1

Why Internationalize? Why Globalize?

 It is said that by 2030:

“Organizations must either Globalize or die”

 More than fifty Percent (50%) of U.S. economy is

based on exports and close to 30% of Indian
economy

 That probably explains why during slowdown,

sustaining just on our Domestic Markets is so
difficult
2
Need for International HR Management
…G.D. on Need and Define

 Globalization of Businesses therefore

necessitates, the need for International Human
Resource Management (called IHRM), as distinct
from Domestic HRM
 Just as Success of a Domestic Business depends
a lot on it’s Human Resources, so is the case with
International Business
 Like in the Domestic Business, Results in
International Markets can only be achieved by:
 HR thr’ proper: Planning, Attracting, Selecting, Inducting,
Directing/Focusing, Motivating, and Retaining Talent
at Corporate Office and Foreign Plants of an MNC
 IHRM is however required to be much more varied,
complicated, involved, creative and adaptive. 3
Need for International HR Management cont…
 International Organizations may possess the very best
of Human Resources at it’s home country, but it
cannot be totally successful, if it cannot effectively
procure, transfer, allocate and utilize the Talent at it’s
Foreign Subsidies.
 This Process of Procuring, Allocating and effectively
Utilizing Human Resources in an International
Business is called IHRM i.e. “International Human
Resource Management”
 IHRM can also be said to be “the utilization of
International Human Resources, to achieve
Organizational Objectives, without regard to
Geographical Boundaries” 4
 IHRMs Human Resource Processes
 IHRM has three broad activities, which
covers the six processes of Domestic HRM
 PROCUREMENT
 ALLOCATION
 UTILIZATION
 These three activities can be Dovetailed
with the Six of Domestic HRM as follows:
 HR Planning, Recruitment & Selection (P)
 Training & Development, Remuneration (A)
 Performance Management, Productivity (U)
5
 INTERNATIONAL HUMAN
RESOURCE MANAGEMENT: IHRM
IHRM is essentially an interplay of
three (3) elements : (which one’s?)
 The Human Resource (HR)
activities to be carried out,
 The Countries of Operation,
 Types of Employees required for
International Business. 6
 Countries of Operation in IHRM
Countries involved in International
Business are 3 (which one’s?)
 The Parent or the Home Country,
which houses the Headquarters
 The Host Country, where the
Subsidiary is located
 The Other Country or Countries,
which may be a Source of Labour,
Finance, etc
7
 IHRM: Types of Employees
 Likewise there are three (3) types of
‘EMPLOYEES’:
 Parent or home country Nationals
 Host country Nationals
 Third country nationals
 Thus say MOTOROLA which operates in India will
have:
 A few American experts as Parent country
Nationals (Americans or Indo-Americans)
 A large Indian workforce, as host country
Nationals
 Japanese and Australians from Motorola’s
Operations in these countries, forming the
8
Third Country Nationals
 IHRM v/s Domestic HRM
Several factors differentiate IHRM from
Domestic HRM. Main Characteristics of
IHRM viz-a-viz Domestic HRM are (GD ?):
 Requires a Broader Perspective than HRM
 More and different HR activities
 There is much greater involvement in
Employees Personal Life
 Changing emphasis as Workforce mix of
Expatriates and Locals varies
 Greater Risk Exposure
 More External Influences
“GD to bring forth three issues in each of above”
9
 In IHRM there is Need for a Broader
Perspective (1)
 Dealing with Pay in different countries with
different currencies… that may change in
relative value
 Benefit requires different coverage in different
Countries e.g. Health Insurance to family:
 In one Country you can cover only working
person & spouse
 in another, also children, in third also
Parents
 In still another, multiple spouses, aunts
uncles, grandparents, nephews, nieces 10
 In IHRM there is Need for a Broader
Perspective ..cont (1)
 Norms in different countries differ. IHRM must know…!
 Family man paid more than Single Women for same
job (belief very strong in Korea & Japan )
 Relations given first / greater opportunities (easier to
handle) others countries view this as nepotism .. L&T!
 Romance at work very appropriate in Korea, not so in
Malaysia, Indonesia.
 More work thru: increased working hours (12 hrs in
Korea & Japan) or more people (Australia, Singapore)
 Rewards more for Seniority less for Performance
(Australia 4%, Japan 31%, Korea 40% for Seniority)
 Job for life (Korea 35%). Job for the present (Western
11
Expatriates only 3%. They do not want to get stuck)
IHRM deals with more and different
HR Activities (2)
 International Orientation
 Host Government Regulations
 Language translation services
 International Taxation
 Administrative Services for
Expatriates
 Relocation 12
In IHRM there is more Involvement in
Employee’s Personal Lives (3)
 Giving accurate inputs for foreign postings and
services available (with regards to remuneration,
housing, health-care) to Parent and Third Country
employees
 Provide help and service as regards Banking,
transfer of money to home country, investments in
a foreign land, coordinating the home visits, etc
 Provide Schooling for children, or arrange for
boarding School in home country, when parents
move to foreign postings
 Help in searching Jobs for Spouses, Colleges for
children wanting to pursue Graduation, MBA, 13etc
 In IHRM there is Change in
Emphasis (4)
 As International Business matures, the emphasis
on various HR activities keep changing
 As the need for Parent and Third Country
Nationals decreases after a while, the focus shifts
to getting more high potential locals to replace
earlier expatriates
 Thus an increased load in terms of Local
Selection, Training and Management Development
 Above results in reduced Emphasis on factors like
Expatriate Taxation, Relocation, etc
 Movement of high Potential local staff to
Corporate Office for Development Assignments
14
 All this, calls for a change in emphasis by IHRM
In IHRM there is a Larger Element of
Risk Factor (5)
 Besides the normal risk Domestic HR faces,
such as violation of Constitutional & Statutory
Provisions (non-recruitment of Apprentices, SC /
ST Quota’s, Union problems), IHRM faces many
more:
 Physical Safety of Employees (not moving out
after 10 pm, not using Elevators when alone)
 Risk of employee getting Kidnapped, acts of
Terrorism (1 to 2 % of Revenues are reserved for
Protection)
 Arrange Emergency Evacuation (as in Kuwait, 15
Indonesia)
In IHRM there is a Larger Element of
Risk Factor (5)…cont
Local Government, taking over majority
control of Operations
Sudden seizures of MNCs assets in Foreign
Country, for Political reasons
Where HR Policies antagonize host Country,
Powerful Unions and Political Groups, MNC
may be asked to leave the country
Sending back Managers who do not
perform, thus incurring heavy Financial
losses. 16
 In IHRM there is more EXTERNAL
INFLUENCE (6)
 MNCs greater visibility requires dealing
with Political figures, Ministers, Economic
and Social Groups
 There is constant pressure from the host
country, like dictating Hiring Procedures
(particularly affirmative action)
 Follow local ways of doing business (code
of conduct, bribe, gifts)
 Strict compliance to stringent Labour Laws,
Taxation, Health and Safety 17
Basic Steps Involved In Effectively
Managing IHRM

