International human resource management lesson 01

UNIT I LESSON HR AND GLOBAL BUSINESS CHALLENGE CONTENTS 1.0 Aims and Objectives 1.1 Introduction 1.2 Developing International HR Strategies 1.3 Issues in IHRM 1.4 Global Business Challenge 1.5 Meaning of IHRM 1.6 Difference between Domestic and International Human Resource 1.6.1 More HR Activities 1.6.2 Need for a Broader Perspective 1.6.3 More Involvement in Employee’s Personal Lives 1.6.4 Changes in Emphasis as the Workforce Mix of Expatriates and Locals Varies 1.6.5 Risk Exposure 1.6.6 More External Influences 1.7 Expanding the Role of HRM in International Firms 1.8 Let us Sum up 1.9 Lesson End Activity 1.10 Keywords 1.11 Questions for Discussion 1.12 Suggested Readings 1.0 AIMS AND OBJECTIVES After studying this lesson, you will be able to: Know the concept of international HRM Describe the complexity of IHRM Discuss the role of HRM in international firms 1.1 INTRODUCTION International dimensions of business and the globalisation of business have a significant impact on human resource management Therefore, a study of the concept of international management is necessary to understand the subject of international human resource management 8 International Human Resource Management The focus of international business is on international transactions, whereas international management deals with managing such transactions within the boundary setup by corporate strategy Thus, when a company decides to enter a foreign market, that decision incorporates planning to establish the ways by which business functions–marketing, accounting, human resource management, and so on–are to be managed in that distant location Managing the various functions and coordinating them with the parent company’s overall strategy is the task of international management The international dimension of management might follow the practice of its headquarters or, the demand of the local market, or a combination of both There is no single dimension that is found to be the best Suffice it to say that many companies follow practices set by their headquarters for upstream activities (such as manufacturing) and respond according to local practices for downstream activities (such as marketing) With the recent advent of technological innovation and the emergence of the Newly Industrialized Countries (NICs), we are witnessing a convergence among nations in terms of rates and preferences, financial systems, and organization design This convergence, along with complementary developments, are forcing organizations to adhere to “borderless” terms The interesting aspect of working internationally is that we have to work with people who have different cultural heritages Cultural differences should be taken into account when communicating and interacting across nations and across cultures within nations Although multinational companies are supranational in operations and strategy, people within them not necessarily share the same cultural values and views on people and life The multinational model is built on the premise that it is necessary to understand cultural differences, rather than trying to smooth them over or override them For example, companies like IBM may have a strong corporate culture, but one of the aspects that the work of Hofstede (1980a) demonstrated was that within IBM, there is wide cultural variation across nations Hofstede (1980a) was one of the first to attempt to develop a universal framework for understanding cultural differences in managers’ and employees’ values based on a worldwide survey, although not the only one Hofstede’s work focuses on ‘value systems’ of national cultures which are represented by four dimensions: Power distance: This is the extent to which inequalities among people are seen as normal This dimension stretches from equal relations being seen as normal to wide inequalities being viewed as normal Uncertainty avoidance: This refers to a preference for structured situations versus unstructured situations This dimension runs from being comfortable with flexibility and ambiguity to a need for extreme rigidity and situations with a high degree of certainty Individualism: This looks at whether individuals are used to acting as individuals or as part of cohesive groups, which may be based on the family or the corporation This dimension ranges from collectivism to individualism (Hui, 1990) Masculinity: Hofstede (1980a) distinguishes ‘hard values’ such as assertiveness and competition, and the ‘soft’ of ‘feminine’ values of personal relations, quality of life and about caring about others, where in a masculine society gender role differentiation is emphasized Firms operating in international markets face different conditions and competitions Multinationals are characterised by an interdependence of resources and responsibilities across all business units regardless of national boundaries These companies have to cope with large flows of components, products, resources, people and information among their subsidiaries, while simultaneously recognising the specialised resources and capabilities of each This demands a complex process of coordination and cooperation involving strong cross-unit integrating devices, a strong corporate identity and a well developed worldwide management perspective Since they look for opportunities in every country (markets, cheaper cost of capital, labour and raw materials) and react to threats by various means, including speedy withdrawal of resources, they have to necessarily deal with the national governments, which control entry and impose conditions on doing business in their territories, often safeguarding the interests