Ihrm Module 1

INTERNATIONAL HUMAN RESOURCE MANAGEMENT

Sub Code: 10MBAHR445/10MBAIB465 MODULE 1

Introduction to IHRM     

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Definition, reasons for going global  Approaches to IHRM Difference between IHRM and Domestic HRM Reasons for emergence of IHRM Models of IHRM-Matching model, Harvard Model, Contextual Model, 5P Model European Model. Models of SHRM in Multinational Companies Internationalization of HRM: Socio-cultural context, Organizational dynamics and IHRM: Role of culture in International HRM Culture and employee management issues Organizational Processes in IHRM Linking HR to International expansion strategies The Challenges of International Human Resource Resource Management

The Imperative 

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The first Industrial first Industrial Revolution of the mid 18th century The second Industrial second Industrial Revolution – Revolution – telecommunication and information technology Lowering & breaking down of trade barriers

Globalization of Business & HR Global Population Changes

Global Communications

Globalizati on Forces

Regional Alliances NAFTA, EU

Global Economic Interdependence

Types of Global Organizations

Types Importing and Exporting

Selling and buying goods and services with organizations in other countries

Multinational Enterprise (MNE)

An organization with operating units located in foreign countries.

Global Organization

An organization having corporate units in a number of countries integrated to operate worldwide.

Transition to Global Organizations

Transition to Global Organizations

Types of Organizations

Managing Across Borders • International corporation

• Global corporation

 – Domestic firm that uses its existing capabilities to move into overseas markets.

 – Firm that has integrated worldwide operations through a centralized home office.

• Multinational corporation (MNC)

• Transnational corporation

 – Firm with independent business units operating in multiple countries.

 – Firm that attempts to balance local responsiveness and global scale via a network of  specialized operating units.

Definition of IHRM 

Morgan …………

IHRM as the interplay among these three factors HR activities, types of employees & countries of operation.

Morgan’s Model

What does IHRM add into the Traditional Framework of HRM? 

Types of employees   

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Within and cross-cultural workforce diversity Coordination Communication

Human resource activities Procurement   Allocation  Utilization of human resources 

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Nation/country categories where firms expand  and operate   

Host country Parent country Third country

Reasons for going global  

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Emergence of stronger & more powerful MNCs  Above has been due to a rapid increase in global activity & competition Effective management of HR globally is fast emerging as a critical success factor for international business. Research evidence shows that 

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Shortage of international managers is becoming an increasing problem The successful implementation of global strategies depends on the existence of an adequate supply of internationally experienced managers Business failures in the international arena may often be linked to poor mgmt of HR Expatriate failure continues to be a significant problem for many international firms

Differing employee expectations, legal environments

Increasing Importance of Global Human Resource Understanding International Mergers and  Acquisitions

Foreign Human Resources

Importance of  Global Human Resources Management

Market Access Opportunities

Global Competition

 Approaches to IHRM Make strategic decision as to level of  standardization desired across locations 

Ethnocentric approach 

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Polycentric approach 

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 Allowing each location to develop own practices and policies

Regiocentric approach 

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Exporting organization’s home country practices and policies to foreign locations

Developing standardized practices and policies by geographic region

Geocentric approach 

Developing one set of global practices and policies applied at all locations

Setting Strategic HR Standards

Difference between IHRM and Domestic HRM 

More HR activities

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The need for a broader perspective

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More involvement in employees’ personal lives

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Changes in emphasis as the workforce mix of  expatriates & locals varies

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Risk exposure

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Broader external influences

Difference between IHRM and Domestic HRM contd…. 

More HR Activities 

International taxation:

usually have both domestic & home country tax liabilities; need tax equalisation policies to ensure absence of either tax incentive or disincentive

International relocation & orientation:

pre-departure training, providing immigration & travel details, providing housing/medical care, school information, finalising compensation details.  Host government relations: important to establish cordial working relationships with government officials in the host country; especially since several requirements are sometime ambiguous and complex.  Language translation services: for internal & external correspondence  Administrative services for expatriates: how ethical & legal are parent country policies & practices in the host country; e.g. AIDS test pre-requisite for acquiring work permit in the host country where expatriate is from the parent country, USA 

Difference between IHRM and Domestic HRM contd…. 

Broader Perspective 

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Design & administer policies for more than one group of employees; often deal with complex equity issues as in many multinationals there is a tendency to extent preferential treatment to PCN expatriates and not to HCNs and PCNs

More involvement in personal lives 

In international movements much greater support & involvement is required; right from housing arrangements, health care, handling banking, house rentals; assist in care of school children left behind in boardings etc

Difference between IHRM and Domestic HRM contd…. 

Broader External Influences: 

Type of government, state of the economy, accepted practices of doing business; nature and focus of legal requirements (in developing vs developed economies)

Moderating Variables (which accentuate or diminish the difference between domestic & international HRM)

The industry in which the MNC is primarily involved

The cultural environment Domestic & International activities of the HRM function Extent of reliance of  the MNC on its home  Attitudes of senior  country or domestic management market

Complexity involved in operating in diff countries with employees of  diff nationalities.

