This document provides an overview of international human resource management (IHRM). It defines IHRM and discusses its key functions such as recruitment, selection, training, and performance appraisal at the international level. It also describes the types of employees managed under IHRM - home country, host country, and third country nationals. The document further discusses important IHRM concepts like expatriates, different IHRM strategies (ethnocentric, polycentric, geocentric), risks associated with IHRM, and the relationship between organizational structure and HRM.

1. INTERNATIONAL HUMAN
RESOURCE MANGEMENT
Unit 1
By
Prof. Sapna Yadav
KIET School of Management

2. INTRODUCTION
• International Human Resource Management (IHRM) can be defined
as a set of activities targeting human resource management at the
international level. It strives to meet organizational objectives and
achieve competitive advantage over competitors at national and
international level.
• IHRM comprises of typical HRM functions such as recruitment,
selection, training and development, performance appraisal and
dismissal done at the international level and additional exercises such
as global skills management, expatriate management and so on.

3. INTRODUCTION
IHRM is concerned with handling the human resources at Multinational Companies
(MNCs) and it includes managing three types of employees −
• Home country employees: Employees residing in the home country of the
company where the corporate head quarter is situated, for example, an Indian
working in India for some company whose headquarters are in India itself.
• Host country employees: Employees residing in the nation in which the
subsidiary is located, for example, an Indian working as an NRI in some foreign
country.
• Third country employees: These are the employees who are not from home
country or host country but are employed at the additional or corporate
headquarters.
• For example, an Indian MNC, which has its corporate office in America, may
employ a French person as the CEO to the subsidiary. The Frenchman employed is
a third country employee.

4. EXPATRIATE
• An expatriate is an employee who is working and temporarily residing
in a foreign country. Many firms prefer to call such employees
‘international assignees’.
• TCNs are also expatriates, as are HCNs who are transferred into
parent country operations outside their own home country.
• The term inpatriate has come into vogue to signify the transfer of
subsidiary staff into the parent country (headquarters) operations

5. IHRM
According to Hugh Scullion,
International HRM (IHRM) involves the HRM issues and problems
arising from the internationalisation of business, and the HRM
strategies, policies and practices which firms pursue in response to the
internationalisation of business.

6. DOMESTIC VS IHRM
There are many similarities between HRM at the national as well as
international level. However, let us have a look at the differences between
them with the help of points given below −
• Domestic HRM takes place at the national level, that is, within a country
and IHRM takes place at the international level, that is, in between two or
more than two countries.
• Domestic HRM is bothered about managing employees belonging to one
nation and IHRM is bothered about managing employees belonging the
home country and host country as well as third country employees.
• Domestic HRM is concerned with managing limited number of HRM
activities at the national level and IHRM is concerned with managing
additional activities such as expatriate management.
• Domestic HRM is less complicated due to less imprint from the external
environment. IHRM is comparatively more complicated, as it is deeply
affected by the external factors such as cultural distance and institutional
factors.

7. DOMESTIC VS IHRM
 More HR activities: taxation, culture orientation, administrative
services
 The need for a broader perspective: cater to multiple needs
 More involvement in employees’ personal lives: adjustment, spouses,
children
 Changes in emphasis as the workforce mix of expatriates and locals
varies: fairness
 Risk exposure: expatriate failure, terrorism
 Broader external influences: government regulations, ways of conduct

8. SOME IMPORTANT TERMS
• Host Country National (HCN): Belongs to the Country where the
subsidiary is located
• Parent Country National (PCN): Belongs to the Country where the
firm has its headquarters
• Third Country Nationals (TCN): Belongs to any other country and is
employed by the firm

9. EXPATRIATES
An employee who is working and temporarily residing in a
foreign country
• Some firms prefer to use the term “international assignees”
• Expatriates are PCNs from the parent country operations, TCNs
transferred to either HQ or another subsidiary, and HCNs transferred
into the parent country

11. RISK ASSOCIATED WITH IHRM
1. Expatriate failure (the premature return of an expatriate from an
international assignment)
2. Under-performance while on international assignment
3. The direct costs of failure (salary, training costs, travel costs and
relocation expenses) 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.
4. Terrorism both for inpatriates and expatriates
5. Major epidemic or pandemic crises (like SARS, Avian Flu, Corona
Virus etc)

15. MULTIDOMESTIC STRATEGY
• Companies with a multidomestic strategy have as aim to meet the
needs and requirements of the local markets worldwide by
customizing and tailoring their products and services extensively.
• In addition, they have little pressure for global integration.
Consequently, multidomestic firms often have a very decentralized
and loosely coupled structure where subsidiaries worldwide are
operating relatively autonomously and independent from the
headquarter.
• A great example of a multidomestic company is Nestlé. Nestlé uses a
unique marketing and sales approach for each of the markets in
which it operates. Furthermore, it adapts its products to local tastes
by offering different products in different markets.

16. Global Strategy: High Integration and Low
Responsiveness
• Global companies are the opposite of multidomestic companies. They
offer a standarized product worldwide and have the goal to maximize
efficiencies in order to reduce costs as much as possible.
• Global companies are highly centralized and subsidiaries are often
very dependent on the HQ. Their main role is to implement the
parent company’s decisions and to act as pipelines of products and
strategies.
• This model is also known as the hub-and-spoke model.
Pharmaceutical companies such as Pfizer can be considered global
companies.

