introduction to global human resource Management.

1. 1
UNIT- I
INTRODUCTION
Introduction:
Global Human Resources Management is all about aligning the policies and procedures,
rules and regulations pay and perks, trends and practices and benchmarking the standards of the
home country on par with the global standards with a global mindset. In addition, it involves
managing the diversified workforce globally. Succinctly Global HRM is all about blending the
HR activities as per the global business environment by dreaming globally but acting locally.
Advantages of GHRM:
There are number of advantages along with GHRM as
 There is more room for growth and expansion.
 Capitalizing on the current globalization.
 Integrating all people as one with the rapid growth of technology.
 it leads to diversity which is the hallmark of GHRM.
 People learn to appreciate the similarities ignoring the culture, ethnic, religious and
regional differences.
Disadvantages of GHRM:
 There will be cultural conflicts leading to differences among the people.
 There is lack of mobility of the people.
 Several other complications and implications involved in GHRM.
Objectives of global HRM as follows:
1. Create a local appeal without compromising upon the global identity.
2. Generating awareness
3. Cross cultural sensitivities among managers globally
4. Hiring of staff across geographic boundaries.
5. Training upon cultures and sensitivities of the host country.
The purpose of international human resource management: is to get the competitive advantage
by hiring and improving the skills, efficiency, and productivity through the process of procuring,
allocating, assigning, providing training & development, performance appraisal, compensating
for the effective utilization of human resources in the global environment. Globalization and the
growth of information technology and the advancements in modern business make the world to
create and adopt new methods and concepts of human resource management in the form of
international human resource management (IHRM).

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GLOBAL HR PERSPECTIVE IN NEW ECONOMY
Categorization of countries in the concept of IHRM
In the concept international human resource management, the countries having headquarters and
subsidiaries are categorized as follows.
 Home country: Where the headquarters is located
 Host country: Where the subsidiary is located
 Third/other countries: These are the sources of finance and human resources
Types of employees in IHRM
The name international human resource management itself indicates that human
resources are recruited from various countries. Here nationals of various countries contribute
their skills and efficiently for the growth of the organization. They are mainly three types, parent
or home country nationals, host country nationals, and third country nationals. These three types
are differentiated on the basis of citizens of headquarters of the company, citizens of the
subsidiaries of the company, and citizens of various countries.
 Home country or Parent Country Nationals (PCNs): Home country nationals are the
employees of the organization and these are the citizens of the country where the head
quarter is located.
 Host Country Nationals (HCNs): Host country nationals are the citizens of the country
where the subsidiary is located or when any organization recruits the nationals of the
country where the subsidiary is located.
 Third-country Nationals (TCNs): Third country nationals are the citizens of the other
countries, and they are neither the citizens of the country where the headquarters is
located nor the citizens of the country where the subsidiary located.
Drivers of globalization:
 Huge markets: rapidly developing economies have huge markets. For companies, mostly
in developed countries, which have been operating below capacities, the emerging
markets offer immense opportunities to increase their sales and profits.
 Low cost of production: many multinational companies are locating their subsidiaries in
low wage and low cost countries to reduce their cost of production.
 Changing demographics: this also add to increasing globalization. Demographic changes
are more visible in India; the country has the largest number of young people in the world
today. These young people will join the employable workforce in the next few years, thus
creating a huge surge of productivity, incomes and savings. Richer countries will face a
shortage of employability people while India will have a surplus of them.
 Regional trading blocks: this also is adding to the pace of globalization. WTO (World
Trade Organization), EU (European Union), NAFTA (North American Free Trade
Agreement), and FTAA (Free Trade Area of the Americas) are a few of the major
alliances among countries trading blocks seek to promote international business by
minimizing trade and investment barriers. Integrating among countries results in efficient
allocation of resources throughout the trading area, promoting the growth of some
businesses and the decline of others, the development of new technology and products
and the elimination of old.