Reasons for emergence of IHRM  

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Emergence of stronger & more powerful MNCs  Above has been due to a rapid increase in global activity & competition Effective management of HR globally is fast emerging as a critical success factor for international business. Research evidence shows that 

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Shortage of international managers is becoming an increasing problem The successful implementation of global strategies depends on the existence of an adequate supply of internationally experienced managers Business failures in the international arena may often be linked to poor mgmt of HR Expatriate failure continues to be a significant problem for many international firms

Differing employee expectations, legal environments

Increasing Importance of Global Human Resource Understanding International Mergers and  Acquisitions

Foreign Human Resources

Importance of  Global Human Resources Management

Market Access Opportunities

Global Competition

Models of IHRM-Matching model 

Hard vs the soft approach

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Matching Model

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Harvard Model

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Contextual Model

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5-P Model

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European Model

Matching Model •

Highlights the resource aspect of HRM and emphasises the efficient utilisation of HR to meet organisational objectives; emphasises a right fit between organisational strategy, structure & HRM systems

Harvard Model Stresses the human/soft aspect & is more concerned with employee-employer  relationship; highlights the interests of different stakeholders in the organisation & how their interests are related to the objectives of the management

Contextual Model Is based on the premise that organisations may follow a number of different pathways in order to achieve the same results,  this is because of the existence of a number of  linkages between external envtal contexts & internal orgnal context  – these linkages influence the content of the organisation’s HRM 

5P Model Melds 5 HR activities (philosophies, policies, programs, practices, processes) with strategic needs,  shows the inter-relatedness of these activities & their  significance in achieving the org. needs 

European Model. 

European Model Is based on the argument that European organisations are constrained at both international & national level by national culture & legislation.;  also constrained at the org level by patterns of  ownership and at the HRM level by trade union involvement & consultative arrangements.  These constraints need to be accommodated while forming a model of HRM. 

Models of SHRM in Multinational Companies 

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Strategic IHRM is resource “human management issues, functions and policies and practices that result from the strategic activities of multinational enterprises and that impact on the international concerns and goals of those enterprises.” Key challenges Closer regional & global integration & co-ordination  Local responsiveness, flexibility and speed  Multicultural nature of the workforce  Constant interaction of internal & external contextual factors 

Internationalization of HRM: Socio-cultural context  

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Culture is a shaping process Members of a group or society share a distinct way of life with common values, attitudes & behaviours that are transmitted over time in a gradual but dynamic process. Subtle process, one is not always conscious of  its effect on values, attitudes & behaviours Culture shock results from differences which require one to adapt or get used to in a relatively short period of time.

Internationalization of HRM: Socio-cultural context contd …. 

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Because international business involves movement of people across cultures and requires people of different cultures to work together; an appreciation of cultural differences becomes essential for success. Coping with cultural differences and knowing when & how they become relevant are a constant challenge for HR managers.

Organizational dynamics and IHRM: 

Patterns of international competition vary from industry to industry Multi domestic industries in which competition in each country is essentially independent of competition in other countries. Role of HR is likely to be more domestic in orientation and structure. firm’s competitive  Global industries in which the position in one industry is significantly influenced by its position in other countries. HR function is structured to deliver international support required by the primary activities of the multinational. 

Factors Influencing Global Work Environment Change forces: Global competition Mergers & Acqstns Organisational Restr  Tech & telecomm

MNCs need to be: Flexible Locally responsive Share Knowledge Transfer Competence

Managerial Response Need global mindset Informal control mechanism Survival & Horizontal communication Growth Virtual teams International Assignments

Cultural Environment of International Business

Culture and employee management issues 

Two broad meanings In anthropological & sociological terms, refers to the shared values, beliefs, attitudes that people belonging to a group/society hold  Outside the academic world, it includes the fine arts and literature 

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Hofstede defined culture as the collective programming of the mind based on a broad tendency to prefer certain states of affair over  others.

Culture and employee management issues contd ….  A nation’s culture or national character is shaped by historical, geographical and philosophical factors  One is not born with a specific culture  – culture is a set of man made norms commonly ascribed to by a group of  individuals and passed on from generation to generation  Recognition of cultural differences between peoples is essential and helps us understand the motives and behaviours of those with whom we interact. 

Major Cultural Influencers • Attitude to power & authority • Tolerance for ambiguity & uncertainty • Attitude to risk & risk taking • Individualism, self orientation • Collectivism, group orientation • Acceptance of responsibility • Interpersonal trust • Attitude to other people’s opinion • Attitude to sharing information & knowledge • Recognition of the rights of others to be consulted with • Preference for certain leadership styles • Preference for independence & autonomy • Achievement orientation, ambition • Work ethic, honesty

Culture and employee management issues contd …. 

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There needs to be a fit between what is imported from abroad and the local environment for any policy/practice to be successful and permanent. The concept of  “recontexctualising” of  imported practices and concepts is therefore, also applicable to HRM.

HRM Susceptibility to Cultural Influences Employee Mgmt Issues 

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Mgmt Style  Participative  Consultative  Paternalistic   Autocratic  Authority Structure  Decentralised  Centralised Org Structure  Hierarchical  Network Leadership Style  Task oriented  Employee oriented Employee relationship  Contractual  Emotional

Specific HRM Issues  

Staffing Policies

Recruitment & selection process

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Remuneration

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Motivation

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Job expectation

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T &D

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Performance Appraisal

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Promotion

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Retirement

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Redundancy & lay off 

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Industrial Relations

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Foreign Assignment

Major Cultural Influencers              

 Attitude to power & authority Tolerance for ambiguity & uncertainty  Attitude to risk & risk taking Individualism, self orientation Collectivism, group orientation  Acceptance of responsibility Interpersonal trust  Attitude to other people’s opinion  Attitude to sharing information & knowledge Recognition of the rights of others to be consulted with Preference for certain leadership styles Preference for independence & autonomy  Achievement orientation, ambition Work ethic, honesty

Organizational Processes in IHRM

Linking HR to International expansion strategies

The Challenges of International Human Resource Management 

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High failure rates of expatriation and repatriation Deployment  – getting the right mix of skills in the organization regardless of geographical location Knowledge and innovation dissemination  – managing critical knowledge and speed of  information flow Talent identification and development – identify capable people who are able to function effectively Barriers to women in IHRM International ethics Language (e.g. spoken, written, body)