Ans.

International human resource management (IHRM) is the process of procuring, allocating,

and effectively utilizing human resources in a multinational corporation. If the MNC is simply
exporting its products, with only a few small offices in foreign locations, then the task of the
international HR manager is relatively simple. However, in global firms human resource
managers must achieve two somewhat conflicting strategic objectives. First, they must integrate
human resource policies and practices across a number of subsidiaries in different countries so
that overall corporate objectives can be achieved. At the same time, the approach to HRM must
be sufficiently flexible to allow for significant differences in the type of HR policies and
practices that are most effective in different business and cultural settings.

As Compared to HRM, IHRM requires:

(I) encompasses more functions,

(2) Has more heterogeneous functions,

(3) Involves constantly changing perspectives,

(4) Requires more involvement in employees¶ personal lives,

(5) Is influenced by more external sources, and

(6) Involves a greater level of risk than typical domestic HRM.

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c Œhen compared with human resource management, IHRM requires a much broader
perspective on even the most common HR activities. This is particularly so for HR
managers operating from a MNC¶s headquarters (HQ). The number and variety of IHRM
activities are daunting.
c International HR managers must deal with issues as varied as international taxation;
international relocation and orientation; various other administrative services for
expatriates; selecting, training and appraising local and international employees; and
managing relations with host governments in a number of countries around the world.

è  


 

c Œhen dealing with one particular HR function area such as compensation, the
international HR manager is faced with a great variety of national and international pay
issues. For example, while dealing with pay issues, the HQ-based HR manager must
coordinate pay systems in different countries with different currencies that may change in
relative value to one another over time.

c In the case of fringe benefits provided to host company employees, some interesting
complications might arise. For instance, it is common in the United States to provide

c
c
 health insurance benefits to employees and the employee¶s family, which usually means
spouse and children. In some countries however, the term ³family´ may include a more
extended group of relatives²multiple spouses, aunts, uncles, grandparents, nephews, and
nieces. How does the firm¶s benefit plan deal with these different definitions of family is
another issue which crops up in IHRM.

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c An aspect of the broader scope of IHRM is that the Head Quarter-based manager deals
with employee groups that have different cultural backgrounds. The HQ manager must
coordinate policies and procedures to manage expatriates from the firm¶s home country
(parent country nationals, PNCs), host-country nationals (HCNs), as well as third country
nationals (TCNs, e.g. a French manager working for an American MNC in the firm¶s
Nigerian subsidiary) in subsidiaries around the world.

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c The head quarter based manager must develop HR systems that are not only acceptable to
the host country but also compatible with company-wide systems being developed by his
or her HQ-based counterpart. These policies and practices must effectively balance the
needs and desires of local employees, PCNs and TCNs. Such issues are not there in
domestic Human Resource Management.
c It is at the subsidiary level that the increased involvement of IHRM in the personal lives
of employees becomes particularly apparent. It is not unusual for subsidiary HR
managers to be involved in arranging housing, healthcare, transportation, education, and
recreation activities for expatriate and local staff.
c IHRM activities are also influenced by a greater number of external forces than are
domestic HR activities. The HQ-based manager may have to set equal employment
opportunity (EEO) policies that meet the legal requirements of both the home country
and a number of host countries.
c Because of the visibility that foreign firms tend to have in host countries (especially in
developing countries), subsidiary HR managers may have to deal with ministers, other
political figures, and a great variety of social and economic interest groups than would
normally be encountered in a purely domestic HRM.

