International HumanResource Management

(Global HRM)

By, Priya Unadkat

Definition:

HRM as a process of procuring, developing, compensating and retaining people in organization operating beyond national boundaries at the global

level

17–2

Inter-country Differences Affecting HRM

Cultural Factors Economic Systems Labor cost Legal and Industrial Relations Factors

Cont’d

Cultural Factors U.S. Managers are more concerned with getting the jobs done. Chinese Managers are more concerned with maintaining a

harmonious environment. Hong Kong Managers fell between these extremes. Compared to U.S. employees, Mexican workers expect

managers to keep distance and be formal When the workload increases, Australian and Singaporean

firms add more staff while Korean and Japanese firms insist existing staff to work for longer hours.

Economic Systems Some countries in Euro zone put more restrictions on the

number on hours an employee can work. Portuguese workers average about 1980 hours of work

annually while German workers average 1648 hours. Labor cost

Higher labor cost in USA and UK than India Legal and Industrial Relations Factors

Germany, codetermination employees have legal right in policy making

India, state plays major role in IR.

Cont’d

Differences between Domestic HRM and IHRM

1. More HR activities2. The need for a broader perspective3. More involvement in employees’ personal lives4. Changes in emphasis as the workforce mix of expatriates

and locals varies5. Risk exposure6. Broader external influences

1. More HR Activities

Human Resource Planning Difficulty in implementing HR procedure in host countries. Difficulty in aligning strategic business planning to HRP and vice-versa. Providing developmental opportunities for international managers.

Employee Hiring Ability to mix with organisation’s culture. Ethnocentric, polycentric or geocentric approach to staffing. Selection of expatriates. Coping with expatriate failures. Managing repatriation process.

Training and Development Emphasis on cultural training Language training Training in manners and mannerisms.

Cont’d

Compensation Devising an appropriate strategy to compensate expatriates. Minimising discrepancies in pay between parent, host and third country

nationals. Issues relating to the re-entry of expatriates into the home country.

Performance Management Constraints while operating in host countries need to be considered. Physical distance, time difference and cost of reporting system add to the

complexity. Identification of raters to evaluate subsidiary performances.

Industrial Relations Who should handle industrial relations problem in a subsidiary? What should be the attitude of parent company towards unions in a

subsidiary? What should be union tactics in subsidiaries?

Tax equalization Relocation & orientation Administrative services Host government relation Language translation

2. The need for a broader perspective More than one national group of employees working.

Cont’d

3. More involvement in employees’ personal lives Schooling, housing Banking, investment Recreational program

4. Changes in emphasis as the workforce mix of expatriates and locals varies As operations matures Local staff availability Taxation, relocation, orientation

Staffing, training & development

Cont’d

5. Risk exposure Expatriate failure Under performance

Higher cost of failure – direct & indirect Terrorism

6. Broader external influences Type of government Developed / developing country

Cont’d

A Model of IHRM

International

No investment outside home country

Import-export Sells in more than one

country Standard product

Multinational

Investment in other countries

Manufacturing Operates in more than

one country Customized products

Basic Functions in International HRM

HRP

Recruitment and Selection

Training and Development

Performance Management

Remuneration

Repatriation

Employee RelationsO

RG

AN

ISAT

ION

AL

EFF

EC

TIV

EN

ES

S

Basic Functions in International HRM

HRP

Recruitment and Selection

Training and Development

Performance Management

Remuneration

Repatriation

Employee RelationsO

RG

AN

ISAT

ION

AL

EFF

EC

TIV

EN

ES

S

International recruitment

Sources of Global Recruitment

Parent Country Nationals: Citizens of the country in which the multinational company

has its headquarters. Host Country Nationals:

Employees of the company’s subsidiary who are the citizens of the country where the subsidiary is located.

Third Country National: For eg: Mr. Akhil- an Indian citizen-is working for an

American subsidiary in France. Mr. Akhil for the American subsidiary in France is called third country national.

Approaches to StaffingApproaches for staffing:

EthnocentricPolycentricGeocentricRegiocentric

Ethnocentric PCNs Strategic decisions are made at headquarters; Limited subsidiary autonomy; Key positions in domestic and foreign operations

are held by headquarters’ personnel; PCNs manage subsidiaries.

Polycentric Each subsidiary is a distinct national entity with

some decision-making autonomy; HCNs manage subsidiaries who are seldom

promoted to HQ positions; PCNs are rarely transferred to subsidiary

positions. They are at key positions at headquarter.

