International Business Management

Unit 13

Unit 13

International Human Resource Management

Structure:
13.1 Introduction
Objectives
13.2 International Organisational Structures
Factors influencing organisation structure
Types of structures
13.3 Introduction to International Human Resource Management
Managing international human resource activity
Domestic versus international human resource management
Expatriate staff
13.4 Scope of International Human Resource Management
National differences in HRM practices
Strategies for international human resources management
International employee relations
Staffing policies in international business
13.5 Summary
13.6 Glossary
13.7 Terminal Questions
13.8 Answers
13.9 Caselet

13.1 Introduction
In the previous unit you learned about strategic management and the role of
strategy in firms success. You also learned about the strategic
management process. In this unit you will learn about the structure of MNCs
and various dimensions and strategies for international human resource
management.
As businesses metamorphoses into multinational companies and as the
world evolves into a global marketplace, international firms need to be
supported by adequate human resources. Human Resource Management
(HRM) practices are necessary in order to procure, allocate, and utilise
human resources particularly managerial manpower in an efficient manner.
While many aspects of traditional HRM policies and procedures are
applicable when a company operates abroad, the integration of the various
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regulatory aspects and diverse cultural dimensions makes it necessary for a

company to dwell into international HRM to operate efficiently at an
international level.
Objectives:
After studying this unit, you should be able to:
interpret the types of international organisational structures.
describe the international HRM process.
examine the various aspects in expatriate employment.
discuss the scope of HRM.
explain the staffing policies of a multinational corporation.

13.2 International Organisational Structures

The structure of an organisation plays a vital role in HRM. It is important to
understand the structure before getting into the discussion on HR practices.
Organisational structure of an international business plays a very important
role in realising the goals of the company. International companies need
appropriate structure to conduct their business effectively in a competitive
economy. The structure of an international business is more complex than in
a purely domestic firm. The more assets and employees a firm has in its
foreign offices, the more languages, cultures, and time zones it has to cope
with resulting in a more complex structure.
The structure has to be well-designed and should be based on the business
strategy. It is important that various structural components are considered
properly. The following are the objectives of a well designed organisational
structure:
Have the right people take right decisions at the right time.
Establish reporting hierarchy and accountability.
Facilitate easy flow of information in the organisation.
Provide a positive work environment that encourages efficiency.
Integrate and coordinate activities.
A multinational firm shares large amounts of information between the
headquarters and its various offices and subsidiaries across the world.
Hence, integrating and coordinating organisational activities is imperative in
the organisational structure.
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There are various factors that influence the design of organisational

structures. Let us discuss some of these factors in detail.
13.2.1 Factors influencing organisation structure
The major factors that influence organisational structure can be classified
very broadly in two as follows:
Environment.
Technology.
Environment
Environmental factors include both internal and external factors affecting the
organisational structure. Let us briefly discuss these factors.
Internal environment Internal environment includes factors controlled by
the management or based on the functions of management. The manner of
functioning of the management contributes to the designing of the
organisation structure. Some of the management approaches affecting
organisational structure are as follows:

Ethnocentric management Decision making is controlled by the head

office and most of the managers are from the parent company.

Polycentric management Decisions are largely decentralised and

managers in the subsidiaries are mostly from the host country

Geocentric management Decision making is decentralised and

managers from across the globe make decisions affecting operations
internationally. In this approach, manager in one country can make
decisions affecting the operations in another country.

The size of an organisation influences its structure. Bigger companies with

multiple divisions add to the level of complexity of the organisational
structure. Increase in the organisation size prompts for an increasing
number of employees to keep up with the organisations growing business.
It also brings in the need for additional rules and regulations to maintain
optimum levels of efficiency and productivity. The need for decentralisation
increases when the company grows in size.
External environment The external environment refers to a wide array of
factors beyond the company's control. These factors can be classified as
follows:
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Environmental risks The instability caused by the differences in

culture, government policies, strength of the economy, and availability of
qualified employees, industry cycle, and stability of the financial system
constitute environmental risks.

