INTERNATIONAL HUMAN RESOURCEMANAGEMENT

Under guidance of: Prof. I. Banerjee Dept. Of Marketing XISSPOST GRADUATE DIPLOMA IN MANAGEMENTINMARKETING MANAGEMENT

DEPARTMENT OF MARKETING

XAVIER INSTITUTE OF SOCIAL SERVICEDR. CAMIL BULCKE PATHRANCHI-834001 (2013-15)

PREPARED BYMARKETING -1 SUB -HUMAN RESOURCE MANAGEMENT2ND TRIMESTER

RAHUL ANAND- 22JOYDEEP DAS - 36MUKESH KUMAR- 44 ANUPAM PRAKASH NIKHIL 51PRINCE KUMAR PANDEY 59

ABSTRACT

With globalization the world has become a market rather than just ones premises. Hence managing the man power is a task that needs to be understood on a global basis. Man power must be managed just not nationally but also internationally. But doing that is not that simple as one has to follow international norms and protocols for managing an organizations human resource. This paper deals with the process, policies and concepts dealing with International Human Resource existing in todays world. The objectives, purpose, dimensions and limitations of International human resource management are few areas covered here. Besides a distinction between domestic and international HRM is also covered in this paper

Keywords: International human resource, objectives, dimensions, limitations and domestic

TABLE OF CONTENTS

CHAPTER NO.TITLE PAGE No. ABSTRACT iii 1. INTRODUCTION 51.1 Definition Of IHRM1.2 Dimensions of IHRM1.3 Purpose of IHRM2. OBJECTIVES82.1 Objectives of IHRM2.2 Difference between domestic HRM and IHRM 2.3 Variables that moderate differences between IHRM and domestic HRM 3.INTERNATIONAL STAFFING 11 3.1 International Staffing Policies3.2 Classification of international staffing3.3 Advantages and disadvantages of using PCNs, HCNs 3.4 Factors influencing the choice between HCN and PCN3.5 Why do companies assign employees abroad? Edstrm and Galbraiths typology4.INTERNATIONAL BUSINESS 164.1 Significance of IHRM in International Business4.2 Major Issues in International HRM4.3 Role of International HRM:4.4 Limitations of IHRM5. BIBLIOGRAPHY19

CHAPTER 1

1. INTRODUCTIONThe advent of the era of liberalization and globalization along with the advancements in information technology (IT) has transferred the world around us. It has brought to centre stage the importance of human resources, more than ever before. The purpose of human resource management (HRM) is to enable appropriate deployment of human resource so that the quality culture can maintain and satisfy the customers not only in national level but to in global level.In a competitive scenario, effective utilization of human resources has become necessary and the primary task of every organization is to identify, recruit and channel competent human resources into their business operations for improving productivity and functional efficiency.Emergency of trade blocks with the formation of different economic and political forums like European Union, North American Free Trade Association, Asia Pacific Economic conference and expanding role of World Trade Organization have now significantly changed the business environment in terms of competition / liberalization and open end marketing opportunity. Business environment become global business environment.Internalization of business now experts influence not only on labour markets and staffing requirements but also on HR practices. Multi domestic operations (MDOs), Joint Ventures (JVs) and strategic Alliance (SA) are common forms of business structures across regions. Changes in organizational structures, relationships with overseas operations, state of the art communications technology and global market now demand different HR approaches for managing MNCs. Globalization of business has probably touched the HR managers more severely than any other functional heads. The HR executives needs to give international orientation to what ever he or she does employee hiring, training and development, performance review, remuneration, motivation, welfare, or industrial relations. International orientation assumes greater relevance as business get increasing interlinked across nations.Since an international business must procure, motivate, retain, and effectively utilize services of people both at the corporate office and at the foreign plants, therefore, the process of procuring, allocating and effectively utilizing human resources in an international business is called International Human Resource Management.1.1 DEFINITION OF IHRMThe HRM issues and problems arising from the internationalizing of business, HRM strategies, policies and practices which firms pursue in response to the internationalization of business.International human resource management is all about the world wide management of human resources Process of sourcing, allocating, and effectively utilizing their skill, knowledge, ideas, plan and perspective in responding to TQM. International Human Resource Management is the process of sourcing, allocating and effectively utilizing human resources in a multinational organization.