Geocentric A global approach - worldwide integration; View that each part of the organization makes a

unique contribution; Nationality is ignored in favor of ability:

Best person for the job; Color of passport does not matter when it comes to rewards,

promotion and development.

Regiocentric Reflects a regional strategy and structure; Regional autonomy in decision making; Staff move within the designated region,

rather than globally; Staff transfers to headquarter are rare.

The Expatriate Assignment Life Cycle

Determining the Need for Expatriate

The Selection Process

Crisis and failure

Crisis and Adjustment

Repatriation and

AdjustmentDeparture

Pre-assignment Training

Post-arrival Orientation and

Training

Reassignment Abroad

or

or

Why Expatriate Assignments Fail

Personality Personal intentions Family pressures Inability of the spouse to adjust Inability to cope with larger overseas responsibility. Lack of cultural skills

17–28

Cultural shock

Disruptions to establish routines of behaviour

Culture Shock Cycle

Factors in Expatriate Selection

Technical Ability

Cross-Cultural Suitability

Family Requirements

Country-Cultural

RequirementsLanguage MNC

Requirements

Selection Decision

Individual Situation

International Training

Components of Effective Training

Cultural awareness programs Preliminary visits

Language training Practical assistance Training for the training role TCN and HCN expatriate training

InternationalPerformance Management

Crucial post assignment issue Steps

Linkage to organizational strategy Setting individual goals Identifying variables Appraising performance Feedback on progress towards goal Opportunity for improvement Linking result with rewards

International compensation

The main approaches to calculating expatriate pay are:

Home-based pay /Balance sheet approach – The provision of remuneration (pay, benefits and allowances) to expatriates that is the same as in their home country.

Host-based pay/Going rate approach – Paying the market rate for the job in the host country. Additional allowances may be paid.

Selected country based – Salary structure in a selected country

Hybrid

Incentives

Foreign service premiums Financial payments over and above regular base pay, and

typically range between 10% and 30% of base pay. Hardship allowances

Payments to compensate expatriates for exceptionally hard living and working conditions at certain foreign locations.

Mobility premiums Lump-sum payments to reward employees for moving

from one assignment to another.

17–38

Cost-of-living allowances (COLAs) Relocation allowance Housing/utilities Benefits

Car, Education to children, Home leave, Recuperation leave

Taxation:

Most time consuming issue Tax equalization

Tax equalization is a process that ensures that the tax costs incurred by an assignee on an international assignment approximates what the tax costs would have been had he remained at home.

Tax protection Tax protection is a process that reimburses an assignee

the excess taxes he incurs while on an international assignment.

Useful facts….. Individualistic cultures like the U.S. and the UK are OK with

bonuses/commissions based on individual performance.  Collective cultures like Japan would prefer to have group bonuses/commissions.

Some countries have a different definition of “family”.  In India family includes parents not just children.  This makes a difference in insurance coverage.

Rating employees on performance is difficult in the Middle East and Asia (i.e. Korea) because of face-saving.  It is difficult for managers to talk to employees about poor performance as this causes the employee to “lose face”.

Cont…

China has a very aggressive sales compensation environment, India shows more interest in base salary and the CTC (cost-to-company) package than variable compensation.

Japanese organization follow Nenko system for promotion.

U.S. workers want two weeks vacation, not because of culture, but because that is the norm in the U.S. In Germany, it is likely to be one month of vacation.

In Japan or Korea large changes in bonuses and allowances are preferred over large changes in base pay because social security and national health insurance rates paid by employers are based on basic pay, not bonuses or allowances.

Union influences play an important role in determining wage policies in Australia. In Hong Kong, by contrast, labour unions are extremely weak.

Cont…

Repatriation :

Needs careful handing May result in re-entry shock or reverse culture shock Future expatriates may depend on repatriation

programs Benefits:

MNCS like Cisco, Ford, are hiring foreign return Indian executives

Global culture Global social network Co-ordination and control Exposure and expertise

The Repatriation Process

Preparation

PhysicalRelocation

Transition

Re-adjustment

RepatriationProcess

• Future• New positions• Checklist of items• Good bye to friends• Travelling• Relocation assistnce

• Housing and schooling

• Driving license• Bank accounts

• Coping with reverse culture shock

• Career demand

Preparation

PhysicalRelocation

Transition

Re-adjustment

RepatriationProcess

Preparation

PhysicalRelocation

Transition

Re-adjustment

RepatriationProcess

Preparation

PhysicalRelocation

Transition

Re-adjustment

RepatriationProcess

Preparation

PhysicalRelocation

Transition

Re-adjustment

RepatriationProcess

Thank You