Strategy for expansion These include the strategies that a company

adopts to enter new markets or expand its business. The structure of a
business, in turn, depends on the strategy adopted by the company.

Technology
Technology plays an important role in the designing of an organisation
structure. The application of technology at different levels like employee,
division and organisation determines the design of the structure. An
organisation may use the technology at different stages like stage of
procurement of inputs and raw material, production stage, and delivery
stage. The sophistication of technology determines the design of a modern
business organisation.
Irrespective of the organisational structure, every firm uses technology and
facilitates communication across job profiles in the organisational structure.
Every department of the organisation uses technology and a many of these
departments have technology experts among their employees. The
technology experts and the professionals working in this field must support
and connect every area of the organisation.
The integration of Information Technology (IT) facilitates communication
among employees. A conscious effort must be made to maintain
relationships with each group. IT representatives must provide updates to
the employees about their various products and applications. In return, the
employees must provide feedback on these products and application to the
IT department. These relationships within departments are often overlooked
and are lost due to immediate organisational design challenges. Hence,
relationships with all future participants must be maintained through well
planned communication.
Technology and the knowledge-based economy are not constrained by the
physical objects and materials of an organisation. Information is flexible and
can be structured and organised in a number of ways. For example,
videoconferencing and telecommuting allow members of project teams from
different departments to work together, regardless of their geographic
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location or department. Thus, technology enables departments within

organisations with easier communication
13.2.2 Types of structures
Organisations adopt the most suitable structure based on the various factors
that we discussed in the previous section. Let us now discuss some of the
most commonly used structures for international business.
Export structure A domestic company has to make provisions for an
exclusive export division. If the export division undertakes all the export
activities instead of using an agent, then it needs to maintain a minimal staff
for the following functions:

Maintain export documentation like shipping, insurance, finance, and

customs.

Conduct international marketing research to understand procedures and

regulations.

Distribute products in the foreign markets.

Indulge in sales and marketing, advertising, promotions, mail order

catalogues and so on.

International division structure An international division is established in

a company when there are substantial branches or subsidiaries operating in
foreign countries. This division controls all the foreign operations of the
organisation. Since all the foreign operations are under one authority,
control and communication are easy. Figure 13.1 depicts an organisation
with an international division.

Figure 13.1: International division structure

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Functional structure In this structure, each functional department is

responsible for activities around the world. For example, the finance
department is responsible for the organisations finance activities around the
world. This is the case with all the other functional departments, such as
marketing, manufacturing, and human resources management. This design
is used by international firms that have a narrow product line with limited
number of products. Figure 13.2 depicts an organisation with a functional
structure.

Figure 13.2: Functional structure

From the figure you can see that each division directly deals with countries
A and B.
Regional structure In this structure, international operations are
organised by dividing the entire globe into different geographic regions.
Strategic decisions are made in the headquarters and the regional manager
is responsible for all operational issues within the region. Figure 13.3 depicts
the regional structure in an organisation.

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Figure 13.3: Regional structure

From the figure above, you can see that regional managers for Europe and
Asia Pacific regions report directly to the company headquarters while
taking charge of their respective countries.
Foreign subsidiary structure In this structure, each of the companys
foreign subsidiary reports directly to the headquarters. This structure
eliminates the necessity of a regional manager. Though strategic decisions
are taken at the headquarters, each subsidiary acts autonomously for their
local operations. Figure 13.4 depicts the foreign subsidiary structure in an
organisation.

Figure 13.4: Foreign subsidiary structure

From the figure you can see subsidiaries based in USA, UK, France, and
Japan report directly to the headquarters in India.
Product division structure International companies that have a
diversified product range across diversified markets can opt for product
based organisational structure. Global responsibility for a product or a group
of products is on separate operational divisions within the company. This
organisational structure, as depicted in figure 13.5, is followed most
commonly by multinational consumer goods companies.
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Figure 13.5: Product division structure

From the figure above, you can see that the product managers report
directly to the headquarters while they are responsible for all the operations
in their respective countries.
International matrix structure This structure is the most complex
organisational structure. This form of structure is suitable where several
functional divisions from across the globe performing related duties are
grouped together into an international product division. These product
divisions can then plan, design, develop, produce the products or services
required. The product divisions are dissolved or the teams are assigned to
some other division after the project is executed. Figure 13.6 gives you an
idea of the international matrix structure.