17. Transnational: High Integration and High Responsiveness
• The transnational company has characteristics of both the global and
multidomestic firm. Its aim is to maximize local responsiveness but
also to gain benefits from global integration.
• Even though this seems impossible, it is actually perfectly doable
when taking the whole value chain into considerations.
• Transnational companies often try to create economies of scale more
upstream in the value chain and be more flexible and locally adaptive
in downstream activities such as marketing and sales.
• In terms of organizational design, a transnational company is
characterised by an integrated and interdependent network of
subsidiaries all over the world. These subsidiaries have strategic roles
and act as centres of excellence.
• Due to efficient knowledge and expertise exchange between
subsidiaries, the company in general is able to meet both strategic
objectives. A great example of a transnational company is Unilever

18. International Strategy: Low Integration and Low
Responsiveness
• An international company therefore has little need for local adaption and
global integration.
• The majority of the value chain activities will be maintained at the
headquarter. This strategy is also often referred to as an exporting strategy.
• Products are produced in the company’s home country and send to customers
all over the world. Subsidiaries, if any, are functioning in this case more like
local channels through which the products are being sold to the end-
consumer.
• Large wine producers from countries such as France and Italy are great
examples of international companies.

19. Organizational structure and HRM
1.The organizational structure should be set as the result of the HR
Management Goals and the defined HR Model.
2.The HR Organization defines clear boundaries around HR Processes.
The Compensation and Benefits unit should be clearly about the
compensation of employees and building different compensation
strategies.
3.Each organizational structure restricts the free flow of information.
The clear communication channels should be designed as all HR
employees know information significant for their job. Many HR
Functions do suffer from the insufficient information.
4.The HR Organizational Structure should be as flat as possible. The
decision making responsibility should be given to the lowest levels of
the HR Organization.
5.The organizational structure has to be flexible. The priorities of the
organization should change quickly and the reaction is needed.

20. INTERNATIONAL HRM PLANNING
• 1. Ethnocentric Approach
According to ethnocentric approach, organizations believe that the
employees of home country nationals can perform better to fulfill the
organization’s mission, vision, and objectives, so all the key managerial
positions of the subsidiary are filled with expatriates from the home
country.

21. BENEFITS OF ETHONOCENTRIC APPROACH
• Organization’s culture can be easily adapted to all the subsidiaries
with the help of key managerial decisions such as vision, mission, and
objectives.
• Possible to eliminate communication barriers between the
headquarters and subsidiaries.
• Proper control is possible with the ethnocentric approach.
• The parent company can monitor the operations of the subsidiaries
effectively.
• Better coordination of activities between the parent company and
subsidiary are possible.

22. DISADVANTAGE OF ETHONOCENTRIC
APPROACH
• Need to pay more for the expatriates from the home country.
• Cross-cultural variations may lead to clashes between the various
levels of the employees.
• Host country national employees may get disappointed by losing the
key managerial roles.
• The subsidiary may lose skilled and experienced employees due to
the ethnocentric approach.
• Expatriates from the home country may not aware of the local values
and beliefs, so cultural clashes may arise and may show an effect on
the business.

23. 2. POLYCENTRIC APPROACH
In polycentric approach, all the key managerial positions are filled with
the employees of the host country nationals.
Many companies are adopting this approach because they believe that
host country nationals can help in fulfilling the objectives of the
organizations with a better understanding of the local culture, beliefs,
and values.
Here subsidiary is given freedom to take decisions and formulate
strategies according to the local business environment and vision and
mission of the headquarters.

24. BENEFITS OF POLYCENTRIC APPROACH
• Host country managers can analyze and understand the local markets
and local people
• Better coordination with the business environment is possible, both
internal and external.
• No difficulty arises due to cultural issues.
• It creates job satisfaction and job enrichment to the host country
nationals.
• Hiring host country nationals is less expensive than hiring expatriates.
• Local market knowledge of the host country nationals enables them
to take strategic decisions

25. DISADVANTAGE OF POLYCENTRIC APPROACH
• It may not always create a scope of better coordination between
headquarters and subsidiaries.
• Quick control of operations is not possible because of the key
managerial positions are occupied by the host country nationals.
• Though the host country managers follow the vision and mission of
the organization, then also errors may occur in the fulfillment of the
standards of organization culture.

26. 3. GEOCENTRIC APPROACH
According to geocentric approach, organizations hire neither the home
country nationals nor the host country nationals preferably.
They recruit employees on the basis of the concept right person for the
right job.
Here organizations hire right persons or suitable employees for the
effective running of the business operations, irrespective of the
nationality. Geocentric approach facilitates competitive advantage by
hiring most talented and eligible people.

27. ADVANTAGE OF GEOCENTRIC APPROACH
• The geocentric approach creates a scope to hire world’s best talented
and skilled employees.
• It facilitates competitive advantage and helps in reaching the market
empire position.
• Hiring most talented and eligible people can fulfill the objectives of
the organization effectively.
• This approach helps in reducing the unfair treatments and clashes in
the organization due to the favoritism towards nationality.

28. DISADVANTAGE OF GEOCENTRIC APPROACH
• Hiring according to geocentric approach is expensive.
• Chance of cross-cultural clashes become high
• It may not always facilitate better coordination and control of the
operations of the organization.
• Difficult to monitor and control the operations
• Organizations need to spend more on expatriate relocation
allowance.
• High cross-cultural variations arise.