse

to adjust to a different cultural
environment.
The managers inability to adapt to
a different physical or cultural
environment. Other family-related
problems.
The managers personality or
emotional immaturity.
The managers inability to cope
with the responsibilities posed by
the overseas work.
The managers lack of technical
competence.
The managers lack of motivation
to work overseas.

Selection Methods
Interviews (executives and
psychologists)
Assessment Centers (exercises)
Tests (language and special tests)
Role of Family

Flowchart of the Selection-Decision Process

Start the Selection Process

Can the position be filled by a local national?

Select local national and subject him/her to

training basically aimed at improving technical
and managerial skills.

YE
S

NO
Identify degree of interaction required with
local community using a 7- or 9- point scale,
ranging from low to high, indicate the degree
of interaction with local community required
for successful performance on the job.

Emphasis* on tasks variables.

LOW

Second but by no means unimportant question

is to ask whether the individual is willing to
serve abroad.

HIGH
Is candidate willing?

NO
Probably not suitable for
position

VERY SIMILAR
Emphasis* on task variables

Start orientation
(moderate to high rigor)

NO
YE
S Probably not suitable for
YE
S

Identify degree of similarity /

dissimilarity between cultures
using a 7- or 9-point scale,
ranging from similar to highly
diverse, indicate the magnitude
of differences between the two
cultures,

HIGHLY

DIVERSE

Emphasis* on relational
abilities factor.
Family situation factor must
also be taken into consideration.
Start orientation (most
rigorous)

position

Start orientation
(moderate to high rigor)

Preparing for an International

Assignment

Study the following subjects:

Social and business etiquette.

History and folklore.
Current affairs, including relations between
the country and the United States.
The cultures values and priorities.
Geography, especially the cities.
Sources of pride: artists, musicians, novelists,
sports, great achievements of the culture,
including things to see and do.
Religion and the role of religion in daily life.
Political structure and current players.
Practical matters such as currency,
transportation, time zones, hours of business.
The language.

Cultural Shock
"A Disorientation that
Causes Perpetual
Stress"
Disorienting Incidents
Impossible
Communication
Telephone Difficulties
Family Frustrations

Special Considerations

Career Development Risks

Reentry Problems
Managing Family Life
Terrorism

Recruitment

Government Regulations
Work Permits Universally Required
Recruitment of Locals Varies
Guest Workers
Role of Church,Religion,Family,
Politics

Selection
Merit Versus Best
Family
Family Ties
Social Standing
Origin
Industrialized versus
Less Developed

Training Issues

Local Resources
Less Technical Capabilities
Apprenticeship Strengths in Europe
Management Development
Language (English Need)

Compensation
Host Country Employees
Production Standard or Time or
Combination
Benefits (often higher than parent
country)
Profit Sharing (may be Required)

Managers
Narrowing of Salary Gap

Expatriate Compensation

Base Pay
Differentials
Incentives
Company Assistance

Compensation of Expatriate
Managers
To be effective, a compensation
program must:

1.
2.
3.
4.
5.

Provide an incentive to leave

the parent country.
Maintain a decent standard
of living.
Facilitate reentry into the
parent country
Provide for the education of
children.
Maintain relationships with
family, friends, and business
associates.

Compensation Elements of an
Expatriate

Programs used by many MNCs have four elements:

Base pay equal to pay of domestic counterparts in
comparably evaluated jobs.
Differentials to offset the higher costs of overseas goods,
services, and housing.
Incentives to compensate the person for separation from
family, friends, and domestic support systems.
Company assistance programs to cover added costs such
as moving and storage costs, automobile, and education
expenses.

The
Price
of
an
Expatriate
Note: Additional
costs often incurred
arent listed above,
including language
and cross-cultural
training for
employee and
family, and costs of
selling home and
cars in the U.S.
before moving.
*Figures take into
account payments
by employee to
company based on
hypothetical U.S.
income tax and
housing costs.
*It is not unusual to
triple costs
compared to USA

An employers typical first-year expenses

of sending a U.S. executive abroad.
Direct Compensation Costs
Base Salary

100%

Foreign-service premium

15%

Goods and services differential

20%

Housing costs

20-40%

Transfer Costs
Relocation allowance

5%

Air fare

2%

Moving household goods

25%

Other Costs
Company Car

15%

Schooling (two children)

20%

Annual home leave (four people)

Personal income tax abroad

5%
50%