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 The declining of trade and investment barriers: the early period of the twentieth century
witnessed high levels of barriers on trade and investment. The aim of such restriction was
to protect domestic industries from foreign competition. Underlying the argument for
protection of domestic industries is the infant industry reasoning. Traffic protection
against the imported commodity is needed.
 Technology: the most powerful instrument that triggered globalization is technology.
Revolution is probably the right word which can best describe the pace at which
technology has changed in the recent past and is continuous to change. Significant
developments have been witnessed in communication, transportation and information
processing, including the emergence of the internet.
Some of the most important perspective of international HRM are as follows: 1. Cultural Factors
2. Economic Conditions 3. Labour Cost Factors 4. Labour Relations Factors.
Perspective influences practices. That the perspective of international HRM will differ from the
indigenous one, the delineation of the former seems in the fitness of the context. The major
factors that form perspective for international HRM and, in turn, influence HRM practices are
scanned as cultural, economic, political, labour cost and industrial relations. These are discussed
in seriatim.
1. Cultural Factors: Culture means shared beliefs, values, norms, and moral by the people.
Organizational culture means a pervasive underlying set of beliefs, assumptions, values,
shared feelings and perceptions, which influence the behaviour of people in the
organization. The same distinguishes one organization from another. Similarly, at macro
level too, wide ranging cultural differences exist across the nations/countries. For
example, the eastern culture widely varies from the western one. Just to quote, the
incentive plans in Asia (Japan) tend to focus on the work group, while in the west the
more usual prescription is still to focus on individual worker incentives’. The research
work of Geert Hofstede’ undertaken into IBM using the responses of managers from 66
different countries produced some interesting evidences on cultural differences. In his
study Hofstede found that societies differ on four primary dimensions which he called:
power distance (PDI), uncertainty avoidance (UAI), individuality (INV) and masculinity
(MASC). A brief discussion of these follows:
 Power Distance (PDI): By power distance Hofstede means the extent to which
members of a society accept that power in institutions and organizations is and
should be distributed equally. Accordingly, the distance between the government and
the governed is narrower in democratic societies like India than in dictatorial ones
like Philippines. This means, Hofstede concludes, the workers in India will have far
more chances of influencing decisions of the government than would the workers in
Philippines. According to him, the same applies to organizations also.
 Uncertainty Avoidance (UAI): In simple terms, uncertainty avoidance means the
creation of set of rules and structures to eliminate ambiguity in organizations and

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support those beliefs that are promising for certainty and conformity. Differences
abound among countries from this point of view also For example, while at work
place, the Indians, Germans and the French feel a much greater need for rules and
regulations than do the Swedes and the British. The attitude of uncertainty avoidance
is much frowned on in high PDI countries like Philippines and Germany.
 Individualism (INV): In simple terms, individualism means the degree of
preference of individuals expected to look after themselves and their immediate
families. Just reverse is collectivist. From this stand point, USA and Britain score
high on the individual index and Indonesia and Pakistan score low. What these mean
is the preference for living and working in individual and collectivist ways
respectively.
 Masculinity (MASC): By masculinity, Hofstede means the extent to which the
society values assertiveness (masculinity) and caring (femininity). In simple terms,
masculinity pertains to those societies in which social gender roles are clearly
distinct, that is, men are supposed to be assertive tough and focused on material
success. Femininity pertains to societies in which women are supposed to be more
modest, tender and caring for the quality of life.
2. Economic Conditions: Like cultural differences, there abound economic differences among
nations/countries. Differences n economic conditions or systems cause inter-country
differences in HR practices. For example, in case of a country with free enterprise systems,
the need for efficiency tends to favour HR practices and policies that encourage productivity,
efficient workers, etc. On the other side, when one moves along the scale toward more
socialist systems, HR practices tend to shift toward different direction like preventing
unemployment. It may do so even at the expense of sacrificing efficiency.
3. Labour Cost Factors: HR practices are also influenced by differences in labour costs existed
in different countries. If the labour cost is high, it can require more focus on labour efficiency
which, in turn, can influence HR practice to shift toward improving labour performance. Labour
may get remuneration as per performance i.e., pay-for-performance. Evidences are available to
mention the inter-country differences in labour costs. Labour cost is quite more in U.K. than in
India, for example. Wide gaps in hours worked also exist among the countries which also need to
be considered while studying HR practices in a particular country. Intra-country differences in
hours worked exist across organizations. For example, in India, there is 5 days week (work) in
the central government departments, while its 6 days week in the state government departments.
This affects HR practices such as vacations between the two types of organizations in the same
country.
4. Labour Relations Factors: Labour relations or industrial relations i.e., relationship between
employees, employers and the government that vary from country to country and have an
enormous bearing on affecting HR practices. For instance, in Germany, codetermination is the
rule. Here, the employees enjoy legal right to have their voice in the matters of their company.