Figure 13.6: International matrix structure

In the matrix structure, you can see that different product managers work
with different departments across the globe, breaking all the divisional
barriers.
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Self Assessment Questions 1

1. A well designed _______ facilitates efficient communication in an
organisation.
2. Technology and the environment are factors that influence
organisational structure. (True/false)
3. ________ is the most complex form of organisational structure.
a) Product division structure
b) Functional structure
c) International matrix structure
d) Foreign subsidiary structure

13.3 Introduction to International Human Resource Management

In the previous section you learned about international business
organisational structures. In this section, you will learn about the ways in
which HRM deals with workforce management and its relationship with the
organisation. The purpose of HRM is to make the maximum utilisation of the
firms human resources so that both employer and employee benefit from
their association. The following are some of the functions of HRM:
Plan, recruit and terminate employees.
Educate and train employees for career development.
Provide compensation and terms of employment for employees.
Facilitate communication between employers and employees.
Settle disputes and negotiate on wages and working conditions.
International Human Resource Management (IHRM) is the process of
recruiting and managing the services of an organisations personnel across
the globe, to achieve its goals.
13.3.1 Managing international human resource activity
Employees are an asset to the organisation. HRM activities need to be
designed to utilise the employees potential to the maximum. This can be
achieved through their involvement with the organisation and by increasing
the employees commitment to the business objectives of the organisation.
The employees are trained to accept change, be innovative, and become
quality conscious and flexible. HRMs task is to integrate personnel into the
organisations corporate ideologies and to constantly help the workforce to
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be more productive and efficient, thereby making the business more

productive. Figure 13.7 illustrates some of the important activities involved in
HRM.

Figure 13.7: HR Activities

As depicted in figure 13.7, human resource planning, recruitment and

selection, training and development, performance management,
remuneration, repatriation and employee relations play an active role in the
organisations efficiency. Let us now discuss some of the important
activities.
Human Resource Planning (HRP) HRP is a very important aspect in the
process of HRM. It is the process of assessing staffing requirement for the
future and taking care of the adequate and timely supply of human
resources for the same. In an international scenario, HRP plays a greater
role in achieving the global objectives of the organisation, as the sourcing of
HR is spread across countries. Some of the challenges in international HRP
are as follows:

Identify the key top management executives.

Design organisational structure and responsibilities of international

managers.

Provide adequate training to managers and equip them for a

multicultural experience.

Maintain the career focus of the international managers by providing

adequate developmental opportunities.

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Integrate multiple business units across the globe to a common strategic

objective.

Recruitment and selection Hiring employees is a challenge for any

international business. The international HR managers have to make sure
that they hire the most suited candidates. This means that possessing the
right skill is not the only criterion. They must also look at the adaptability of
the potential employees to the corporate culture and beliefs of the
organisation. The HR manager also needs to make sure the organisation
hires new employees with flexibility to adapt to foreign cultures.
13.3.2 Domestic versus international human resource management
Fundamentally, domestic HRM and IHRM have the same processes and
objectives. IHRM differs from the domestic HRM in terms of its scope and its
challenges because of the internationalisation of business and its managers.
Let us discuss some of the factors that differentiate IHRM from domestic
HRM.

The scope of the HR activities is larger because the organisation deals

with multiple countries and employees from several cultures.

International workforce requires greater involvement of management at

a personal level.

The approach is complex because of the potential cultural mix in the

workforce.

Risk management is an integral part of the IHRM policies.