 Human Resource Planning (HRP)

 Recruitment & Selection
 Training & Development
 Performance Management
 Remuneration
 Repatriation
 Employee Relations 18
 INTERNATIONAL HUMAN
RESOURCE PLANNING

 What is HRP on the

International Scene?
 What are the Key Issues
Involved in IHRP?
19
 Human Resource Planning (HRP)

HRP in the International arena,

could be viewed as ‘Successful’,
if the right Human Resources
are:
are attracted, selected and efficiently
deployed,
….for meeting the Strategic Global
Objectives of an MNC
20
 Human Resource Planning (HRP)
 Key issues in IHRP are :
 Ability to identify Top Management
Requirements
 Identify the critical Success factors required
by International Managers (e.g.
Competencies)
 Ability to provide Development Opportunities
 Tracking Commitment and Progress in
International Career
 Synergizing HRP with Strategic Business
requirements
 Dealing with multiple Business units with
differing Strategies (one Global, other
21
Regional)
Basic Steps Involved In Effectively
Managing IHRM

 Human Resource Planning (HRP)

 Recruitment & Selection
 Training & Development
 Performance Management
 Remuneration
 Repatriation
 Employee Relations
22
 Recruitment & Selection in IHRM
Two important aspects to be ensured for
the purpose of Good Selection :
 Right person in the right place
 Beliefs and Values of the person selected,
must be consistent with the new
Organization and Country of placement
There are three Basic Approaches to
Staffing on the International Arena :
 Ethnocentric
 Polycentric
 Geocentric
23
Staffing in IHRM: Ethnocentric Approach
 All Key positions, both at Headquarters and
Subsidiaries are held by Parent Country
Nationals
 Best Strategy in the early phase, when:
 one is transplanting a running Business
 parent country nationals are more effective
in representing views of the home office
 As an example, 71% of Japanese Companies
had Japanese Presidents only
 Disadvantages are:
 it is a costly Process
 an element of resentment from the home country
24
 Staffing in IHRM: Polycentric Approach
 Key positions at Corporate Headquarters are
manned by Parent Country Nationals, however
Subsidiaries are largely staffed by Host Country
Nationals
 As ultimate Goal in any Approach is to hand over
Operations finally to the host country nationals, it
therefore makes sense to initiate them into the
Subsidiary as soon as possible
 As an example, in this approach HR can be
largely local, receiving and executing Company
guidelines from Corporate HR, but largely
otherwise independent 25
 Staffing in IHRM: Polycentric Approach
cont…
 Subsidiaries can be be manned by third
Country Nationals also
 Advantage of Polycentric Approach is:
 Hosts have thorough / better knowledge of
Culture, Politics, Law, Business etc, of their
Country
 Disadvantage of Polycentric Approach can
be:
 Experience of Expatriates (Parent country
Nationals) may be sorely missed
26
 Staffing in IHRM: Geocentric Approach
 It is a Staffing approach that uses a
Worldwide Integrated Strategy
 This mode of Staffing seeks the best people
for the key Jobs. This is irrespective of the
Nationality
 Geocentric Approach, matches the underlying
philosophy of a Global Competition for Key
Positions
 This approach is adopted by truly Global
players such as General Motors, Colgate
Palmolive etc 27
 Staffing in IHRM: Geocentric Approach

 As an example, in Colgate Palmolive, 60 %

or more of all Expatriates are from
countries other than USA. Almost all speak
at least two Languages