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CHALLENGES OF GLOBALISATION
Globalization poses four major challenges that will have to be addressed by governments, civil
society, and other policy actors.
 One is to ensure that the benefits of globalization extend to all countries. That will certainly
not happen automatically.
 The second is to deal with the fear that globalization leads to instability, which is
particularly marked in the developing world.
 The third challenge is to address the very real fear in the industrial world that increased
global competition will lead inexorably to a race to the bottom in wages, labor rights,
employment practices, and the environment.
 And finally, globalization and all of the complicated problems related to it must not be used
as excuses to avoid searching for new ways to cooperate in the overall interest of countries
and people.
As MNCs do business in new global markets, they may encounter several
significant challenges:
 Ethical Business Practices: Arguably the most substantial of the challenges faced by MNCs,
ethical business practices in areas such as labor, product safety, environmental stewardship,
corruption, and regulatory compliance have historically played a dramatic role in the success
or failure of global players. For example, Nike’s brand image was hugely damaged by reports
that it utilized sweatshops and low-wage workers in developing countries. In some nations,
particularly those without a strong rule of law, bribing public officials (e.g., paying them off
with gifts or money) is relatively common by those seeking favorable business terms.
Although national and international laws exist to crack down on bribery and corruption, some
businesspeople and organizations are pressured to go along with locally accepted practices.
Maintaining the highest ethical standards while operating in any nation is an important
consideration for all MNCs.
 Organizational Structure: Another significant hurdle is the ability to efficiently and
effectively incorporate new regions within the value chain and corporate structure.
International expansion requires enormous capital investments in many cases, along with the
development of a specific strategic business unit (SBU) in order to manage these accounts
and operations. Finding a way to capture value despite this fixed organizational investment is
an important initiative for global corporations.
 Public Relations: Public image and branding are critical components of most businesses.
Building this public relations potential in a new geographic region is an enormous challenge,
both in effectively localizing the message and in the capital expenditures necessary to create
momentum.
 Leadership: It can be difficult for businesses to find effective organizational leadership with
the appropriate knowledge and skills to approach a given geographic market successfully.
For every geography worldwide, unique sets of strategies and approaches apply to language,

6. 6
culture, business networks, management style, and so forth. Attracting talented managers
with high intercultural competence is a critical step in developing an effective global
strategy.
 Legal and Regulatory Structure: Every nation has unique laws and regulations governing
business. MNCs need access to legal expertise to help them understand in-country laws and
comply with applicable regulations. It is important for businesses to understand the legal and
regulatory climate for their industry and type of organization before entering a new market,
so that this information can be factored into the business case and strategic decisions about
where and how to expand globally, as well as strategic and operational planning to ensure
profitability.
Additional challenges can arise, particularly in the following areas:
 Infrastructure: Infrastructure includes the basic physical and organizational structures
needed for a society to operate and for an economy to function. It can be generally defined as
the set of interconnected structural elements that provide a framework supporting an entire
structure of development, such as roads, bridges, water supply, sewers, electrical grids,
telecommunications, and so forth. It also includes organizational structures such as a stable
government, property rights, judicial system, banking and financial systems, and basic social
services such as schools and hospitals. A country’s infrastructure will help determine the ease
of doing business within that nation. For example, a country with poor road conditions and
intense traffic may not be the best place to conduct business that requires goods to be
transported from city to city by land. Poor infrastructure makes it difficult for businesses to
operate effectively because they have to shoulder additional cost and risk to make up for
what the country’s society does not provide.
 Technology: The level of technological development of a nation affects the attractiveness of
doing business there, as well as the type of operations that are possible. Companies may
encounter a variety of technological challenges doing business in foreign countries, such as
training workers on unfamiliar equipment; poor transportation systems that increase
production and distribution costs; poor communication facilities and infrastructure;
challenges with technology literacy; lack of reliable access to broad-band Internet and
related technologies that facilitate business planning, implementation, and control.
IMPLICATIONS OF MANAGING PEOPLE
Here are the implications on HR management:
 Workplace is having more percentage of knowledge based workers, having global market
for their knowledge sharing.
 The global market decides the cost of talent.
 Talent and non capital is a scarce resource.
 Mobility of talent has increased.

