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IHRM.pptx
- 2. What is IHRM? •IHRM can be defined as set of activities aimed managing organizational human resources at international level to achieve organizational objectives and achieve competitive advantage over competitors at national and international level. • IHRM includes typical HRM functions such as recruitment, selection, training and development, performance appraisal and dismissal done at international level and additional activities such as global skills management, expatriate management and so on.
- 3. OBJECTIVES OF IHRM •Create a local appeal without compromising upon the global identity. • Generating awareness of cross cultural sensitivities among managers globally and hiring of staff across geographic boundaries. • Training upon cultures and sensitivities of the host country.
- 4. NEED FOR IHRM •Managing expatriates • Globalization has forced HRM to have international orientation • Effectively utilise services of people at both the corporate office and at the foreign plants
- 5. FUNCTIONS OF IHRM RECRUITMENT SELECTION EXPATRIATES PERFORMANCEAPPRAISAL TRAINING AND DEVELOPMENT COMPENSATION WOMEN IN INTERNATIONAL BUSINESS DUAL CAREER GROUPS INTERNATIONAL INDUSTRIAL RELATIONS TRADE UNIOUNS PARTICIPATIVE MANAGEMENT
- 6. More HR activities Needfor a broader perspective More involvement in employee personal lives Risk exposure More external influences Characteristics of IHRM 6
- 7. More Human ResourceActivities 7 • Difficulty in implementing HR in host countries • Developmental opportunities for international managers. Human Resource Planning • Ability to mix with organisation’s culture • Ethnocentric, polycentric or geocentric staffing approach • Selection of expatriates • Managing repatriation process Employee Hiring • Emphasis on cultural training • Language training • Training in manners & mannerisms Training & Development
- 8. 8 • Devising anappropriate strategy to compensate expatriates • Minimising difference in pay between parent, host & third country nationals • Issues relating to the re-entry of expatriates into the home country Compensatio n • Constraints while operating in host countries need to be considered. • Physical distance, time differences & cost of reporting system add to the complexity. Performance Management • Handling industrial relations problems in a subsidiary. • Attitude of parent company towards unions in a subsidiary Industrial Relations
- 9. Pay issues • Differentcountries, different currencies • Gender based pay in Korea, Japan, Indonesia Health insurance for employees & their families Overtime working – Promotions based on seniority or merit Need for Broader Perspective 9
- 10. 10 • More involvementfor both parent-country & third-country nationals • Housing arrangements • Health care • Remuneration packages • Assist children left behind in boarding schools More Involvement in Employee’s Personal Lives Changes in emphasis as the workforce mix of expatriates and locals vary
- 11. 11 • Physical safetyof the employees. • Failure of expatriates to perform well financial losses to the firm Risk Exposur e • Dealing with ministers, political figures, economic & social interest groups • Hiring procedures dictated by host country. • Catch up with local ways of doing business. External Influence
- 12. Reasons for GrowingInterest in IHRM 12 Globalisation of Business Movement to network organisations from traditional hierarchical structures Significant role in implementation & control of strategies Effective HRM determinant of success in international business
- 13. Global Recruitment HomeCountry Nationals Host Country Nationals Third Country Nationals
- 14. Home-Country National Host-Country National Third-Country National Advantages Greater control of organization Languagebarrier is eliminated The third-country national may be better equipped to bring the international perspective to the business Managers gain experience in local markets Possible better understanding of local rules and laws Costs associated with hiring such as visas may be less expensive than with home- country nationals Possible greater understanding and implementation of business strategy Hiring costs such as visas are eliminated Cultural understanding Morale builder for employees of host country
- 15. Home-Country National Host-Country National Third-Country National Disadvantages dapting toforeign environment may be difficult for manager and family, and result in less productivity Host-country manager may not understand business objectives as well without proper training Must consider traditional national hostilities Expatriate may not have cultural sensitivity May create a perception of “us” versus “them” The host government and/or local business may resent hiring a third-country national Language barriers Can affect motivation of local workers Cost of visa and hiring factors dapting to foreign environment may be difficult for manager and family, and result in less productivity Host-country manager may not understand business objectives as well without proper training Must consider traditional national hostilities
- 16. STAFFING POLICIES INIHRM • Ethnocentric: Here the Key management positions are filled by the parent country individuals. • Polycentric: In polycentric staffing policy the host country nationals manage subsidiaries whereas the headquarter positions are held by the parent company nationals. • Geocentric: In this staffing policy the best and the most competent individuals hold key positions irrespective of the nationalities.
