A learning Resource on IHRM

1. International Human Resources
Management(IHRM) Issues-A learning Resource
Jayadeva de Silva.M.Sc ,FIPM ,FITD
Objectives
After following this lesson, you should be able to:
 Identify the types of organizational forms used for competing
internationally.
 Explain the economic, political-legal, and cultural factors in
different countries that HR managers need to consider.
 Explain how domestic and international HRM differ.
 Discuss the staffing process for individuals working
internationally.
 Identify the unique training needs for international assignees and
their employees.
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2.  Identify the characteristics of a good international compensation
plan.
 Reconcile the difficulties of home- and host-country performance
appraisals.
 Explain how labor relations differ around the world.
Increasing Importance of Global Human Resource
Understanding Managing Across Borders
Types of Corporations
• International corporation
 Domestic firm that uses its existing capabilities to move
into overseas markets.
• Multinational corporation (MNC)
 Firm with independent business units operating in
multiple countries.
• Global corporation
 Firm that has integrated worldwide operations through a
centralized home office.
• Transnational corporation
 Firm that attempts to balance local responsiveness and
global scale via a network of specialized operating units.
How International Companies Affect the World Economy
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3. o Their production and distribution extend beyond national
boundaries, making it easier to transfer technology.
o They have direct investments in many countries, affecting the
balance of payments.
o They have a political impact that leads to cooperation among
countries and to the breaking down of barriers of nationalism.
How Does the Global Environment Influence Management?
Unified Economies
Closely partnered nations such as the European Union (EU) have
developed into strong competitors.
Promotes job growth in trading nations.
Cultural environment
The communication patterns, religion, values and ideologies,
education, and social structure of a host country influence how HR is
conducted in that country.
Cultural Environment of International Business
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4. Domestic versus International HRM
Issues in international HRM in helping employees adapt to a new and
different environment outside their own country:
Relocation
Orientation
Objective
Translation services
International Staffing
Expatriates, or Home-country Nationals
Employees from the home country who are on international
assignment.
Host-country Nationals
Employees who are natives of the host country.
Third-country Nationals
Employees who are natives of a country other than the home
country or the host country.
Changes in International Staffing over Time
Hiring Host-Country Nationals
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5. Three main advantages:
Hiring local citizens is generally less costly than relocating
expatriates.
Since local governments usually want good jobs for their citizens,
foreign employers may be required to hire locally.
Most customers want to do business with companies they perceive
to be local versus foreign.
Recruiting Internationally
Work Permit, or Visa
Government document granting a foreign individual the right to
seek employment.
Guest Workers
Foreign workers invited to perform needed labor.
Apprenticeships
Vocational training programs in skilled trades.
Transnational Teams
Teams composed of members of multiple nationalities working on
projects that span multiple countries.
Selecting Global Managers
Global manager
A manager equipped to run an international business
Skills Categories
Ability to seize strategic opportunities
Ability to manage highly decentralized organizations
Awareness of global issues
Sensitivity to issues of diversity
Competence in interpersonal relations
Skill in building community
Selecting Global Managers
•Begin with self-selection.
•Create a candidate pool.
•Assess core skills.
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6. •Assess augmented skills and attributes.
Measured Expatriate Characteristics
Core Skills
Skills that are considered critical to an employee’s success abroad.
Augmented Skills
Skills that are helpful in facilitating the efforts of
expatriate managers.
Failure rate
Percentage of expatriates who do not perform satisfactorily.
Comparison of Advantages in Sources of Overseas Managers
Host Country Home country Third country
Less costly Talent available within company Broad experience
Preferred by
host-country Greater control International outlook
Intimate knowledge of Company experience Multilingualism
environment and culture
Language facility Mobility
Experience provided to
Corporate xecutives
Expatriate Selection Criteria
Causes of Expatriate Assignment Failure
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7. • Family adjustment
• Lifestyle issues
• Work adjustment
• Bad selection
• Poor performance
• Other opportunities arise
• Business reasons
• Repatriation issues
Training and Development
Essential training program content to prepare employees for working
internationally:
Language training
Cultural training
Assessing and tracking career development
Managing personal and family life
Repatriation
Culture shock
Perpetual stress experienced by people who settle overseas.
Preparing for an International Assignment
To prepare for an international assignment, one should become
acquainted with the following aspects of the host country:
1. Social and business etiquette
2. History and folklore
3. Current affairs, including relations between the host country
and the United States
4. Cultural values and priorities
5. Geography, especially its major cities
6. Sources of pride and great achievements of the culture
7. Religion and the role of religion in daily life
8. Political structure and current players
9. Practical matters such as currency, transportation, time zones,
hours of business
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8. 10 The Language
Training Methods
o Reviewing available information about the host company: books,
magazines, video tapes.
o Conversations with host country natives.
o Sensitivity training to become familiar with the customs and
overcome prejudices.
o Temporary assignments to encourage shared learning.
