1. International HRM 1 Definition of HRM - The process of planning, recruiting, selecting, training, appraising and compensating employees & attending to their labor relations, health, safety, fairness concerns - Increased globalization & internationalization has led to the development of IHRM, in which international organizations manage their human resources across different national context Cross Cultural Management by Shobhana Madhavan Introduction - With increased Globalization, companies have to manage multi- cultural HR in different countries in different legal, political, economic, technological & cultural systems - HR department can no longer work in isolation but have to maintain close linkages with the subsidiaries & headquarters - Changing technology & increasing competition has made the role of HR even more critical - HR outsourcing & global HR consultancies have become very popular today - Virtual teams are becoming common - Adoption of worldwide company culture - Increase in workforce diversity - Increased reliance on information systems

2. International HRM 2 Cross Cultural Management by Shobhana Madhavan Factors Influencing IHRM International HRM Strategies Economic Development, legal system, political system Type of industry, organizational culture National Cultures of parent & subsidiary

3. International HRM 3 Cross Cultural Management by Shobhana Madhavan Staffing Policies - When an organization goes international, it has 3 types of employees; 1.Parent Country Nationals (PCNs) 2.Host country Nationals (HCN) 3.Third Country Nationals (TCNs) - In international business firms typically adopt different approaches to staffing 1.Ethnocentric Approach: In early stage of an organization’s international life cycle, managers in the subsidiary will belong to the parent country 2.Polycentric Approach: subsidiaries are decentralized, managed locally & headed by local people. It happens when the headquarters feel that local people would be better skilled & more adept in understanding local markets & handling local issues. HR policies are tailored to local conditions 3.Geocentric & Regiocentric Approaches: In a ‘geocentric’ staff are managed on a global basis. In a ‘regiocentric’ staff are managed on a regional basis. The HR policies are decided at the headquarters & implemented across different locations with only few local variations dealing with local laws & regulations. Staff are selected, appraised & posted at different subsidiaries based on their skills & qualifications & not their nationality

4. International HRM 4 Cross Cultural Management by Shobhana Madhavan Recruitment & Selection -Recruitment is the process of attracting applicants who match the organization’s needs - Selection is the process of determining who should be employed in a given position Legal & Cultural Influences on Recruitment & Selection Legal Requirements - It is illegal to ask a candidate to reveal his/ her age, gender, race, religion & marital status in the US -Equal Opportunities -Disabilities -Child Labor -Reservation Culture on Recruitment & Selection - Recruitment Advertisement: - Germany: JD is often included in job advertisement A technical Diploma is highly valued than a bachelor’s degree - USA: attractive advertisement with eye catching statements & pictures are common. CV is laud & exaggerate one’s achievement - India: companies in IT use USA type advertisement, while public sector companies list job responsibilities & salary grades After liberalization, the trend in private sector has been towards US model of highlighting one’s achievements. Technical diploma is considered inferior to an engineering degree

5. International HRM 5 Cross Cultural Management by Shobhana Madhavan Legal & Cultural Influences on Recruitment & Selection Cultural on Recruitment & Selection - Recruitment Advertisement: - Europe: Modesty is appreciated, especially in Scandinavian countries With globalization, even these countries are moving towards American model of marketing themselves. In France: Grandes Ecoles are the most premium institutes, their graduates are placed in the top ranking Today a candidate’s educational qualification & professional experience matters more than candidate’s family name Example: listing one’s father’s name in CV was very common in 1970’s which is of no importance in today’s times Selection Methods - France is one of the few countries that uses ‘Graphology’ (handwriting analysis) for selection - In USA, managers are hired based on their specialization - In Japan, where MBA education was not very popular till the 1980s, students were hired from universities