Expatriates are subject to tax at home and in the host country. Hence,
tax policies have to be devised in a way that they do not penalise the
employee for moving to another country.

Relocation of staff involves providing immigration and travel services,

providing housing, medical care, and schooling for employees children,
pre-departure training, international allowances and so on.

The laws in the host country vary from those in the parent country. The
human resource department must be equipped to deal with all potential
issues and ensure that the newly relocated employees and their families
are able to function properly in the foreign country.

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Differences in government policies of foreign countries requires the

human resource team to ensure that all the expat employees adhere to
the norms set by the government.

13.3.3 Expatriate staff

Expatriates play a major role in international businesses. Multinational
companies place a lot of effort in selecting employees. By employing staff
from the parent country in the companys various international locations, the
senior management ensures that the foreign subsidiary runs according to
the requirements of the head office. The senior management also ensures
that experienced employees with the right attitude and capabilities are
involved with foreign operations and are fully aware of company policies.
Expatriates also tend to have greater product knowledge and managerial
expertise than the locals.
The following are some of the disadvantages in employing expatriates:

Problems with the local language, customs, culture, and business

practices.

Time to settle in the new environment, which has a negative impact on

the employees productivity.

Prejudices towards certain ethnic groups may arise during foreign

posting.

Imposed management style that the host country employees are not
comfortable with and may find inappropriate.

Obstruction of opportunities for local staff.

Expatriate selection
Selection of expatriate employees is a highly specialised function in HRM.
The following factors are important while recruiting an expat employee:
Technical competency.
Interpersonal skills.
Ability to cope with the foreign environment.
Ability of the expatriates family to adjust to the foreign environment.
Figure 13.8 presents the different criteria for recruiting expatriate
employees. The HR team must consider the candidates personal

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expectations, as well as the candidates family comfort, in moving to a

foreign country.

Figure 13.8: Expat selection criteria

After the HR team selects the right candidate, they provide proper support
and information to the employee and family for a smooth transition. This
step is critical to the success of employing the expatriate and in turn the
success of the international business unit. Before posting the newly
recruited employee to the international location, the company must do the
following:

Provide the employee and family with cultural and language orientation
with the intention of familiarising the new country to them.

Make provision for pre-assignment visits so that the employee, spouse

and family can find appropriate accommodation, schools, recreational
options and so on.

Assign mentors who are familiar with the experience of relocation,

preferably from the home country.

Counsel the family about the challenges of moving to a new country so

that they can prepare themselves.

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Adjusting to expatriate life

Managing the overseas employee has always been the tough job for the
HR manager. Host country culture can be dramatically different from the
way things are back home. Most of the times, new expatriate including
their spouses and children feel overwhelmed and disoriented by the
shock of a novel cultural environment. Possible ways of adjusting to new
life as expatriates can be psychological adjustment to the new
environment which is largely an internally oriented process of feeling of
well-being or satisfaction of being abroad. Second method is the
sociocultural adjustment process which is externally oriented and
involves that how well one can adjust himself or can act with new team of
unfamiliar people or community. One can find new friends and here are
several general suggestions on how to find new friends:
Expats with children have an opportunity to start or strike up a
conversation with other parents at school, sporting activities, and
social events.
Cities especially in Europe and North America has networking groups
for professional women. Even in developing countries respective
embassies/cultural center have information about networking meeting
or cultural events where expatriates can familiarise themselves.
One can take a course in dance, music, painting, pottery and even
the local language. This helps in getting people to know about
expatriates choice and interests and interact.
One can become a volunteer or even become a member of a local
NGO. It is one of the most rewarding ways to meet new people as
you contribute to the society.
Expats can also mingle with their neighbours and make new friends
especially if the area has predominantly expatriate population. For
example, Geneva or New York
One can join an athletic club or join a sport club which not only keeps
him busy but makes him physical and emotionally strong.
Spouse of the expatriates can even join a job which is considered
least cost and most effective way of immersion in the host culture.
Adapted from: How to Adjust to Expat Life, Maria Fole at
www.suite101.com
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Expatriate failure
Globally, there has been a failure rate of more than 25 percent amongst
expat employees. Despite the training and efforts undertaken by the HRM,
the expats underperformance and failure has been a matter of concern for
the multinational companies. Most cases of expatriate failure have been due
to the following reasons:
Spouses inability to adjust.
Marital stress.
Employees inability to adjust.
Home sickness.
Hostility towards host nationals.
Loss of confidence.
Family tension and conflict.
Personal or emotional maturity.
Inability to cope with larger international responsibilities.
Difficulties with new environment.
Personal or emotional problems.
Lack of technical competence.
Self Assessment Questions 2
4. Planning, recruiting, and termination are some of the functions of the
______________ management.
5. The expats underperformance and failure is not a matter of concern for
the multinational companies. (True/False)
6. HRM activities need to be designed to utilise the employees potential
to the maximum. (True/False)
7. Which one of the following is not an important activity involved in HRM?
a. Human resource planning.
b. Recruitment and selection.
c. Remuneration.
d. Project planning.
Activity 1
Play the role of an international HR manager and devise a plan in 500
words to help with the transition of an expatriate employee and his family
to an Indian city.
Hint: Domestic versus international human resource management
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13.4 Scope of International Human Resource Management