of local firms and consumers Hence, the way multinationals business requires high external focus and internal responsiveness National cultural traits also play a critical role in the conduct of business by influencing customer preferences and the values, beliefs and behaviour of employees Thus, culture affects both internal and external perspectives of management, including the cost of doing business and its results People play a key role in any type of business activity but their role has become very critical in the new economy and service sector Multinationals have emanated mostly from developed economies, which now control about 50% of world trade and 75% of global GDP and dominate the service sector (60 to 80%) Therefore, how multinationals manage their human resources (acquire, allocate, utilise and reward) becomes an important field of study and analysis This area of study comes under the purview of IHRM Since national cultures crucially influence these people, management processes, motivation and decision-making, including negotiations and diplomacy–their study has also become necessary to understand the subject of IHRM The second approach to IHRM is the study of industrial relations and labour management practices and policies in different countries Study of industrial relations in a country is reflective of its state of society, historical evolution, power relationships between groups, class struggle, political framework, prevailing labour laws and national approach to labour management This is a very wide field and encompasses different approaches Check Your Progress What are the four dimensions of national culture as propounded by Hofstede? 1.2 DEVELOPING INTERNATIONAL HR STRATEGIES Among the various factors that need to be addressed by a company’s international HRM system for creating global strategies are: Building a global culture, which will encourage the managerial mindsets and attitudes to develop an integrated, networked organisation to cope with global customers and global transactions Developing the leadership and managerial capability and structure to support global strategies and operations HR and Global Business Challenge 10 International Human Resource Management Gaining management interest and involvement in human resource management Ensuring optimum quality and depth of managerial personnel to serve global customers Ensuring managers have the technical and managerial skills to work effectively at the global level Increasing the extent and scope of managerial talent in the organisation Identifying the depth of managerial talent in the organisation Developing global and local approaches to training and development Ensuring management succession Sustaining and improving performance at all levels in all areas of the company Implementing global human resource systems for recruitment, performance management, training and development, succession planning, remuneration and benefits Establishing a total quality culture, and changing people’s attitudes to quality Linking HRM to strategic objectives Types of International Employees Foreign parent expatriates are employees from the foreign parent headquarters assigned to the venture, usually in upper management positions Host country nationals are employees directly recruited and employed by the venture and are nationals of the host country They may occupy all levels in the organisation; however, initially they are usually not found in the upper management levels Third-country expatriates of the foreign parent are employees in the foreign parent organisation who are nationals of neither the foreign parent country nor the host parent country Third country expatriates of the new venture are employees recruited directly by the venture who are nationals of neither the foreign parent(s) country nor the host parent(s) country Check Your Progress Identify and mention the types of employees of an international firm 1.3 ISSUES IN IHRM Before 1986, most written material on international HR focused on managing international assignments, usually from an American perspective Many current books and articles are still written from a domestic point of view, but the literature is becoming considerably broader in scope The quantity and quality of such material have increased dramatically in the past five years The following topics have been most prevalent: Managing international assignments: This continues to be the most popular topic Articles about the selection, training, compensation and repatriation of expatriate failures Many articles refer to expatriate managements as the major concern of HR managers in multinational corporations Employee and family adjustment: People’s adjustment to expatriate assignments can be extremely challenging, regardless of the country For example, an American family on an assignment in Indonesia went to a restaurant with their pet dog The restaurant manager politely greeted them at the door, took their dog and, 30 minutes later–much to the family’s horror—served it to them In America, a Chinese family bought a can of what they believed—because of the picture on the label—to be fried chicken They were surprised and disappointed to open it and learn the can contained only the shortening used for cooking fried chicken Selecting the right person for a foreign assignment: This is critical for success Expatriates must be personally adaptable and their families capable of adjusting to new and unusual challenges Orientation and training are enormously valuable in helping expatriates and their families adjust to the new culture and learn a new language Compensation plans for expatriates are usually complex and