- 17. Recruitment & Selection 14 Ethnocentric Approach •Key management positions held by parent- country nationals • Appropriate during early phases. Polycentric Approach • Host-country nationals hired to manage subsidiaries • Parent-country nationals occupy key positions at corporate HQ. Geocentric Approach • Seeks best people for key jobs, irrespective of nationality • Underlying principle of a global corporation Regiocentric Approach • Variation of staffing policy to suit particular geographic areas • Provides a 'stepping stone' for a firm wishing to move from an ethnocentric or polycentric approach to a geocentric approach categories of employees can be hired – parent country nationals (PCNs), host country nationals (HCNs) & third country nationals (TCNs)
- 18. Ethnocentric Approach Advantages Easier Centralized Decision making Motivation Transfer of tactic Knowledge Unified Corporate Culture Disadvantages Host country nationals feels frustrated Not able to understand local culture May loose chance for promotion Cost operations increase
- 19. Polycentric Approach Advantages Betterunderstand local culture Motivation and morale Less expensive Training and operating cost Less adjustment problems Disadvantages Problem of Coordination and Control Overseas Experience Restricts Mobility Subsidaries may fail to adopt organizational culture
- 20. Geocentric Approach Advantages Large cadre of Global executives Build a strong unifying corporate culture Enhances local responsiveness Transfer of Core Competencies People with multicultural experience can meet the challenges of cultural diversity Disadvantages Immigration laws Cost of Training and relocation increase Pay levels tends to be high Training and Development is time consuming
- 21. How It IsDifferent from Domestic HRM • Domestic HRM is done at national level and IHRM is done at international level. • Domestic HRM is concerned with managing employees belonging to one nation and IHRM is concerned with managing employees belonging to many nations (Home country, host country and third country employees) • Domestic HRM is concerned with managing limited number of HRM activities at national level and IHRM has concerned with managing additional activities such as expatriate management. • Domestic HRM is less complicated due to less influence from the external environment. IHRM is very complicated as it is affected heavily by external factors such as cultural distance and institutional factors.
- 22. ISSUES IN IHRM •Managing International Assignments • Employee and Family Adjustments • Selecting the right person for foreign assignments • Culture and Gauge • Language and Communication
- 23. EFFECTIVE IHRM IMPLEMENTATION The followingchecklist identifies some of the critical decisions/actions required in the formulation and implementation of an effective IHR strategy. 1. As certain the current and intended nature of international operations in the organisation (multi- domestic, international, global or transnational?) 2. Determine the extent to which HR policies and practices should be standardised or localised in accordance with overall organisational strategy. 3. Assess the extent to which local cultural, social, political, economic and legal factors will impinge on any attempts to apply standard HR policies if integration is a key factor in organisational strategy.
- 24. 4. Ensure acomputerised database of global human resources is used if integration is desired. 5. Work with the senior management team to identify the competencies required to achieve global organisational objectives. 6. Work with national HR and line managers to formulate IHR policies and practices in the key areas of sourcing, development and reward which will embed a transnational mindset in the organisation.
