Global Business and International Human Resource Management (IHRM)

1. Global
Business
& IHRM

2. First Things First : Definitions
Globalization
Though it is difficult to provide a thoroughly foolproof definition, the concept
can be roughly defined as :
●
“the cross-border integration of business” ,
● or as Gary Dessler puts it* “the tendency of firms to extend their sales,
ownership, and/or manufacturing to new markets abroad”.
● For an in-depth approach, globalization might as well be depicted as : “ an
integration of economy, finance, trade, and communications from a worldwide perspective, in order to establish a successful economy on a global
basis.”
Thus globalisation is often seen through the sole economic lens, as having
given rise to some kind of “global marketplace” or “single world market”.
Indeed, its yet preponderant economic dimension results from the economic
interdependence of countries , through the free circulation of goods,
services, the transfer of technology and flow of capital, across and
beyond international borders.
But more than this, the “big picture” is the genesis of a “global village” ,
the nest of nexus, enabled by pervasive social and cultural interactions
2
and IT speedways.
*Human Ressource Management- 13th Edition- Gary Dessler.

3. First Things First : Definitions
HRM & IHRM
HRM : Gary Dessler* defines Human Resource Management as :
● The policies and practices involved in carrying out “the people” or human
resource aspects of a management position, including recruiting, screening,
training, rewarding, and appraising.
● Besides,
Human Capital is “the knowledge, education, training, skills, and
expertise of a firm's workers”.
As G. Dessler* has it “with the globalization of the world economy, even small firms
are discovering that success depends on marketing and managing abroad”.
International Human resource Management (IHRM) is a set of human resource
processes and state-of-the-art knowledge enabling a firm to spread and manage
overseas activities.
● Managing human resources internationally (expatriates, local workers, and third
country workers) creates challenges, first coming from the sometimes vast
distance involved.
●
But the bigger issue is coping with the cultural, political, legal, and
econonmic differences among countries*, while preserving
consistency with overall corporate policies.
*Human Ressource Management- 13th Edition- Gary Dessler.
3

4. Global Mobility : a Changing landscape
In the midst of the world crisis, global mobility has
evolved :
●
●
From a “check-the-box” costly exercise (simply “keeping up with the
corporate Joneses” and nonetheless competitors on foreign markets
can turn out to be very costly),
to a key enabler of business and development strategy.
To help avoid mismatches between investment and the prospective
return (ROI), companies have created a wide range of global mobility
policies.
Corporate strategic issues range from :
● coordinating operations on markets and business units,
● to balancing the antagonist internationalization strategies of
convergence-divergence
(home-office
control
vs
local
autonomy),
● and implementing suitable and most convenient HRM practices
on a worlwide basis.
4

5. IHRM Challenges
Managing “human resources in different
cultures, economies, and legal systems
presents some challenges.
However, when well done, HR management
pays dividends”.*
As a matter of fact, firms cannot afford to
mismanage such issues as:
● Legal
● Political
● Economic
● Cultural
● Ethical
● or labor-related differences among
“target countries”.
*Factors Affecting Global HR Management- http://www.whatishumanresource.com/factorsaffecting-global-hrmanagement
5

6. IHRM : a matter of contingency
To put it simply, “Like country, like contingency ”
●
●
●
Economic systems vary from market (US), to planned (North Corea),
and mixed economies (China),
while “managing globally also requires monitoring political risks” (e.g.
nationalization in Venezuela)*,
and labor-law systems must be paid great attention (minimum wages,
working
hours,
termination
of
employment,
German
Codetermination).
Whatever works in one country can prove counterproductive, or even
illegal elsewhere.
When misaddressed, cultural differences result in destroying
shareholder value, and ethics concerns can reveal thorny
problem, and should materialize into healthy global policies on
topics
like
“bribery,
Sarbane-Oxley,
harassment
and
discrimination”*.
*Human Ressource Management-
13th
Edition- Gary Dessler.
6

7. IHRM : the Coping Issue
There is no escaping the conclusion that :
●
●
for a global firm, pursuing multiple goals , survival means
becoming as diverse as the environment (i.e. “internal
requisite variety”),
and as an adaptive system, a firm constantly creates
solutions in accordance with its turbulent environment, to
ensure survival.
Of course, some differences arise between HRM and IHRM,
whose international dimension implies to cope with:
1) the deployment of knowledge, i.e. getting the right skills
and savvy wherever needed,
2) the dissemination of innovation and best practices
regardless of their origin,
3) talent management on a global basis, detection and
retention.
7

8. The IHRM Process
1
Planning
2
Staffing
3
Selecting
4
Training
5
6
7
8
9
Compensation Repatriation Impatriation Employee Multicultural
Relations Environment
The IHRM process enables to manage effectively
a global workforce.
8