expensive because of the taxes, allowances and premiums Repatriation can be traumatic and difficult for returning executives, and the transition back home needs to be planned as carefully as the move abroad Culture, communication and gauge: International HR professionals are expected to understand the implications of cultural differences between countries and their interplay with differing corporate cultures They are often responsible for seeing that expatriates are trained to adapt to cultural differences and overcome cultural shock Also, HR professionals play an important role in ‘cultural wrinkles’ in international joint ventures, mergers and acquisitions Language and communication: These are also important in international HR management Expatriate managers must learn the foreign language or rely on local interpreters to communicate with the local workforce Parent company officials may struggle to communicate with local managers in foreign subsidiaries Because human resource professionals are often expected to foster international communication, they must understand that effective communication involves more than just speaking the same language To communicate effectively, individuals must share the deeper meanings that are often embedded cultural norms and traditions Check Your Progress Mention any five issues in international human resource management 1.4 GLOBAL BUSINESS CHALLENGE 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: The biggest challenge is also the most obvious: the worldwide variations in social, political, and economic circumstances An HR practice that works in one country may be unacceptable in another Fluctuations in currency, government regulations, compensation expectations, job security, and learning styles are just a few examples of the local variations a global HR professional faces Currently, there is a European legislation that prohibits a company from sharing employment records across geographical boundaries without the employee’s permission – a potential threat to global staffing 11 HR and Global Business Challenge Perception of HR: Another global challenge is that the perceived value of HR function varies across locations In one country, HR may be perceived as a true business partner, working with high-level managers on critical strategic assessments In other country but within the same company, HR may be viewed as a transactional personnel department that handles administrative work 12 International Human Resource Management Attitude and actions of headquarters toward HR: These help to determine how seriously the HR function is viewed locally The position of the corporate chief HR officer also sends signal to local units on the importance of the HR function Resistance to change: A third major challenge facing global HR practices is that different locations have their own way of doing things and resisting change If an HR initiative that is viewed as being imposed by the corporate management on the local HR staff, then it can be difficult to gain acceptance This is true regardless of whether it’s a US multinational ‘forcing’ initiatives on its local business or a German company ‘forcing’ policies and practices on its international businesses Cultural differences in learning and teaching styles: These are subtle differences For example, the entertaining instructional style often used in the US might not find a receptive audience in Japan, where such an approach is not considered credible The field of international Human Resource Management has been characterized by three broad approaches Early work in this field emphasizes cross-cultural management approach and examining human bahaviour within organizations from an international perspective A second approach developed from the comparative industrial relations and HRM literature seeks to describe, compare and analyze HRM systems in various countries A third approach seeks to focus on aspects of HRM in multinational firms 1.5 MEANING OF IHRM Before we offer a definition of international HRM, we will first define the general field of HRM Typically, HRM refers to those activities undertaken by an organization to utilize its human resources effectively These activities would include at least the following: Human Resource Planning Staffing Performance Management Training and Development Compensation and Benefits Labour Relations (Industrial Relations) An article by Morgan (1986) on the development of international HRM presents a model of international HRM (shown in Figure 1.1) that consists of three dimensions: The three broad human resource activities: Procurement, allocation, and utilization (These three broad activities can be easily expanded into the six HR activities listed above) The three national or country categories involved in international HRM activities: The host-country where a subsidiary may be located, the home (parent) country where the firm is headquartered, and ‘other’ countries that may be the source of labour or finance 3 The three types of employees of an international firm: Host-country Nationals (HCNs), Parent-Country Nationals (PCNs), and Third-Country Nationals (TCNs) Thus, for example, IBM employs Australian citizens (HCNs) in its Australian operations, often sends U.S citizens (PCNs) to Asia-Pacific countries on assignments, and may send some of its Singapore employees on an assignment to its Japanese operations (as TCNs) Morgan defines international HRM as the interplay among these three dimensions-human resource activities, types of employees, and countries of operation We can see that in broad terms, international HRM involves the same activities as domestic HRM (e.g., procurement