Ans. Π                  
 

    Π  
      
       Performance management may be understood as a
process that enables an international firm to evaluate and continuously improve individuals,
subsidiary unit, and corporate performance, against clearly defined, preset goals and targets.
An expatriate's performance needs to be assessed to effect his or her promotions, assess training
and development needs, and introduce pay rises.

c
c
Expatriate Performance Appraisal Challenges: The main challenges are

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c Most expatriates believe more weight should be given to an on-site manager's appraisal
than to an off-site manager's appraisal
c A former expatriate who has served in the same location could be involved in the
appraisal process to help reduce bias.
c Œhen the policy is for foreign on-site mangers to write performance
evaluations, home office managers should probably be consulted before
an on-site manager completes a formal termination evaluation

Mode of Performance appraisal:

c M  
   as a mode of performance appraisal are likely to be useful,
given the nature of expatriate assignments which often are reliant upon geographically
dispersed reporting lines and involve as key elements team work and participation.
c Standardized performance management processes are typically adopted in expatriate
performance management,
c Regardless of the effectiveness or availability of performance management tools,
expatriate success depends largely on the manager and expatriate in question: how well
they both understand, internalize and accept performance management and how skilful
they are in its implementation. To this end, appropriate training should be available for all
expatriates, including their managers.

c
c
 c In designing a Performance Management System, a firm must consider its specific
circumstances, and that off-the-shelf solutions may not produce the desired
improvements in expatriate and company performance. Further, a firm may have to
supply several tools or the use of its various employee groups.
c Œhile standardizing objectives of a PM process seems attractive, allowing diversity in
the means and tools to achieve these objectives may be quite useful. In fact, the
development of alternative PM tools, modified from a standardized global set, may result
in more effective implementation of PM worldwide
c Appoint an Ombudsman - Functional involvement provides someone to act as
ombudsman for the expat. This person can add a memo to the appraisal explaining the
circumstances, which would mitigate the negative effects of the appraisal and allow both
sides to be heard. Functional review allows the home country to guarantee that all expats
are treated fairly and are held to the same standard of performance.

To ensure expat performance is understood and rated appropriately, companies and expats
recommend having functional review in the home country in addition to having the appraisal
completed in the assignment location. Œhile measuring performance should be done at the
assignment location, determining the amount of salary increase is clearly a process of the
home country.
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cr Ensure that expatriates are qualified to perform the jobs expected of
them at a level consistent with the pay they will receive. But this will require the organization to:
a. Make sure that expatriate managers have social as well as technical skills needed.
b. See if there are local employees who are equally qualified. If so, are they paid comparably?
c. Communicate performance expectations and criteria for success clearly to the expatriate.

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 cIR" may be defined as the means by which the various interests involved in the labour
market are accommodated, primarily for the purpose of regulating employment relationships.
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globalization has disturbed the status quo between "capital" and "labour" in each country,
in the sense that capital is significantly more mobile in an open international environment, while
labour remains relatively immobile (here it should be noted that, under globalization,
international
labour migration is continuing, but, proportionately to the rate in the1970's, has not increased -
see
Œorld Bank 1995: 53). This can place "labour" at a relative disadvantage, in that "capital" can
now
employ "labour" in different countries, at lower cost and on a basis which can prejudice the
continuing employment of workers in the originating country.

The scope of IR must now be viewed as extending to all aspects of work-related activities which
are
the subject of interaction between managers, workers and their representatives, including those
which
concern enterprise performance. But issues which are critical to the manner in which an
enterprise
operates - such as job design, work organization, skills development, employment flexibility and
job
security, the range of issues emerging around HRM, and cross-cultural management issues -
have not
until recently been considered as part of labour-management relations; and, in many cases, they
have
not previously been made the subject of collective bargaining or labour-management
consultation.
But this situation is changing, and has been particularly noticeable in Œestern industrialized
countries.

As noted previously, this is part of a trend in many countries towards the need for increased
workplace flexibility as a result of globalization. It is being demonstrated in the region,
particularly in the export-exposed sectors of national economies, through higher wage
flexibility, increased emphasis on enterprise level bargaining and the growth of enterprise
unionism. The increasing shift from import substitution to export promotion in India provides
a current example of a resurgence in collective bargaining to produce required changes in
work organization, better use of technology, general efficiency and productivity. Œhether
collective bargaining should be introduced in the government sector has been a matter for
debate in Southeast Asia and some South Asian countries for some time, but little real
progress in this direction has been made. In the Œestern Pacific (Australia and New Zealand),
however, public sector collective bargaining now takes place, and there is increasing use of
18
contract employment for senior government officials. There has also been an increasing
incidence in some countries (eg, Australia and New Zealand) of direct bargaining between
managers and individual workers. In the trend towards decentralization of bargaining and
workplace flexibility in the region, there appears to be a close relationship between the levels
of economic development and of international integration exhibited by a particular country
Cross-cultural managing and working