- 25. Training And Development CrossCulture training Language Training
- 26. Performance appraisel Stipulatethe Difficulty level More weightage to onsite managers appraisel Home site manager- background information to be taken Performance criteria must be modified Qualitative criteria should also be considered Self appraisel
- 27. International Compensation ⚫“International compensationcan be defined as the provision of monetary and non-monetary rewards, including base salary, benefits, perquisites, long- and short-term incentives, valued by employees in accordance with their relative contributions to MNCperformance.”(Fenwick,2003) ⚫Components:Basesalary,incentives,allowances&benefits
- 28. Objectives ⚫Attract employees whoare qualified , experienced and interested in international assignments ⚫Facilitatethemovementofexpatriate’sfromonesubsidiaryto another,from home to subsidiary,and back from subsidiary to home. ⚫Provideaconsistent andreasonablerelationship between the pay levelsof employees at headquarters,domestic affiliates and foreign subsidiaries ⚫Becost effective byreducing unnecessary expenses ⚫Should be easily understood and easy to administer
- 29. Base Salary ⚫Amount ofmoney that an expatriate normally receives in his/her home country ⚫In a domestic context, base salary denotes the amount of cash compensation serving as a benchmark for other compensation elements (such as bonusesand benefits). ⚫Used to establishexpatriate pay ⚫Paid in home currency,local currency or combination ⚫Serves as benchmark against which bonuses & benefits are calculated
- 30. Benefits ⚫constitute asubstantial portion- approx.one third of compensation ⚫Transportability of pension plans,medical coverage &social security coverage are very difficult to deal asnational practices varies. ⚫ issues surround the amount & nature of the benefit package for expatriates ⚫ Whether MNC’sshould maintain expatriates in home country benefit programs particularly if firm does not receive tax deduction for it ⚫ Whether MNChasoption of enrolling expatriates in host country benefit programs ⚫ Whether home or host country isresponsible for the expatriates socialsecurity benefits ⚫ Whether benefits should be subject to the requirements of home or host country
- 31. Allowances SomeCommon InternationalAllowances ⚫ Foreignservice premiums –most common for employees on long-term assignments (over one year).More often paid to parent country nationals (PCNs) than to third countrynationals(TCNs). ⚫ Hardship–in consideration of isolation,crime, natural hazards,political violence, based on government data upon which rates can be provided byconsulting organizations such asInternational SOS,aglobalmedical and security assistance company. ⚫ Relocation–compensationfor costssuchastransport, storage, temporary accommodation,purchases of appliances and vehicles,associated with moving to the host country. ⚫ Education–forassignees’children.Thismayinvolvecompensationforlanguage classes,books,and school fees.Home country boarding school fees mayalsobe involvedfor assigneeswho opt not to take their children to isolated and or politically violent locations. ⚫ Home leave –provision for the assigneeand family to return home periodically during the length of the assignment.(Dowling et al., 1999;Stanley,2001)
- 32. Approaches to ExpatriateCompensation 1. Home-based policy (the balance sheet approach) 2. Host-based policy (going rate approach) 3. Local Plus approach
- 33. Home-based policy(the balancesheet approach) ⚫Homecountry’ssalarystructure,Financialinducementsto home package- Foreign hardship allowance ⚫The BalanceSheet approach preserves equity between international assignees of the same nationality and between assignments ⚫However,it can create disparities and inequities between PCNs, TCNs and HCNs
- 34. Host-based policy(going rate approach) ⚫Assigneetransfers to the host country payroll and receives base and incentive paybased on host countrycompensation practices and regulations. ⚫ Adopting the same compensation for all countries within aparticular region. ⚫ The host-basedapproach maybe acost-effective option to the traditional home-basedapproach,including local plus policy components. ⚫ Difficulties can occur in repatriating assignees,if applying this approach, becauseit integrates employees into the local host salary structure. It can make it very difficult to move the assignees to another destination or backto their home country . ⚫ Another challenge with this approach can be that of defining aregion.
- 35. Balance Sheet Approach Equity Ease in reputation Market Rate Approach Simplicity Equality with locals Identification with the host country Disadvantages Complexity in administration Disparity between expatriates of different countries Rivalry for overseas assignment in a particular country Difficulity in repatriation Variation between assignmnets for the same employee Disadvantages
- 36. Taxation T ax Equalization ⚫Firmswithhold an amount equal to the home country tax obligation of the expatriate, and pay all taxes in the host country . ⚫the employee pays no more and no less tax while on assignment than they would have paid had they remained in their home country. ⚫The company bears all the actual home and host country tax due. ⚫themost commonapproach to tax management, used by 80%of companies.
- 37. T axProtection ⚫ Employee paysupto the amount of taxes would payon remuneration in the home country, but could end up paying less if the host country tax burden is lower than in the home country . ⚫The company will reimburse the employee for anyexcess tax resulting from higher tax rates in the host country
- 38. Expatriate Assignment LifeCycle 22 Determining the need for an expatriate Selection Process Pre-assignment training Departure Post-arrival Orientation & Training Crisis & Adjustment Crisis & Failure Repatriation & Adjustment Reassignment Abroad
- 39.
- 40. Expatriate Failure 23 Premature returnof expatriates to their home country Reasons • Inability to adjust to host country culture leads to culture shock • Personal & emotional problems • Difficulties with the environment • Inability to cope with larger international responsibilities • Other family reasons
- 41.