refers to HR planning and staffing); however, domestic HRM is involved with employees within only a single national boundary Human Resource Activities Procure Allocation Other Utilize Home Host-Country Nationals (HCNs) Host Parent-Country Nationals (PCNs) Countries Third-Country Nationals (TCNs) Type of Employees Source: Adapted from P.V Morgan, 1986, International human resource management Figure 1.1: Model of International HRM 1.6 DIFFERENCE BETWEEN DOMESTIC AND INTERNATIONAL HUMAN RESOURCE The complexities of operating in different countries and employing different national categories of workers are a key variable that differentiates domestic and international HRM, rather than any major differences between HRM activities performed Many firms underestimate the complexities involved in international operations, and there is some evidence to suggest that business failures in the international arena may often be linked to poor management of human resources It is worthwhile examining in greater detail what is meant by the statement that international HRM is more complex than domestic HRM Dowling (1988) has summarized the literature on similarities and differences between international and domestic HRM and argues that the complexity of international HR can be attributed to six factors that differentiate international from domestic HRM These factors are as follows: More HR activities; The need for a broader perspective; More involvement in employee’s personal lives; Changes in emphasis as the workforce mix of expatriates and locals varies; Risk exposure; and More external influences 13 HR and Global Business Challenge 14 International Human Resource Management 1.6.1 More HR Activities Expatriates are subject to international taxation, and often have both domestic (i.e., parent-country) and host-country tax liabilities Therefore, tax equalization policies must be designed to ensure that there is no tax incentive or disincentive associated with any particular international assignment The administration of tax equalization policies is complicated on account of the wide variations in tax laws across host countries and by the possible time lag between the completion of an expatriate assignment and the settlement of domestic and international tax liabilities In recognition of these difficulties, many multinational firms retain the services of a major accounting firm for international taxation advice 1.6.2 Need for a Broader Perspective HR managers working in an international environment face the problem of designing and administering programmes for more than one national group of employees (e.g., PCN, HCN, and TCN employees who may work together in Zurich at the European regional headquarters of a U.S.-based multinational) They need to take a broader view of issues For example, a broader, more international perspective on expatriate benefits would endorse the view that all expatriate employees, regardless of nationality, should receive a foreign service or expatriate premium when working in a foreign location Yet some multinationals, which routinely pay such premiums to their PCN employees on international assignment (even if the assignments are to desirable locations), are reluctant to pay premiums to foreign nationals assigned to the home country of firm Firms following such a policy often use the term inpatriate to describe foreign nationals assigned to the home country of the firm Such a policy confirms the common perception of many HCN and TCN employees that PCN employees are given preferential treatment 1.6.3 More Involvement in Employee’s Personal Lives A greater degree of involvement in the employee’s personal lives is necessary for the selection, training, and effective management of both PCN and TCN employees The HR department or professional needs to ensure that the expatriate employee understands housing arrangements, health care, and all other aspects of the compensation package provided for the assignment (cost-of-living allowances, premiums, taxes, etc.) Many multinationals have an “International HR Services” section that coordinates administration of the above programmes and provides services for PCNs and TCNs such as handling their banking, investments, homes while on assignment, coordinating homes visits, and final repatriation 1.6.4 Changes in Emphasis as the Workforce Mix of Expatriates and Locals Varies As the need for PCNs and TCNs declines and more trained locals become available, resources previously allocated to areas such as expatriate taxation, relocation, and orientation are transferred to activities such as local staff selection, training, and management development The latter activity may require establishment of a programme to bring high-potential local staff to corporate headquarters for developmental assignments 1.6.5 Risk Exposure The human and financial consequences of failure in the international arena are more severe than in domestic business For example, expatriate failure (the premature return of an expatriate from an international assignment) is a potentially high-cost problem for international companies Direct costs (salary, training costs, travel and relocation expenses) per failure to the parent firm may be as high as three times the domestic salary plus relocation expenses, depending on currency exchange rates and location of assignments Indirect costs such as loss of market share and damage to international customer relationships may be considerable (Zeira and Banai, 1984) Terrorism is another aspect of risk exposure relevant to international HRM Most major multinationals must now consider this factor when planning international meetings and assignments; it