International Human Resource

Management

Human resource management (HRM) is the set of activities directed at attracting, developing, and maintaining the effective workforce necessary to achieve a firm’s objectives. Recruiting and selecting employees, providing training and development, appraising performance, and providing compensation and benefits are all part of HRM.

What is IHRMInternational HRM is the process of procuring, allocating and utilizing human resource in an a global firm.

Differences in culture, levels of economic development, and legal systems among countries may force changes in HRM systems

The International Human Resource Management Process

©2004 Prentice Hall 20-4

HRM’s Strategic Content

Recruitment and Selection

Training and Development

Performance Appraisal

Compensation and Benefits

Labor Relations

Contribution to Organizational Effectiveness

Why International Human Resource Management?

Increasing globalization, firms and employees in them moving all over the world.

Major problems in international operations because of human resource management

The role of HR in International OperationsManaging a Multicultural WorkforceDeveloping Managerial Talent in a Global

Business Environment

Main challenges in IHRMDifferent labor lawsDifferent political climateDifferent stage(s) of technological

advancementDifferent values and attitudes e.g. time,

achievement, risk takingRoles of religion e.g. prayer, taboos,

holidays, etcEducational level attainedSocial organizations e.g. social

institutions,

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Necessary Skills and Abilities for International Managers

Skills and AbilitiesNecessary to DoThe Job

•Technical•Functional•Managerial

Skills and AbilitiesNecessary to WorkIn a Foreign Location

•Adaptability•Location-specific skills•Personal characteristics

Improved Chances of Succeeding inAn International Job Assignment

Scope of InternationalizationSize of staffing tasks depends on scope of

firm’s international involvementExport departmentInternational divisionGlobal organization

Centralization versus Decentralization of Control

Centralized firmsFavor home country managers

Decentralized firmsFavor host country managersMost common amongst multi domestic firms

Major Areas of IHRM

The management of human resources in global corporations

The management of expatriate employees

The comparison of HRM practices in a variety of different countries

Questions for HR professionals• Do we have a strategy for becoming an international

firm?• What type of managers will we need to be successful?• How can I find out about the way that HRM is

conducted in other countries (laws, trade unions, labor market).

• What will be the impact of cultural norms on our HR policies.

• How will we choose whether to send expatriates or use local employees.

• How do we move people to different locations• How do we manage transfer of knowledge across

borders

Strategic Significance

The international HRM process involves understanding the strategic context of HRM within the firm’s overall strategy, recruiting and selecting appropriate managerial personnel, providing necessary training and development, assessing performance, providing compensation, and evaluating managerial retention and turnover.

International Managerial Staffing Needs

Most firms begin their international expansion with small-scale exporting. Thus, during a firm’s initial foray into foreign markets a home-country citizen, who may or may not have special training in working in foreign markets, usually manages the firm’s international transactions.

Later when the firm establishes an international department, subsidiary managers (usually host country citizens) report to the authority of the international division (usually a home country citizen).

As a firm further expands its operations in a global organization, a team of managers with expertise in the firm’s product lines, necessary functional skills, individual country markets, and the firm’s global strategy is usually assembled.

Parent-country Nationals

Advantages Control and co-ordination by

HQ is maintained. Promising managers get

international experience. PCNs may be the best people

for the job. Assurance that the

subsidiary will comply with company objectives policies etc.

Disadvantages HCNs promotion

opportunities are limited.

Adaptation to host country may take a long time.

PCNs may impose an inappropriate HQ style.

Compensation differences between PCNs and HCNs may cause problems.

Host-country Nationals

AdvantagesNo problems with language

and culture. Reduced hiring costs. No work permits required. Continuity of management

improves since HCNs stay longer in positions.

Govt. policy may force hiring of HCNs.

Promotional opportunities not limited - so higher morale among HCNs.

DisadvantagesHQ may have less control

over operations. HCNs may still have limited

career opportunities outside the subsidiary.

Hiring HCNs limits opportunities for PCNs to gain overseas experience.

Hiring HCNs may encourage a federation of disintegrated national units rather than one integrated global unit.

Third-country Nationals

AdvantagesSalary and

compensation may be lower than for PCNs.

May be more familiar with host country than the PCNs.

DisadvantagesHost government may

resent TCNs as much as PCNs.

TCNs may not comply with HQ style of management.

TCNs may not want to return after assignment.

Complications for IHRM compared to HRM

Firms must decide whether managers will be selected from the home country, from the host country or from third countries.

Training and development in an international firm may be more complex than in a domestic firm.

Compensation systems must be adapted to meet the needs of each country’s labor market.

Complications for IHRM compared to HRMInternational HR managers face a more

complex task than their domestic counterparts because differing cultures, levels of economic development, and legal systems among countries may require companies to adapt their hiring, firing, training, and compensation programs to each country.

Major differences between domestic HRM and IHRM

Business activities e.g. taxation, international relocation, expatriate remuneration, performance appraisals, cross-cultural training and repatriation

Increased complexities e.g. currency fluctuations, foreign HR policies and practices, different labor laws

Increased involvement in employee’s personal life e.g. personal taxation, voter registration, housing, children’s education, health, recreation and spouse employment

Complex employee mix – cultural, political, religious, ethical, educational and legal background

Increased risks e.g. emergency exits for serious illness, personal security, kidnapping and terrorism