9. IHRM Process Step #1 : Planning
Planning (step 1) depends on :
●
●
●
the needs of the business unit,
and the mission of the assignees (mid-term
role, commuting etc),
but some other considerations must also be
dealt with, such as labor country contingency
(e.g. Danwei or Chinese “job for life”
mentality).
9

10. IHRM Process Step #2 : Staffing
Staffing (step 2) policies depend on top management's
values and orientation.
●
While “offshoring means having local employees abroad do jobs
that the firm's domestic employees previously did in-house”,
firms deciding to hire locals or expatriates abroad gives rise to 3
other staffing patterns :
● Ethnocentric practices are corporation-oriented, as “the firm fills
key management jobs with parent-country nationals” (for unified
corporate culture, tighter control,and faster transfer of core
competencies).”
● Polycentric - oriented firms staff their foreign subsidiairies with
host-country nationals, and home-office with parent-country
nationals” (for workforce cost control and reduction of cultural
misunderstandings).
● Geocentric firms are competence-oriented and hire the fitting
employees whatever their origins.
International workforce thus can be dispatched into
4 categories :
Parent-Country Nationals (PCNs), Host-Country Nationals
(HCNs), Third-Country Nationals (TCNs), and offshoring
locals.
10

11. IHRM Process Step #3 : Selection
Selection (step 3) involves testing would-be assignees “for
traits that predict success in working abroad”(G.Dessler).
Feedback has helped identify 5 success factors in a foreign
assignment : ”job knowledge and motivation, relational skills,
flexibility-adaptability, extra-cultural openness, and family
situation”*.
● Applicants can then be selected upon a set of criteria depending
on technical ability, job requirements, and professional maturity
for one thing (using tools like previous performance appraisals,
job description, people reviews etc),
● but also soft skills : crosscultural suitability, emotional intelligence,
language abilities, interpersonal , teamwork and leadership skills,
without mentioning family situation.
● Selecting
can then start with realistic previews, aimed at
facilitating “self-selection to enable expatriate candidates to decide
for themselves if the assignments” are suitable for them.
● As for adaptability screening , it aims at “assessing the
assignee’s (and spouse’s) probable success in handling the
foreign transfer and to alert them to [tricky] issues”, the
best-known tool being Prudential Relocation's Overseas
Assignment Inventory (OAI)**.
●
*Human Ressource Management- 13th Edition- Gary Dessler.
**Overseas Assignment Inventory available at : http://www.prudential.com/view/page/public/14394
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12. IHRM Process Step #4 : Training
Training concerns expats and families ( to prevent spouse
rejection risk, or family culture shock), as well as HCNs (Host
Country Nationals unaccustomed to the corporate culture of
their foreign employer).
●
●
Expatriate training may comprise pre-departure and incountry crosscultural and language training to help expats
and families reduce stress and pressure by cultivating a
global mindset (intellectual, psychological, and social
resources) and provide them with suitable coping
strategies. Some firms even develop “global buddy”
programs.
When entering an MNC (multinational company),
HCNs also need some training more particularly
focused on PCN cultural background, history, norms,
vision and missions, technological and savvy
transfer, together with subsidiary accountability
fields and specific goals and challenges.
12

13. IHRM Process Step #5 : Compensation
The Compensation (step 6) “ordeal” consists in :
●
●
●
●
balancing attractiveness (attracting talents)
and effectiveness (manageable costs),
cost-of-living differences
and the risk of percieved inequities (lowering discrepancies
between locals and expats).
The IHRM compensation
requirements or objectives :
●
●
●
●
●
system
meets
5
corporate
attracting talents,
building a consistent corporate-wide pay system,
being cost-effective,
avoiding discrepancies in pay between PCNs-HCNs-TCNs,
matching compensation with “the stage of life cycle”.
Then comes the 5-step process of creating a global pay
system :
●
●
●
●
●
set the framework by formulating strategic goals and identify the
actionable behaviors required by executives in the pursuit of
these goals,
identify gaps in the existing compensation and reward system,
systematize pay systems worlwide,
adapt global policies to local conditions,
and conduct pay practice assessments to fine-tune
13
the firm's policy.