6. International HRM 6 Cross Cultural Management by Shobhana Madhavan Selection Interviews - Use of ‘structured interviews’ are recommended by the researchers - Cultures differences in body language play an important role in interviews - In Korea, Interviewee may not answer right away, will take a moment or two before answering as a sigh of respect & reflection - In Japan, the interviewee may not look into the eyes of the interviewer Assessment Centre Methods Skill tests, role plays, analytical exercises Case analysis, in- basket exercises Interviews Presentatio ns, fact- finding exercises Employee Orientation - It provides new employees with the background information they need to perform their jobs, besides information about the company rules - In collectivist cultures like Japan, the new employee is made to feel a part of the team by shouting slogans like ‘Proud People, Proud Team’, doing morning exercises with the team. The employee is rotated through different departments to get a holistic picture of the company - In India, different companies follow different styles if induction programs. TCS send its employees to other office locations to get a holistic picture of company’s functioning, while others may have classroom trainings

7. International HRM 7 Cross Cultural Management by Shobhana Madhavan Training & Development - Training refers to the methods used to give new or present employees the skills they need to perform their jobs - In today’s times, ‘training’ is sometimes termed as ‘learning’ because of the current emphasis on ‘knowledge economy’ & ‘learning organizations’. Training consists of the following; 1.Training needs assessment 2.Planning - Training schedule - Venue, date, lodging, transportation - Trainer identification - Methods of instructions: includes; * On job training * Job apprenticeship training: a structured process through which people become skilled workers through classroom training & on- job training * Classroom training * Online training 3.Implementation 4.Evaluation of training: Kirkpatrick’s model is one of the most commonly used models of training evaluation, done at four levels; a. Reaction: feedback is taken from employees about the different components of the training program

8. International HRM 8 Cross Cultural Management by Shobhana Madhavan Training & Development 4.training evaluation, done at four levels; b. Learning: tests are conducted to assess the learning of the candidate c. Behavior: feedback from supervisors of whether the training has resulted in changing the behavior of the participants d. Results: assessment whether the training had an impact on final results and achievement of organizational goals Influence of Culture on Training - A study was conducted on the impact of culture on training & development on four regions of the world; 1.USA 2.East Asia 3.Middle East/ North Africa 4.Latin America The findings of this study on the impact of culture on; 1.The role of the trainer 2.Training needs analysis 3.Delivery methods 4.Administration In the USA & Canada; - Trainers may be informal & there is an equal relationship between the trainer & the trainee

9. International HRM 9 Cross Cultural Management by Shobhana Madhavan Influence of Culture on Training In the USA & Canada; -Trainees are encouraged to ask questions - Trainees are open about the areas in which they would like to improve their skills - Training methods are application- oriented - Training could be in an economical location - There is more emphasis on training content & delivery rather than on the food, accommodation & opportunities for socialization & tourism In the Middle East & Latin America; - The trainer is accorded a great deal of respect - Trainer is expected to be very formal & well dressed - Participants do not like to admit their lack of knowledge, so assessing training needs is difficult - The delivery of program needs to be orderly & well organized & lecture notes should be made available - Lecturing as a mode of training is accepted - The training venue should be attractive - The opening & closing of the program needs to be ceremonial - Sufficient time for socialization should be factored in the training schedule

10. International HRM 10 Cross Cultural Management by Shobhana Madhavan Influence of Culture on Training In Europe; - The style of training varies from country to country - The French are hierarchical & prefer structured theoretical sessions - The Germans & Swiss too, prefer well structured courses with handouts where the trainer knows the right answer - The British enjoy debating & are uncomfortable with the straight line - In Italy, a very expressive style is appreciated In India; - Is still generally formal & the trainer is treated with respect - Selection of training participants is often more because of good relationships or because the candidate has shown good potential rather than based on needs -Training is often considered as a reward for good performance & as a break from the high pressure at work - Training venues are often at good hotels -Time for socializing, sightseeing & shopping is often included in the schedule

