GHRM or IHRM Scope -:

Cross cultural management 2. Comparative industrial relation 3. HRM in multinational firms1.

Cross Cultural Management

IHRM in MNC

Comparative IR systems

HRM v/s GHRM HRM activities includes1.

2.3. 4. 5. 6.

HRP Staffing Performance Management Training & Development Compensation & benefits IR

HRM v/s GHRM GHRM- includes

Broad HR activities (procurement, allocation & utilization) 2. National or Country categories ie a) Host country Subsidiary may be located b) Parent country Firm is Head quartered c) Other country Source of labour 3. Category of employees ie HCN, PCN & TCN1.

GHRM HCN Host country national like Indian company has

its unit in US and employees US locals. PCN Parent country nationals like Indian company employs Indian locals or Indian company sends Indian employee to US unit. TCN Third country National like Indian company employs Japanese to work in US unit.

Expatriates In GHRM the staff generally moves across national

boundaries into various roles, these employees are traditionally been called as expatriates. An expatriates is an employee who is working and temporarily residing in a foreign country. Some firms prefer to call them international assignees. PCN & TCN are always expatriates but what when HCN transferred to Parent country of the organization? Inpatriate or expatriates.

Is GHRM is complex? More HR activities Need of broader perspective More involvement in employees personal lives

Managing workforce mix of expatriates and locals Risk exposure Broader external influences

Is GHRM is complex? In addition to complexity, there are four other variables that moderate

differences between domestic and international HRM. These variables are below:1.

The Cultural Environment cultural shock & nepotism.

2.3.

Industry Type multi domestic industry & global industry.Reliance of the Multinational on its Home-Country Domestic Market small home market.

4.

Attitudes of Senior Management to International Operations failure in managing human resources.

Barriers to GHRM There are a number of unique problems that global

companies face when trying to implement consistent practices across their global HR networks. These problems act as barriers to effective Global HRM. These are: Variations Perception of HR Attitude and actions of headquarters toward HR Resistance to change Cultural differences in learning and teaching styles

Factors influences global work environmentForces for changeMNE requirements Managerial responses Survival and growth

Factors influences global work environmentForces of change Global competition, merger & acquisitions, advances in technology, organizational restructuring. 2. Requirement of MNE Flexibility, local responsiveness, knowledge sharing, competence transfer. 3. Managerial responses Developing global mindset, cross border & virtual teams, international assignment. Result Survival & growth1.

Management demand of InternationalizationSizeFlow & volume of InfoOperation modes Management demands

StructureHost country demands

Control Mechanism

National cultural & Language

Path to global status Organizations pass through several stages of

organizational development, which results into change in organizational structure due to: 1. Strain imposed by growth & geographical spread. 2. Need for improved coordination & control across business units. 3. Constraints imposed by host government regulations on ownership and equity.

Path to global statusStages of Internationalization:Foreign production Sales subsidiary Network of subsidiaries

Exporting

Licensing

Subcontracting

Path to global status Exporting : Initial stage for manufacturing firms entering

international operations. Simple exporting is difficult for service firms like legal firms and soon they have to open their branches. Exporting often tends to be handled by intermediary like foreign agent or distributor.

Path to global statusExport Department:MD

Production manager

Fin manager

Mkt manager

HR manager

Domestic Sales

Export sales

?

Path to global status Sales subsidiary - :

As firm develops expertise in foreign market agents & distributors are often replaced by direct sales with the establishment of sales subsidiary or branch office. 2. This stage is prompted by problems with foreign agents, more confidence on international sales activity, greater control & increased importance to overall success of the organization. 3. Exporting still controlled by HQ but firm must make decision regarding coordination of subsidiaries including staffing. (ethnocentric approach PCN).1.

Path to global statusSales Subsidiary :MD

Production manager

Fin manager

Mkt manager

HR manager

?

Export manager

Exports

Sales subsidiary

?

Path to global status Exporting Initial stage Sales subsidiary Branch office rather opting for

agents / distributors. Foreign production setting up the plant Network of subsidiaries - Offices across the country Exporting - Licensing - Foreign production

Control mechanism Control mechanism:Control Mechanism

FormalStructure Reporting system Budgets Performance target Formal comm.

