INTERNATIONAL HUMAN RESOURCE MANAGEMENT (IHRM)

UNIT 1

 International human resource management

(IHRM) is the process of procuring, allocating, and effectively utilizing human resources in a multinational corporation. In simple terms, IHRM is concerned about managing human resources at Multinational Companies (MNC) and it involves managing 03 types of employees namely,

 Home country employees- Employees belonging to

home country of the firm where the corporate head quarter is situated. Host country employees- Employees belonging to the nation in which the subsidiary is situated. Third country employees- These are the employees who are not from home country/host country but are employed at subsidiary or corporate head quarters. As an example a American MNC which has a subsidiary at India may employ a French person as the CEO to the subsidiary. The Frenchman employed is a third country employee.

Differences between domestic HRM and International HRM (IHRM)

Domestic HRM is done at national level and

IHRM is done at international level. Domestic HRM is concerned with managing employees belonging to only one nation where as IHRM is concerned with employees belonging to many nations (Home country, host country and third country employees) Domestic HRM is concerned with managing limited number of HRM activities at national level and IHRM has concerned with managing additional activities. Domestic HRM is less complicated due to less influence from the external environment. IHRM is very complicated as it is affected heavily by external factors such as cultural distance, language barriers etc.

 Managing human resources in an

international context is more complex than in a domestic set up because of the many differences between headquarters and the subsidiaries. The HR policies of certain companies seem to discriminate on the basis of religion, race, caste, gender or nationality.

SIMILARITIES
The HR manager needs to plan for the

human resources, hire the right people in right numbers, train and develop, compensate, maintain and motivate employees, whether his or her domain is domestic or global. Another similarity relates to environmental forces that impact on both, HR departments in global and domestic businesses. These forces include political, legal, cultural and economic constraints

Finally, the major objective of the human

resource function is the same in domestic and international business: supporting business strategy and ensuring organizational effectiveness through a variety of interventions

 HRM is a strategic function concerned with

recruitment, training and development, performance appraisal, communication and labor relations. HR policies guide the various functions of HRM. The need for a particular type of HRM is determined by the need for standardization or adaptation.

International HR Approaches:
Ethnocentric.

The home country practice prevails with this approach. Headquarters from the home country makes key decisions, employees from the home country hold important jobs, and the subsidiaries follow the home country resource management practice. There motto is this work in my country therefore, it must work in other countries also'. These are home country oriented organization.

 Example: When a Japanese corporation

invests in Mexico, Japan is the home country and Mexico is the host country. If the Japanese Corporation is ethnocentric, it will except Mexicans to accept the inherent superiority of Japan. Investments will be made on the Japanese methods of conducting business

 In this approach, all key management

positions are held by parent country nationals, e.g., Toyota, , Samsung etc. this strategy may be appropriate during the early phases of international business, because firms at that stage are concerned with transplanting a part well in their home country. Ethnocentric corporations believe that home country nationals are more intelligent, reliable and trust worthy than foreign nationals. Firms such as Procter and Gamble, Philips, originally followed the ethnocentric approach.

 The adaptation of expatriate managers to host

countries often takes a long time during which PCNs make mistakes and make poor decisions. When PCN and HCN compensation packages are compared, the often considerable income gap in favour of PCNs is viewed by HCN, as unjustified. For many expatriates, a key international position means new status, authority and an increase in standard of living. These changes may affect expatriates sensitivity to the needs and expectations of their host country subordinates.

 Apart from, this the cost of maintenance of

expatriates is quite high. This approach is not only reflected in the staffing policy but in all other areas such as performance appraisal where evaluation format is designed and administered by parent nationals and new product development is done in the home country.. They have difficulty in communicating in different languages and accepting cultural differences.

Polycentric Approach
Each subsidiary manages on a local basis. A

local employee heads a subsidiary because headquarters managers are not considered to have adequate local knowledge. Subsidiaries usually develop human resource management practices locally. There motto is when in Rome do as the Romans do'.

 When you are elsewhere lives as they live

elsewhere. The polycentric staffing requires host country nationals to be hired to manage subsidiaries, while parentcountry nationals occupy key positions at corporate headquarters. Although top management positions are filled by home-country personnel, this is not always the case. They see profit potential in a foreign country but find the foreign market difficult to understand.

 The polycentric message is: Local people

know what is best for them. Let's give them some money and leave them alone as long as they make us a profit. Governmental pressure and foreign laws often necessitate polycentric approach. The local government may be a major customer and insist on local ways to be adopted. Many multinationals adopt this approach because they face the heterogeneous environments in which product preferences may be the deciding factors and strategies are to be developed on a market by market basis.

