HR challenges and Opportunities

Unit II

Functions of Domestic HRM

HR Planning Employee Hiring Training and Development Compensation & Benefits Management Performance Management Industrial Relations

HR Challenges – Globalized Environment

Managing outsourcing partners BPO & Call Centers Work life balance Ethical Practices Managing Diversity Organizational restructuring Changing Demographics Managing employee expectation

HR Challenges of the Future

Integration with the business Empowerment of employee Focus on productivity through team building Dynamic Org Structure People sensitive management styles and

practices Management of changing work diversification Efficient use of information technology Organizational communication Sustaining individual effectiveness through

performance feedback and counseling

PERSPECTIVES, LINKAGE AMONG COUNTRIES,

STAKE HOLDERS, THEIR CONCERN AND OF OPERATIONS

Lesson III

International Business Management

American Assembly of the Collegiate Schools of Business (AACSB)

Japanese Economy

INDIVIUAL AND COMPANY CONCERN

Lesson IV

Business Ethics

is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.

Ethical Values

Religion

Culture

Law

Law breaking in Business

Importance of Ethics

Ethics corresponds to basic human needs. It is man’s basic nature that he desires to be ethical; not only in his private life but also in his business.

A company perceived by the public to be ethically and socially responsive will be honored and respected even by those who have no intimate knowledge of its actual working.

Values give the management credibility with its employees. Values are supposed to be a common language to bring the leadership and its people together.

Values help better decision-making Ethics and profit go together. Value driven companies are

most likely to be successful in the long run, though in the short run, they may lose money.

Law cannot protect the society, ethics can.

Difficulties in Ethical Decision Making

managers confront situations where a distinction between facts and values has to be made while making ethical decisions.

the good and evil exist simultaneously, in tandem, and are interrelated.

antagonistic interests frequently use incompatible ethical arguments to justify their intentions. some ethical standards vary with the passage of time. ethical behavior is molded from the clay of human imperfection.

Ways of Resolving Ethical Issues

can consider three well-known principles to resolve an ethical issue: moral idealism, intuitionism and utilitarianism

engage in imaginary conversations with a hypothetical opponent as an antidote for certitude. Have a debate with an intelligent person who takes a different view. Seek out a more experienced, ethically sensitive person in the organization to be your adviser.

write down pros and cons in the form of a balance sheet

Ways of Resolving Ethical Issues

Sort out ethical priorities before problems arise. Prioritization shall help consider alternatives when one is not under stress.

one should commit oneself publicly on ethical issues.

ethical perfection is illusionary. We live in a morally complex civilization with profuse rules, norms, obligations and duties.

Human Resources & Ethics

HR managers play several key roles in determining the ethical climate of their organizations. This is true for a number of reasons.HR is often the first place employees turn when they notice policy violations. Each action taken determines how employees perceive enforcement.

HR’s activity in the area of ethics has an impact that goes beyond enforcement of basics. Even in companies where HR is uncertain how much support will be provided by senior management, they can begin by enforcing simple policies and rules. By confirming that support exists at the top to enforce these, HR establishes a base for what will not be tolerated

Career in International Business

Lesson V

International Business

At the corporate headquarters level, the two major activities that differentiate domestic and international HRM are taxation relocation and orientation.

Managers of MNCs must familiarize themselves with the differences in culture, social beliefs, language, philosophy, religious beliefs, work habits, and overall customs of the market in which they will function. Adapting to these differences is a key element in the ongoing success of a company competing in the international marketplace.

Recruitment Philosophy

Ethnocentrism :- Management staffs all key positions, both at home and abroad, with home country executives. This approach is found in firms that are highly centralized and that rely on low-cost production of products.

Polycentrism :- The attitude here is that host country management should be done by host country nationals. It is based on the belief that home country nationals are better able to understand their own markets.

Regiocentrism :- This means that global markets should be handled regionally.

Geocentrism. According to this approach, qualified people can come from any background or culture. Resource allocation, staffing, manufacturing, and marketing are done on a global basis.

SELECTION CRITERIA

Technical and managerial skills Motives and desires Social skills Diplomatic skills Maturity and stability Family factors Others :- Age, Gender

Expat Career Opportunity Spouse and family adaptability. leadership ability knowledge of job higher education respect for laws and people of host

country previous overseas experience knowledge of the language of host

country

Human Resources Function Ensuring that the organization fulfils all of its

equal employment opportunities and other government obligations. Carrying out job analysis to establish the

specific requirements for individual jobs within an organization. Forecasting the human resource requirements

necessary for the organization to achieve its objectives-both in terms of number of employees and skills.