11. International HRM 11 Cross Cultural Management by Shobhana Madhavan Guidelines for Training Across Cultures 1.Clothing & Behavior: What is defined as formal wear depends on ‘national culture’ 2.Ice Breaking Sessions: Asian participants are more conscious & would not like to appear silly in front of others. Trainers are advised to gradually warm up the participants. Highly skilled trainer could move above this constraint 3.Training Methodology: If a US based trainer is training Asian participants, he/ she may find the participants unresponsive, lack of energy & enthusiasm. Passive learning is the style in Asia. If Asian trainers have to train US/ British than they should be prepared for challenging questions 4.Training Logistics: Participants from High Power Distance Societies expect to be treated like special people & some ceremony. Upscale hotels, formal opening ceremony, good food, sightseeing, shopping are some of the ingredients taken into consideration. In countries like Vietnam, afternoon naps are common, so trainer should give thirty minutes extra after lunch if he/ she does not want dull participation in class. A picture of the entire group is appreciated in relationship based cultures like Asia & South America 5.Multi- Cultural Participants: A trainer can either form mixed groups or homogenous groups depending on the objective of team exercises. When debriefing the trainer can discuss about influence of culture on team results

12. International HRM 12 Cross Cultural Management by Shobhana Madhavan Performance Appraisal - Performance Appraisal is the evaluation of the employee performance relative to the performance standards set for them Steps in performance Appraisal 1.Defining the job objectives for a certain time frame 2.Assessing the actual performance as compared to these objectives 3.Giving & receiving feedback Challenges of PA in International Management 1.Selection of the evaluator- Who should do the appraisal? - Evaluation by parent country manager - Evaluation by host country manager - Evaluation by both parent & host country manager 1.Process of appraisal- How should the appraisal be done? - Setting goals through a process; MBO - Assessing performance through rating forms - Giving feedback - 360 degree feedback 1.Frequency of appraisal- When should the appraisal be done? - Quarterly - Bi- annually - Annually

13. International HRM 13 Cross Cultural Management by Shobhana Madhavan Compensation & Rewards - Compensation & rewards is extremely complex - As employees with the same company with the same qualification with similar roles may receive different pay & benefits Balance Sheet Approach -There are four main group of expenses; Income tax, housing & utilities, goods & services & discretionary expenses -These are estimated for the home & host country -This could cause disparity in salaries as the base salary would be different -Example: an Indian, American & Singaporean are working with the same company, the American will receive the highest base salary then Singaporean & then Indian Going Rate/ Market Rate Approach -The base salary of the expatriate is linked to the salary structure of the host country -Some additional supplements are added especially if the job is in a developing country -Salaries are obtained through compensation surveys

14. International HRM 14 Cross Cultural Management by Shobhana Madhavan Compensation & Rewards Legal Aspects - Maternity or paternity benefits - Minimum wages - Equal pay for men & women doing the same job - Regulation of gratuity, insurance & bonuses - Compensation for lay offs & retrenchment -New mothers in Norway gets ten months maternity. Even fathers are entitled for same amount of leaves if they are looking after the baby -Four weeks leave is granted for new father -Cultures like US with short term orientation do not normally offer gratuity while countries like India offer gratuity -Concept of fixed pay Vs variable pay Culture & CEO Compensation -In high power distance countries the difference in salaries & perks between CEO & Middle manager is very high like India, USA. CEOs prefer chauffer driven cars, memberships of golf clubs, domestic helps are part of perks received -In low power distance countries like Sweden is low. Example; Ingvar Kamprad- founder of global furniture chain, IKEA. He is ranked one of the richest men in the world, but he drives a 15 year old car & travels by economy class

15. International HRM 15 Cross Cultural Management by Shobhana Madhavan Compensation & Rewards Labor Costs Across Countries -Labor costs are often the determining factor in setting up business in other countries -The BPO boom in India in the 1990s & 2000s happened because of lower wages, English- speaking computer trained professionals compared to US & Europe -Similarly in the last two decades, China has become the most popular manufacturing destination of MNCs because of its low labor cost -Germany is known for having the most educated workforce in the world International Labor Relations Company should understand the labor laws, socio- political context of labor relations. Union Structure & Power - Some countries like US & UK have many types of union; 1. Industry Union (pertaining to industry like automobiles) 2. Craft Union (pertaining to a craft, plumbing, electrician) 3. White Collar Unions 4. Political Unions 5. Religious Unions

16. International HRM 16 Cross Cultural Management by Shobhana Madhavan International Labor Relations Collective Bargaining - It is a bargaining process by which representatives of the management & the union meet to negotiate a labor agreement