Chapter 1

Introduction:
The Enduring Context of
IHRM
 Chapter Objectives
 In this introductory chapter, we establish the scope
of the textbook:
Define key terms in IHRM
Outline the differences between domestic HRM and
IHRM
Identify the variables that moderate these differences
And discuss trends and challenges in the global work
environment and the enduring context in which IHRM
functions and activities are conducted, including the way in
which forces for change affect the operations of the
internationalizing firm and have consequences for the
management of people in the multinational context.
IBUS 618 Dr. Yang 2
 The General Field of HR
 Major Functions and Activities
 Human resource planning
 Staffing
 Recruitment
 Selection
 Placement
 Performance management
 Training and development
 Compensation (remuneration) and benefits
 Industrial relations
History of HRM
 History of HRM
 Personnel Management

 Human Resource Management

GLOBALIZATION
 Stages of Globalization
 Domestic

 International

 Multinational
Reasons for Globalization?

8
 Reasons for Globalization of
Businesses
 Expand Market Share
 Cheap labour, Raw material is easily available
 Extensive Global Communication
 New technology
 To Sustain in Foreign Competition
 Trade Agreement like NAFTA
What is an Expatriate?
 What is an Expatriate?
An employee who is working and temporarily
residing in a foreign country

They are also called ‘international assignees’

by some firms.

All three categories of employees, i.e. PCNs,

TCNs, and HCNs are expatriates
Nationality of the employee is major factor in
determining the person’s ‘category
 What is an Repatriation?

Transfer of subsidiary staff back

to the parent country
(headquarters) operations.
 International Human Resource
Management
 In international HRM, the preceding activities are
broadened to include aspects pertaining to the national
or country categories
 (Host, Home, Other) countries,

 and firm employees

 Host‐Country Nationals (HCNs)

 Parent‐Country Nationals (PCNs)

 Third Country Nationals (TCNs)

WHY TO STUDY IHRM??
 Why to Study IHRM?
 Recent years have seen a rapid increase in
global activity and global competition.

 As the MNCs increase in number and

influence, so the role of international HRM in
those companies grows in significance.

 The effective management of human resources

internationally is increasingly being recognized
as a major determinant of success or failure in
international business
 Differences between Domestic HRM
and IHRM
 More HR activities

 The need for a broader perspective

 More involvement in employees’ personal

lives

 Changes in emphasis as the workforce mix of

expatriates and locals varies
 Risk exposure
 Broader external influences
 More HR Activities
 International taxation

 International relocation and Orientation

 Administrative services for expatriates (AIDS

Test Services)

 Host-government relations (work permits..)

 Language translation services

 The Need for a Broader
Perspective
 Designing and administering programs for
more than one national group of employees
(e.g. PCN, HCN, and TCN).

 Complex equity issues arise when employees of

various nationalities work together (expatriate
premium to PCN only)

 and the resolution of these issues remains one

of the major challenges in IHRM field.
 Changes in Emphasis as the Workforce
Mix of PCNs and HCNs varies
 As the need for PCNs and TCNs declines and more
trained locals become available, resources previously
allocated to areas such as expatriate taxation, relocation
and orientation are transferred to activities such as local
staff selection, training and management development.

 These assignments may require the establishment of a

program to bring high-potential local staff to corporate
headquarters for development assignments.

 The need to change emphasis in HR operations as a

foreign subsidiary matures is clearly a factor that would
broaden the responsibilities of local HR activities such
as human resource planning, staffing, training and
development and compensation.
 More Involvement in employees
Personal Lives
 A greater degree of involvement in employees’ personal
lives is necessary for the selection and effective
management of both PCN and TCN employees.

 The HR department or professional needs to ensure that

the expatriate employee understands housing
arrangements, health care and all aspects of the
compensation package provided for the assignment
(cost-of-living allowances, taxes and so on)

 Many multinationals have an ‘International HR Services’

section that coordinates administration of the above
programs and provides services for PCNs and TCNs
such as handling their banking , investments and home
rentals while on assignment and coordinating home visits
and final repatriation.
 Risk exposure
 Expatriate failure (the premature return of an expatriate
from an international assignment) and
underperformance while on international assignment
are potentially high-cost problems for international
companies.

• Direct Costs (salary, training costs and travel and relocation

expenses) per failure to the parent firm may be as high as three
times the domestic salary plus relocation expenses, depending
on currency exchange rates and location of assignments.

• Indirect Costs such as loss of foreign markets share and

damage to key host-country relationships may be considerable.
 Broader External Influence
3 Major External Factors That Influence IHRM

 Type of Government (Host Country dictation in

hiring)

 State of Economy

 Generally accepted practices of doing business

in each of the various host countries in which
the multinational operates
 Defining IHRM
 International HR Management is the
strategic integration and alignment
of HR practices with business
objectives to enhance firm and
employee performance around the
globe.