Chapter 1
Introduction:
The Context of IHRM
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• The environment in which organizations operate is rapidly becoming a
global one. Due to the Global competition and advances in technology
and telecommunication, more and more companies are entering
international market by exporting their products, building facilities in
other countries, and entering into alliance with foreign companies.
When organizations operate globally, their employees are very likely to
be citizens of more than one country. Managing human resource
globally covers the same functions of Human resource management
but in a broader way. These general fields include:
– Human resource planning
– Staffing
• Recruitment
• Selection
• Placement
– Performance management
– Training and development
– Compensation (remuneration) and benefits
– Industrial relations
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Differences between Domestic HRM and 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
Differences between Domestic HRM
and IHRM: variables
• Complexity involved in operating in different
countries, varied nationalities of employees
• The different Cultural Environment
• The industry or industries with which the MNC
is involved
• Attitudes of Senior Management
• Extent of reliance of MNC on home country
domestic market
Impacts on Management
• Need for flexibility & Local responsiveness
• Knowledge sharing &Transfer of compliances
• Developing a global mindset
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Three Approaches to IHRM
• Cross-cultural management
Examine human behavior within organizations from
an international perspective
• Comparative HRM and Industrial Relations
Seeks to describe, compare and analyze HRM
systems and IR in different countries
• HRM in multinational firms
Explore how HRM is practiced in multinationals
Interrelationships between
Approaches of IHRM
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What does IHRM add into the Traditional
Framework of HRM?
• Types of employees
– Within and cross-cultural workforce diversity
– Coordination
– Communication
• Human resource activities
– Procurement
– Allocation
– Utilization of human resources
• Nation/country categories where firms expand and
operate
– Host country
– Parent country
– Third country
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Nation/country categories where firms
expand and operate
– Parent country( the country in which an
organization’s headquarter is located.
– Host country (a country- other than the parent
country- in which an organization operates a
facility)
– Third country( A country that is neither the parent
country nor the host country of an employee.)
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A Model of IHRM
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What is an expatriate?
• 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
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International Assignments Create
Expatriates:
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Variables that Moderate Differences
between Domestic HR and IHRM
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Collectivism against Individualism
• Individualism reflects the extent to which
individuals are integrated into groups. People are
expected to take care of themselves and their
immediate family only( USA). In organizations, the
aim is to gain self-respect and personal
achievement.
• In Collectivist societies, people are integrated into
strong, cohesive groups throughout their
lifetime. In organizations, the focus is on fitting in
harmoniously and teamwork achievement.
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Power distance
• Power distance relates to the extent to which
societies accept power in institutions and
organizations. This relates to the centralization of
authority and the degree of autocratic leadership.
Societies with high power distance are reflected in
hierarchical organizations where superiors seen to
be more powerful than subordinates( France,
Greece, Philippines, India). In contrast, countries
with low power distance follow a more democratize
style of management and a flatter organizational
structure.( Britain, New Zealand).
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Uncertainty avoidance
• It refers to the degree to which societies feel
threatened by ambiguous situations and the
extent to which they try to avoid uncertain
situations. In countries with high uncertainty
avoidance, such as France, organizations adopt
strong bureaucracies and career stability and
generally discourage risk taking activities.
Countries with low uncertainty avoidance (UK,
Sweden) they adopt more flexible structures
and encourage more diverse views.
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Masculinity Vs Femininity
• Masculinity measures the extent to which the
dominant values are ‘male value’ such as
assertiveness, the acquisition of money and
goods and not caring for others. (Japan,
Australia) while Feminine category are softer
and emphasis on work-life balance, emotions,
relationship and care for weak. (Sweden).
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Long term/Short term Orientation
• Suggest whether the focus of cultural factors
values is on the future (long term) or the past
and present (short term). Cultures with a long
term orientation value saving and persistence,
which tend to pay off in the future. (Japan ,
China). Short term orientation like USA, Russia,
Arabic countries, promote respect for past
tradition and for fulfilling social obligations in
the present.
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Managing cross Borders
• International • Multinational
- An organization that build
- An organization that sets facilities in a number of
up one or a few facilities different countries in an
in one or a few foreign effort to minimize
countries. production and
distribution costs.
- Uses existing capabilities
- Several subsidies operating
to expand into foreign as stand alone business
markets units in multiple countries
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Managing cross Borders
• Global • Transnational
- An organization that choose -a type of HRM system that
to locate a facility and use makes decisions from a global
cultural differences as an perspective, including
advantage. managers from many
countries and is based on
- Views the world as a single ideas contributed by people
market; operations are representing a variety of
controlled centrally from countries.
the corporate office
- Specialized facilities permit
local responsiveness; complex
coordination mechanisms
provide global integration
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Look at the following Examples
• Coca-Cola.
• Shell
• McDonalds
• HSBC
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