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Week1Lecturenotes.docx
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International Human
Resource
Management:
BUSMGT 761
I always encourage students to study course content not only to get good grades, which are important, but also to derive life lessons. So, when you study this paper, think about what you would learn about people management that could help you in navigating your personal life and relationships. I believe that our identity shapes our work and studies and at the same time our work/studies also shape who we are and what we are becoming.
This course will help you to understand the core concepts of human resource management and practical realities of managing employees across national boundaries in multinational enterprises and in different cultural contexts. This course will facilitate development of a broad understanding of the core functions of HRM in any organisation, and the additional challenges a global, culturally diverse organisation faces.
Each week will focus on one main functional area of IHRM.
These will be discussed in detail during Week 1 TBL
The purpose of this week is to provide an overview of the emerging field of international HRM by:
1) Defining key terms in IHRM and considering several definitions of IHRM.
2) Introducing the historically significant issue of expatriate assignment management and reviewing the evolution of these assignments to reflect increasing diversity regarding what constitutes international work and the type and length of international assignments.
3) Outlining the differences between domestic and IHRM by looking at six factors: more HR activities
the need for a broader perspective more involvement in employees’ personal lives
changes in emphasis based on variances in the workforce mix of
expatriates and locals risk exposure more external influences
and detailing a model which summarizes the variables that moderate
these differences.
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4) Presenting the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models and developing an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and the faster and more detailed diffusion of these practices across organizational units and firms.
We will conclude that the complexity from operating in different countries and employing different national categories of employees is a key variable in differentiating between domestic and IHRM, rather than any major differences between the HR activities performed.
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What is HRM?
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HRM refers to those activities (policies and practices) undertaken by an organisation to effectively utilise its human resources (HR) (to achieve the organisation goals). |
Human Resource Management or People Management is about hiring the right people, at the right time, and right cost to achieve organisational objectives.
HRM policies and practices influence the relationship between an employer and an employee. That’s why you read in news how some organisations are great places to work, whereas some are toxic workplaces.
Policies and practices in managing employees are important. Happy employees make productive workplaces.
HRM is essential for:
· HR professionals (to understand fundamentals of people management)
· Line managers (who directly manage employees and are quite responsible for their development and retention)
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· Entrepreneurs (when organisations are small, entrepreneurs are quite involved in hiring, developing, and compensating employees. When organisations grow in size, entrepreneurs stay involved with key HRM functions related to their talent pipeline/top leadership team).
· Lastly, study of HRM teaches us a lot about managing people in our personal lives.
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HRM Processes/Activities
Performance
Ability
Motivation
Environment
•
Human
resource/manpower
planning
•
Sourcing/Staffing: recruitment &
selection
•
Performance
management
•
Training
&
development
•
Compensation
&
benefits
•
Industrial
(
employment)
relations
One way of looking at HRM is a series of different functions that are concerned with different aspect of workforce management. There are connections between each of these functions and increasingly, the practice of HRM is seen as being holistic, that is, it is about connecting functions in a way that produces systems and processes that are consistent and complementary.
AND for anyone who has ever HAD a job (even flipping burgers) you have been at the receiving end of those HRM processes.
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What is IHRM?
|
Concerned with the human resource problems of multinational firms in foreign subsidiaries (such as expatriate management) or, more broadly, with the unfolding HR issues that are associated with the various stages of the internationalisation process (Boxall, 1995) How MNCs manage their geographically dispersed workforce in order to leverage their HR resources for both local and global competitive advantage (Scullion, 2005) |
IHRM applies an international lens to HRM. It’s about managing people who work in organisations that have offices/presence in more than one country.
https://www.glassdoor.com/Award/Best-Places-to-Work-LST_KQ0,19.htm
Why is people management important?
It’s people who achieve individual and organisational goals, and thus provide companies sustained competitive advantage.
https://www.glassdoor.com/Award/Best
-
Places
-
to
-
Work
-
LST_KQ0,19.htm
Glassdoor best places to work.
Glassdoor is an American website where current and former employees anonymously review companies. Glassdoor also allows users to anonymously submit and view salaries as well as search and apply for jobs on its platform. In 2018, the company was acquired by the Japanese firm, Recruit Holdings, for US$1.2 billion.
Each year Glassdoor ranks overall company ratings to determine its annual Employees’ Choice Awards, also known as the Best Places to Work Awards
Interrelationships Between Approaches in
the Field
Textbook Figure 1.1
Lecture 2
Lecture 3, 4, 5 & 6
Lecture 7 & 8
3 broad approaches in the field of IHRM:
1. First approach emphasises cross-cultural management i.e., examining human behaviour within organisations but from an international perspective.
