Internationalhumanresourcemanagment MBA III

8/11/2019 Internationalhumanresourcemanagment MBA III

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International Human

Resource

ManagementBino Joseph


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Definition

The process of procuring, allocating andeffectively utilising human resources in aninternational business is called internationalhuman resources management (IHRM).

Need for IHRM

Managing expatriates

Globalization has forced HRM to haveinternational orientation

Effectively utilise services of people at both thecorporate office and at the foreign plants 3


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Model of IHRM

HRActivities

Procure Utilise

Allocate

Types ofemployees

Home country nationals

Host country nationals

Third country nationals

Countries

Home country

Host country

Third country

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More HR activities

Need for a broader perspective

More involvement in employee personal lives

Changes in emphasis as the workforce mix of expatriates andlocals vary

Risk exposure

More external influences

Characteristics of IHRM

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More Human Resource Activities

Difficulty in implementing HR in host countries Aligning strategic business planning to HRP &

vice-versa

Developmental opportunities for internationalmanagers.

Human Resource Planning

Ability to mix with organisations culture

Ethnocentric, polycentric or geocentric staffingapproach

Selection of expatriates

Coping with expatriate failure

Managing repatriation process

Employee Hiring

Emphasis on cultural training

Language training

Training in manners & mannerisms

Training & Development 6


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Devising an appropriate strategy to compensate expatriates

Minimising discrepancies in pay between parent, host &third country nationals

Issues relating to the re-entry of expatriates into the homecountry

Compensation

Constraints while operating in host countries need to be

considered Physical distance, time differences & cost of reporting

system add to the complexity

Identification of raters to evaluate subsidiary performance

PerformanceManagement

Handling industrial relations problems in a subsidiary

Attitude of parent company towards unions in a subsidiary

Union tactics in subsidiaries

IndustrialRelations 7


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Need for Broader Perspective

Pay issues

Different countries, different currencies

Gender based pay in Korea, Japan, Indonesia

Health insurance for employees & their families

Nepotism common in small businesses in Asia Pacific region

Overtime workingKorean & Japanese firms

Promotions based on seniority or merit8


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More Involvement in Employees

Personal Lives

More involvement for

both parent-country &

third-country nationals Housing arrangements

Health care

Remuneration packages

Assist children left behind

in boarding schools

Changes in Emphasis

Need for parent-country &third-country nationals

decrease as more trained

locals become available

Resources reallocated toselection, training &

management development

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Physical safety of the employees

Terrorism poses a great threat

Failure of expatriates to perform wellfinancial losses to the firm

Seizure of MNCs assets in a foreign

country

RiskExposure

Dealing with ministers, political figures,economic & social interest groups

Hiring procedures dictated by hostcountry

Catch up with local ways of doingbusiness

ExternalInfluence

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Reasons for Growing Interest in

IHRM

Globalisation of

Business

Effective HRMdeterminant of

success ininternational business

Indirect costs of poorperformance in

international businessvery costly

Movement to network

organisations fromtraditional hierarchical

structures

Significant role in

implementation &control of strategies

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Basic Steps in IHRMHRP

Recruitment & Selection

Training & Development

PerformanceManagement

Remuneration

Repatriation

Employee Relations

MulticulturalManagement

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HR Planning

Key Issues in International HRP

Identifying top management potential early

Identifying CSF for future international managers Providing developmental opportunities

Tracking & maintaining commitment to individuals ininternational career paths

Tying strategic business planning to HRP & vice-versa

Dealing with multiple business units while focusing onglobal & regional strategies 13


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Recruitment & SelectionEthnocentric

Approach

Key managementpositions held byparent-countrynationals

Appropriateduring earlyphases

P&G, Philips

Polycentric

Approach

Host-countrynationals hired tomanagesubsidiaries

Parent-countrynationals occupykey positions atcorporate HQ

HUL

Geocentric

Approach

Seeks bestpeople for keyjobs, irrespectiveof nationality

Underlyingprinciple of aglobalcorporation

Colgate-Palmolive

Regiocentric

Approach

Variation ofstaffing policy tosuit particulargeographic areas

Provides a'stepping stone'for a firm wishingto move from anethnocentric orpolycentricapproach to a

geocentricapproach

143 categories of employees can be hiredparent country nationals (PCNs), host

country nationals (HCNs) & third country nationals (TCNs)


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Advantages & Disadvantages of

Using PCNs

Advantages

Familiarity with home

office, goals, practices

Easy organisational control& coordination

International exposure to

promising managers

PCNsspecial skills &experiences

Disadvantages

Difficulty in adapting to foreigncountry

Excessive cost of selecting,

training & maintainingexpatriates

Promotional opportunitieslimited for HCNs

May try to imposeinappropriate HQ style

Compensation differences forHCNs & PCNs

Family adjustment problems15


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Using HCNs

Advantages

Familiarity with the situation

in host-country

Lower hiring costs Locals motivated due to

promotional opportunities

Responds well to localisation

of subsidiarys operations

No language barrier

HCNs stay longer in positions

Disadvantages

Difficulty in exercisingeffective control over thesubsidiarys operations

Communication problemswith home office personnel

No opportunity for homecountrys nationals to gain

international experience Limited career opportunity

outside the subsidiary16


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Using TCNs

Advantages

Salary & benefit

requirements lower than

that of PCNs May be better informed

about host country

environment

Truly internationalmanagers

Disadvantages

Host country govt. may

resent hiring TCNs

May not return to theircountry after assignment

Host countrys sensitivity

w.r.t nationals of specific

countries

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Expatriate Assignment Life Cycle