14. IHRM Process Step #6 : Compensation
Cont'd
●
●
●
To handle the problem of overall consistency
and equity, firms “pay a similar base salary
company-wide, and then add on various
allowances according to individual market
conditions”
so that all in all, expat compensation comprises
5 components including : salary, benefits,
allowances, incentives, and tax equalization or
protection.
Firms usually pay performance incentives using
overall corporate performance criteria , and
various “incentives” to encourage employees
to take foreign assignments ( foreign service
premiums, hardship allowances, mobility
premiums).
14

15. IHRM Process Step #6 : Compensation
Cont'd
Compensation varies
approaches, namely :
●
●
●
●
●
according
to
5
different
the balance sheet,
the going-rate approaches,
the lump sum method,
the cafeteria
and the regional systems.
The balance-sheet approach, the most common , is :
●
●
●
a technique which consists in formulating expatriate pay
by equalizing purchasing power across countries,
the basic idea being : expatriates should enjoy the same
standard of living they would enjoy at home.
The firm estimates the 4 groups of expenses it comprises
(i.e. income taxes, housing, goods and services,
discretionary expenses) in the expat's home and host
countries and then pays any differences
(e.g. additional income taxes , or housing expenses).
15

16. IHRM Step #6+7 : Re - & Impatriation
Repatriation (step 6) is reportedly the “forgotten phase of the
expatriation cycle”, and it is not always appropriately dealt with.
● The responsibility of a successful repatriation experience resides
in the co-action of HRM, the expat's manager, and the expats
themselves (self-management).
● A
reversed culture shock is sometimes experienced, the
cocooning practices aimed at expats are over, the skills
developed abroad may not serve back to the home-office, and
the expat has been “out of the loop” for some time.
● For all these reasons it is important for the expat to keep in
touch with home office, stay in the loop, maintain a certain level
of communication while abroad,
● and the firm may also set up specific missions to enable expat
feedback and expat skill transfer, to make sure the investment
made will not be lost in relocation. Some companies also forge
mentor programs.
There is no dealing with repatriation without mentioning
impatriation practices (step 7) resulting from the firms'
will to acquire foreign talents, technical experts, specific
knowledge or savvy (remember the famous “brain
drain”).
16

17. IHRM Process Step #8 :
Labor relations
Firms with subsidiaries abroad face substantial
differences in labor relations practices among countries
and regions.
Where unions are still influential (e.g. Europe) labor
relations management and collective bargaining must
be effective, and firms have to deal with four issues :
●
●
●
●
Centralization : industry-wide collective bargaining vs enterprise or plant level bargaining
Employer organization : employers are also unionorganized and active in collective bargaining
Union recognition : representativity of small unions
Content and scope of bargaining : despite industrywide agreements, individual employers are free to
institute more generous terms.
17

18. IHRM Process Step #9 :
Multicultural Environment
Last but not least (step 9) in a multicultural
environment :
●
●
“managers need to
understand cultural
differences
and
adjust
their
styles,
communications, and rewards to fit within each
culture”.
Talent and crosscultural management skills,
together with the creation of a corporate “culture
mix” is certainly the key to convenient HR policies
and best practices.
18

19. Global Leadership Capabilities
There is no escaping globalization, and to attain
global leadership, executives need to acquire
foundational global leadership capabilities :
Global
Leadership Training
Communication
Culture
Leadership
* Global
Meetings
* Global
Presentations
* Global
negociations
* Global virtual
communications
* Doing business
globally
* Cultural
orientations @
work
* Leading global
teams
* International
assignment
* Leading global
teams
* Communicating
& collaborating
effectively across
culture
* Valuing diversity
& practicing
inclusion
After Berlitz Global leadership Training
illustration from Berlitz Global leadership Training
http://www.berlitz.com/Corporate-Solutions-for-language-instruction-and-global-leadership-training/GlobalLeadership-Training/What-is-Berlitz-Global-Leadership-Training/Global-Leadership-Capabilities/178/
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20. Global Leadership Mindset
Universal Leadership
Competencies (Campbell)
Context-specific
Competencies
●
●
●
Role competencies
Culture specific
competencies
Language
●
Context
Specific
Competencies
Personal & Family
●
●
●
●
●
●
●
●
Learning Mindset
Tolerance of ambiguity
Expectations
Cultural curiosity
Coping Skills
Networking
Marriage & family culture
Energy & Health
Universal
Leadership
Competencies
●
●
●
●
Global
Mindset
Personal
& Family
●
●
●
●
●
Developmental
Experiences
●
●
●
●
●
●
Vision
Management
Empowerment
Diplomacy
Feedback
Entrepreneurialism
Personal Style
Personal energy
Multicultural
Awareness
Developmental Experiences
Multicultural Learning
Distance influence
Influence without authority
Dealing with Complexity
Multicultural relationship building
Matrix Influence
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Source : Advances In Global Leadership Issues @ www.emeraldinsight.com/journals.htm

21. Bibliography
Human
Ressource
Management
Gary Dessler