is estimated that firms spend to 2% of their revenues on protection against terrorism The HR department also may need to devise emergency evacuation procedures for highly volatile assignment locations The invasion of Kuwait and the ensuring Gulf War in 1991 is an example of a situation in which employees unexpectedly and very rapidly came to risk 1.6.6 More External Influences Major external factors that influence international HRM are the type of government, the state of the economy, and the generally accepted practices of doing business in each of the various host countries in which the multinational operates A host government can, for example, dictate hiring procedures, as is the case in Malaysia During the 1970s, the Malaysian government introduced a requirement that foreign firms comply with an extensive set of affirmative action rules designed to provide additional employment opportunities for the indigenous Malays who constitute the majority of the population but tend to be under-represented in business and professional employment groups relative to Chinese Malays and Indian Malays In addition to complexity, there are four other variables that moderate differences between domestic and international HRM These variables are discussed below: (i) Cultural Environment: Anyone travelling abroad, either as a tourist or businessperson, experiences situations that demonstrate cultural differences in language, food, dress, hygiene, and attitude to time While the traveller can perceive these differences as novel, even enjoyable, for people required to live and work in a new country, such differences can prove difficult They experience culture shock—a phenomenon experienced by people who move across cultures The new environment requires many adjustments in a relatively short period of time, challenging people’s frames of reference to such an extent that their sense of self, especially in terms of nationality, comes into question People, in effect, experience a shock reaction to new cultural experiences that cause psychological disorientation because they misunderstand or not recognize important cues Culture shock can lead to negative feelings about the host country and its people and a longing to return home Activities such as hiring, promoting, rewarding, and dismissal will be determined by the practices of the host country and often are based on a value system peculiar to that country’s culture A firm may decide to head a new international operation with an expatriate general manager but appoint as the HR department manager a local—a person who is familiar with the host country’s HR practices This practice can cause problems, though, for the expatriate general manager, as happened to an Australian who was in charge of a new mining venture in Indonesia The local manager responsible for recruitment could not understand why the Australian was upset to find that he had hired most of his extended family rather than staff with the required technical competence The Indonesian was simply ensuring that his duty to his family was fulfilled—since he was in a position to employ most of them, he was obligated to so The Australian, however, interpreted the Indonesian’s actions as nepotism, a negative practice according to his own value system (Dowling et al., 1989) 15 HR and Global Business Challenge 16 International Human Resource Management The HR department staff of a large firm in Papua New Guinea, were concerned over a number of accidents involving operators of very large, expensive, earthmoving vehicles The expatriate managers investigating the accidents found that local drivers involved in the accidents were chewing betel nut, a common habit for most of the coastal peoples of Papua, New Guinea, and other Pacific islands Associating the betel nut with depressants such as alcohol, the expatriate managers banned the chewing of betel nut during working hours In another move to reduce the number of accidents, free coffee was provided at loading points, and drivers were required to alight from their vehicles at these locations What the managers did not realize was that nut, like their culturally acceptable coffee, is, in fact, a stimulant, though some of the drivers were chewing it to cover up the fact that they drank beer before commencing work (ii) Industry Type: Porter (1986) suggests that the industry (or industries if the firm is a conglomerate) in which a multinational firm is involved is of considerable importance because patterns of international competition vary widely from one industry to another At one end of the continuum of international competition is the multidomestic industry, one in which competition in each country is essentially independent of competition in other countries; traditional examples include retailing, distribution, and insurance At the other end of the continuum is the global industry, one in which a firm’s competitive position in one country is significantly influenced by its position in other countries; examples include commercial aircraft, semiconductors, and copiers The role of the HRM function in multidomestic and global industries can be analyzed using Porter’s value-chain model In Porter’s (1985) model, HRM is seen as one of four support activities for the five primary activities of the firm Since human resources are involved in each of the primary and support additives, the HRM function is seen as cutting across the entire value chain of a firm If the firm is in a multidomestic industry, the role of the HR department will most likely be more domestic in structure and orientation The main role for the HRM function would be to support the primary activities of the