 The Corporate HR function in Geocentric

Companies is highly challenging, as it has a
vast canvas of HR aspects to deal with, due
to the differing Global Environment
28
 Staffing in IHRM: General Policies
 How does one decide whether to hire
Parent Country, Host Country or Third
Country Nationals? (These are generally
called as PCN’s, HCN’s and TCN’s)
 This is done through a review by HR with
Senior’s, based on the possible
considerations of ‘Advantages &
Disadvantages’ in each case
 Through a G.D. please Identify the various
Advantages and Disadvantages of Hiring
PCN’s, HCN’s and TCN’s…………..…..G.D.
29
 The Expatriate Manager in Multinational
Companies (MNC’s)
Who are Expatriates?
Expatriates are Employees working in
the Parent or Other Countries:
 who because of their special Skills /
Competencies,
 are ideal, for working in the Host country,
 where they play an important role
because of their Experience and past
Exposure in International Market 30
 Staffing in IHRM: Approach for Expat’s

 Deciding on approaches for

Expatriates :
 approaches which rely on
Expatriates are : Ethnocentric &
Geocentric
 also companies rely extensively on
PCN’s & TCN’s for recruiting
Expatriates
31
 Determining the Need for Expatriates
 Not only from the host country’s requirements,
but also for an MNC, it makes sense to have the
larger part of the workforce from the Host Country
 MNCs look for an Expatriate only in the following
cases:
 Where Special Competencies are not available
locally
 Where only a Global Manager can expand the
MNCs philosophy, ethics, and the inherent
style of action/functioning (which is distinct to
the MNC) Maybe more so at the start-up time
 To man Senior Positions, where value addition,
intricate knowledge of Organizational Strengths
and Weaknesses, and exposure to International
Scenario are very essential for success
32
Stages in the Cultural adjustments in the Host
Country for Expatriates (Sinusoidal: 2 Curves)
 Tourist Stage :
 Initial Phase. Expatriate enjoys a great deal of
excitement.
 Disillusionment Stage :
 Mood descends, as difficulties with new Culture
becomes clear
 Difficulty in conversing in the local Language
 Problems in Operation : obtaining Food Supplies
 Home sickness
 Bottom of the Curve is called ‘CULTURAL SCHOCK’
 Adapting Stage (only if cultural shock is overcome)
 Accepting, feeling more positive
33
 More effective at home & work, more satisfying
 Cultural Factors to be taken care of

What is Culture?

Does Culture differ from Country to

Country?

If so explain on what Parameters does

it differ? (explain with examples, such
as Loyalty, Compensation etc)
34
 Cultural Factors to be taken care of by IHRM
What is Culture?
 A country’s Culture is a set of Values, symbols,
beliefs, language, norms that guide human behavior
within a Country and somewhat within an
Organization
 Culture and therefore work culture in particular
differs from country to country
Culture of Loyalty
 Even today, changing of jobs in Japan is looked
down upon, for their sense of loyalty is still quite
large. This is not so in Western countries.
 In India only truly good companies are able to
extract a greater sense of loyalty. Our Culture in
this respect has been changing over the years 35(10
to 2 years!)
 Cultural Factors to be taken care of by IHRM

 Cultural differences because of differing Nature

 Recent studies reveal that Asians and Arabs
find Westerners unnecessarily pushy, tend
not to share credit for joint efforts and want
to find solutions based more on their culture
and norms than that prevailing
 Indians understanding of others culture is
relatively much better, however when it
comes to meshing with the host culture,
Indians tend to keep to themselves more
36
Cultural Factors to be taken care of by IHRM
Culture and Compensation
 Culture also plays a part in determining
Compensation
 In U.S.A. compensation practices
encourage individualism and high
performance.
 Europe stresses on Social Responsibility,
whereas in Japan, Age and number of
years Experience is critical to greater
compensation
37
 Cultural Factors to be taken care of by IHRM

Culture of Parent Company to Prevail!

 While it is the aim of most MNC’s to have more
host employees after a while, it must be borne
in mind that certain critical values of the Parent
Company, that is it’s Corporate Culture, must
prevail and pervade
 To ensure above, Parent Companies need to
bring in a critical mass of Expatriates at the time
of start-ups, so that these threshold cultural
values are ingrained from the beginning for all
employees
38
 Cultural Factors to be taken care of by IHRM
Culture – Managing it Successfully
 Expatriates maintain a good balance between
maintaining their own cultural values while
accepting those of the Host Countries
 Knowledge of cultural differences in people
from different countries and also having a good
insight to the Host country workplace, will aid a
good HR practitioner to achieve maximum
effectiveness at work
 TRAINING is a very critical component of
culture building and needs to be taken up very
seriously (training discussed subsequently)
39
Learning from Expatriate Failures in USA

Ranking in priority are:

1. Inability of spouse to adjust
2. Managers inability to adjust at
work
3. Personal and / or Emotional
Maturity
4. Other family reasons
5. Inability to cope with International
Responsibilities 40
 Learning from Expatriate Failures in
JAPAN

Ranking in priority are:

1. Inability to cope with International
Responsibility
2. Difficulty with Environment
3. Personal or Emotional Problems
4. Lack of Technical Competence
5. Inability of Spouse to adjust 41
Possible reasons for Expatriate Failures
in INDIA !

