International Human

Resource Management
M S Ramesh

Session 1

1
 Agenda
• Introduction to IHRM
– Definition
– Globalization
– Some Myths
– Reasons for going global
– Reasons for emergence of IHRM
– Differences between IHRM and domestic
HRM
– Approaches to IHRM

2
 Introduction to IHRM

• Definition of HRM (contd.)

• “Human” represents the dimension of HRM which
relates to the soft aspects such as commitment of
employees through participation and the fact that
the most important assets being the employees.
• “Resource” represents the hard aspects such as
the strategy link of HRM and the importance of
efficient utilization of employees.
• “Management” represents the role of HRM as part
of management that implies that it’s not only an
administrative function that carries out the
formulated policies but also a managerial function
that contributes to strategy formulation

3
 Introduction to IHRM

• Definition of IHRM
• International HRM (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

4
 Introduction to IHRM

• Definition of IHRM (contd.)

• The process of procuring, allocating, and
effectively utilising 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
• In global firms HR managers need to achieve two
somewhat conflicting strategic objectives
• They must integrate HR 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
5
 Some Myths about Globalization

• Myth #1: Global = International

• Myth #2: Global strategy means doing same
thing everywhere
• Myth #3: Globalizing = stateless corporation, no
national/community ties
• Myth #4: Globalization requires abandoning
country images and values
• Myth #5: Globalizing means tackling on
acquisitions or alliances in other countries,
without much integration/change
• Myth #6: A strategy must involves
sales/operations in another country
6
 International, Multinational, Global &
Transnational organizations
• International company – transports its
business outside home country; each of its
operations is a replication of the
company's domestic experience;
structured geographically; and involves
subsidiary general managers
• Companies offering multiple products often
find it challenging to remain organized e.g.
need to have a common information systems
for accounting, financial and management
controls, and marketing. Most evolve to
become multinational companies

7
 International, Multinational, Global &
Transnational organizations
• Multinational company – grows and
defines its business on a worldwide basis,
but continues to allocate its resources
among national or regional areas to
maximize the total
• Global organizations – treat the entire
world as though it were one large country;
may be the entire company or one or more
of its product lines; may operate with a
mixture of two or more organizational
structure simultaneously

8
 International, Multinational, Global &
Transnational organizations
• Transnational organization - Use
specialized facilities to permit local
responsiveness; more complex
coordination mechanism to provide global
integration

9
 Reasons for Globalization

• Scale Economies
• Scope Economies
• Shorter Product Life Cycles
• Direct Foreign Investment
• Technology

10
Factors that Influence the Global Work
Environment

11
 Forces for Change

• Global competition
• Growth in mergers, acquisitions and
alliances
• Organization restructuring
• Advances in technology and
telecommunication

12
 Impacts on Multinational Management

• Need for flexibility:

• Local responsiveness:
• Knowledge sharing:
• Transfer of competence

13
 Reasons for emergence of IHRM

Uncertainty, Complexity,
Hypercompetition

Need to Refocus on Persons, Roles and

Integration for Global Performance HR

Capabilities
People Processes
Persons in Roles
14
 Reasons for emergence of IHRM

• 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 human resource
management in a global perspective
• The increasing role of HR in International
Operations
• Challenges of managing a Multicultural Workforce
• Developing Managerial Talent in a Global
Business Environment

15
 Basic Terms in IHRM

• National or Country Categories

– Host Country where subsidiary is located
– Home Country where the firm headquartered
– ‘Other’ or 'Third' Country
• Employees of an International Firm
– Host Country Nationals (HCN)
– Parent Country Nationals (PCN)
– Third Country Nationals (TCN)
– Expatriates

16
 Basic Terms in IHRM

• Host Country National (HCN): Belongs

to the Country where the subsidiary is
located
• Parent Country National (PCN):
Belongs to the Country where the firm has
its headquarters
• Third Country Nationals (TCN): Belongs
to any other country and is employed by
the firm

17
 Basic Terms in IHRM

• What is an Expatriate?
• An employee who is working and temporarily
residing in a foreign country
• Some firms prefer to use the term “international
assignees”
• Expatriates are PCNs from the parent country
operations, TCNs transferred to either HQ or
another subsidiary, and HCNs transferred into the
parent country

18
Differences between Domestic HRM and IHRM

03/03/11
 Differences between Domestic HRM and
IHRM
• More HR activities: taxation, culture
orientation, administrative services
• The need for a broader perspective: cater to
multiple needs
• More involvement in employees’ personal
lives: adjustment, spouses, children
• Changes in emphasis as the workforce mix
of expatriates and locals varies: fairness
• Risk exposure: expatriate failure, terrorism
• Broader external influences: government
regulations, ways of conduct

20
 Differences between Domestic HRM and
IHRM - Variables
• Complexity involved in operating in
different countries, varied nationalities of
employees
• The different Cultural Environment
• The industry or industries with which the
MNC is involved
• Attitudes of Senior Management
• Extent of reliance of MNC on home country
domestic market

21
 Approaches to Managing and Staffing
Subsidiaries
• Ethnocentric
• Home country approach
• Polycentric
• Local approach
• Regiocentric
• Regional approach
• Geocentric/Global
• Global approach

22
 The Influence of Managing and Staffing
Approaches
• Ethnocentric approach
• PCN’s usually staff important positions at
headquarters and subsidiaries
• Polycentric approach
• HCN’s generally work in foreign subsidiaries
• PCN’s manage headquarters positions

23
 The Influence of Managing and Staffing
Approaches
• Regiocentric approach
• PCN’s and managers from the region—either
HCN’s or TCN’s—staff regional headquarters
positions
• HCN's primarily staff local subsidiaries
• Geocentric approach
• Chooses the most suitable person for a
position

24
 The Influence of Managing and Staffing
Approaches
• Ethnocentric:
• Highly centralized
• HQ controls
• PCNs dominate.
• Polycentric/Regiocentric:
• Decentralized
• Each subsidiary has some degree of decision making
autonomy
• HCNs primarily manage subsidiaries.
• Geocentric:
• Ignores nationality in favor of ability and competence
needs in a worldwide integrated business strategy.

25
 Choosing an Approach to IHRM

• Corporate international strategy

• Political and legal concerns
• Level of development in foreign locations
• Technology and the nature of the product
• Organizational life cycle
• Age and history of the subsidiary
• Organizational and national cultural
differences

26