firm in each domestic market to achieve a competitive advantage through either cost/efficiency or product/service differentiation (Schelur 1984) Lanrent (1986) proposes that a truly international conception of human resource management would require the following steps: An explicit recognition by the parent organization that its own peculiar ways of managing human resources reflect some assumptions and values of its home culture An explicit recognition by the parent organization that its peculiar ways are neither universally better nor worse than others but are different and likely to exhibit strengths and weaknesses, particularly abroad An explicit recognition by the parent organization that its foreign subsidiaries may have other preferred ways of managing people that are neither intrinsically better nor worse, but could possibly be more effective locally A willingness from the headquarters to not only acknowledge cultural differences, but also to take active steps in order to make them discussable and therefore usable The building of a genuine belief by all involved that more creative and effective ways of managing people could be developed as a result of cross-cultural learning (iii) Reliance of the Multinational on its Home-Country Domestic Market: A pervasive but often ignored factor that influences the behaviour of multinationals and resultant HR practices is the extent of reliance of the multinational on its home-country domestic market The United Nations Conference on Trade and Development (UNCTAD) in its annual survey of foreign direct investment calculates what it refers to as an “index of transnationality,” which is an average of ratios of foreign assets to total assets, foreign sales to total sales, and foreign employment to total employment (The Economist 1997) Based on this index of transnationality, the most foreignoriented multinational is Nestle, with 87% of assets, 98% of sales, and 97% of employees located outside of Switzerland The top ten multinationals are as follows: Nestle (Switzerland) Thomson (Canada) Hoderbank Finaciere (Switzerland) Seagram (Canada) Solvay (Belgium) Asea Brown Boveri (Sweden/Switzerland) Electrolux (Sweden) Unilever (Britain/Netherlands) Philips (Britain/Netherlands) 10 Roche (Switzerland) There is not a single U.S firm in the top fifteen multinationals listed—CocaCola and McDonald’s are ranked 31st and 42nd, respectively The reason is as obvious as it is important—the size of the domestic market for U.S firms A very large domestic market influences all aspects of how a multinational organizes its activities Thus, multinationals from small advanced economies like Switzerland (population million), Belgium (10 million), Sweden (9 million), and the Netherlands (15 million) are in a quite different position to U.S multinationals based in the largest single national market in the world with over 250 million people (iv) Attitudes of Senior Management to International Operations: It is likely that if senior managements not have a strong international orientation, the importance of international operations may be underemphasized in terms of corporate goals and objectives In such situations, managers may tend to focus on domestic issues and minimized differences and international HRM practices This failure to recognize differences in managing human resources in foreign environments, frequently results in major difficulties in international operations (Desatink and Bennett, 1978) The challenge for the corporate HR manager is to work with top management in fostering the desire “global mindset.” Check Your Progress What are the factors that differentiate international HRM with that of domestic HRM? 17 HR and Global Business Challenge 18 International Human Resource Management 1.7 EXPANDING THE ROLE OF HRM IN INTERNATIONAL FIRMS Bhatt et al (1988) examined the role of HR staffs and managers in the strategic planning of multinational firms The study concluded that HR involvement at the corporate level tended to be informal, limited in scope, and heavily dependent upon the competence and personal characteristics of the senior HR manager The HR manager played a major role separate from that of the department or functional area Staffing was the main area in which the HR managers were involved in strategy formulation; other traditional HR areas (e.g., compensation and evaluation of manager performance) were viewed as general management concerns and not primarily HR related At the SBU level, the HR department was more involved in strategic planning; its role was more established and the emphasis was on how HR staff could help implement a strategy As Doz and Prahalad (1986) point out, a HR system can be strong only if it receives extensive support and involvement from senior management It is difficult to advocate international HRM policies if one is not fully appreciative of the importance of the firm’s international operations to its overall profitability and competitiveness, and aware as well of the special demands placed on the HR function by the complex global environment The need for a global perspective applies to both the individual HR manager and the HR department To accomplish this goal, Reynolds (1992) suggests that HR managers be transferred from headquarters to international operations, not into subsidiary HR departments but into other line positions that will broaden their perspectives Moving HR staff from the subsidiaries into headquarters is another way of encouraging headquarters HR staff to appreciate the international operations of the firm and to develop policies and activities to support staff throughout the entire global network Smaller firms