Developing and implementing a plan to meet these requirements.

Human Resources Function

Recruiting and selecting personnel to fill specific jobs within an organization.

Orienting and training employees. Designing and implementing management

and organizational development programs. Designing systems for appraising the

performance of individuals. Assisting employees in developing career

plans.

International HRM

International HRM as the interplay among these three dimensions—human resource activities, types of employees, and countries of operation.

We can see that in broad terms international HRM involves the same activities as domestic HRM: (Ex. procurement refers to HR planning and staffing). However, domestic HRM is involved with employees within only one national boundary.

IHRM Vs Domestic HRM

The basic functions (procurement, allocation, utilization and motivation) of HRM and IHRM

are the same! The main difference between HRM and IHRM

lies in their different levels of inherent complexity

IHRM is characterized by a comparatively, and normally considerably, higher level of inherent complexity and uncertainty than HRM

The Internationalization of HR Management

Globalization Freer movement of the factors of

production (capital, labor, information) Growth of international trade and

investment. Opening of new markets (e.g. East

Europe) Emergence of trading blocs Competition and cost reduction pressures Multiculturalism, immigration

Challenges of IHRM

All organizations – particularly smaller and medium-sized entities with comparatively smaller resource bases - operating in an international, culturally heterogeneous context, face numerous challenges in regard to effectively managing their human resources to some extent

Countries

Host

Home

HR Activiti

es

Types of Employe

es

Other

Procure

Utilize

Allocate

Host country National ( HCN)

Parent country National ( PCN)

Third country National ( TCN)

A Model of IHRM

IHRM: The Dimensions of Complexity

Peter Dowling specifies the following six factors that differentiate IHRM from HRM: › 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 › More external factors

IHRM: The Dimensions of Complexity

IHRM typically requires numerous additionalactivities to be performed, which are unnecessary ina national (domestic) context. Important Examples:

› Taxation considerations - National taxation systems tend to differ significantly and taxes may still be due afterelapse of an assignment period.

› International Relocation and Orientation › Pre-departure training, immigration and travel details,

housing, shopping, medical care and schoolinginformation, determination of compensation andallowances

More HR Activites

Administrative Services for Expatriates – Provision of assistance to expatriates for dealing with various administrative issues, for example, acquisition ofvisas and work permits for expatriates

Host-Government Relations – Ensuring compliance with the regulations and procedures mandated by the government of the host country

Language Translation Services – Providing translation support for expatriates where and when needed

Need for a Broader Perspective

The diversity of employees – i.e. human resources – necessitates a broader perspective for organizations operating internationally as opposed to those operating solely nationally

For instance, should employees from theorganization’s parent country receive specialbenefits for taking on international assignments,while the organization’s employees from othercountries be denied these same benefits?

More Involvement in Employees’ Personal Lives

For organizations operating nationally, theirinvolvement in their employees’ personal lives isnormally confined to issues such as arranging andadministering employee insurance programs andrelocation assistance if a shift from a workplace inone city to another becomes necessary

For organizations operating internationally, acomparatively significantly higher of support may,and often is, required, for instance, helping findsuitable accommodation for the expatriate’s familyto live, helping find a school for his or her childrento attend and arranging recreational programs

Risk Exposure

The element of “expatriate failure” is comparativelyhigher for organizations operating internationally. The costs of expatriate failure can be quite substantial:

› Direct Costs: Salary, training, travel and relocation › Indirect Costs: Loss of the organization’s market share,

reputational damage .› Other high-cost risk factors are terrorism and political

instability, e.g. targeted bombings, assassinations,civil and social upheavals, military conflicts

More External Influences

Government-Driven Factors, for example, affirmative action programs intended to increase employment for, and increase the skill level of their nationals.

Local business practices (is it acceptable to accept “gifts” to facilitate operations? (ethical issues)

Local regulations, especially in regard to labor, health and safety, taxation, the environment

Domestic & International

Activities of HRM

Cultural Activity

Industry within which the MNC is

involved

Extent of dependence of the MNC in its home country

and domestic Market

Attitude of Senior Management

Complexity involved in Operating in

different countries and employing

different national categories of employees

Additional Important Considerations in IHRM

IHRM and the Cultural Environment

Culture is a distinct way of life, set of values, attitudes and behaviors which members of a society internalize over time and through the process of socialization. Some visible manifestations of culture are dress, food, language, hygiene, attitudes towards other members of society and to time and work