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The changing role of managers:
 Converters: taking today’s technology and converting it into tomorrow’s need.
 Scanners: people responsible for finding new niches and customers
 Expeditors: bypass red tape and bureaucratic regulations.
 Browsers: employees who can scan related industries, technologies and professions for
ideas their organization can use.
 Linkers: those who persuade individuals and related companies to join short term
partnership.
 Energy conservers: people who look to plug drains in emotional, physical or intellectual
energy brought about by ineffective managers or poor work environment.
 Talent scouts: those who look for people with potential to become masters.
HR in the changing scenario:
 Is the organizational structure of the company, which was developed and implemented
years ago, good enough to successfully function in today’s changing economic
environment?
 Is the HR profession contributing enough to justify its existence or is it a burden?
 Is the HR profession contributing to the profit making abilities of the organization?
 Are the specifications for recruitment being modified from time to time to suit the
changing talent market? Are we getting the best people?
 Are the executives and the employees of the company motivated enough to contribute
their best? What is their level of satisfaction?
 Is the company able to cope up with the changes, which are taking place around it, and
how much is the HR professional contributing towards enhancing thos ability?
LEVERAGING HR FOR COMPETITIVENESS
The ability to influence a system or environment in such a way, that multiplies the
outcome of one's effort without a corresponding increase in the consumption of resources. In
other words, leverage is the advantageous condition of having a relatively small amount of cost
yield a relatively high level of returns.
Shifting market conditions, economic roller coasters, disruptive technologies and increase
competition economic crisis compels businesses to make difficult decisions to remain viable and
competitive. Increasing regulatory pressures, decreasing revenues, and continual competitive
threats have turned the “status quo” into the “status isn’t”. Oftentimes to get to the other side to
reach organizational objectives we must cross a bridge. It turns out sometimes that bridge is on
fire and requires immediate action.
Immediate action at times means to shake the "deer in the headlights" or do what we've
always done mode and get creative. Workplaces can leverage its human resources in order to
navigate through these difficult times to remain viable, and ultimately obtain a competitive

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advantage when things turn around. Among the many strategies here are three specific areas
where human resources can be leveraged during times of uncertainty:
 Cost containment: Cost containment can and should go beyond just considering eliminating
positions and reducing supply purchases. Human resources can be leveraged in analyzing and
locating wasteful spending in its benefits, compensation, and staffing practices. There are
reports of organizations finding hundreds of thousands of dollars in savings by its human
resources facilitating the auditing of its benefit plans and records, alone. In fact, Liberty
Benefit Insurance Services offers insight into how businesses have been able to save much-
needed money by auditing its health insurance plans. Through these auditing practices,
businesses may be able to find savings without compromising on coverage. In addition,
businesses can leverage human resources in correcting those cost containment opportunities
from within the organization.
These activities include facilitating real collaborative house-wide organizational
efforts, managing reduction-in-force efforts while mitigating risks that may lead to spending
money on legal defense. By managing a non-punitive, truly engaging efforts, employees may
feel open to sharing with you areas of opportunity for saving money. However, punitive,
singling-out efforts will only encourage employees to remain silent, costing the company
cost containment opportunities that could have been realized. While cost containment
findings may offer short-term solutions, being able to internally work together, identifying
and self-correcting wayward practices is a step towards becoming self-reliant and viable in
the long term.
 Performance Improvement: In an era where businesses must do more with less, it is critical
that its workforce is performing at its highest level, now more than ever. Now is the time to
be fully “on” with all employees moving in the same direction. This can be done with the
right tools and collaborative support from the executive and leadership teams.
In a time of crisis, it is especially important to ensure job descriptions, evaluations,
any assessment tools, training efforts and internal communication methods are current and
aligned with organizational goals and objectives. A common mistake is to assume that these
are only administrative chores and have no impact on organizational performance. It is
completely ironic when businesses use tools that are not connected to actual goals and
objectives but expect stellar performance. Resist the temptation to use tools just because
some other company uses it without building in language and measurements that align with
your desired business culture and goals.
When each of these tools is designed with business results in mind and skillfully
leveraged together, they can help achieve direct results such as hiring the right people,
holding them accountable, and developing future leaders. It is these steps that keep people on
the ship focused on the desired direction, despite the stormy weather going on around you.

