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International Human Resource
Management
Human resource management (HRM) is the set of activities directed at attracting, developing, and maintaining the effective workforce necessary to achieve a firm’s objectives. Recruiting and selecting employees, providing training and development, appraising performance, and providing compensation and benefits are all part of HRM.
What is IHRMInternational HRM is the process of procuring, allocating and utilizing human resource in an a global firm.
Differences in culture, levels of economic development, and legal systems among countries may force changes in HRM systems
The International Human Resource Management Process
©2004 Prentice Hall 20-4
HRM’s Strategic Content
Recruitment and Selection
Training and Development
Performance Appraisal
Compensation and Benefits
Labor Relations
Contribution to Organizational Effectiveness
Why International Human Resource Management?
Increasing globalization, firms and employees in them moving all over the world.
Major problems in international operations because of human resource management
The role of HR in International OperationsManaging a Multicultural WorkforceDeveloping Managerial Talent in a Global
Business Environment
Main challenges in IHRMDifferent labor lawsDifferent political climateDifferent stage(s) of technological
advancementDifferent values and attitudes e.g. time,
achievement, risk takingRoles of religion e.g. prayer, taboos,
holidays, etcEducational level attainedSocial organizations e.g. social
institutions,
7
Necessary Skills and Abilities for International Managers
Skills and AbilitiesNecessary to DoThe Job
•Technical•Functional•Managerial
Skills and AbilitiesNecessary to WorkIn a Foreign Location
•Adaptability•Location-specific skills•Personal characteristics
Improved Chances of Succeeding inAn International Job Assignment
Scope of InternationalizationSize of staffing tasks depends on scope of
firm’s international involvementExport departmentInternational divisionGlobal organization
Centralization versus Decentralization of Control
Centralized firmsFavor home country managers
Decentralized firmsFavor host country managersMost common amongst multi domestic firms
Major Areas of IHRM
The management of human resources in global corporations
The management of expatriate employees
The comparison of HRM practices in a variety of different countries
Questions for HR professionals• Do we have a strategy for becoming an international
firm?• What type of managers will we need to be successful?• How can I find out about the way that HRM is
conducted in other countries (laws, trade unions, labor market).
• What will be the impact of cultural norms on our HR policies.
• How will we choose whether to send expatriates or use local employees.
• How do we move people to different locations• How do we manage transfer of knowledge across
borders
Strategic Significance
The international HRM process involves understanding the strategic context of HRM within the firm’s overall strategy, recruiting and selecting appropriate managerial personnel, providing necessary training and development, assessing performance, providing compensation, and evaluating managerial retention and turnover.
International Managerial Staffing Needs
Most firms begin their international expansion with small-scale exporting. Thus, during a firm’s initial foray into foreign markets a home-country citizen, who may or may not have special training in working in foreign markets, usually manages the firm’s international transactions.
Later when the firm establishes an international department, subsidiary managers (usually host country citizens) report to the authority of the international division (usually a home country citizen).
As a firm further expands its operations in a global organization, a team of managers with expertise in the firm’s product lines, necessary functional skills, individual country markets, and the firm’s global strategy is usually assembled.
Parent-country Nationals
Advantages Control and co-ordination by
HQ is maintained. Promising managers get
international experience. PCNs may be the best people
for the job. Assurance that the
subsidiary will comply with company objectives policies etc.
Disadvantages HCNs promotion
opportunities are limited.
Adaptation to host country may take a long time.
PCNs may impose an inappropriate HQ style.
Compensation differences between PCNs and HCNs may cause problems.
Host-country Nationals
AdvantagesNo problems with language
and culture. Reduced hiring costs. No work permits required. Continuity of management
improves since HCNs stay longer in positions.
Govt. policy may force hiring of HCNs.
Promotional opportunities not limited - so higher morale among HCNs.
DisadvantagesHQ may have less control
over operations. HCNs may still have limited
career opportunities outside the subsidiary.
Hiring HCNs limits opportunities for PCNs to gain overseas experience.
Hiring HCNs may encourage a federation of disintegrated national units rather than one integrated global unit.
Third-country Nationals
AdvantagesSalary and
compensation may be lower than for PCNs.
May be more familiar with host country than the PCNs.
DisadvantagesHost government may
resent TCNs as much as PCNs.
TCNs may not comply with HQ style of management.
TCNs may not want to return after assignment.
Complications for IHRM compared to HRM
Firms must decide whether managers will be selected from the home country, from the host country or from third countries.
Training and development in an international firm may be more complex than in a domestic firm.
Compensation systems must be adapted to meet the needs of each country’s labor market.
Complications for IHRM compared to HRMInternational HR managers face a more
complex task than their domestic counterparts because differing cultures, levels of economic development, and legal systems among countries may require companies to adapt their hiring, firing, training, and compensation programs to each country.
Major differences between domestic HRM and IHRM
Business activities e.g. taxation, international relocation, expatriate remuneration, performance appraisals, cross-cultural training and repatriation
Increased complexities e.g. currency fluctuations, foreign HR policies and practices, different labor laws
Increased involvement in employee’s personal life e.g. personal taxation, voter registration, housing, children’s education, health, recreation and spouse employment
Complex employee mix – cultural, political, religious, ethical, educational and legal background
Increased risks e.g. emergency exits for serious illness, personal security, kidnapping and terrorism