In the previous section we studied the role and other aspects of selecting
expatriate employees. In this section, we will discuss the scope of IHRM.
The three main dimensions of international human resources management
are as follows:
Human resource activities.
Countries of operation.
Origin of employees.
Human resource activities HR activities in an IHRM context involves
procurement, allocation, and utilisation of workforce. These functions in turn
cover all the six activities of human resources management, that is, human
resource planning, hiring, training and development, remuneration,
performance management, and employee relations.
Countries of operation The countries of operation in an IHRM
perspective involves the host country in which the overseas operation is
located, the home country that houses the headquarters of the company,
and other countries that supply labour and finance.
Origin of employees The origin of the workforce of an international
business can be classified into three types parent country nationals, host
country nationals, and third country nationals.
13.4.1 National differences in HRM practices
In this section, let us discuss the factors that determine human resources
management practices in each country. The different factors are economic,
social, cultural, legal, labour market, business stakeholders, role of the
state, the workforce and so on. Differences that arise at a national level are
as follows:

Degree of employee
management.

Legal regulations of employee relations and rights of employees.

The importance of market forces when deciding remuneration and

employment conditions.

Cultural background of the key people involved in human resources

management.

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Across various countries, the same jobs can vary with respect to motivation,
commitment, pay scale, skill set, and education. Other factors that
determine national differences are length of employment that has an effect
on the attitude of personnel towards the organisation, age and gender,
expectation regarding working hours, etc. The attitude of managers from
different countries also varies in many aspects. Some of these aspects
include the following:
Management style.
Values and ethics.
Approach to decision making.
Approach to problem solving.
Expectations with respect to remuneration.
Importance given to management models and techniques.
Attitude to risk.
13.4.2 Strategies for international human resources management
The success of a multinational company depends on the techniques and
strategy adopted to select, train, develop, manage, and motivate its
workforce. An organisation achieves its objectives only with competent
employees. The main reasons for organisations to formulate a human
resources strategy are as follows:

Capable of competing on an international level with rivals when they

have most efficient employees.

Employee expense is a large part of the total spending of a multinational

firm.

Capacity to innovate, add new business lines, and enter new markets
depends more on its employees than on capital investment.

Emphasis on the computerisation of administrative and manufacturing

functions has a large impact on the structure of employment within a
business. There is lower demand or unskilled labour.

Need for specialist skills, which are attained over time and experience,
to increase organisational complexity.

Employees have to be treated based on the specific labour laws that the
host countries follow.

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A proper human resources strategy is needed if the management

emphasises on human relations. It thus, encourages a professional
approach to human resources management. Problems with the strategies
discussed earlier include the following:

The lack of genuine commitment to execute the strategy since strategies

are sometimes formulated as a formal procedure based on the norms of
the headquarters.