A Synthesis of Country Clusters
Returning from an Overseas Assignment
Repatriation
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9. The process of an employee transitioning home from an
international assignment.
Throw a “welcome home” party.
Offer counseling to ease the transition.
Arrange conferences and presentations to make certain that
knowledge and skills acquired away from home are identified and
disseminated.
Get feedback from the employee and the family about how well the
organization handled the repatriation process.
Compensation
Different countries have different norms for employee
compensation.
Financial (money) incentives versus nonfinancial incentives
(prestige, independence, and influence)
Individual rewards versus collectivist concerns for internal equity
and personal needs
General rule: match the rewards to the values of the local culture—
create a pay plan that supports the overall strategic intent of the
organization but provides enough flexibility to customize particular
policies and programs to meet the needs of employees in specific
locations.
Forces Driving Global Pay
CULTURAL PREFERENCES
Importance of status
Role of individual vs. organization vs. government
Equality vs. disparity
Achievement vs. relationships
ECONOMIC CONDITIONS
Size of economy
Types of industries, natural resources
Inflation, unemployment
Protectionism vs. open market
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10. PERSONAL PREFERENCES
Attitudes toward risk
Quality of life vs. work
Short- vs. long-term
Competitiveness vs. solidarity
SOCIAL CONSTRAINTS
Income tax rates, social costs
Laws and regulations
Collective bargaining, worker participation
Skills, education of workforce
Compensation of Host-Country Employees
o Hourly wages vary dramatically from country to country.
o Pay periods are different.
o Seniority may be an important factor.
o High pay rates can upset local compensation practices.
o Bonuses, profit-sharing, benefits and paid leave may be more
extensive and legally required.
Hourly Wages in Different Countries* in US Dollars
Norway 31.55
Germany (former West) 31.25
Switzerland 27.87
Belgium 27.73
Sweden 25.18
United States 21.97
France 21.13
Britain 20.37
Japan 20.09
Australia 20.05
Canada 19.28
Italy 18.35
Spain 14.96
Israel 11.73
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11. Korea 10.28
Portugal 6.23
Taiwan 5.84
Brazil 2.67
Mexico 2.48
China 0.63
Sri Lanka 0.49
Compensation of Expatriate Managers
o Provide an incentive to leave the United States
o Allow for maintaining a U.S. standard of living
o Provide for security in countries that are politically unstable or
present personal dangers
o Include provisions for good healthcare
o Provide for the education of children
o Consider foreign taxes the employee is likely to have to pay (in
addition to domestic taxes) and help with tax forms and filing
o Allow for maintaining relationships with family, friends, and
business associates.
o Facilitate reentry home
o Be in writing
Expatriate Compensation Systems
Home-Based Pay
Pay based on an expatriate’s home country’s compensation
practices
Balance-Sheet Approach
A compensation system designed to match the purchasing power in
a person’s home country
Calculate base pay
Figure cost-of-living allowance (COLA)
Add incentive premiums
Add assistance programs
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12. Expatriate Compensation Systems (cont’d)
Host-Based Pay
Expatriate pay comparable to that earned by employees in a host
country to which the expatriate is assigned.
Localization
Adapting pay and other compensation benefits to match that of a
particular country
Other Issues
Adequacy of medical care
Personal security
Education
Performance Appraisal of International Managers
Who Should Appraise Performance?
Home-country evaluations
Host-country evaluations
Adjusting Performance Criteria
Augmenting job duties
Individual learning
Organizational learning
Providing Feedback
Debriefing interview
Boosting ROI of Expatriates
Major initiatives planned to improve assignment return on
investment (ROI):
Better candidate selection 32%
Career-planning skills 26
Communicating objectives 24
Assignment preparation 20
Monitoring program 17
Cross-cultural training 10
Developing or expanding intranet 7
Communication/recognition 6
Web-based cultural training 5
Mandating destination support 4
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13. Other 17
International Organizations and Labor Relations
International Differences in Unions
The level at which bargaining takes place (national, industry, or
workplace)
The degree of centralization of union-management relations
The scope of bargaining (parties and issues)
The degree to which government intervenes
The degree of unionization and union strength.
Key Terms
 augmented skills
 balance-sheet approach
 codetermination
 core skills
 cultural environment
 culture shock
 expatriates, or home-country nationals
 failure rate
 global corporation
 global manager
 guest workers
 home-based pay
 host-based pay
 host country
 host-country nationals
 international corporation
 localization
 multinational corporation (MNC)
 repatriation
 third-country nationals
 transnational corporation
 transnational teams
 work permit, or visa
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14. Your Notes
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