Geocentric or Global
This staffing philosophy seeks the best people for

key jobs throughout the organization, regardless of nationality, selecting the best person for the job, irrespective of nationality is most consistent with the underlying philosophy of a global corporation. The MNC is taking a global approach to its operation, recognizing that each part (subsidiaries and headquarters) makes a unique contribution with its unique competence. It is accompanied by a worldwide integrated business and nationality is ignored in favour of ability.

 The company that applies the global

integrated business strategy manages and staffs employees on a global basis. For example, Electrolux (the vacuum cleaner company) has for many years attempted to recruit and develop a group of international managers from diverse countries. These people constitute a mobile base of managers who are used in a variety of facilities as the need arises.

There are main advantages to its approach: It enables a multinational firm to develop an international executive team which assists in developing a global perspective and an internal pool of labour for deployment throughout the global organization.
It supports cooperation and resource

sharing across units.

There are disadvantages associated with a geocentric policy. Bridging the gap between HCN subsidiary managers and the PCN managers at headquarters is a major problem, especially with regard to language barriers, conflicting national loyalties and differences emanating from personal values attitudes to business and so on. Host government want a high number of their citizens employed and may utilise immigration controls in order to force HCN employment if enough people and adequate skills are unavailable. Many western countries need extensive documentation if they wishes to hire a foreign national instead of a local national, which is time consuming,

 A geocentric policy can be expensive to implement

because of increased training and relocation costs. A related factors is the need to have a compensation structure with may be higher than national levels in many countries. Large numbers of PCNs, TCNs and HCNs need to be sent abroad in order to build and maintain the international team required to support a geocentric staffing policy. To implement a geocentric staffing policy successfully, therefore, requires a longer lead time and more centralized control of the staffing process.

Regiocentric Approach
In Regiocentric approach Operations

managed regionally; communication and coordination high within the region. Like geocentric approach, it utilizes a wider pool of managers but in a limited way. This approach advocates the division of operations of the multinational company on the basis of some geographical regions and allows the transfer of employees with in a particular region.

 The advantages of using a Regiocentric

approach are:
It reflects some sensitivity to local conditions,

since local subsidiaries are staffed almost totally by HCNs. It can be a way for a multinational to more gradually from a purely ethnocentric or polycentric approach to a geocentric approach.

Linking HR to International Expansion Strategy.

Seven steps for aligning HR to business

strategy: Professionally managed companies, such as Unilever, Citicorp, Hewlett Packard, and others use this basic framework to make sure their HR practices are fully and exactly aligned to create the organizational capabilities required to execute strategy in the most powerful way possible.

 Step 1: Identify the organizational unit for

which a human resource strategy is being developed. Step 2: Identify and prioritize the externally driven forces and trends in your business environment that are influencing your business unit. Step 3: In the context of the externally driven forces determined in step 2, determine key sources of competitive advantage. Identify 3 to 5 measures of success for each source of competitive advantage

 Step 4: Identify the cultural and technical

capabilities that you need to have to win in the market place. What mindset and behaviors do we need to have more of in the future than we have had in the past in order to achieve our numbers to a greater extent in the future than we have in the past? Step 5: Identify which HR practices will have the greatest influence on creating your ideal human organization. Ask yourself: What major HR practices will best create an organization with the above cultural capabilities? Which practices will have the greatest influence? In what order and over what time frame should the initiatives be implemented?

 Step 6: Align HR

Decide how the identified HR initiatives need to be created or changed in order to create your? What changes need to occur in each HR practice so that each practice will be more effective in ideal human organization. Which HR practices will receive attention over the next 12 to 18 months creating these cultural capabilities in your people? Step 7: Identify action plans What will be done? By whom? By what date? Who else needs to be involved? When will the progress be reviewed? By whom?

 Step 8: Measure results - What are the purposes of the measurements? - What results do we want to measure?

- Who should be the sources of data?

- How should we take the measurements? - When and where should we take measurements? - The most difficult part in measuring HR is

knowing what to measure, not doing the measurement itself. Once we know what to measure, measurement can occur very quickly. In a complete HR measurement system, you have to measure what HR does, what it delivers and what it impacts. Thus one can show the relationship between what HR does, what it delivers and what it impacts.

Expanding role of HRM in International Firms

PLANNING AND ORGANISING FOR WORK, PEOPLE

AND HRM - Strategic perspective - Organization n design - Change management - Corporate Wellness management PEOPLE ACQUISITION AND DEVELOPMENT - Staffing the organization - Training & development - Career Management - Performance Management - Industrial relations

ADMINISTRATION OF POLICIES , -

PROGRAMMES & PRACTICES Compensation management Information management Administrative management Financial management