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 Positioning for growth: Leveraging human resources comes into play for workplaces who
wish to engage in positioning for growth. Some of those activities are through leadership,
hiring the right people, and employee engagement.
1. Leadership - Identifying who should be “on the bus”, obtaining and developing a strong
leadership team is a key strategy. Effective leadership development programs address
current challenges and are not a one-size-fits-all approach. Most organizations have
leaders that are at different stages in their development. In addition, with multi-
generations that comprise the workforce, being able to mix-up and customize
development programs are essential.
2. Hiring the right people - Recruitment is the front door to successful talent management
and goal achievement. Businesses will be set up for success if they make a concerted
effort to hire people with values that are aligned with organizational goals and
objectives.
3. Employee engagement - Knowing how to engage people in crisis, solutions, and
organizational goals and objectives is a key strategy towards success. You can sit and
bark orders at people all you want, but unless employees are engaged in the desired
direction, success will be elusive.
This article only touches on some of how human resources can be leveraged. Other
activities include facilitating merger and acquisition due diligence, communication strategies,
expounding on performance management, employee engagement, and human resource
technology are also considerations.
While times are tough, acting like a “deer in the headlights” or reacting without
leveraging human resources can cause the already burning bridge to get worse. It is the executive
who can step away from the status quo, know how to leverage resources and create new
opportunities, will realize success today and in the future.
STRATEGIC ROLE OF INTERNATIONAL HRM
Understanding strategy:
In approaching the subject of strategy it is commonly articulated as belonging to three categories:
 Corporate level strategy: in crafting corporate level strategy, the organization should decide
where it wants to be in the next 10 to 15 years hence, in at least eight areas-market standing,
innovation, productivity, physical and financial resources, profitability, managerial
performance and development, worker performance and attitudes, and social responsibility.
 Business level strategy: the appropriate question at the business unit level is, “how should
we complete in the chosen business? A business unit is an organizational subsystem that has
a market, a set of competitors, and a goal distinct from those of the other subsystems in the
group.
 Functional level strategy: each business unit will consist of several departments, such as
manufacturing, sales, finance and HRD. Functional level strategies identify the basic courses
of action that each of the department must pursue in order to help the business unit to reach

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its goals. In crafting the functional level strategies, managers must understand that the
different functions are interrelated.
Model of strategic HRM:
 The resource-based perspective: this approach explains practices that provide competitive
advantage, such as the unique allocation of the MNC’s resources, organizational culture and
core competences.
 A behavioral view: the second variable, a behavioral vies, explains practices designed to
control and influence attitudes and behaviors. Being founded on the contingency theory, this
variable stresses the instrumentality of such practices in achieving strategic goals.
 Cybernetic system: this variable explains the adoption of practices resulting from feedback
on contributions to strategy. For example, training programs might be adopted to help the
company pursue a strategy and would be updated based on the feedback.
 Agency/transaction cost: this variable explains why companies use control systems such as
performance evaluation and reward system. Strategies might not be pursued if performance
evaluation and reward system were not in place
 The institutional/political force: seeks to explain that practices such as the inappropriate
performance evaluation system may exist because of organizational inertia rather than
rational decision making.
 Resource dependence and power variable: explains practices caused by power and political
influences such as legislation, unionization, control of resources, and expectations of social
responsibility.
DIFFERENCE BETWEEN DOMESTIC & INTERNATIONAL HRM
WHAT IS INTERNATIONAL HRM?
IHRM can be defined as set of activities aimed managing organizational human resources
at international level to achieve organizational and achieve competitive advantage over at
national and international level.
WHAT IS DOMESTIC HRM?
Domestic HRM is the process of procuring, allocating and effectively utilizing the human
resources in local countries. By the name itself, you should already have an idea that IHRMs
work internationally or beyond national borders, whereas its domestic counterpart works within
the set, local, national borders.
International HRM Domestic HRM
1 IHRM is done at international level. Domestic HRM is done at national level
2 IHRM is concerned with managing
employees belonging to many nations.
Domestic HRM is concerned with managing
employees belonging to one nation.
3 IHRM has concerned with managing
additional activities such as expatriate
management.
Domestic HRM is concerned with managing
limited number of HRM activities at national
level.