Ranking in priority are:

1. Family reasons
2. Inability to adjust with
Environment
3. Emotional Problems
4. Lack of Technical Competence
42
 Success & Failure for Expatriates
MNCs have to focus on the following areas to ensure
Success for Expatriates or action in case of a failure:
 First determine the ‘Need for Expatriates’
 Identify & ‘Select the Right Candidate’
 Arrange ‘Pre-assignment Training’ prior to Departure
 Ensure ‘Post-arrival Orientation & Training’
 Chances are, he Successfully completes his term
 In case of a Crises if Adjustment is possible
(overcomes cultural shock), he can be reassigned
(maybe in same or in a slightly different role) in host
nation
 In case of further Failure, crises and where no
adjustment in host country is possible, the person has
to be Repatriated and Adjusted in the home nation
 This premature return to the home country is
popularly termed “Expatriate Failure”. 43
…Draw a Sequential Process Diagram
 MNCs Way of Global Management ..G.D.

Determine an MNC’s way of “Thinking and

Working” on the following:
 What is their Philosophy?
 What is their thinking when they expand?
 How are they generally Structured?
 How is the balance between Expats and
Locals managed?
 What is the role of HR at Corporate and
Local level?
44
The Coco-Cola way of Global HR Management
 One of the most successful Multinational
Enterprise
 Operates in 200 countries, and 80% operating
income from businesses outside US
 Headquartered in Atlanta-USA, with a ‘local face’
in each country of Operation
 Philosophy ‘think globally, act locally’, depicts it’s
cross border management mentality
 National Businesses have the ‘freedom of
operation appropriate to local markets’, while at
the same time possessing an overriding ‘Common
Mindset’
 Manages it’s Global Operations through 25
Operating Divisions, under 6 Regional Groups45
The Coco-Cola way of Global HR Management …cont
 Corporate HRM function is charged with providing the
glue that binds various Groups and Divisions into one
family
 It achieves this by propagating a common HR
philosophy within the company and by developing a
group of Internationally minded mid-level Executives
for Senior Management responsibilities
 Local HR is then empowered to develop it’s own HR
practices e.g. compensation which is competitive in
the local market
 Twice a year Corporate HR conducts a two- week
program for all local HR staff members from all it’s 25
divisions ( helps to translate HR philosophy into
action in local business, and great benefits in terms
46
of information sharing between Divisions)
The Coco-Cola way of Global HR Management …cont

 Operations staffed with majority of locals and very

limited Internationals, as philosophy is that locals
understand local business better.
 Internationals / Expatriates are needed only for
two reasons. One to fill specific skill-sets, not
available locally (expatriate of Polish descent in
Eastern Europe to fill up specific Financial
Managers Vacancy ) and to expand employees
skill base. A global Company requires Senior
Managers necessarily with International Exposure
 About 500 High-Level Managers involved in it’s
Global service Program 47
The Coco-Cola way of Global HR Management …cont
 These High-Level Managers not only have very
good knowledge of their specialized field but also
of the company, having served at various
locations
 These Expatriates are able to not only add value to
each assignment, but also enhance their
contribution to the company through differing
International Experience
 Out of 500, about 200 move each year. As against
local benchmarks, these Expatriates are paid US
benchmark salaries
 Ultimate Goal of Coca-Cola is to build a cadre of
Internationally minded high level Managers from
which to draw the Senior Managers to head even
Corporate Office. 48
MNCs Way of Global Management ..G.D.

Looking at Coco – Cola, now determine

MNCs way of Global Management:
 What is their Philosophy?
 What is their thinking when they expand?
 How are they generally Structured?
 How is the balance between Expats and
Locals managed?
 What is the role of HR at Corporate and
Local level? 49
 If there is one major
reason for :
EXPATRIATES FAILURE
--- what is it?
50
 It is:
Wrong Selection

51
 The Selection Process
Major reason for Expatriate failure is ‘Wrong
Selection’
One of the reason is the assumption, that a
person with the required Competence in the
Home Nation, will be automatically
successful in the Host country
Before Short-listing at Recruitment stage,
there are six important FACTORS which
must be considered and reviewed before
embarking on Selection
These FACTORS fall under two categories;
namely: Individual and Situational
52
“GD : Please find three factors under each”
 INDIVIDUAL FACTORS
(which must be reviewed)
Technical Ability & Competence for the
job (view the job in the host country, not
the present one at home)
Cross-cultural suitability (N.Veg / Veg,
food taste, non-smoker, non-drinker, non-
believer, strong opinionated culture-wise)
Family requirements (working wife,
children studying during critical years,
old parents)
53
 SITUATIONAL FACTORS (to be reviewed)
 Country-cultural Requirements: is the ability to
jell with the host countries cultural
requirements such as:
 drinking or smoking habits in public,
 headgear a must for all women, children disallowed
in drama halls, strict observance of dress codes
 personal contact by opposite sex in public
 Language: ability to pick-up and learn (wanting
to learn at least the host language)
 MNC requirements: openness towards meeting
different goals and targets in host country,
through less budgets, less manpower (as
54
requirements differ for start-ups & others)
 Selection Methods
 Selection Methods adapted for this very
critical Process of SELECTION:
 Biographical Data (Inventory, Resumes)
 Psychometric, Personality, IQ, Trade and
other Tests
 Work Samples (Technical Skills, typing etc)
 Interviews
 Assessment Centers (Leadership, Administration)
 References
55
 CONSIDERATIONS IN SELECTION

