Introduction

Book - International Human Resource Management 6e, Peter J. Dowling,

Marion Festing and Allen D.Engle,SR
 The advent of the era of liberalization and globalization along with the advancements in information technology (IT)
has transferred the world around us. It has brought to centre stage the importance of human resources, more than
ever before. The purpose of human resource management (HRM) is to enable appropriate deployment of human
resource so that the quality culture can maintain and satisfy the customers not only in national level but to in global
level.
In a competitive scenario, effective utilization of human resources has become necessary and the primary
task of every organization is to identify, recruit and channel competent human resources into their business operations
for improving productivity and functional efficiency.
Emergency of trade blocks with the formation of different economic and political forums like European
Union, North American Free Trade Association, Asia Pacific Economic conference and expanding role of World Trade
Organization have now significantly changed the business environment in terms of competition / liberalization and
open end marketing opportunity.
Multi domestic operations (MDOs), Joint Ventures (JVs) and strategic Alliance (SA) are common forms of
business structures across regions. Changes in organizational structures, relationships with overseas operations, state –
of – the art communications technology and global market now demand different HR approaches for managing MNCs
The HR executives needs to give international orientation to what ever he or she does – employee hiring,
training and development, performance review, remuneration, motivation, welfare, or industrial relations.
International orientation assumes greater relevance as business get increasing interlinked across nations.
Since an international business must procure, motivate, retain, and effectively utilize services of people both
at the corporate office and at the foreign plants, therefore, the process of procuring, allocating and effectively utilizing
human resources in an international business is called International Human Resource Management.
 1.Human resource planning
2.Staffing: recruitment, selection, placement
3.Performance management
HRM
4.Training & development
includes….. 5.Compensation & benefits
6.Industrial relations
 1. The HR activities of procurement, allocation &
utilization ( the six HRM activities)
2. The countries where IHRM occurs:
• Host-country where subsidiary may be
Morgan’s located
• Parent-country where firm is
3-D headquartered
• Third-country that may be
definition source of labor, finance & other inputs

of IHRM…. 3. The employees of an international firm:

• HCNs (host country nationals)
• PCNs (parent country nationals)
• TCNs (Third country nationals)
Dimension Model of IHRM.

According to P.V. Morgan: IHRM is the interplay

among 3 dimensions:
• HR Activities
• Types of Countries
• Types of employees

(Source: ad opting from P.V.Morgan, IHRM : Fact or Fiction. Personnel Administrator, Vol 31, 9 (1986) pp 44)
 1. Parent org. recognizes that its HRM reflects some
assumptions & values of own home culture.
2. Parent org. recognizes that its own peculiar ways
are neither universally better nor worse than
others – just different & likely to exhibit strengths
& weaknesses, particularly abroad.
Laurent’s 3. Parent org. recognizes that its foreign subsidiaries
may prefer other ways to manage people – ways
steps for true that are neither intrinsically better nor worse, but
possibly more effective locally.
IHRM: 4. Headquarters is willing to acknowledge cultural
differences & take steps to make them
discussable & therefore usable.
5. All parties build belief that cross-cultural learning
invites more creative & effective ways of
managing people.
 Applying a strategic view of IHRM
External Factors
• PESTLE
• Organizational links with other
MNEs and with national
government MNE
• Asymmetric events Performance
• Environmental dynamics HR Function
• Global corporate HR • Financial
Organizational Factors role performance
• HR practices • Social
• MNE balance of global integration • Crisis Management & performance
and local responsiveness coordination • Enterprise
• MNE structure resilience
• Firm size and maturity
• MNE strategy
• Corporate Governance
• Headquarters’ international
orientation
• MNE culture
Purpose of IHRM

To enable the firm /, the multinational corporations (MNCs), to be a

successful globally.
Objectives of IHRM

• Remaining competitive throughout the world

• Efficient
• Locally Responsive
• Flexible and adaptive
• Capable to transforming learning across their globally dispersed
units
Who is an Expatriate?

• An expatriate is an employee who is working and temporarily residing

in a foreign country also called an International Assignee
• PCN and TCN always are called Expatriates. HCN’S who are
transferred into parent country operations outside their own home
country.