Informal

Personal relationship & informal comm.

Corporate culture

Mode of operation Linkage of operation & GHRM:Internationalization Strategy

GHRMStaff placement: Length & purpose Related activities : training

Mode of operation Link influenceVariety: Franchising Management contracts Joint venture

Approaches to staffing Ethnocentric approach PCN preferred, because of lack of

qualified HCNs and also to have better 3 Cs at initial internationalization process.

Polycentric approach HCN preferred, treat subsidiary as

separate entity, PCN dont get transferred to subsidiary, chances of promoting HCN to hold key position in HQ, further eliminates language issues, adjustment issues & reduces the expenses in terms of training cost.develop international executive teams, it overcomes federation drawback of polycentric approach, supports cooperation & resource sharing across units.

Geocentric approach Best people for key jobs, helps MNC to

Approaches to staffing Ethnocentric approach High compensation package,

adapting to culture & environment. Polycentric approach Career path of HCN & PCN,

complexities in bridging the gap between HQ & subsidiary. Geocentric approach Host country requirement to

place high number of their citizen, extensive documentation related to expatriates, increased training & relocation cost.

Reasons for international assignments Survey of 273 companies from 17 countries by

Pricewaterhousecoopers says every organization wants to reduce the number of expats but it actually increases. Why? Position filing: As need arises organization depending upon the type of position and level involved employ someone locally or transfer suitable candidate. A survey by GMAC global relocation services gives an idea that primary objective for international assignment is to fill a skill gap.

Reasons for international assignments Management development: In order to develop common

corporate values, HQ staff gets transferred to subsidiary or subsidiary staff to HQ. Organization development: Strategic objective of the organization comes into play, the need of control, transfer of knowledge, competence, procedures & practices into various locations and also to exploit global market opportunities. A survey report by Pricewaterhousecoopers revealed that staff mobility supported in developing a global corporate culture & assisted in cross fertilization of ideas.

Types of international assignments Short term up to 3 months related to trouble

shooting or stopgap measure. Extended up to 1 year. Similar activities like short term assignment. Long term varies from 1 year to 5 year, involving a clear defined role in the receiving operation.

Types of international assignments Under these broad categories some subcategories exists: 1. Commuter assignment : employee travel weekly from one

country to another. 2. Rotational assignment: employee travel for short period with break. 3. Contractual assignment: based on a contract may e for 6 to 12 months and an example could be R & D services. 4. Virtual assignment: Employee does not relocate to host location but manages from home base. Useful when organization does not have ample prepared staff to accept foreign posting.

Role of an expatriate Expatriate as an agent of direct control: Ensuring

compliance through direct supervision. German companies mostly follow this approach to have dominance through expatriate control. Expatriate as an agent of socialization: Use of corporate culture as an informal control mechanism. There is a belief that expatriate assist in transfer of shared values. But can have negative impact. Expatriate as network builder: Movement of person to various subsidiaries makes him develop good network. Long term assignments supports more development as compared to short term assignments.

Role of an expatriate Expatriate as language node: Once a person has

learned the foreign language, can lend support to organization. Expatriates as an information source: Collect information from host country acting as an agent of parent country and can influence host country operators.

Issues in staff selection Myth of global manager:

Universal approach to management 2. There are common characteristics shared by successful international managers. 3. People can adapt multi cultural adaptability & behaviors.1.

Issues in staff selection Profile of an expatriate: Choose right candidate,

selection is complex activity. Expatriate failure.

Factors moderating performance Inability to adjust in foreign culture Adjustment process. Willingness to move

Employment relationship Work environment related factors

Selection criteria of expatriates Factors in SelectionTechnical ability Cross cultural suitability Family requirement

Selection decision Country / cultural requirement

Language

MNE requirement

Selection criteria of expatriates Technical ability: Persons ability to perform the

required task is an essential consideration, therefore technical and managerial skills are essential. Cross cultural suitability: Cross cultural environment where an expatriate operates is an critical aspect. Apart from technical and managerial skill, person should have cultural adaptability for successful performance. Person must have diplomacy, positive attitude, maturity, emotional stability, language ability.

