1. International Human Resource Management
Chapter 28
International Human Resource Management

2. Lecture Overview International HRM
Difference between IHRM and Domestic HRM
Basic steps in IHRM
Key Issues in International Labour Relations

3. International Human Resource Management
Globalization has significantly influence HRM practices and policies
All HRM functions need international orientation
MNC operating internationally need to be more focused to attract, motivate and transfer workforce globally
The process of procuring, allocating, motivating, training & development, and compensating and utilizing human resources in international business is called international human resource management
IHRM covers six main functions of domestic HRM such as HR planning, recruiting, training and development, performance management, compensation and labour relations
The three countries categories of IHRM are country where headquarter is based, country where subsidiary is located, and country from where workforce and finances come

4. International Human Resource Management
The three types of workers in international business are host country, parent country and third country nationals
IHRM differs from domestic HRM on following points
More HR activities
Broader perspective
More involvement in employees’ personal lives
Greater workforce diversity
Change in Emphasis
More risk
More external influences

5. International Human Resource Management
More HR activities
IHRM has boarder scope in deal with employment related issues.
For example: International taxation, host country regulations, home country regulations, international orientation of relocating and training of employees, and administrative and compensation issues of expatriates, and language translation services

6. International Human Resource Management
Each HR functions has different scope and issues in IHRM
HR Planning
Difficulty in implementation of HR policy and procedure in host country
Difficulty in aligning business strategy with HR strategy
Providing career development opportunities to international managers
Hiring
Matching person and organizational fit (cultural match)
Selection of expatriates
Managing expatriates failures
Managing repatriation process

7. International Human Resource Management
Training and Development
Language training
Cultural training
Training of expatriates and managers
Compensation
Deciding compensation of expatriates
Deciding compensation of parent, host, and third country nationals
Performance Management
Implementation of performance evaluation system in host country
Physical distance, time difference, and reporting cost
Raters to evaluate subsidiary performance

8. International Human Resource Management
Industrial Relations
Who should deal industrial relations issues in subsidiary?
What is attitude and policy of parent company toward unions in subsidiary?
What should be tactics to deal with unions in subsidiary?
2) Need for Broader Perspective
In dealing with compensation issues, HR manager in headquarter need to consider different pay systems for parent, host, and third country nationals, paying in different currencies, and change in relative value of currency
In deciding fringe benefits, HR managers face difficulty, in most countries providing health insurance is compulsory, whereas definition of dependent varies from country to country, in some countries dependent means multiple spouses, children, parents, grandparents

9. International Human Resource Management
3) More involvement in employees’ personal lives
In IHRM there is more involvement of HR department in dealing with their personal issues for better selection, training, relocation and effective management of global workforce
HRM department need to ascertain that managers selected for foreign assignment understand housing, health care, and remuneration package
HRM need to have more information about manager family, schooling of their children, emotional and physical health of their spouse and children etc.
‘International Human Resource Services’ section provide services to managers like handling investment, banking, home rental, house arrangements, home visits, and repatriation issues
Unlike domestic HRM in International HRM, HR manager needs to understand more about their personal lives and provide support in relocation for foreign assignment even assistance to children left behind

10. International Human Resource Management
4) Greater Work force Diversity
IHRM requires more emphasis on management of global and diversified work force
Different work ethics, motivation level, cultural compatibility, managing team work are main issues that IHRM to handle
5) Change in Emphasis
Emphasis has changed from idea of repatriation and dependence on third country nationals towards development of local managers
As more trained local managers are available, the issue of training and development of local managers come to highlight
Designing programs and policies to provide development opportunities to local managers by placing them in headquarter

11. International Human Resource Management
6) Risk Exposure
MNCs operating in different countries need to assess the law and order situation and advise or provide support to their expatriates or third countries employees
HR department may also need to have emergency evacuation program for their employees working in highly risk areas
Poor selection decision may result into huge loss as in case of expatriate may not perform well and recalled
If MNC’s policies and practices are hostile to unions, political party or in violation of host country regulations, company can be asked to win up operations or government may seize physical and financial assets

12. International Human Resource Management
7) External Influence
MNCs operating in host country face more external influence as opposed to local company
Federal and local government, political figures, political and social groups exert great pressure on foreign company
Subsidiary manager need to know local way of doing business, dealing with different ministries, political parties, and labour unions

13. International Human Resource Management
Growing interest in IHRM
There are number of reasons for growing interest in IHRM
Thanks to globalization, more and more entry of multinational corporations means greater mobilization of human resources
In international business human resources performance is more critical for success
The cost of underperformance in international assignment is very high both in financial and image terms
The international expansion mainly depend on availability and utilization of competent human resources
Finally, implementation of strategies is more crucial than developing, and implementation is dependent upon culture that is developed by HR policies and practices

14. Managing International HR Activities
Organizational Effectiveness
HR Planning
Recruitment and Selection
Training and Development
Performance Management
Remuneration
Repatriation
Employee Relations
Multicultural Management
Adopted from: Aswathappa. Human Resource Management, Text and Cases, 2008, p