2. Second approach focuses on comparing and analysing HRM approaches in various countries.
3. Third approach focuses on HRM in multinational firms and would be the main focus of this course.
As Figure 1.1 demonstrates, there are overlaps between the three approaches.
IHRM is more
Complex
than HRM
•
International HR activities
•
A need for a broader perspective
•
More involvement in employees’
personal lives
•
Changes of emphasis as
the mix of expatriates and locals varies
•
More risk exposure
•
Broader external influences
Domestic HRM involves employees working within only one national boundary whereas IHRM involves employees working across national boundaries.
IHRM also includes aspects pertaining to the national or country categories involved in international HRM activities (the host country where a subsidiary may be located, the parent country where the firm is headquartered, and
‘other’ countries that may be the source of labor, finance, and other inputs), as well as the three categories of employees of an international firm (host country nationals, parent country nationals, and third country nationals).
In IHRM, staff are moved across national boundaries into various roles within the international firm’s foreign operations (expatriates/international assignees).
In IHRM, the complexity of operating in different countries and employing different national categories of workers is a key variable that distinguishes domestic and international firms. This complexity is due to six factors: more HR activities, the need for a broader perspective, more involvement in employees’ personal lives, changes in
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emphasis because of variances in the workforce mix of expatriates and locals, risk exposure, and broader external influences.
Let’s look at each one of these activities in more detail.
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· International taxation · International relocation & orientation · Administrative services for expatriates · Host-government relations · Language translation services
|
To operate in an international environment, a HR department must engage in a number of activities that would not be necessary in a domestic environment.
Expatriates are subject to international taxation, and often have both domestic (i.e their home country) and host country tax liabilities. Therefore, tax equalisation policies must be designed to ensure that there is no tax incentive or disincentive associated with any particular international assignment.
International relocation and orientation may involve activities, such as, arranging for pre-departure training, handling immigration details, providing housing, medical care, shopping, finalising compensation details.
Providing administrative services may be a time consuming and complex activity because policies and procedures are not always clear cut and may conflict with local conditions.
Host government relations ma6 be particularly important in developing countries where work permits and other important certificates are often easily obtained when a personal
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relationship exists between the relevant government officials and multinational managers.
Provision of language translation services for internal and external correspondence is an additional international activity for the HR department.
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Need for a Broader Perspective · ➢Expatriates (Long term assignments) ➢Short-term Assignees ➢FIBT ➢Fly-In-Fly-Out · Employees can be: ➢Host Country Nationals (HCNs) ➢Parent Country Nationals (PCNs) ➢Third Country Nationals (TCNs) |
Because HR managers working in an international environment face the problem of designing and administering programs for more than one national group of employees, they need to take a broader view of issues.
These are the three categories of employees in an international firm:
PCN – parent country national HCN – host country national
TCN – third country national
For example, the US multinational IBM employs British citizens in its British operations (HCNs), often sends US citizens (PCNs) to Asia-Pacific countries on assignment and may send some of its Singaporean employees on assignments to its Chinese operations (as TCNs). The nationality of the employee is a major factor in determining the person’s ‘category', which in turn is frequently a major driver of the employee’s employment contract and compensation.
Using global virtual teams
Advances in telecommunications make it far easier today to carry out international
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projects and operations using global virtual teams. Global virtual teams are groups of geographically dispersed and generally same-level coworkers who meet and interact using information technologies to accomplish an organisational task. For example, two multinational pharmaceutical companies used a multinational team with members from four continents to address detailed postmerger operational integration problems. Collaborative software, such as Zoom and Microsoft Teams, enable teams to hold live project reviews and discussions, share documents and exhibits. The main challenges virtual teams face are people related. Challenges include building trust, cohesion, team identity and overcoming isolation among team members. Similarly, if most team members reside in one country, the others assume that the real power also lays in that country. Here the solution is to stress that the team has a unified goal and a common purpose (Dessler, 2020).
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Employees’ Personal Lives · Selection, training and effective management of PCN, HCN and TCN · Housing · Health care · Compensation package · Schooling & family members · Annual home visits |
More involvement in employees’ personal lives is necessary to select, train, and effectively manage both PCN and TCN employees. The HR department or HR professional needs to ensure that the expatriate employee understands housing arrangements, health care, and all aspects of the compensation package provided for the assignment such as cost-of-living allowances, premiums, and taxes.
In the international setting, the HR department must be much more involved in order to provide the level of support required. Consequently, it will need to know more about the employee’s personal life. For example, some national governments require the presentation of a marriage certificate before granting a visa for an accompanying spouse. Thus, marital status could become an aspect of the selection process, regardless of the best intentions of the MNE to avoid using a potentially discriminatory selection criterion.