Biographical Data:
 Competency, function and location wise
Inventory of people in Organization
 Detailed Resumes of shortlisted employees
 Outstanding ex- employees with competitors
TESTS:
 Appropriate Personality and Psychological
Tests to match International requirements
 Tests used as important inputs during
selection process. 56
 CONSIDERATIONS IN SELECTION
Interviews
 Short-listing of likely candidates by a Panel
 Rounds of Interviews (Google)
 Review two of the Five Key Factors for Success
in the International Arena
Assessment Centers
 Cross-checking the Competencies observed in
Interviews and at Work (Leadership, Creativity,
Initiative etc)
References
 Verbal discussions with present and past
seniors for insights on attitude, competency
and performance 57
 5 Key Success Factors to be reviewed
during SELECTION
 Professional Competencies :
Technical (Knowledge & Skills)
Experience
Administrative Skills
 Social Skills :
Cultural Empathy,
Tolerance to ambiguity
Flexibility for adapting to new ideas
Interpersonal Skills
Adapting to Stress
Leadership
58
 5 Key Success Factors to be reviewed during
SELECTION…Cont
 Motivation for International Assignment :
 genuine desire for Foreign Assignments
 interest in new Cultures
 commitment to Goals
 assignment in sync with faster Development
 Family Support :
 spouses willingness to go abroad
 spouses career goals
 spouse in sync with husbands Career Goals,
 spouses ability for building relationships,
 children's educational requirements
 old parents willingness to stay back or adjust
 health factors in family
 Language:
59
 Willingness to learn host language besides English
Basic Steps Involved In Effectively
Managing IHRM

 Human Resource Planning (HRP)

 Recruitment & Selection
 Training & Development
 Performance Management
 Remuneration
 Repatriation
 Employee Relations
60
 TRAINING & DEVELOPEMENT
 An Expatriate requires Pre-departure
and Post-arrival Training, as this is an
important input to prevent Failure,
besides proper Selection (G.D. – why
required and what is required?)
 Training required is:
 Cultural Training
 Language Training
 Practical Training
61
 CULTURAL TRAINING
 Aids in empathizing with host culture and
enhancing effectiveness in interacting with the
host country citizens (Indians in Australia)
 Cultural training also helps in understanding the
culture, local customs, history, politics, economy,
religion, social and business practices of the
hosts
 Given the big problem of adaptation in the host
country, Organizations arrange familiarization
trips not only for Managers but also for Spouse
and Children, before actual transfer
62
 CULTURAL TRAINING
 As maximum and quick assimilation of the Host Country
Culture is one of the key factors in preventing Expatriate
Failure, nothing is left to chance by way of Cultural
Training, including teaching the required etiquette at
work and even things like etiquette while eating!
 Cultural Training is also imparted when Expatriates
return to the Parent Company. It includes Counseling on
return to Parent firm, to prevent the phenomena of
Reverse Cultural Shock. Inputs as regards the current
Workplace and Lifestyles in the Parent Company are
included in the Training
 Realizing the importance of Cultural Training,
Company’s abroad and in India, now-a-days spend
substantial amounts on Cultural Training.
63
 LANGUAGE TRAINING
Language Training is desirable and obvious,
but MNCs do not give the desired
importance :
 As English is an International Language, it is
wrongly assumed that it is sufficient to
Communicate in any Host Country
 However in Non-English speaking Countries lie
China, Japan, Russia, and France, this can be a
big problem
Knowledge of host country language helps
build rapport and improve effectiveness.
This training is a therefore a must. 64
 PRACTICLE TRAINING
 Practical training seeks to help the Expatriate
family feel at home in the host country
 Sooner they settle down in the new country and
environment, better are the prospects of success
at work
 Training in practical aspect before departure
cannot be overemphasized:
 How to address in public
 What to talk, what not to talk,
 How to dress: formally and informally
 How to socialize, etc
 A fast way to practical learning is to quickly mix
with your countries Expatriate community and
learn from their knowledge and experience (this 65
naturally forms a part of post arrival Training)
Developing International Staff and MNC Teams

International Staff and MNC Teams have

Programs for continual Development such
as:
Expanding operational knowledge and skills
Development Programs for honing
Managerial Skills
Development through expansion of
assignment / greater responsibilities
Projects in different countries (exposure)
Opportunities for on-going Learning 66
Management Development as a Strategic Tool
 While MDPs aid in honing and developing
Managerial skills and Competencies MNCs also
use these to spread their Multinational Strategies :
 Bring about a spirit of togetherness and loyalty to the
Main Organization (through songs, picnics, sporting
events, get-togethers)
 Sharing of different cultures w.r.t. host, home and other
countries
 Understanding locational Strengths and Weaknesses
 Build informal networks for future
 Aids in handling changing assignments in various
locations
 Overall gives shape to a common company culture in
the firms globally dispersed operations 67
Basic Steps Involved In Effectively
Managing IHRM

 Human Resource Planning (HRP)