1.2 Dimensions of IHRM:According to P.V. Morgan: IHRM is the interplay among 3 dimensions: HR Activities Types of employees Types of Countries

Fig:1 Dimension Model of IHRM.

1) Broad activities of IHRM procurement, allocation and utilization of human resources cover all the six activities of domestics HRM i.e, HR planning, Employees Hiring, Training and Development, Remuneration, Performance Management and Industrial Relations.2) The national or country categories involved in IHRM activities are: The host country where subsidiary may be located. The home country where the company has its headquarters. Other countries that may be sources of labour or finance.3) The three types of employees of an international business are Parent Country Nationals (PCNs) Host Country Nationals (HCNs) Third Country Nationals (TCNs)For example, IBM which employs Australian citizens in its Australian operations, after sends US citizens to Asia Pacific countries on assignment, and may send some of its Singaporean employees to its Japanese operations.

1.3 PURPOSE OF IHRMInternational human resource management (IHRM) is about the worldwide management of human resources. The purpose of international human resources management is to enable the firm, the multinational enterprise (MNE), to be successful globally. This entails being: (a) competitive throughout the world; (b) efficient; (c) locally responsive; (d) flexible and adaptable within the shortest of time periods; and (e) capable of transferring learning across their globally dispersed units. These requirements are significant, and the magnitude of the reality is indisputable: for example, a substantial majority of industries in North America and Europe are under full-scale attack by foreign competitors. On the other hand, most of the emerging markets are now bombard by foreign direct investments (FDIs) by the MNEs of developed nations.

IHRM for many firms is likely to be critical to their success, and effective IHRM can make the difference between survival and extinction for many MNEs. Yet, for reasons of cost, time, and difficulty, IHRM research has been limited and largely focused on a few issues. Calls are now being made to advance our understanding of this important area in several ways, including: 1) developing models and frameworks to reflect the complex set of environmental factors that impinge upon the global management of human resources researching international human resource activities in a way that recognizes their systematic interaction and 3) utilizing more theoretical perspectives to predict and explain relationships

CHAPTER 2

2.1 OBJECTIVES OF IHRMTo understand Types of international business operations. How international HRM differs from domestic HRM. The reasons for increasing importance of international HRM. The importance of managing cultural differences for the success of international business operations. The approaches to managing and staffing subsidiaries of multinational organizations. The international HR practices.2.2 DIFFERENCE BETWEEN DOMESTIC HRM AND IHRMOne obvious difference between domestic and international HRM is that staff are moved across the national boundaries into various roles within the international firms foreign operations these employees have traditionally been called expatriate. An expatriate is an employee who is working temporarily residing in a foreign country. However, as pointed out by Dowling (1999) domestic HRM is involved with employees within only one national boundary; on the other hand IHRM deals with 3 nationals or country categories (expatriate): PCN, HCN and TCN. So, broadly there are two major factors therefore which differentiate domestic HRM from IHRM.1. The complexities of operating in different countries / cultures.2. Employing different nationals and different categories of workers across boarder. It has been also argued by Dowling (1999) that the complexities of IHRM can be attributed to six factors that differentiate international from domestic HRM.Theses are:1. A wide range of HR activities The need for a broader perspectives. More Involvement in employees personal life. Responsiveness to changes in staffing requirements as international strategy changes. Higher risk exposure More external influences.However, the international dimension brings with it a host of issues, which the domestic HR functions would not normally get involved in. The practice of HRM in the international context is different from its domestic counterpart in a number of ways. These include: Being responsible for a greater number of functions and activities such as selection, training and management of international assignees. Having to expand ones area of expertise to include a much broader knowledge of foreign country employment laws and global organization designs. Having to get much more closely involved with employees lives as the firm moves employees to foreign assignments. For example, collecting information and furnishing to visa authorities about aids or material status of employees. Being involved with greatly expanded and constantly changing mix of employees (from the host countries and foreign locals), adding considerable diversity and complexity to the HR tasks. Having no cope with more external influences; for example, having to consider the impact of foreign cultures and laws. Having to face greater exposure to problems and liabilities (for example, making mistakes in expatriate assignments can cost as much as US$4 million per assignee). The accumulated direct and indirect costs can be huge. Additional responsibilities like translation of language, both at headquarters and at the subsidiary level, organizing schooling and housing for expatriates and providing administrative services. Management of differential compensation due to variety of allowances and adjustments. More emphasis on activities like international relocation and orientation, both pre departure and post departure cultural training. Knowledge of international taxation, rate of inflation and cost of living, including currency fluctuation. Diversity management, like managing people from different cultural and political backgrounds and gender differences. More contacts with Government officials for obtaining visas, work permits, tax certificates, fixing of meetings and so on. More coordination and travel to assess performance of expatriates and solve problems. More risk management as threats from terrorists, Kidnappers and protecting intellectual property rights of firms. More risk management as threats from terrorists, kidnappers and protecting intellectual property rights of firms. More public relations work to enhance the multinationals image and deal with human rights and other NGOs and interest group operating in different countries.

