International Human Resources Management

1
 IH RM
● The process of procuring, allocating and effectively utilizing
human resources in an international business is called
international human resources management (IHRM).
● This is the HR M issues and problems arising from the
internationalization of business, and the H R M strategies,
policies and practices which firms pursue in response to the
internationalization process
● IHRM is the management of HR in business operations in at
least two nations

Need for IHRM

● Managing expatriates
● G lobalization has forced H RM to have
international orientation
● Effectively utilize services of people at both the
2
corporate office and at the foreign plants
 Differences between Domestic H R M and IHRM
● M ore HR activities: taxation, culture orientation,
administrative services
● The need for a broader perspective: provide to multiple needs
● M ore involvement in employees’ personal lives:
adjustment, spouses, children etc.
● C hanges in emphasis as the workforce mix of expatriates
and locals varies: fairness
● Risk exposure: expatriate failure, terrorism
● Broader external influences: government regulations, ways
of conduct
● C omplexity involved in operating in different countries,
varied nationalities of employees
● The different Cultural Environment
● The industry or industries with which the M N C is involved
● Attitudes of Senior Management
3
● Extent of reliance of M N C on home country domestic market
 Major Diffe. between Domestic H R M 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

4
 Main challenges in IHRM

● High failure rates - expatriation and repatriation

● D eployment – getting the right mix of skills in
the organization regardless of geographical location
● Knowledge and innovation dissemination –
managing critical knowledge and speed of information
flow
● Talent identification and development –
identifying capable people who are able to function
effectively
● Barriers to women in IHRM
● International ethics
● Language (e.g. spoken, written, body)
5
 Main challenges in IHRM …

● Different labor laws

● Different political climate
● Different stage(s) of technological advancement
● D ifferent values and attitudes e.g. time,
achievement, risk taking
● Roles of religion e.g. holy objects, prayer,
taboos, holidays, etc
● Educational level attained
● Social organizations e.g. social institutions,
authority structures, interest groups, status systems

6
 Models of IHRM

7
 Reason for Growing interest in IHRM

8
 Indicators of Globalization

● International trade is growing at a more rapid rate than

world output
● Foreign direct investment (FDI) flows have set record
levels in recent years
● Cross-border inter-firm agreements have rise
dramatically during the last 20 years
● Social, economic, and political developments
throughout the world have changed the way global
business is conducted.

9
 Pressures of globalization
● Globalization is the system of interaction among the countries of
the world in order to develop the global economy.
● Globalization involves technological, economic, political, and
cultural exchanges made possible largely by advances in
communication, transportation, and infrastructure.
● The advent of the era of 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 pressures it poses on IHRM include:
- Remaining competitive throughout the world
- Efficient
- Locally Responsive
- Flexible and adaptive
- C apable to transforming learning across their
10
globally dispersed units.
 Global Challenges

International companies face many challenges when try

to make HR Practices consistent across all the
locations/offices.
Top Three challenges included:
● V ariations in social, political and
economic circumstances.
● Different locations/offices have their own way of doing
things are resistant to change.
● The perceived value of the H R function varies
across locations/offices.

11
 More HR activities

12
 More HR activities ...

13
 Need for a Boarder Perspective

14
15
16
 Types of International Organizations
There are four types of International Organizations:
1. International Corporations
2. Multinational Corporations
3. Global Corporations
4.Transnational Corporations
1. International Corporations
Domestic firms that builds on its existing capabilities
to penetrate overseas market.
Example : Honda, General Electric
2.Multinational Corporations
- MN C s have operating units (subsidiaries) located in
foreign countries
- Subsidiaries function as autonomous units
18
Examples : Shell, Philips
 Types of International Organizations …
3.Global Corporations
-Maintains control over its operations
worldwide (subsidiaries) through a centralized
home office.
-They treat the entire world as a single market
Examples : Matsushita –Panasonic Global
4. Transnational Corporations
- Provides autonomy to independent country operations but
bring these operations together into an integrated whole
through networked structure
- They combines the local responsiveness of an M N C and the
efficiency of a global corporation
Examples : Ford & Unilever
18
 Major Factors Affect IHRM

19
 IHRM Planning

20
 IHRM Recruitment and selection

21
 International staffing

• refers to the process of selecting employees for staffing

international operations of an MNC

MNCs can be staffed using three different sources

a. Home country or Parent Country National (PCN)
b. Host Country Nationals (HCN)
c. Third Country Nationals (TCN)

Pa
ge
 • PCN
Employees of an organization who are citizens of the country in
which the headquarters of the company is located
• HCN
Employees of an organization who are the citizens
of the country in which the foreign subsidiary is located
• TCN
Employees of an organization who are the citizens of the
country other than the country where the organization is
headquarterd and the country that is hosting the subsidiary

Pa
ge
 Hiring PCNs

24
 Hiring H C N s

25
 Hiring TCNs

26
 Different Approaches in Global Compensation

The “Balance Sheet Approach”

● Home-country groups of expenses—income taxes, housing,
goods and services, and discretionary expenses—are the
focus of attention.
● The employer estimates what each of these four expenses is
in the expatriate’s home country, and what each will be in
the host country.
● The employer then pays any differences such as additional
income taxes or housing expenses.

27
 Different Approaches in Global Compensation

Local Going Rate Approach

● This can be desirable in high-paying countries such as the
US of Switzerland
● The market rate is also preferred when the assignment
is likely to be long term or permanent.
● The main advantage of this method that it is administratively
simpler than the balance sheet.

Hybrid Approach
● This approach refer variation of the greater of home or host
system where a balance sheet is compared to local market
rate equivalent.

28
30