Changes
in
Emphasis
As
the
foreign
operation matures,
HR activities
change
.
Common stages of MNC development typically progress from
contract
to
ownership
As foreign operations mature, the emphasis put on various HR activities change. For example, as the need for PCNs and TCNs declines and more trained locals become available, resources previously allocated to areas such as expatriate taxation, relocation, and orientation are transferred to activities such as local staff selection, training, and management development.
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More Risk Exposure
· Expatriate failure · Under-performance while on assignment · Political risk and terrorism · Emergency evacuation procedures
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Frequently the human and financial consequences of failure in the international arena are more sever than in domestic business. For example, expatriate failure and underperformance while on international assignment is a potentially high cost problem for MNEs. The direct costs of failure to the parent firm may be as high as three times the domestic salary plus relocation expenses. Indirect costs such as loss of foreign market share and damage to key host-country relationships may also be considerable.
Most major MNEs must now consider political risk and terrorism when planning international meetings and assignments.
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· Pre crisis · Planning · Screening & Training · Housing · During the crisis · Decision making, managing processes and logistics · Initiation of the CMT (Crisis Management Team) ➢ Communication! · Post crisis · Individual support · Organisational learning Source: Human resource and expatriate evacuation: a conceptual model (Fee, McGrath-Chamo & Liu, 2013) |
These are some of the activities that HR department needs to take into consideration for emergencies.
Security firm International SOS provides its clients with online and smart phone tools. These let client quickly notify employees travelling abroad of potential problems and what to do about them.
Many employers use intelligence services for monitoring potential terrorist threats abroad. Hiring crisis teams and paying ransoms can be expensive for all but the largest firms, so many employers buy kidnapping and ransom insurance (Dessler, 2020).
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Broader External Influences
· Government • Local ways of · State of economy doing business · Local affirmative • Codes of conduct action rules • Housing · Labor relations • Education
|
The major external factors that influence IHRM are the type of government, the state of the economy and the generally accepted practices of doing business in each of the various host countries in which MNEs operate. A host government can, for example, dictate hiring procedures, as has been the case until recently in Malaysia.
In developed countries, labour is more expensive and better organised than in lessdeveloped countries and national and/or state governments require compliance with legal requirements on issues such as labour relations, taxation, and health and safety.
Differences in economic systems translate into differences in intercountry practices. In market economies (such as United States), governments play a relatively restrained role in deciding what will be produced and sold at what prices. In planned economies (such as North Korea), the government decides and plans what to produce and sell at what price. In mixed economies (such as China), many companies are still state owned, while others make decisions based on demand. Differences in economic systems tend to translate into differences in human resource management policies. For instance, dismissing employees in China or Europe is more difficult than in the United States.
The Variables that Moderate the Differences
between HRM & IHRM
Textbook Figure 1.3
The textbook names five variables that act as “moderators”; i.e, that diminish or accentuate the differences between domestic and international HRM: complexity, the cultural environment, industry type, extent of reliance of the multinational on its home country domestic market, and the attitudes of senior management to international operations.
Many firms from advanced economies, with limited experience in international business, underestimate the complexities involved in successful international operations—particularly in emerging economies. There is considerable evidence to suggest that business failures in the international arena are often linked to the poor management of human resources.
Role of the HR department:
an explicit recognition by the parent organization that its own peculiar ways of managing human resources reflect some assumptions and values of its home culture; an explicit recognition by the parent organization that its peculiar ways are neither
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universally better nor worse than others, but are different and likely to exhibit strengths and weaknesses, particularly abroad;
an explicit recognition by the parent organization that its foreign subsidiaries may have other preferred ways of managing people that are neither intrinsically better nor worse, but could possibly be more effective locally;
a willingness from headquarters to not only acknowledge cultural differences, but also to take active steps in order to make them discussable and therefore usable; and building a genuine belief by all parties involved that more creative and effective ways of managing people could be developed as a result of cross-cultural learning.
→ Changes that are required to internationalize the HR function have more to do with mindsets than with behaviors.
Pages 8-14 of your textbook consider these five aspects in detail.
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What is culture? A shared and sustained set of understandings, values, and beliefs that influence behaviour
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An important characteristic of culture is that it is so subtle a process that one is not always conscious of its relationship to values, attitudes, and behaviours. One usually has to be confronted with a different culture in order to fully appreciate this effect. The new environment requires many adjustments in a relatively short period of time, challenging people’s frames of reference to such an extent that their sense of self, especially in terms of nationality, comes into question. People, in effect, experience a shock reaction to new cultural experiences that cause psychological orientation because they misunderstand or do not recognise important cues. Culture shock can lead to negative feelings about the host country and its people and a longing to return home.