 Recruitment & Selection
 Training & Development
 Performance Management
 Remuneration
 Repatriation
 Employee Relations
68
 PERFORMANCE MANAGEMENT
 One of the most Challenging tasks of IHRM is:
 managing the ‘Performance of Organizations’
varied facilities, located all over the globe
 PM in the International arena is a process
that enables MNC’s to:
 evaluate and facilitate continuous improvement
 of Individuals
 of Subsidiary and
 Corporate Performance
 against clearly defined pre-set Goals and
Targets 69
 PERFORMANCE MANAGEMENT
Performance Management has therefore to
be much more Comprehensive,
 as it includes Assessment of not only the
Individual’s Performance
 but also of the Parent Firm and it’s Subsidiaries
Each MNC has it’s own strategic goals and
expectations from the foreign affiliates in
terms of:
 market performance,
 contribution to total profits and
 competitiveness 70
PERFORMANCE MANAGEMENT ..cont
 While a “Subsidy’s Performance” needs to be
assessed in terms of fulfillment of it’s
Headquarters' laid out expectations:
 the constraint within which the subsidiary
functions, must be taken care of such as:
 prevalent competition and market conditions
 physical distance and time difference,
 frequency of contacts,
 all of these complicate a correct assessment
 In spite of fax, internet, teleconferencing,
there is no substitute for a face-to- face
interaction between a Subsidiary Manager71and
his Corporate Head
Basic Steps Involved In Effectively
Managing IHRM

 Human Resource Planning (HRP)

 Recruitment & Selection
 Training & Development
 Performance Management
 Remuneration
 Repatriation
 Employee Relations
72
 GLOBAL COMPENSATION
and BENEFITS
 Organizations that are successful in the Global
Arena, have aligned their Human Recourses in
support of their Strategic Business Plans
 One of the major Component is in the manner
Human Resources Total Compensation
Program, supports the way Business is
structured, organized and operated both
Globally and Domestically
 In Compensation related matters,
Organizations should think Globally and Act
locally
73
COMPENSATION for EXPATRIATES
 International HR Managers give considerable
attention in designing of attractive remuneration
package for expatriates.
 Criteria's considered in designing are (G.D.)
 Package must attract those whose special
competencies are required for International
assignments
 Remuneration should not be a hindrance in
transferring an employee from home to
subsidiary, from subsidiary to subsidiary, and
subsidiary to home country
 Provide consistent and reasonable relationship
between pay levels of employees at
headquarters, domestic affiliates and foreign
subsidiaries 74
COMPENSATION for EXPATRIATES
 Criteria's considered in designing are..cont (G.D.)
 Remember on an average Expats costs at least
three times more than they would in a domestic
Market
 Therefore be cost effective, by reducing
unnecessary expenses (e.g. incentive v/s on-
going premium)
 Compensation packages need to cover extra
costs of housing, education for children, yearly
visits to their homes with family
 It should also include Foreign Service and
Hardship premiums
 However now-a-days, there is a good trend
wherein Global Leaders no longer accept Foreign
postings mainly from Compensation angle,
Learning and Growth are also important criteria’s
75
 Problems in designing an International
Remuneration Package …G.D.
 Discrepancy in pay between parent, host and third
country nationals (payment in India less than in
USA for same job)
 Need to vary Expatriates Compensation depending
on the ‘stage of life cycle’ of his family (child:
young, schooling, grown)
 Remuneration on re-entry in parent country is a
problem because of large variance in
Compensation
 Fluctuations in dollars requires constant
monitoring and adjustments
76
 Problems in designing an International
Remuneration Package …G.D.
 Remunerations have to deal with changes in
International Businesses (e.g. pay in India hiked
after transfer to host country)
 MNC’s concept of Stock ownership and linking of
Compensation to Performance may not be readily
acceptable in the host country
 Most host countries would like a more direct and
immediate linkage of Rewards to Performance
such as PLR’s, at the end of each Year
 At the other end, USA and European Company’s
find radical foreign approaches such as Profit
Sharing and Team based Pay difficult to adjust77 to
 REMUNERATION PACKAGE
Any Expatriates remuneration
package seeks to equalize the cost
of living at home and abroad.
Package generally contains:
BASIC SALARY
BENEFITS
ALLOWANCES
INCENTIVES
TAXES 78
 BASE SALARY
 In Domestic setting Base Salary is the cash
component (take-home) , and is related to some
Benefits such as PF, Bonus
 For Expatriates Base Salary is the primary
component of a package of allowances such as
 foreign service premium
 cost of living
 housing
 in-service benefits and pension
 Payment can be made in the home country or the
host country currency
 Base Salary is the foundation block for
International Remuneration, whether person is a
79
Parent or Third Country National
BENEFITS (Housing, Car, Medical…)
Benefits constitute a large portion of
Expatriates Remuneration
Problematic issues in Benefits are: …G.D.
 Whether to consider for home country benefits,
especially if tax free?
 Whether to consider for host country benefits
only and make up the difference?
 Will termination effect employee in host
country? (e.g. :no medical on termination)
 Whether home or host country will be
responsible for Social Security? 80
BENEFITS (Housing, Car, Medical…)