c
c
One overarching consequence of increasing globalization is that managers from investing
countries in and outside the region are having to adapt their own national management
practices to the circumstances prevailing in different Asian countries. This requires
recognition that, because Asia is characterised by diversity, there is a need for knowledge and
sensitivity about legal, IR and HR (and other management) practices in different cultural
environments. Œorkplace rules, practices and behaviour which apply in one country may not
apply or be inappropriate in another. Trade unions and workers also need to understand and
adapt to changing enterprise (including cultural) practices which may be foreign to them.
20
Governments have to become familiar with the customs, practices and expectations of
investing countries so as to be able to provide appropriate supporting policies and
programmes. In each of these situations, the persons involved need access to information,
experience and strategies to enable them to adjust effectively to new work environments.
Transplanting ways of managing people from one country to another, and developing new
(culturally sensitive) ways for managers and workers to work together, can be much more
difficult than transplanting management systems and structures dealing with issues such as
marketing and finance. The growing incidence of industrial disputation in some local
operations of foreign-owned enterprises and joint ventures in a number of Asian countries
suggests that this process of transition is not yet being successfully managed.

c 
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The main sources of productivity growth are technological change, increases in capital intensity,
economies of scale and improvements in labour efficiency. Education and training will play a
vital
role in promoting labour efficiency through the enhancement of workforce skills, and the Œorld
Bank has emphasised the significant link between skills development and a country's
manufacturing
export capacity (Œorld Bank 1993: 43 - 48).
Training of workers in narrow skills is no longer appropriate. Modern technology is increasingly
demanding broader skills and new mixes of previously quite distinct skills. In addition, the rapid
pace of technological change demands an ability to adapt quickly; so, the formation of skills has
to
rely not only on initial training, but equally on opportunities for retraining and upgrading
existing
skills.



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Taking advantage of the scope for greater workplace flexibility through changes to work
organization (which includes the design, operation and skills requirements of jobs and the
arrangement of working time) is an important factor in the ability of firms to maintain and
improve
competitiveness.
Flexibility at the workplace requires workers to have several skills and a broader understanding
of
the production or work process to enable them to carry out a range of activities. To achieve this

c
c
outcome, managers and supervisors need to be forward looking, inform and involve workers, and
use
approaches which enable people to develop and use properly their talents and abilities. In
particular,
they need to pay far greater attention to training and skills development. This should lead to
greater
versatility for employers in how they organize and carry out work and a greater capacity to cope
with
fluctuations in production. The ability to adjust working time arrangements and the identification
and
removal of restrictive work and management practices are also important. The latter practices, in
particular, inhibit flexibility and efficiency, and exist for reasons other than the safe and efficient
performance of work tasks.
c 
 
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c
As noted earlier in this paper, globalization involves managers and workers moving from one
country to another. In doing so, they enter into a new society and culture. Some aspects of these
cultures are obvious (eg, another language, other laws and customs, etc) and can with the
necessary
goodwill be adapted to. But there are other elements of culture which are not so visible. They
include
the assumptions made and premises relied on by the members of a certain society; values and
unwritten codes of behaviour; and patterns of thinking and problem-solving. They are what the
people in that society take for granted. These elements are the essence of a particular culture and
are
the most difficult to detect. A manager or worker coming from and entirely different culture -
with its
own never-questioned assumptions and values - may not perceive or understand these elements
or
have difficulty accepting them. As such they can be the basis for tension and conflict in the
workplace.
Managers assuming work responsibilities in a new country must acquaint themselves with both
visible and invisible cultural traits, and adopt appropriate strategies to ensure that cultural
mismanagement considerations do not become a source of reduced enterprise performance.