Selection criteria of expatriates Family requirements: Family / spouse are considered

as major factor for successful international assignment. Various issues to be considered can be career of partner, home settlement abroad, old age parents, child education, health issues etc. Country / cultural requirement: Country policies plays an important role and due to which companies in order to open up the blocked transfer want to send PCN or TCN.

Selection criteria of expatriates MNE requirement Language Equal employment opportunity issues

Expatriate selection in practice: Coffee machine style

Dual career couples Alternative assignment arrangement Family friendly policies:

Inter company networking 2. Job hunting assistance 3. Intra company employment 4. On assignment career support1.

Importance of T & D Expatriates are trainers Adoption of system & processes Reason for International assignment is Management

Development.

Components of effective pre departure training Cultural awareness program Preliminary Visits Language training

Knowledge of corporate language Practical assistance Training for the trainers role TCN & HCN expatriate training Provision for training non traditional expatriate

assignment.

Types of training1. 2.

3.4. 5. 6.

On the job -: Orientation Training ie Induction Job instruction Info about how to conduct the job. Apprentice training - ITI Internship / Assistantship - Doctors Job rotation - Bank Coaching Cricket team

Types of training 1. 2. 3. 4.5.

Off the job -: Vestibule Utilisation of actual equipments. Lecture Verbal presentation of information. Role playing is to create realistic situation. Simulation technique that duplicates as nearly as possible actual condition encountered on the job. Laboratory / Sensitivity training smaller group ie 12 or less. Provides awareness about their own behaviour & how other perceive them.

Compensation Remuneration is the compensation an employee

receives in return for his or her contribution to the organisation. Society Some people see pay as a measure of justice. Stockholders To stockholders, executive pay is of special interest, as linking executive pay to company performance is supposed to increase stockholders wealth.

Compensation Managers Compensation influences their success in

two ways. First, it is a major expense. In addition to treating it as an expense, a manager also uses it to influence employee behaviour and improve organisation performance. Employees The pay individuals receive in return for the work they perform is usually the major source of their financial security.

Components of compensation1. 2.

3.4.

Financial : Hourly and monthly rated wage and salary. Incentives ie individual plans and group plans. Fringe benefits ie PF , Gratuity, Medical care, Group Insurance. Perquisites are Company car, furnished house (Offered to retain competent executives)

Components of compensation Non Financial -: Recognition, Growth Prospects.

International compensation objectives Policy should be consistent with the overall structure and

business needs of the MNC. Policy must attract and retain staff in the areas where the multinational has greatest needs and opportunities. Hence important factors can be incentive for foreign service, tax equalization, reimbursement of reasonable costs. Policy should facilitate the transfer of international employees in the most cost effective manner for the firm. Policy must give due consideration to equity & ease of administration.

International compensation objectives For employees: Policy should offer financial protection in terms of

benefits, social security & living cost in foreign location. Employee will expect that foreign assignment will offer financial advancement through income or savings. Employee expect the issues like housing, education for children & recreation to be addressed in the policy.

Key components of compensation Base salary Foreign service inducement / hardship allowance Allowances

Benefits

Key components of compensation Base Salary: A bit different in terms of the domestic concept where cash

compensation serves as a benchmark for other compensation elements such as bonus / benefits. In international compensation base salary is a foundation block. Primary component of the package of allowances may have many components which are directly related to base salary like foreign service allowance, cost of living allowance and also the basis of in service benefits. Major factor is whether the base salary is linked to PCN or TCN home country or international rate is being paid.

Key components of compensation Foreign service inducement / hardship allowance: PCN often receive salary premium as inducement or

hardship allowance for accepting the international transfer. Other factors considered for determining the hardship allowance can be week working hours, international comparison of living cost. Payments mostly being calculated on base salary and ranges between 5 to 40 % of base salary depending upon the length of service, job assigned, tax implications. Most of the time it is being offered to PCN and not to TCN.