Problematic issues in Benefits are: ..Cont

 Whether Benefits should meet the
requirements of home or the host country
 Which country should pay the Benefits?
 Whether other benefits should be used to
offset any shortfall in the coverage
 Whether home country benefits should
be made available to local citizens
81
 ALLOWANCES
 Cost of Living Allowance: It is a payment for
the difference between home country and
oversees cost of living, or to provide
equivalent standard of living
 COL Allowance may cover a variety of
expenses including :
 Relocation expenses ( transport, travel etc )
 Housing
 Hardship (depending on the country and
location)
 Spouse assistance: to offset spouse income in
home country (or help in getting a job in home
country or employment in firms foreign
subsidy) 82
 Incentives
 Incentives are:
 a one time Lump-sum Amounts, given as an
inducement to accepting a foreign Assignment
 more used now-a-days, against giving an on-
going premium
 Advantages of Incentives are threefold:
 They are paid on accepting Oversees
Assignments (payments tend to retain
Motivating factor)
 Cost – to – Company works out less (no future
financial commitment)
 Large sums received by Expats, can be used
for saving or spending
83
 Taxes
 There are two approaches to International
Taxation followed by Companies. These are:
 Tax Equalization
 Tax Protection
 Tax Equalization:
 Withhold an amount equivalent to home country
Tax obligation and pay whatever taxes due in host
country
 Tax Protection:
 Employee agrees to pay-up the Tax on
remuneration in the home country
 Then if the taxes in the host country are less, the
employee is eligible for the windfall
84
Tailoring the Compensation Package
 Working within the Components discussed,
MNC’s try to tailor remuneration packages
in order to fit specific situations.
 Take the situation of the highest paid CEO
and the lowest paid Workmen:
 in USA the ratio is 60:1
 in Sweden it is 8:1
 in Japan it is 4:1.
 Therefore each country’s package is
tailored accordingly.
 In designing an Expatriates remuneration,
MNC’s follow a number of approaches,
which are detailed behind: 85
TAILORING THE RENUMERATION PACKAGE
 Balance Sheet Approach: expatriate does not
loose out anything and maintains home country
living standard, besides receiving some financial
inducements
 Localization: pay local salary for those taking up
long-time assignments early in their career ( no
comparison required with home country)
 Lump-sum Approach: give lump-sum and let
employee decide how he wants to use entire
amount
 Cafeteria Approach: give him a series of
individual options within the overall fixed amount
 Regional System: Difference based on Region. 86
e.g. Europe less, US more.
Basic Steps Involved In Effectively
Managing IHRM
 Human Resource Planning (HRP)
 Recruitment & Selection
 Training & Development
 Performance Management
 Remuneration
 Repatriation
 Employee Relations
87
 REPATRIAION
 Repatriation is the activity of bringing the
Expatriate back to the home country
 Care has to be taken to ensure, that he/she
does not suffer re-entry or reverse cultural
shock (new assignment/people, less status)
 Generally shock occurs as Expatriates are less
prepared for re-entry compared to when
expatriated
 Success at relocating Expatriates in the home
country, depends on how well the firm and
88
IHRM handles repatriation Program
 PROCESS of REPATRIAION

A proper process of Repatriation

requires to follow four stages as
follows:

 Preparation
 Physical Relocation
 Transition
 Readjustments
89
 PROCESS of REPATRIAION

PREPERATION INVOLVES:
 developing a plan for shifting the expat
to home country in consultation with
seniors
 reviewing with the person a list of choices
at work in the home country and
obtaining his concurrence
 finally making plans to shift him/her and
the family back home
90
 PROCESS of REPATRIAION
 PHYSICAL RELOCATION INVOLVES:
 Personalized help by HR. This goes a long way
in reducing stress and disruption. This
includes:
 arranging a farewell party to say goodbye to
friends and colleagues developed in host
country
 aiding in fast clearances at work and temporary
residence
 Helping in transportation of goods, furniture etc
 Making travel plans, arranging for tickets
91
 PROCESS of REPATRIAION

 TRANSITION INCLUDES:
 arranging for a temporary stay, in a
hotel or company Guest House etc
 next aid in finding a permanent house or
arranging a company flat as per norms
 help in children's admission to School
and/or College
 admin tasks, such as renewing driving
license, opening bank accounts, etc
92
 PROCESS of REPATRIAION
 READJUSTMENTS: G.D.
 One of the most important phase, where
IHRM needs to aid in coping with reverse
shock, due to anxiety on return home
because of:
 adjustment to home country
 lingering doubts about proper placement
 isolation due to old kingdom lost,
 feeling devalued
 less status
 manage with even less pay
 difficulty in readjustment for children/family
93
Importance to Repatriation by MNC’s
 MNCs give great importance to Repatriation
Programs :
 As they do not wish to loose out on ex-expats who can
grow to man important positions in the Parent
company, because of their varied International
exposure
 By having a detailed formal well designed Repatriation
Program, which besides other issues mentioned also
assigns a Senior as a Mentor to oversee smooth
transition for the expat
 All these aid the Expatriate to be so much better
prepared and face re-entry with a lot of confidence
94
Basic Steps Involved In Effectively
Managing IHRM

 Human Resource Planning (HRP)