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Determining theneed for an

expatriate

Selection

Process

Pre-assignment

training

DeparturePost-arrival

Orientation &

Training

Crisis &

Adjustment

Crisis & Failure

Repatriation &Adjustment

Reassignment

Abroad


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Expatriate Failure

Premature return of expatriates to their home country

Reasons Inability to adjust to host country cultureleads to culture shock

Personal & emotional problems

Difficulties with the environment

Inability to cope with larger international responsibilities Other family reasons

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Culture Shock Cycle

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ExpatriateSelection

FamilyReqments

Cross-cultural

Suitability

MNCReqments

Language

Country-cultural

Reqments

TechnicalAbility

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Individual Situation


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Training & Development

Cross CulturalTraining

LanguageTraining

PracticalTraining

ManagementDevelopment

& Strategy

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HCN Training

Gaining knowledgeabout parent

organisation

Technical know-how specific to

organisation

Role of thesubsidiary in the

MNC

General awareness

of the parentcountry cultural

norms 23


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Expatriate Performance

ManagementLinkage to

organisationalstrategy

Setting individualperformance goals

Identifyingvariables impacting

performance

Appraising theperformance

Providing regularfeedback on

progress towardsgoals

Providingopportunities for

improvement

Linking results withrewards

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Link unit goals toindividual/team goals

This will offer benchmarksfor employees to strivetowards excellence

Setting

IndividualPerformance

Goals

Compensation packages

Type of task

Moral & physical support Host environment

Multicultural adjustability

Variables

ImpactingPerformance

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Paying Expatriates

Objectives to be achieved Attract qualified & interested employees

Facilitate movement of expatriates between subsidiaries

Consistent & reasonable relationship between pay levels

Cost-effective

Problems faced in deciding remuneration package

Discrepancies in pay between parent, host & third countrynationals

Vary compensation based on family situation of expat

Remuneration when re-entering parent-country organisation

Must accommodate changes in international businessenvironment

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Components of Remuneration

Package

Base salary

Benefits

Allowances

Incentives

Taxes

Tax equalisation

Tax protection

Factors Influencing Compensation

Internal Environment Goal Orientation

Capacity to pay

Competitive strategy

Organisational culture

Internal workforce composition

Labour relations

Subsidiary role

External Environment Parent nationality

Labour market characteristics

Local culture Home & host country govts role

Industry type

Competitors strategies27


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Approaches to Designing the Pay

Package Balance-sheet approach

Going-rate approach

Lumpsum method

Cafeteria approach

Regional approach

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Repatriation

Preparation

PhysicalRelocation

Transition

Readjustment

The activity of bringingthe expat back to the

home country

Can cause re-entry shock

or reverse culture shock

Reasons

Posting period over

Childrens education

Not happy with overseas

assignment

Failure to do a good job 29


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Types of Assignments

Business

Visits

Short-term Commuter Long-term

Min. Duration 1-30 days 1-3 months Returns home

at regular

intervals

6-12 months

Max. Duration 183 days 6-12 months 2-4 years 3-5 years

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Short term assignments

Advantages

Employee less restricted by familyconcerns

Spouses career unaffected

Generally less expensive

Disadvantages

Family split

Identical benefits taxed differentlyin home & host


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Commuter assignments

Advantages

Childrens education

undisturbed

Spouses career unaffected

Disadvantages

Big strain on familyrelations if more than 1year

Long term assignments

Advantages

Family remains together

All emoluments subject to asingle tax legislation

Disadvantages

Spouses career affected

Childrens education disturbed

Loss of support from relatives &friends


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International Labour RelationsHandling Labour Issues

Delegated to foreignsubsidiaries

Labour relations centralisedwhen inter-subsidiary

production integration ispresent

Depends on nationality ofownership of subsidiary

More intervention whensubsidiary is of strategicimportance

Union Tactics

Strikemost common tactic

International Trade Secretariats(ITS)

Lobbying for restrictive national

legislations Intervention of ILO, UNCTAD, EU

& OECD

Principles of ILO

Freedom of associations

Right to organise &collectively bargain

Abolition of forced labour

Non-discrimination inemployment

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Multiculturalism Culturecustoms, beliefs, norms & values that guide behaviour of people

in a society or passed on from one generation to the next Multiculturalismpeople from many cultures (countries) interact

regularly

Benefits

Greater creativity & innovation

Sensitivity in dealing with foreign customers Possibilities of hiring best talent

Superorganisational culture

Universally acceptable HR policies & practices

Functions of IHR manager

Possess strong personal identity Have knowledge of beliefs & values of different cultures

Display sensitivity

Communicate clearly according to the cultural group

Cultivate cosmopolitan outlook & attitudes33


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Power Distance Uncertainty avoidance

Individualism Masculinity

HofstedesCultural

Dimensions

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Internationalhumanresourcemanagment MBA III