15. Managing International HR Activities
HR Planning
HR planning in international business is more complex and crucial
HRP procedures are difficult to implement in different countries. Cultural differences in view of planning
Identification of top management
Identification of critical competencies for future managers
Providing developmental opportunities
Tracking and supporting in pursuing international career path
Aligning business strategy with HRP and vice-versa (European and Asian strategy)

16. Managing International HR Activities
Recruitment and Selection
Main issue in international hiring is not to select competent employee but candidate who could mix with culture of organization
Ethnocentric Approach
All key management positions are held by parent country nationals
This is good strategy at early stage of new start up/operations in host country
Polycentric Approach
Subsidiary is headed by host country nationals and parent country nationals are at the top positions in headquarter
Some countries have made regulation or exert pressure to hire host country nationals for top position in subsidiary

17. Managing International HR Activities
Geocentric Approach
In this staffing approach best people are selected to fill vacant positions irrespective of their nationality
Staffing approach
Advantages
Disadvantages
Parent Country Nationals
Familiarity with headquarters goals and objectives
More organizational control and coordination
Competent managers are giving expatriate opportunity
Specific skills and experience
Difficulty in adjustment: foreign language, different culture and political and socio economic system
Cost of training, remuneration and family benefits
Host countries nationals feel demotivated when they see no further progress
PCN can impose unnecessarily HQ culture and style
Family adjustment issues

18. Managing International HR Activities
Staffing approach
Advantages
Disadvantages
Host Country Nationals
Familiarity with country’s culture, political system and business practices
Low cost of hiring and remuneration
Promotional opportunities for locals hence motivated and committed
No language barrier
Continuity of management
Communication problems with home country management
Little change of host country nationals to get international assignments and experience
Difficulty in inculcating HQ management philosophy, culture, and best practices
Third Country Nationals
Low salary package as compared to PCN
They are truly international managers
May be more aware of host country culture, political and economic system, language hence easily and quickly adjust
Host country may not like to hire TCN
TCNs may not return to their country
Host country may be sensitive or have hostile attitude toward TCN
Resistance from subsidiary employees
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

19. International Human Resource Management
Chapter 28
International Human Resource Management

20. Lecture Overview International HRM
Difference between IHRM and Domestic HRM
Basic steps/activities in IHRM
Key Issues in International Labour Relations

21. Managing International HR Activities
Organizational Effectiveness
HR Planning
Recruitment and Selection
Training and Development
Performance Management
Remuneration
Repatriation
Employee Relations
Multicultural Management
Adopted from: Aswathappa. Human Resource Management, Text and Cases, 2008, p

22. Managing International HR Activities
Factors Influencing PCN and HCN Choice
Dimensions
Factors
Parent Country Characteristics
Cultural distance between HQ and subsidiary, size of operation, research intensity
Industry Characteristics
Financial institution, need for control, need to customize
Subsidiary Characteristics
Age, acquired or strategic role of subsidiary, performance, ownership
Host Country Variables
Educational levels, political risk, cost of hiring
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

23. Managing International HR Activities
Expatriates
Expatriates are those employees who work abroad (away from their home country) for a specific time period with a planned return to third country or home country
Crises and adjustment
Expatriates Assignment life cycle
Reassignment abroad
Need for expatriates
Departure
Post arrival training
Repatriation and adjustment
Selection process
Pre assignment training or
Crises and failure
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

24. Managing International HR Activities Reasons of Expatriate Failure
US Firms
Japanese Firms
Spouse adjustment problem
Inability to cope with international responsibilities
Inability of managers to adjust
Difficulties with environment
Other family reasons
Personal and emotional problems
Personal and emotional maturity of managers
Lack of technical competence
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

25. Managing International HR Activities
Expatriate Adjustment Process
Cultural Shock Cycle
High
Mood
Low
Months in new culture
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

26. Managing International HR Activities Expatriate Selection Decision
Individual
Technical Ability
Cross cultural suitability
Family requirements
Situation
Country-cultural requirements
MNC requirements
Language
Expatriate Selection Decision
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

27. Managing International HR Activities
Training and Development
The common objectives of training and development in MNCs are
Bridging cultural gap between subsidiary and HQ
Orientation challenges are different in HQ and subsidiary
Building united corporate culture
Training and development activity IHRM most of the time focus on training of candidate likely to be posted abroad
Expatriates are giving training to reduce likelihood of failure in foreign assignment. The main components of training of expatriate are cross cultural, language and practical training, and management development programs

28. Managing International HR Activities
Cross Cultural Training:
Expatriate receives pre-departure training on host country culture to make it easy for him/her to adjust to new culture
Expatriate often receives training on repatriation to avoid cross cultural shock
Merits
Demerits
More chances of success in foreign assignment
May not remove cultural biases
Provides comprehensive global perspective
Recipient may not take it serious
Sense of confidence
May not make real difference in business
Reduces cultural shock
Can not prepare manager to face all real life problem
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