The differences in opinion over a worthwhile human resources strategy

may arise between the human resources department at the head office
and the subsidiaries.

The necessity for all the organisations employees to be aware of the

human resource strategy through proper communication between
management and the workforce. Without proper employee involvement,
it is difficult to implement the HR strategies.

Improper HR strategies lead to various organisational issues that are not

obvious in the short term.

Influences on international human resources management

External factors that influence human resources strategies are as follows:

Legal factors related to the workforce on issues such as the right to

strike, employee protection, participation in management decisions,
setting of minimum wage levels, etc.

Political environment, which refers to the attitude of the host country

government, guidelines on employment, and industrial relations.

Economic factors including inflation, unemployment, competition, and

growth prospects.

Social trends such as participation of women in the workforce, attitude

towards working hours, demands for improvement of working life quality,
changes in living standards, opportunities for education and so on.

Technological factors that affect working methods, needs to impart new

skills on the workforce, flexibility of labour, and the impact of new
technologies on the management.

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The internal factors that affect the international human resources strategies
are as follows:

The level of decentralisation of the company.

Morale of the employees.

Ability of unskilled workers to complete jobs.

Background, educational level, and technical skills of the local

workforce.

Trade union activity within the subsidiaries.

Attitude of the important stakeholders towards employee relations.

Perspectives of top managers.

13.4.3 International employee relations

Employee relations deal with all the formal and informal relationships
between employees and the management. There is a greater emphasis on
cooperation than on conflict in the management of employee relations. It is
important for the management to recognise the importance of harmony
within the workforce across various countries. The management should
credit increased competitiveness to employee relations policies for better
employee cooperation.
Some of the major decisions the management must consider while devising
an employee relations strategy are as follows:
Decide whether to recognise trade unions.
Implement procedures that affect employee relations and the way
managers approach employee relations. For example, selection,
recruitment, appraisal, training, and promotion.
Check if external agencies used by the management help in resolving
conflicts.
Divide the profit between the business owners and workers.
Communicate effectively with employees.
Know the extent to which employee representatives are involved in
making decision at a management level.
Generally, MNCs customise the employee relations policies for each
subsidiary or country depending on that countrys labour laws and practices.
Because of the differences in the approach by different countries,
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companies cannot use a standardised model across its international

operations. The state of employee relations in the subsidiaries is important
in controlling labour costs and helping the organisation grow. This is a cause
of concern to the parent company. Headquarters advise on the following
aspects:
The firms philosophy on workers relation with the management and the
role of trade unions.
Various solutions to employee relations.
Cost factors that arise due to the companys overall strategy.
Comparison of success of employee relation policies in other countries.
Pay scales and employment conditions in various countries.
Measures to improve productivity in other countries.
Management aims to apply consistent policies to its subsidiaries throughout
the world, though such policies need not be identical. It is also vital for
managers in subsidiaries to be completely aware of the relationship
between management and employees to create harmony. Harmony results
in greater competitiveness and efficiency.
13.4.4 Staffing policies in international business
The international human resources manager needs to formulate staffing
policies before starting of the process of hiring employees. The four main
policies regarding staffing are explained as follows:
Ethnocentric approach
The key managers are from the parent country. The strategy is important
during the early stages of the business because a part of the business that
was successful in the home country needs to be transferred to the host
country. Some of the reasons for this approach are as follows:
The lack of qualified employees from the host country.
The need for a united corporate culture.
The maintenance of good communication, coordination, and control with
headquarters.
The following are the disadvantages of the ethnocentric approach:
Host country employees being deprived of promotion.
The time taken by the home country managers to adapt to the host
countries.
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The sensitivity of the expatriates to the needs and expectations of their

host country subordinates.