 Recruitment & Selection
 Training & Development
 Performance Management
 Remuneration
 Repatriation
 Employee Relations
95
 IR Issues in MNC’s
 Organized Labour in foreign locations can be a
big Constraining factor, in pursuit of an MNCs
Global Strategy
 Therefore IHRM must learn to understand the
nuances and the importance of handling foreign
labour in a most efficient manner
 Where understanding and/or importance was
missing on the part of management and more so
with IHRM, it has lead to disastrous results as
follows:
 GE bought peace by agreeing not to integrate
and consolidate operations in a most efficient
manner
 Daewoo went bankrupt because labour
96
resisted trimming their labour force
 KEY ISSUES IN INTERNATIONAL
LABOUR RELATIONS Mgmt Angle
 Who should handle Labour Relations, the
Headquarters or the Subsidiary Plant?
 National differences in economic, political, and legal
systems produce different Labour relations, therefore it
is generally delegated to foreign subsidies
 However MNCs do get involved in agreements, to
ensure that no precedents are made as these may
affect International Plans
 In exceptions, like where ‘Transnational Sourcing’
takes place (where subsidy of one country relies on
a foreign subsidy as a source of components),
Labour relations are generally Centralized at MNC’s
97
Headquarters
 KEY ISSUES IN INTERNATIONAL
LABOUR RELATIONS Wkmn Angle
 What should be the Unions Position in
Dealing with MNCs?
 The most potent weapon with the Union is a Strike –
‘a temporary suspension of operations’ designed to
exert pressure upon Management
 However Unions are vary today of using this
weapon, because for one in the present global
context they seem to be loosing strength and
secondly they do not posses the staying power to
match MNCs financial clout
 Clout is in terms of absorbing losses at one place
and making up through increased profits in another
98
subsidy
 KEY ISSUES IN INTERNATIONAL
LABOUR RELATIONS…cont
 What should be the Unions Position in Dealing
with MNCs? …cont
 Clout is also in terms of capacity to move from one
location to another, at fairly short notice. Unions are
aware of this fire-power.
 On their side, the Unions have formed International
Trade Secretariats (ITSs), in order to achieve
transactional bargaining with MNCs
 Finally Labour also seeks intervention from ILO
(International Labour Organization), for work-place
related principles, to be observed by all nations
 The best would be to mutually respect each other
and look at the overall interest of the Business of
99 the
Organizations, and hence it’s people
 Global Unions and Labour Agreements
 While Unionism is on a decline in some countries,
particularly after Globalization, in other countries it
has still maintained strength
 28% of employees in Japan are Unionized; 43% in
Germany; 50% in U.K.; 96% in Sweden;and around
70% in India
 Strength differs from mild to relatively strong, even
militant unions
 In most countries the Government laws make it
difficult to fire workmen, so companies are reluctant
to hire Permanent workmen
 In some countries (not in India), generous and lengthy
unemployment benefits discourage jobless from
seeking new work 100
Global Unions and Labour Agreements…cont
 The North American Free Trade Agreements,
called NAFTA has a side agreement on Labor,
designed to protect workers of individual
countries (Canada, Mexico, U.S.A.)
 Organizations in each of these countries have
to comply with the Labor Laws of NAFTA
 Laws pertain to Health & Safety, Child Labor,
HRD, Work Benefits, Social Programs,
Productivity, Employment Standards and more.
 Non-compliance of these Laws can lead to
massive fines upto or even more than 20
101
Million Dollars per violation
Global Unions and Labour Agreements…cont
Labor unions have also formed a world-wide
International Trade Secretariats (ITS’s)
There are 15 of them. They provide
worldwide links in terms of information and
also aid in Transnational bargaining with
MNC’s
A world body like the ILO is much sought
after for intervention by Labor Unions. A lot
of pressure is exercised on MNC’s to follow
ILO’s Work-place related Principles, as
these are respected by all nations 102
Emerging Trends in Employee Relations and
Employee Involvement
 MNC’s are today not only educating but also
involving their Workmen on the Goals, Issues
and Problems encountered by them through a
variety of means such as:
 Weekly meetings to discuss schedules and working
out solutions on the progress of the jobs
 Seeking Technical inputs
 Interfacing with Customers (how difficult)
 Imparting knowledge about Competition faced
 Formation of Quality Circle Teams (wkmn as a
Leader!)
 Communicating Strategic decisions (new product)
103
Emerging Trends in Employee Relations and
Employee Involvement

 Atmosphere so created, through above actions

results in:
 Trust and Joint ownership of all problems
 Fast resolution of critical issues
 Cost cutting becomes an on-going matter
 Openness in discussing questions, leading to
greater ideas and greater scope for improvements
 Greater understand of workmen problems, resulting
in expeditious resolution directly (w.o union)
 Reduced clout of union as most subject matter is
known better to workmen 104
 International Labor Organization & it’s
Standards..G.D.

 The ILO is a Global Body devoted to obtaining

decent and productive working conditions of
Freedom, Equity, Security, and Human Dignity
 It’s main aim is to promote rights at work,
encourage decent employment opportunities,
enhance social protection and strengthen
dialogue in dealing with work related issues
 ILO is responsible for drawing and overseeing
International Labor Standards
105
International Labor Organization & it’s Standards

 Working with member States ILO seeks to

ensure that the ‘Labor Standards’ are
respected in practice as well as in principle
 For applying the Standards, ILO is backed by a
‘Supervisory System’ that is unique at
International Level. The system helps to ensure
that countries implement conventions they
ratify
 ILO regularly examines the application of
Standards in Member States and points out
areas where they could be better applied.
 ILO also assists in case of problems
106
 ILO STANDARDS
 There are 22 Standards formulated and
implemented by ILO. Few of these are listed
below
 Freedom of association, collective bargaining & IR
 Forced Labor
 Elimination of Child Labor
 Equality of Opportunity and Treatment
 Employment Policy and Promotion
 Wages
 Working Time
 Occupational Safety and Health
107
108
 The Selection Process
Major reason for Expatriate failure is ‘Wrong
Selection’
One of the reason is the assumption, that a
person with the required Competence in the
Home Nation, will be automatically
successful in the Host country
Before Short-listing at Recruitment stage,
there are two important FACTORS which
must be considered, before embarking on
Selection
These FACTORS fall under two categories;
namely: Individual and Situational
109
“GD : Please find three factors under each”