IHRM requires an appreciation of the prevailing differences in the cultural environments in which an organization operates. There is now a broad awareness, that culture is an important impact determinant in the HRM equation

Differences between the parent and host country cultures can be a source of conflict (e.g.: problem of nepotism)

IHRM and the Cultural Environment

The “Culture Shock” refers to the situation inwhich an expatriate is unable to adjustemotionally to a new cultural environment inwhich he or she is expected to work. Sometypical manifestations of a culture shock are:

› Psychological disorientation › Negative feelings for the host country and its people › Strong desire to return to one’s home country

IHRM and Reliance on the Home-Country Domestic Market

The size of a country’s domestic market may haveconsiderable influence on the extent to which itsmultinationals are oriented. Multinationals based incountry’s with large domestic markets offering thebenefits of high consumer demand, such as theUnited States of America, would be inward-lookingand their HR practices structured accordingly. Small countries (e.g.: Netherlands, Sweden, Switzerland, Canada), who may be largely reliant on foreign markets for their growth, may have different (i.e. more outwardly-oriented) HR practices.

IHRM and Attitudes of Senior Management

A “global mindset” is strongly recommended bywhich the development of a globally-oriented staff in an organization is encouraged and facilitated bysenior management

Typical Reasons for failure to develop a global mindset by organizations are: –Ethnocentrism

–Inward-Oriented–Lack of Information–Cultural Insensitivity

Managing International HR Activities

The steps…….

HR Planning Recruitment and Selection Training and Development Performance Management Remuneration Repatriation Employee Relations

HR Planning

Identifying top management potential early. Identifying critical success factors for future

international managers. Providing developmental opportunities. Tracking and maintaining commitment to

individuals in international career paths. Tying strategic business planning to HRP and

vice versa. Dealing with multiple business units while

attempting to achieve globally and regionally focused (e.g. European or Asian) strategies.

Sources of Human Resources

Home-country nationals Host-country nationals Third-country nationals Inpatriates Subcontracting and Outsourcing

Recruitment

Ethnocentric Approach

parent nation employees fill all key positions in a multinational. While this approach may be common for firms at the early stages of internationalization, there are business reasons for pursuing such an approach:

› A perceived lack of qualified host nation employees.› The need to maintain good communication,

coordination, and control links with corporate headquarters.

Disadvantages of Ethnocentric Approach

It limits the promotion opportunities of host country nationals, which may lead to decline in productivity and attrition.

The parent company nationals being placed in the host country take lots of time in understanding the local dynamics leading to faulty decisions.

The salary structure of the parent company nationals creates a feeling which is much better than its employees in other countries, discrimination and frustration among the employees from the host country.

Polycentric approach.

This approach is basically taken up while employing host country nationals in the subsidiary of the MNC operating in that country and its basic premise is that parent country nationals will only hold positions in the

corporate headquarters –

› There would be no language barrier. The local dynamics can be well taken care of by the local people. The hassles of cultural adjustment are not there.

› Managing local politics and administration will be very easier.

› This is less expensive than the ethnocentric approach.

Disadvantages of Polycentric approach

Maintaining understanding between the corporate and the subsidiary management becomes difficult.

It also becomes difficult to imbibe the original culture of the company.

This will not provide the opportunity to the host country employees to get exposure and experience outside their own country, which will minimize their growth and development in the organization beyond their own country.

Geocentric approach

This approach subscribes the view of employing the best people in key positions throughout the organization without the consideration of any nationality. This addresses the disadvantages of both ethnocentric and polycentric approach.

Disadvantages of Geocentric approach

Constraints in terms of the employment policy of the particular country, the paper work involved in hiring a foreign national instead of a local national, hassles 'of obtaining work permit for dependents of the employee.

Is expensive in terms of the investment towards training and development of the individual, benchmarking the salary with the international compensation package, which is definitely more than the salary to be given to the individual in his home country

Regiocentric approach

This approach advocates the division of operations of the multinational company on the basis of some geographical regions and allows the transfer of employees within a particular region –

› A major motive for using such an approach is that it allows interaction between executives transferred to regional headquarters from subsidiaries and parent country nationals posted to the regional headquarters.

› It also reflects some sensitivity to local conditions.

› Another advantage is that such an approach can prove highly effective for a multinational to move from a purely ethnocentric to geocentric approach.

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Disadvantages of Regiocentric approach

It can produce 'federalism' at a regional rather than a country basis.

While this approach does improve career prospects at the national level, it only moves the barrier to the regional level.