Polycentric approach
This approach requires host country nationals to manage subsidiaries. The
benefits of such a policy are that there are fewer possibilities of language
issues, expensive training periods, and cultural adjustment issues. The
disadvantage of this approach is that the local managers may find it hard to
bridge the gap between the subsidiary and the parent company. There may
also be language issues, loyalties to the host country that conflict with the
needs of the multinational organisation, and cultural differences between the
home country managers.
Region-centric approach
Managers from various countries in the region are employed within the
geographic region of a business. Although they operate with a certain
amount of independence, they are not moved to the home country. This is a
flexible approach and locals are hired when regional expertise is needed
whereas employees from the parent country are brought in if product
knowledge is required. The disadvantage of this approach is that managers
in the region may not understand those at the head office and adequate
number of managers with international experience cannot be hired. This
approach serves as a step towards a geocentric approach.
Geocentric approach
The best suited employees for vital positions are hired throughout the
company without taking into account the nationality of the employees. The
success of this approach is based on the following five assumptions:

Availability of highly skilled employees at the subsidiaries.

International experience required to succeed in top positions.

Ambitious and promising managers who can be readily transferred from

one country to another.

Adaptability of managers to different countries after international

exposure over a period of time.

This approach helps a company create a pool of efficient international

managers, comfortably working in a number of cultures.

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Self Assessment Questions 3

8. The workforce of a multinational are of three types parent country
nationals, host country nationals, and _____________.
9. Ethnocentric and polycentric approaches are examples of
____________ policies.
10. Remuneration is one of the key staffing policies in an international
business. (True/False)
11. The nationality of the employees is not taken in to account while hiring
for the company in geocentric approach. (True/False)
12. Which of the following is not an approach under staffing policy?
a) Geocentric approach.
b) Biometric approach.
c) Polycentric approach.
d) Ethnocentric approach.
Activity 2
Using resources on the internet, analyse the HR practices that an Indian
MNC employs to recruit and retain its expat employees.
Hint:
http://www.streetdirectory.com/travel_guide/183845/human_resources/ne
ed_for_effecting_recruitment_and_hr_practices.html

13.5 Summary
Let us summarise the points covered in this unit on international human
resource management:

The structure of an organisation plays a vital role in HRM. Internal and

external environment contribute the structure of an organisation.
Business strategy plays an important role in the structure of an
organisation.

The different types of international organisational structures are export

structure, international division structure, functional structure, regional
structure, international subsidiary structure, product structure, and
international matrix structure.

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IHRM is a vital component in the functioning of a multinational

enterprise. IHRM helps deal with the factors that make the workforce
more efficient and the organisation more competitive.

Though there are many strategies and policies regarding the

deployment of personnel across various countries, the one that best
aligns the needs of the parent country and employees in foreign
subsidiaries is the one that yields the best results.

International staffing policies depend on the approach adopted by an

organisation. The four approaches are ethnocentric, polycentric, regioncentric, and geocentric approach.

13.6 Glossary
Home country: The country where a companys headquarters is located.
Host country: A country other than the home country where a company
operates.
Remuneration: The total package, which includes salary, bonuses,
allowances, stock options and so on, that the employee receives from the
employer.

13.7 Terminal Questions

1.
2.
3.
4.
5.

Analyse different structures in an international organisation.

Explain the function of human resource planning.
List the key factors affecting the recruitment of expats.
State the key national differences in HRM practices.
Discuss the different approaches to staffing in an international business.