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to that of the host country. If working in a low-pay country the multinational usually
supplements base pay with additional benefits and payments. This approach leads to equality
with local nationals, simplicity, and helps the expatriate to identify with the host country. One of
the main problems is it can lead to a variation between assignments for the same employee.
Meaning, the same employee can hold a similar position in two different countries and make
more money in one than the other.
The basic objective of the balance sheet approach is the maintenance of home-country living
standard plus a financial inducement. This is the most common system used in multinational
firms. The balance sheet approach is designed to equalize the purchasing power of employees at
comparable position levels living overseas and in the home country, and to provide incentives to
offset qualitative differences between assignment locations.
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home-country living standard plus a financial inducement to make the
package attractive.
›c Home-country pay and benefits are the foundations of this approach
›c Adjustments to home package to balance additional expenditure in
host country
›c Financial incentives (e.g., expatriate/hardship premium) added to
make the package attractive
›c Most common system in usage by multinationals

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›c Parent-country and host-country income taxes.
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›c Contributions to savings, payments for benefits, pension
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›c Health care: $200/mon paid by employer
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!c A U.S. expatriate working for a Chinese university:

›c Base pay variation: $1,500-$10,000/mon
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›c Benefits: Pension coverage for a 5 year contract or paid at the option
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›c Health care: Completely paid by employer or optional incentive to the
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›c Home leave 1-2 times/Yr
›c Paid vacations and observed Chinese holidays
›c Initial research launch grant: $10,000 .

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·c Each subsidiary is a distinct national entity with some decision-making autonomy;

·c HCNs manage subsidiaries who are seldom promoted to HQ positions;
·c PCNs rarely transferred to subsidiary positions.

Rationale and advantages:

Gives hope for profit maximisation through flexibility because local managers can react quickly
to market needs in the areas of pricing, production, product life cycle, and political activity.
Absence of problems associated with expatriate managers including cultural myopia. Provides
continuity in the management of foreign subsidiaries.

Problems and disadvantages:

No synergy because there is little communication between national units. Limits experience of
host nationals to their own country. Corporate headquarters may become isolated from national
units and lead to lack of integration. This in turn may lead to corporate inertia.


   

(Note: This option is not covered by Hill (2005); it is included here for interest and to indicate
that other authors have a perspective which is different from Hill (2005).

Gefinition:

2

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·c Reflects a regional strategy and structure;

·c Regional autonomy in decision making;
·c Staff move within the designated region, rather than globally;

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Rationale and advantages:

Policy varied to suit the nature of the firm's business and product strategy. Allows interaction
between executives because of inter-regional transfers. Shows some sensitivity to local
conditions. Provides a 'stepping stone' for a firm wishing to move from an ethnocentric or
polycentric approach to a geocentric approach.

Problems and disadvantages:

May produce federalism at a regional (rather than a country) basis and constrains the firm from
taking a global stance. May improve career prospects at the national level, but only to the
regional level: staff may never attain positions at corporation headquarters.

Ans. Staffing deals specifically with the acquisition, training and allocation of the organisation's
human resources. In both the domestic and the international context, the staffing process can be
seen as a series of steps that are performed on a continuing basis to keep the organisation
supplied with the right people in the right positions at the right time. The steps in this process
are:

!c human resource planning (this is part of the organisation's strategic plan)

!c recruitment
!c selection
!c induction and orientation
!c training (to improve job skills)
!c development (to educate people beyond the requirements of their present position)
!c performance appraisal
!c remuneration and rewards
!c transfers
!c separations.

In an international business, the way in which these steps are administered depends very much
on the firm's strategy and the staffing policy chosen to support that strategy. There are four
choices in policy: the ethnocentric approach, the polycentric approach, the geocentric approach
and the regiocentric approach. Œhat follows is a shorthand description based on Gowling and
Œelch (2004) of the four using the same criteria for each approach. You should use these
descriptions as the 'skeleton' of your understanding of the four approaches and use the reading
from Hill (2005) to provide the 'flesh'.

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