Cultural awareness is essential for the HR manager at corporate headquarters as well as in the host location. Coping with cultural differences, and recognizing how and when these differences are relevant, is a constant challenge for international firms.
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The Industry Continuum
Barlett & Ghoshal (1998) Typology of MNCs |
At one end of the continuum of international competition is the multidomestic industry, one in which competition in each country is essentially independent of competition on other countries. E.g., retailing, distribution, and insurance. At the other end of the continuum is the global industry, one in which a firm’s competitive position in one country is significantly influenced by its position in other countries. E.g., commercial aircraft, semiconductors, and copies.
The role of the HRM function in multidomestic and global industries can be analysed using Porter’s value chain model. In Porter’s model, HRM is seen as one of four support activities for the five primary activities of the firm. Since HR are involved in each of the primary and support activities, the HRM function is seen as cutting across the entire value chain of a firm. For instance, if the firm is a multidomestic industry, the role of the HR department will most likely be more domestic in structure and orientation.
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· Wider and potentially more strategic remit · Due diligence in M&As/ FDI decisions · Co-ordinating CSR initiatives and compliance · International management development · Convergence v Divergence · Global ‘War-for-Talent’ · Need to recruit, select, develop, retain workforce talent to achieve global competitiveness’
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Many firms from advanced economies, with limited experience in international business, underestimate the complexities involved in successful international operations—particularly in emerging economies. There is considerable evidence to suggest that business failures in the international arena are often linked to the poor management of human resources.
The Attitudes of Senior Management
HR
has
to
help senior
managers
in
developing
this
mindset
It is likely that, if senior management does not have a strong international orientation, the importance of international operations may be underemphasised (or possibly even ignored) in terms of corporate goals and objectives. In such situations, managers may tend to focus on domestic issues and minimise differences between international and domestic environments.
Reliance on the Home
-
Country
Domestic Market
Size is not the only key variable when looking at a multinational; the extent of reliance of the multinational on its home-country domestic market may also be very important. In fact, for many firms, a small home market is one of the key drivers for seeking new international markets.
A very large domestic market influences all aspects of how a multinational organises its activities. For example, it will be more likely to use an international division as the way it organises its international activities and, even if it uses a global product structure, the importance of the domestic market may be pervasive.
· Parent organization explicitly recognizes that its HRM reflects some assumptions and values of own home culture.
· Parent organization explicitly recognizes that its own peculiar ways are neither universally better nor worse than others –
just different and likely to exhibit strengths and weaknesses, particularly abroad.
Laurent’s steps • Parent organization explicitly recognizes that its
foreign subsidiaries may prefer other ways to manage
for true IHRM: people – ways that are neither intrinsically better nor
worse, but possibly more effective locally.
· Headquarters is willing to acknowledge cultural differences and take steps to make them discussable & therefore usable.
· All parties build belief that cross-cultural learning invites more creative and effective ways of managing people.
Laurent’s 5 steps for true IHRM?
MNE recognizes its HRM reflects assumptions & values of its own home culture. MNE recognizes its own ways are not inherently better or worse than others’ ways abroad.
MNE recognizes its foreign subsidiaries may prefer other ways to manage people. Headquarters is willing to discuss cultural differences and take steps to make them more usable.
All parties believe that cross-cultural learning invites more creative and effective HRM.
See p. 12.
Applying
a
strategic
view
of
IHRM
A
framework
of
strategic
HRM in
MNEs, Figure 1.4
S
ource:
De
Cieri
and
Dowling
, 2012
This is a theoretical framework, designed by De Cieri and Dowling, that has been derived from a strategic approach using a multiple methodological approach. Their framework assumes that MNEs operate in the context of worldwide conditions, including the influences of industry (global or multidomestic) and regional, national, and local markets that include geopolitical, legal, socio-cultural, and economic characteristics. They propose that external factors have direct influence on both internal/organisation factors and strategic human resource management strategy and practices, and that external factors have a direct influence on MNE performance.
Summary
Definition
of HRM and IHRM
Complexity
involved in operating in different
countries and employing different national
categories of employees is a key variable
differentiating domestic and IHRM
Other
variables that moderate differences
between domestic and IHRM
:
overall global
complexity; the cultural environment; the
industries; the extent of reliance of the
multinational on its home
-
country domestic
market; and the attitudes of senior management
A
model of SHRM
in multinational enterprises
Read Chapter 1 and the ‘essential resource’ on Canvas.
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