Table 1.1 Difference between IHRM and Domestic HRM

2.3 VARIABLES THAT MODERATE DIFFERENCES BETWEEN IHRM AND DOMESTIC HRM

Figure:2.1 Showing relationship between IHRM and Domestic HRM with other variables.

CHAPTER 3INTERNATIONAL STAFFING3.1 International Staffing Policies:Perlmutter (1969) identified three different international orientations that have become the standard way to describe MNC staffing policies.(i) Ethnocentric: MNCs following an ethnocentric staffing policy would appoint mostly parent country nationals to top positions at their subsidiaries(ii) Polycentric: MNCs following a polycentric staffing policy would prefer to appoint host country nationals (iii) Geocentric: Firms with a geocentric staffing policy would simply appoint the best person, regardless of his/her nationality and that could include third country nationals (TCNs), nationals of a country other than the MNCs home country and the country of the subsidiary.In a later publication, Heenan and Perlmutter (1979) defined a fourth approach, which they called Regiocentric. In this approach, managers are transferred on a regional basis, such as Europe, and it often forms a mid-way station between a pure polycentric/ethnocentric approach and a truly geocentric approach. It is important to note that these staffing policies apply to key positions in MNC subsidiaries only. Although some PCNs or TCNs might still be found at middle management, MNCs normally appoint host country managers at this and lower levels.

3.2 Classification of international staffing:Table 1.2Parent countryNationality of employee is the samee.g. a German employee

national (PCN)as that of the headquarters of theworking at the Chinese

multinational firmsubsidiary of Volkswagen

Host countryNationality of employee is the samee.g. a Chinese employee

national (HCN)as that of the local subsidiaryworking at the Chinese

subsidiary of Volkswagen

Third countryNationality of employee is neithere.g. an Indian employee

national (TCN)that of the headquarters nor theworking at the Chinese

local subsidiarysubsidiary of Volkswagen

Indeed, irrespective of the specific approach chosen in a given MNC the staffing decisions are usually initiated centrally and then imposed on the foreign units by the HQ. In this regard, Novicevic and Harvey (2001) call for a pluralistic orientation in which subsidiaries are given more autonomy and flexibility in the staffing process. This pluralistic orientation would consist of multiple, diverse and possibly competing orientations of subsidiary staffing that operate independently within the MNC context and requires coordinating mechanisms such as the socialization of key MNC staff. The term expatriation is often used to describe the process of international transfer of managers. Although the term expatriate could literally be taken to mean any employee that is working outside his or her home country, it is normally reserved for PCNs (and sometimes TCNs) working in foreign subsidiaries of the MNC for a pre-defined period, usually 2-5 years. It is common to use the generic term international assignee to refer to any person that is relocated internationally.