with limited resources may find it impossible to finance staff transfers for development purposes, but they may be able to identify other ways to globally orientate HR staff, such as an annual visit to key foreign subsidiaries Larger multinationals schedule frequent meetings of corporate and subsidiary HR managers as a way to foster corporate identity and to ensure greater consistency in global HR practices (Brandt, 1991) 1.8 LET US SUM UP The interesting aspect of working internationally is that we have to work with people who have different cultural heritages Multinationals are characterised by an interdependence of resources and responsibilities across all business units regardless of national boundaries These companies have to cope with large flows of components, products, resources, people and information among their subsidiaries, while simultaneously recognising the specialised resources and capabilities of each Therefore, how multinationals manage their human resources (acquire, allocate, utilise and reward) becomes an important field of study and analysis This area of study comes under the purview of IHRM 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 19 HR and Global Business Challenge Resistance to change Cultural differences in learning and teaching styles Morgan defines international HRM as the interplay among these three dimensions-human resource activities, types of employees, and countries of operation The complexities of operating in different countries and employing different national categories of workers are a key variable that differentiates domestic and international HRM 1.9 LESSON END ACTIVITY What inter-country differences affect HRM? Give examples of how each may specifically affect HRM 1.10 KEYWORDS HRM: A process of bringing people and organisations together so that the goals of each one is met, effectively and efficiently IHRM: It is the process of procuring, allocating and effectively utilising human resources in a multinational corporation International corporation: A domestic firm that builds on its existing capabilities to penetrate overseas markets Multinational corporations: A more complex form that usually has fully autonomous units operating in multiple countries Global corporation: It has corporate units in a number of countries that are integrated to operate as one organisation worldwide 1.11 QUESTIONS FOR DISCUSSION What is International HRM? What are the issues involved in it? What are the barriers to effective global HRM? Define International HRM Explain the International HRM model by a programme “India is seen to be more attractive than China for Foreign Direct Investment” Substantiate this statement What are the various steps required for a truly international conception of HRM? Check Your Progress: Model Answers CYP Hofstede’s four dimension of National Culture: Hofstede’s work focuses on ‘value systems’ of national cultures which are represented by four dimensions: Power distance: This is the extent to which inequalities among people are seen as normal This dimension stretches from equal relations being seen as normal to wide inequalities being viewed as normal Uncertainty avoidance: This refers to a preference for structured situations versus unstructured situations This dimension runs from being comfortable Contd 20 International Human Resource Management with flexibility and ambiguity to a need for extreme rigidity and situations with a high degree of certainty Individualism: This looks at whether individuals are used to acting as individuals or as part of cohesive groups, which may be based on the family or the corporation This dimension ranges from collectivism to individualism (Hui, 1990) Masculinity: Hofstede (1980a) distinguishes ‘hard values’ such as assertiveness and competition, and the ‘soft’ of ‘feminine’ values of personal relations, quality of life and about caring about others, where in a masculine society gender role differentiation is emphasized CYP Types of Employees of an International Firm: (i) Host-country nationals (ii) Parent-country nationals (iii) Third-country nationals CYP Issues in IHRM: (i) Managing international assignments (ii) Employee and family adjustment (iii) Selecting the right person for a foreign assignment (iv) Culture, communication and gauge (v) Language and communication CYP The complexity of international HR can be attributed to six factors that differentiate international HRM from domestic HRM These factors are as follows: More HR activities; The need for a broader perspective; More involvement in employee’s personal lives; Changes in emphasis as the workforce mix of expatriates and locals varies; Risk exposure; and More external influences 1.12 SUGGESTED READINGS P L Rao, International Human Resource Management, Excel Books, New Delhi, 2008 Briscoi, Schuler and Claus, International Human Resource Management, Routledge, 2008 Breuester, Sparrow and Vernon, International Human Resource Management (3rd edition) P.J Dowling and D.E Welch, International Human Resource Management, Thomson, London, 2004  ... on human resource management Therefore, a study of the concept of international management is necessary to understand the subject of international human resource management 8 International Human. .. Rao, International Human Resource Management, Excel Books, New Delhi, 2008 Briscoi, Schuler and Claus, International Human Resource Management, Routledge, 2008 Breuester, Sparrow and Vernon, International. .. Adapted from P.V Morgan, 1986, International human resource management Figure 1.1: Model of International HRM 1.6 DIFFERENCE BETWEEN DOMESTIC AND INTERNATIONAL HUMAN RESOURCE The complexities of