29. Managing International HR Activities
Performance Management
In IHRM performance management tend to focus on evaluation of performance and continuous improvement of individual, subsidiary and corporate performance against pre set targets and objectives
Steps in Performance Management of Expatriate
Linkage to organizational strategy
Setting individual performance goals
Identifying variable impacting performance
Appraising the performance
Providing regular feedback
Providing opportunities for development
Linking results with rewards
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p

30. Managing International HR Activities
Expatriate’s Compensation
The objectives of expatriate compensation
Attract employees for international assignment
Facilitate the movement
Be cost effective
Provide consistent relationship between HQ employees and foreign subsidiary
Problems with expatriate compensation
Gap between pay of parent, host and third country nationals
The pay variation considering the expatriate's family
Issues relating to entry of expatriate back to parent country

31. Managing International HR Activities
Expatriate’s Compensation
MNC Internal environment
Goal orientation
Capacity to pay
Internal workforce composition
Subsidiary role
MNC external environment
Parent nationality
Local culture
Host and home country government role
Industry type
Competitor's strategy
Staffing Option
Compensation strategy
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 6773

32. Managing International HR Activities
Expatriate’s Compensation
Base Salary
Different meaning from domestic employment
Primary component of package of allowances (foreign assignment premium, house allowance, and cost of living allowance)
Payment in home country and host country currency
Benefits Issues
Whether expatriate subscribe to home country benefits (if there is tax exemption)
Whether home or host country is responsible for social security benefits
Whether the benefits should be according to host or home country requirements
Whether home country benefits be available to local citizens

33. Managing International HR Activities
Expatriate’s Compensation
Allowances
Cost of living allowance, provide same standard of living as expatriate was enjoying in home country
Covers expenses like relocation, housing, hardship, and education
Spouse assistance (protect or compensate loss in case of spouse lost income due to relocation)
Offer support to find spouse job or placement in subsidiary
Incentives
Incentive is once time lump-sum payment apart from regular salary
Tax equalization: MNC based on home country tax obligation withhold or deduct amount from expatriate salary and pay all taxes in host country
Tax protection: Employee pays up to the taxes he would pay on remuneration in his home country and entitled to retain extra in case tax deduction is less in foreign assignment

34. Managing International HR Activities
Expatriate’s Compensation
Tax Consideration
Tax equalization: MNC based on home country tax obligation withhold or deduct amount from expatriate salary and pay all taxes in host country
Tax protection: Employee pays taxes he would pay on remuneration in his home country and entitled to retain extra in case tax deduction is less in foreign assignment

35. Managing International HR Activities
Expatriate’s Compensation
Tailoring the package
Balance sheet approach
Equate purchasing power of expatriate in host country with home country
Going rate approach
Expatriate compensation is linked with host country on going rate
Lump-sum method
Giving lump-sum amount and expatriate has option to spend in a way he likes
Regional approach
In which MNC decide compensation system for particular region (Europe, South Asia, Middle east)

36. Managing International HR Activities
Repatriation
Bringing expatriate back to home country after completion of assignment or due to other reasons (failure to perform, adjustment problems, family problems)
Re-entry shock or reverse culture shock
Benefits of returnees
Exposure to global culture and local culture
Part of global network
Understand operations of HQs and subsidiary (overseas operations)
Transfer technology, business knowledge back to home country
Provide coordination and communication support

37. Managing International HR Activities
Benefits from returnees
Exposure to global culture and local culture
Part of global network
Understand operations of HQs and subsidiary (overseas operations)
Transfer technology, business knowledge back to home country
Provide coordination and communication support
Personal and professional growth (global and broader vision)

38. Managing International HR Activities
Repatriation Process
Preparation
Physical relocation
Repatriation Process
Transition
Re-adjustment
Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 681

39. Managing International HR Activities
Repatriation
Challenges of Re-entry
Individual Perspective
Personal Perspective: Face reverse cultural shock schooling, social network, loss of income, lower social status
Professional disappointment: No use of his expertise and skills gained during foreign assignment, less authority, autonomy, and importance
Often limited promotion opportunities and career choices means removed from mainstream corporate advancement
Organizational Perspective
Retaining the expatriate after repatriation

40. Managing International HR Activities
Industrial Relations
Who should deal industrial relations issues in subsidiary?
What is attitude and policy of parent company toward unions in subsidiary?
What should be tactics to deal with unions in subsidiary?

41. Managing International HR Activities
Multiculturalism
Culture is customs, beliefs, values and norms that guide behavior and pass from one generation to other
Multiculturalism when people from different cultures interact regularly
IHR managers should have cross cultural competence
Should have strong personal identity, knowledge of different cultures, communicate effectively in language of given culture group
Hofstede Cultural dimensions: Power distance, uncertainty avoidance, Individualism, and masculinity

42. Summary International HRM Difference between IHRM and Domestic HRM
Basic steps/activities in IHRM
Key Issues in International Labour Relations