3.3 Advantages and disadvantages of using PCNs, HCNs :

Table 1.36

Advantages

PCNs familiarity with the home office's goals, objectives, policies and practices technical and managerial competence effective liaison and communication with home-office personnel

easier exercise of control over the subsidiary's operations

Disadvantages

difficulties in adapting to the foreign language and the socioeconomic, political, cultural and legal environment

excessive cost of selecting, training and maintaining expatriate managers and their families abroad the host countries' insistence on localizing operations and on promoting local nationals in top positions at foreign subsidiaries

family adjustment problems, especially concerning the unemployed partners of managers HCNs familiarity with the socioeconomic, political and legal environment and with business practices in the host country

lower cost incurred in hiring them as compared to PCN and TCN provides opportunities for advancement and promotion to local nationals and, consequently, increases their commitment and motivation

responds effectively to the host country's demands for localization of the subsidiary's operation

difficulties in exercising effective control over the subsidiary's operation communication difficulties in dealing with home-office personnel lack of opportunities for the home country's nationals to gain international and cross-cultural experience

3.4 Factors influencing the choice between HCN and PCN :

Parent country/companyIndustry

+ Level of Uncertainty Avoidance+ Banks & banking services

+ Cultural distance between+ Security & commodity brokers

parent and host country+ Printing & publishing

+ Size of the company- Advertising agencies

[+ R&D intensity]- Computers & office equipment

- Electronics & equipment

- Food & related products

Likelihood of PCN in managing director position at foreign subsidiaries

Host country

Education level +Political risk

Cost of living higher than parent company

Subsidiary characteristics

Age

Acquisition + Majority ownership

Reporting distance from HQ + Size Performance

* (+) denotes a positive relationship. Example: + Size = The larger the organization the higher is the likelihood that a PCN holds the managing director position in its foreign subsidiaries.

With regard to parent country/company characteristics, MNCs from countries with a national culture that scores high on uncertainty avoidance (Hofstede, 1980, 2001) have a higher tendency to employ PCNs as managing directors for their subsidiaries. There is often suspicion towards foreigners as managers and a view that initiative arising from subordinates should be kept under control. Managers are expected to be experts in their fields and generally are selected based on seniority (Hofstede, 1980, 2001). These characteristics usually point to a trusted PCN as the preferred alternative for senior positions in subsidiaries. Direct control of subsidiary operations will also be more important if the level of cultural distance, or institutional distance (Gaur, Delios, & Singh, 2007) between home and host country is high. In this case, HQ managers might not trust the information they receive from local managers. Additionally, HQ managers might fear that local managers are less committed to the company. However, Gong (2003a) found that the reliance on PCNs in cases of high culturaldistance weakens over time, suggesting that MNCs longer presence in a host country may lead to the development of trust relationships with HCNs and thus a reduced need to deploy PCNs. Furthermore, communication between people from different cultural backgrounds can be very difficult (even if they speak the same language) and the opportunity for misunderstanding is usually high .Therefore, HQ managers will prefer to have at least some home country managers in important positions to facilitate the information flow.

3.5 Why do companies assign employees abroad? Edstrom and Galbraiths typology

There are few theoretical means of clarification or concepts regarding the motives for international transfers. At first sight, the study by Edstrom and Galbraith (1977) is the only one that theoretically explains why international transfer of managers occurs. They propose three general company motives for making this type of transfer. The first was to fill positions, which concerns the transfer of technical and managerial knowledge. This motive is quite important for developing countries, where qualified local nationals might not be available, but specific knowledge transfer might be necessary to subsidiaries in developed countries as well. Expatriates can be seen as the key bearers of tacit knowledge. The second major motive is management development. The transfer gives the manager international experience and develops him/her for future important tasks in subsidiaries abroad or with the parent company. This kind of transfer would be carried out even if qualified host-country nationals were available. For the third motive for international transfers, the final goal is not individual development but organization development. This motive consists of two elements: socialization of both expatriate and local managers into the corporate culture and the creation of a verbal information network that provides links between subsidiaries and HQ.