• Inpatriate – Transfer of subsidiary staff into the parent country

operations.
• IN SOME CASES FOR ALL TRANSFERRED INTO A COUNTRY
Difference Between domestic and IHRM
One obvious difference between domestic and international HRM is that staff are moved across the national
boundaries into various roles within the international firm’s foreign operations – these employees have traditionally
been called ‘expatriate’. An expatriate is an employee who is working temporarily residing in a foreign country.
However, as pointed out by Dowling (1999) domestic HRM is involved with employees within only one national
boundary; on the other hand IHRM deals with 3 nationals or country categories (expatriate): PCN, HCN and TCN. So,
broadly there are two major factors therefore which differentiate domestic HRM from IHRM.
1. The complexities of operating in different countries / cultures
2. Employing different nationals and different categories of workers across boarder.
It has been also argued by Dowling (1999) that the complexities of IHRM can be attributed to six factors that
differentiate international from domestic HRM. Theses are:
1. A wide range of HR activities
2. The need for a broader perspectives
3. More Involvement in employee’s personal life.
4. Responsiveness to changes in staffing requirements as international strategy changes.
5. Higher risk exposure
6. More external influences.
However, the international dimension brings with it a host of issues, which the domestic HR functions would not
normally get involved in. The practice of HRM in the international context is different from its domestic counterpart
in a number of ways. These include: 1. Being responsible for a greater number of functions and activities such as
selection, training and management of international assignees.
Difference Between domestic and IHRM
However, the international dimension brings with it a host of issues, which the domestic HR functions would not normally get involved in. The practice
of HRM in the international context is different from its domestic counterpart in a number of ways. These include:
1. Being responsible for a greater number of functions and activities such as selection, training and management of international assignees.
2. Having to expand one’s area of expertise to include a much broader knowledge of foreign country employment laws and global organization designs.
3. Having to get much more closely involved with employees lives as the firm moves employees to foreign assignments. For example, collecting
information and furnishing to visa authorities about aids or material status of employees.
4. Being involved with greatly expanded and constantly changing mix of employees (from the host countries and foreign locals), adding considerable
diversity and complexity to the HR tasks.
5. Having no experience with more external influences; the impact of foreign cultures and laws.
6. Having to face greater exposure to problems and liabilities (for example, making mistakes in expatriate assignments can cost as much as US$4
million per assignee). The accumulated direct and indirect costs can be huge.
7. Additional responsibilities like translation of language, both at headquarters and at the subsidiary level, organizing schooling and housing for
expatriates and providing administrative services.
8. Management of differential compensation due to variety of allowances and adjustments.
9. More emphasis on activities like international relocation and orientation, both pre departure and post departure cultural training. Knowledge of
international taxation, rate of inflation and cost of living, including currency fluctuation.
10. Diversity management, like managing people from different cultural and political backgrounds and gender differences.
11. More contacts with Government officials for obtaining visas, work permits, tax certificates, fixing of meetings and so on.
12. More coordination and travel to assess performance of expatriates and solve problems.
13. More risk management as threats from terrorists, Kidnappers and protecting intellectual property rights of firms.
14. More risk management as threats from terrorists, kidnappers and protecting intellectual property rights of firms.
15. More public relations work to enhance the multinationals image and deal with human rights and other NGOs and interest group operating in
different countries.
Significance of IHRM in International Business
Scullion (2001) outlined 10 major significance of IHRM in globally business environment. This significance can categorised in 5 key areas:
CHALLENGE:
• Rapid growth of internalization and global competition has increased the nos. and significances of MNCs – resulting in the increased mobility of
human resources.
• Increasing no. of strategic alliances and cross border mergers and acquisitions has increased the strategic implementation of IHRM as Global business.
COMMITMENT:
• World wide recognition of management of human resources in international business and cross cultural management.
• Business Networks and Horizontal communication and HR plays a vital role.
COST EFFECIVENESS:
• The performance of expatriates. (poor performance of expatriate may affect the market share and damage to foreign relations)
• Growing Importance of Expatriates in International Business.
COMPETENCE:
• Global Strategy Implementation.
• Success or failure of international business based on effectiveness of management of HR.
CONGRUENCE:
• Learning, knowledge acquisitions have been identified as important potential sources of comp. advantages for MNCs. This has also enhanced the role
of IHRM to meet the key strategic challenge of objectives.
• Knowledge management is an important source of comp. advantage for MNCs, where IHRM is the key partner and plays a central role.
IHRM is more complex than domestic HRM (Dowling, 1988)

IHRM has …
• more HR activities
• a need for a broader perspective
• more involvement in employees’ personal lives
• changes in emphasis as the mix of expatriates & locals varies
• Risk exposure
• Broader external influences
1. IHRM has international HR activities
• International taxation
• Administrative services for expatriates
• Host-government relations
• Language translation services
• International relocation involves:
a) Arranging for pre-departure training
b) Providing immigration & travel details
c) Providing housing, shopping, medical care, recreation & schooling information
d) Finalizing compensation details such as:
 Delivery of salary overseas
 Determination of overseas allowances
 Taxation treatment
2. The Need for broader perspective :
• More than one national group of employees
• International perspective on expatriate benefits
• Preferential treatment – US and Europe
• Equity Issues - Compensation
3. More involvement in employees’ personal lives
• Housing arrangements, health care, comp packages, cost of living allowances,
taxes…
• Handling banking, investment, home rental…final repatriation
• Need to know more about personal life – marriage certificate, housing and
schooling
• In remote areas – recreational programs
4. Changes in the workforce mix
• Decline in PCN and TCN – resources previously allocated need to adjusted
• More locals available
• Broaden HR activities
5. Risk Exposure
• Expatriate Failure
• Terrorism
• Emergency evacuations procedure
• Epidemic or pandemic crisis
6. Broader external influences
• Type of Government
• State Economy
• Generally accepted practices
• Favoring particular ethnic groups
• Difference in developed and less developed countries – labor more expensive
and better organized
Four more moderators that differentiates domestic and
International HRM

1 2 3 4

The Cultural The industry ( or The extent of The attitudes of

environment – industries) with which reliance of the senior
culture shock, the multinational is multinational on its management from
etic/emic. primary involved – home-country domestic to international
the MNE continuum ( market. A more strategic
next slide)
domestic market view is required to
manage IHRM issues.
The MNE/ MNC type continuum

An MNE performs somewhere in this range:

Multidomestic Industries Global Industries

Examples
retailing, distribution, insurance airlines, semiconductors, copiers

International strategy
Collapses to a Must integrate activities on a
series of domestic strategies. worldwide basis.
MNEs fail primarily because of a lack of understanding of the essential
differences in managing human resources in foreign environments.
• http://docshare01.docshare.tips/files/27665/276658465.pdf
• www.drluisortiz.com/PPT/chapter_1ihrm.pptx
• https://xisspm.files.wordpress.com/2012/02/chap-2-concept-of-ihrm.pdf
• http://panmore.com/staffing-policy-hrm-issues-in-international-business