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4 IHRM is very complicated as it is
affected heavily by external factors such
as cultural differences and institutional
factors.
Domestic HRM is less complicated due to
influence from the external environment.
5 Human resource managers working in an
international environment face the
problem of addressing HR issues of
employees belonging to more than one
nationality. Hence, these HR managers
need to set up different HRM systems for
different locations.
Human resource managers in domestic
environment administer HR programmes to
employees belonging to a single nationality.
6 International HRM requires greater
involvement in the personal life of
employees. The HR manager of an MNC
must ensure that an executive posted to a
foreign country understands all aspects of
the compensation package.
In the domestic environment, the involvement
of the HR manager or department with an
employee’s family is limited to providing
family insurance programmes or transport
facilities in case of a domestic transfer.
7 International HRM has to deal with more
external factors than domestic HRM.
Domestic HRM has to deal with less external
than IHRM.
8 There are more risks involved in IHRM
than in the domestic HRM.
There are fewer risks involved in domestic
HRM than in international HRM.
HR CHALLENGES AT INTERNATIONAL LEVEL
There are 10 very important challenges that are faced by most multinational companies:
1. Compliance with labor laws. Every company finds a challenge in working with laws,
regulations, and rules in another country. These vary dramatically from one country to
another, and companies often need the help of good advisers to unravel and comply with
the different rules and policies.
2. Talent acquisition. It is critical to acquire the right people at the right time, but finding
the right talent for a “foreign company” is sometimes a difficult task. Even simply
identifying and recruiting individuals can be a challenge in another country.
3. Developing agile leaders. An organization needs flexible leaders who can adapt to the
changes and challenges of operating in a global environment. They must be able to bring
the local context and culture into their decisions and relation- ships within each country.
4. Balancing local and home issues. Deciding which decisions must be made locally and
which must be made at the headquarters is critical. For example, financial accounting
may be kept at headquarters, while succession planning may need to be more at the local
level.
5. Building capability. Employees must understand the products and services and how to
how to produce or sell them. They must understand how to communicate and integrate
with others across borders in the cultural context. Learning and development can be
different from one country to another. For sustainability, capability must be enhanced
routinely in the organization.

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6. Efficient coordination and collaboration. A global company must be connected and
orchestrated in its work. Employees must be synchronized in their projects and efforts,
and they must collaborate on a routine basis. This gets more difficult when different
languages and long distances are involved.
7. Retaining critical talent. Some individuals in the organization are considered critical
talent, and these are the people who make the most difference. It is not always an
executive or a manager. It might be the IT team, the direct sales force, the store
managers, or the research and development professionals. The challenge is to retain this
critical talent in the organization. High turnover can be disastrous.
8. Sharing knowledge across borders. Knowledge management and knowledge sharing
are important, particularly in a knowledge-based company. Using all the tools for
collaboration and sharing is essential. Building databases that easily integrate with each
other is also important.
9. Operating efficiently. The products and services delivered must be produced at a low
cost to the organization; otherwise, competition will have an advantage. Efficiency is
king, and delays and bottlenecks have to be removed to make a smooth work machine.
10. Improving productivity. In addition to lowering production costs, there must be more
output. The gross productivity of a firm, revenue divided by employees, must be
continuously improved as technology is used, capability is enhanced, and engagement
and motivation kick in to deliver a very powerful workforce.
These challenges are consistent with those found in many studies. For example, IBM’s most
recent “Global Chief Human Resources Officer Study” identified developing agile leaders,
retaining critical talent, improving productivity, and sharing knowledge as very important
challenges for today’s environment.