1. Chapter 28 International Human Resource Management

2. Recap of Previous Lectures Industrial Relations Resolving Disputes Collective Bargaining Process Labour Laws in Pakistan Equal Employment Practices in Pakistan

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

4. 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

5. 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 1.More HR activities 2.Broader perspective 3.More involvement in employees’ personal lives 4.Greater workforce diversity 5.Change in Emphasis 6.More risk 7.More external influences

6. International Human Resource Management 1)More HR activities IHRM has boarder scope in dealing 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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 wind up operations or government may seize physical and financial assets

13. 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, social groups and labour unions

14. 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

15. Managing International HR Activities HR Planning Recruitment and Selection Training and Development Performance Management Remuneration Repatriation Employee Relations Multicultural Management Organizational Effectiveness Adopted from: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 664. 333

16. 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)

17. 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

18. Managing International HR Activities Geocentric Approach In this staffing approach best people are selected to fill vacant positions irrespective of their nationality Staffing approachAdvantagesDisadvantages 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

19. Managing International HR Activities Staffing approachAdvantagesDisadvantages 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 chance 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. 667 333

20. Summary International HRM Difference between IHRM and Domestic HRM

21. Summary International HRM Difference between IHRM and Domestic HRM Basic steps in IHRM

22. Managing International HR Activities Factors Influencing PCN and HCN Choice DimensionsFactors Parent Country Characteristics Cultural distance between HQ and subsidiary, size of operation, research intensity Industry CharacteristicsFinancial institution, need for control, need to customize Subsidiary Characteristics Age, acquired or strategic role of subsidiary, performance, ownership Host Country VariablesEducational levels, political risk, cost of hiring Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 668 333

23. Managing International HR Activities Problems of 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 Need for expatriates Selection process Departure Pre assignment training Post arrival training Crises and failure Crises and adjustment Reassignment aboard Repatriation and adjustment or Expatriates Assignment life cycle Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 669 333

24. Managing International HR Activities Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 669 333 Reasons of Expatriate Failure US FirmsJapanese Firms Spouse adjustment problemInability to cope with international responsibilities Inability of managers to adjustDifficulties with environment Other family reasonsPersonal and emotional problems Personal and emotional maturity of managers Lack of technical competence Inability to cope with international responsibilities Spouse adjustment problem

25. Managing International HR Activities Expatriate Adjustment Process Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 670 333 Mood High Low Months in new culture Cultural Shock Cycle

26. Managing International HR Activities Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 670 333 Individual Technical Ability Cross cultural suitability Family requirements Situation Country-cultural requirements MNC requirements Language Expatriate Selection Decision

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 1)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 MeritsDemerits More chances of success in foreign assignment May not remove cultural biases Provides comprehensive global perspective Recipient may not take it serious Sense of confidenceMay not make real difference in business Reduces cultural shockCan not prepare manager to face all real life problem Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 672 333

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 Source: Aswathappa. Human Resource Management, Text and Cases, 2008, p. 674 333 Linkage to organizational strategySetting individual performance goalsIdentifying variable impacting performanceAppraising the performanceProviding regular feedbackProviding opportunities for developmentLinking results with rewards Steps in Performance Management of Expatriate

30. Managing International HR Activities Expatriate’s Compensation