The classification of Edstrom and Galbraith is well accepted in the literature on international transfers. Virtually every publication that deals with this topic refers to Edstrom and Galbraiths now classic 1977 Administrative Science Quarterly article.

CHAPTER 4

INTERNATIONAL BUSINESS

4.1 Significance of IHRM in International Business:

Scullion (2001) outlined 10 major significance of IHRM in globally business environment. This significance can categorised in 5 key areas:

Fig: Showing significance of IHRM in International Business

CHALLENGE:

Rapid growth of internalization and global competition has increased the nos. and significances of MNCs resulting in the increased mobility of human resources.

Increasing no. of strategic alliances and cross border mergers and acquisitions has increased the strategic implementation of IHRM as Global business.

COMMITMENT:

World wide recognition of management of human resources in international business and cross cultural management.

Business Networks and Horizontal communication and HR plays a vital role.

COST EFFECIVENESS:

The performance of expatriates. (poor performance of expatriate may affect the market share and damage to foreign relations) Growing Importance of Expatriates in International Business.

COMPETENCE:

Global Strategy Implementation. Success or failure of international business based on effectiveness of management of HR.

CONGRUENCE:

Learning, knowledge acquisitions have been identified as important potential sources of comp. advantages for MNCs. This has also enhanced the role of IHRM to meet the key strategic challenge of objectives.

Knowledge management is an important source of comp. advantage for MNCs, where IHRM is the key partner and plays a central role.

4.2 Major Issues in International HRM:According to Hendry (1994), there are three main Issues in IHRM:

The management and development of expatriates- selection, training, compensation and repatriation of expatriate failures.

The internationalization of management throughout the organization (host country, parent country and other third countries).

The need to internationalize the whole organization by creating a new corporate culture reflecting the need for greater international experiences across the whole organization, due to the increasing frequency of cross cultural interactions of doing business at home as well as abroad mainly Cultural communication & gauge and Language and communication.

4.3 Role of International HRM:

International human resource management is the basis of success of any global multinational organization. International HRM enhances employees effectiveness to achieve goals of the organization and meet the needs; to develop employees to assume more diverse tasks, assignments, face challenging situations and better understand the cultural variations across the nations.

IHRM department deals with heterogeneous functions and has to give additional focus on various aspects, such as:

More involvement in the employees personal life. Deal with different groups of employees i.e. PCN, HCN and TCN for which HR policies and practices may differ. International HR managers have to understand cultural differentiation in multicultural environment. Manage external influences, i.e host government authorities, business and other interest pressure and labour groups, etc. Lay different emphasis on management training to deal diverse workforce, their orientation and to meet international environment. Provide guidance on taxation and compensation aspects.

4.4 Limitations of IHRM

Management is basically the principle based on local cultures, traditions, practices and needs of the organizational growth. It is not universal for everywhere, specially in the field of human resources management.

HRM methods and systems developed by one society can not always be transferred and applied to another.

HRM and industrial relations practices differ across countries as these have their historic origin in countries.

Personnel management and industrial relations are embedded in societal rules, norms, values, ideologies and no MNC can afford to ignore the influence of local culture.

Conclusion:Thus it has been observed that effective internationalization of human resources management and IRs remains bleak. The degree of adaptation on International HRM to local customs in various subsidiaries of MNCs will be remaining on the strategic agenda and managing International HR activities is an elaborate and complex task for todays manager.

BIBLIOGRAPHY

1. INTERNATIONAL HUMAN RESOURCE MANAGEMENT, Dr. Shyamal Gomes

2. INTERNATIONAL HRM: AN OVERVIEW, Robert Kase.

3. FUNDAMENTALS OF HRM, Noe & Hollenbeck