13.8 Answers
Self Assessment Questions 1
1. Organisational structure.
2. True.
3. c) International matrix structure.

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Self Assessment Questions 2

4. Human resource.
5. False. The expats underperformance and failure has been a matter of
concern for the multinational companies.
6. True.
7. d) Project planning.
Self Assessment Questions 3
8. Third country.
9. Staffing.
10. False. Remuneration is not one of the key staffing policies in an
international business.
11. True.
12. b) Biometric approach.
Terminal Questions
1. Export, international division, functional, regional, international
subsidiary, product and international matrix are some of the
organisational structures in the international business. These are
explained in sub-section 13.2.2 of this unit. Refer the same for details.
2. Human resource planning is the process of assessing the staffing
requirement for the future and taking care of the adequate and timely
supply of human resources in an organisation. These are explained in
sub-section 13.3.1 of this unit. Refer the same for details.
3. Technical competency, willingness to work in a foreign country,
adequate growth opportunity, spouse and familys willingness to adapt in
a new country are some of the factors affecting the recruitment of
expats. These are explained in sub-section 13.3.3 of this unit. Refer the
same for details.
4. Employee participation in decision making, legal framework of employee
relations, individualism, collectivism, cultural background, and so on is
the common national differences in HRM practices. These are explained
in sub-section 13.4.1 of this unit. Refer the same for details.
5. Ethnocentric, polycentric, region-centric and geocentric are the
approaches taken by HRM in an international business. These are
explained in sub-section 13.4.4 of this unit. Refer the same for details.

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13.9 Caselet
IHRM at Unilever
Unilever PLC. is the worlds largest Fast Moving Consumer Goods
(FMCG) Company with a turnover of 39.8 billion and is the leader in
Home and Personal Care Products, Foods and Beverages. It employs
1,63,000 people in more than 100 countries worldwide. Unilevers
products are sold in over 170 countries around the world.
Their manufacturing facilities are spread across many countries and they
also export products to countries where they do not have manufacturing
operations. Currently, they have 264 manufacturing sites worldwide, all of
which strive for improved performance on safety, efficiency, quality and
environmental impacts working to global Unilever standards and
management systems.
Hindustan Unilever Limited (HUL), a subsidiary of Unilever PLC. is India's
largest FMCG company with around two thirds of the market share in its
sector. HUL has several manufacturing plants spread across the country.
The mission that inspires more than 15,000 employees, including over
1,400 managers of HUL group is to help people feel good, look good and
get more out of life with brands and services that are good for them and
good for others. It is a mission HUL shares with its parent company,
Unilever.
The fundamental principle determining the organisation structure is to
infuse speed and flexibility in decision-making and implementation with
empowered managers across the companys nationwide operations.
HUL is known for its capability to appeal to and darn the right employees.
Several Unilever India managers have taken senior level responsibilities
in Unilever's worldwide system. In 2008, over 80 HUL managers held top
positions in different Unilever companies or corporate functions.
The management realised that to be competitive, they had to re-structure
their hiring policies, and hence developed an international cadre of
managers. The management posted its employees to various parts of the
world after providing them intensive training on culture and countryspecific details. These managers are expected to work in any country
with the same amount of efficiency as they would in any other.
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Discussion questions
1. Suggest the most appropriate organisational structure for HUL.
(Hint: HUL has multiple global products and manufacturing plants
across the globe)
2. What makes HULs managers most sought after in Unilever?
(Hint: Refer HRP in section 13.2.1)
Source:http://www.unilever. com/ boutus/ introductiontounilever/
unileverataglance/?WT.LHNAV=Unilever_at_a_glance Retrieved on 8th
October 2010
http://www.hul.co.in/aboutus/introductiontohul/HULataglance/default.aspx
Retrieved on 8th October 2010

References:

Bhalla, V. K. & Shiva Ramu, S. (2008). International Business Environment and Management. Anmol Publications.

Brewster, Chris, Sparrow, Paul & Vernon, Guy. (2008). International

Human Resource Management. Universities Press (India) Limited.

Cherunilam, Francis. (2010). International Business Environment.

Himalaya Publishing House.

Harzing, Anne Will & Rusysseveldt, Joris Van. (2007). International

Human Resource Management. Sage Publications India Pvt. Ltd.

K., Aswathappa & Sadhna, Dash. (2009). International Human Resource

Management Text and Cases. Tata McGraw-Hill Publications Co. Ltd.

McDonald, Frank & Burton, Fred. (2002) International Business.

International Thomson Computer Press.

E-References:

http://managementhelp.org/hr_mgmnt/hr_mgmnt.htm, retrieved on 6th

October 2010

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