Key components of compensation Allowances : Important factor in international compensation as

partly salary is based on it. COLA cost of living allowance based on living condition which varies from one location to another. Housing allowance paid in accordance with the benefit availing in the home country. Another option is company provided accommodation. And can be determined on the income / salary or the level of the job of the incumbent.

Key components of compensation Home leave allowance Education allowance Relocation allowance

Spouse assistance

Approaches to international compensation Going rate approach Balance sheet approach

Approaches to international compensation Going rate approach:1. 2.

a)b) c)

3.

Based on local market rate Relies on survey comparisons among Local nationals (HCN) Expatriates of same nationalities Expatriates of all nationalities Base pay and benefits may be supplemented by additional payments for low pay rates.

Approaches to international compensation Going rate: Advantages:

Equality with local nationals 2. Simplicity 3. Identification with host country 4. Equity amongst different nationalities1.

Approaches to international compensation Going rate : Disadvantage:

1. Potential re entry problems

Approaches to international compensation Balance sheet approach:

1. Basic objective is maintenance of home country living standard plus financial inducement 2. Home country pay and benefit are the foundation of this approach 3. Adjustment to home package to balance additional expenditure in host country 4. Most common system in usage by multinational firms

Approaches to international compensation Balance sheet: Advantages:

Equity between assignment and expatriates of same nationalities. 2. Facilitates expatriates re entry. 3. Easy to communicate to employees.1.

Approaches to international compensation Balance sheet : Disadvantage:1.

Can result in disparities between expatriates of different nationalities and between expatriates and locals.

Taxation Taxation : Most critical as no body wishes to pay. But it

would become more painful when you have been forced by the law to pay as per the host country norms and also as per the parent country norms. Taxation approaches: 1. Tax equalization: firms withhold an amount equal to home country tax obligation and pay it in the host country. 2. Tax protection: employee pays up to the amount of taxes he would pay on compensation in the home country, and is entitled to any windfall received if total taxes are less in the foreign country than in the home country.

Re entry and career issues Re entry to home country poses new challenges like re

entry shock or reverse cultural shock. Repatriation is considered to be the last stage of expatriation process and it highly contribute towards attracting the future expatriates as repatriation gives an idea about the organizational practice / effectiveness in handling the repatriation process.

Re entry and career issues Repatriation process:

Preparation developing plan for future and gathering information about new position. 2. Physical relocation travelling to new location usually to home country. 3. Transition settling to temporary accommodation where necessary arrangements for housing, schooling have been made. 4. Readjustment coping with re entry shock or reverse cultural shock as well as career demands.1.

Re entry and career issues Individual reaction to re entry:1. a)

b)c) 2. a) b) c)

Job related factors: Career anxiety No post assignment guarantee of employment Changes in the home workplace Work related: Employment relationship Re entry position Devaluing the overseas experience

Hofstedes Cultural Dimensions Five dimensions of culture: 1. Power distance: This refers to the degree of inequality that

2.

exists and is accepted among people with and without power. A high PD score indicates that society accepts an unequal distribution of power and people understand "their place" in the system. Low PD means that power is shared and well dispersed. It also means that society members view themselves as equals. Individualism: This refers to the strength of the ties people have to others within the community. A high IDV score indicates a loose connection with people. In countries with a high IDV score there is a lack of interpersonal connection and little sharing of responsibility, beyond family and perhaps a few close friends.

Hofstedes Cultural DimensionsMasculinity: This refers to how much a society sticks with, and values, traditional male and female roles. High MAS scores are found in countries where men are expected to be tough, to be the provider, to be assertive and to be strong. If women work outside the home, they have separate professions from men. 2. Uncertainty / avoidance: This relates to the degree of anxiety society members feel when in uncertain or unknown situations. High UAI-scoring nations try to avoid ambiguous situations whenever possible.1.

Hofstedes Cultural Dimensions5. Long term orientation: This refers to how much society values long-standing as opposed to short term traditions and values. This is the fifth dimension that Hofstede added in the 1990s after finding that Asian countries acted differently from western cultures.