Major differences between domestic HRM and IHRM

Business activities e.g. taxation, international relocation, expatriate remuneration, performance appraisals, crosscultural training and repatriation Increased complexities e.g. currency fluctuations, foreign HR policies and practices, different labor laws Increased involvement in employees personal life e.g. personal taxation, voter registration, housing, childrens education, health, recreation and spouse employment Complex employee mix cultural, political, religious, ethical, educational and legal background Increased risks e.g. emergency exits for serious illness, personal security, kidnapping and terrorism

Strategies of international, multinational, global & transnational organizations

International company transports its business outside home country; each of its operations is a replication of the company's domestic experience; structured geographically; and involves subsidiary general managers Companies offering multiple products often find it challenging to remain organized e.g. need to have a common information systems for accounting, financial and management controls, and marketing. Most evolve to become multinational companies

Strategies of international, multinational, global & transnational organizations

Multinational company grows and defines its business on a worldwide basis, but continues to allocate its resources among national or regional areas to maximize the total.

Strategies of international, multinational, global & transnational organizations

Global organizations treat the entire world as though it were one large country; may be the entire company or one or more of its product lines; may operate with a mixture of two or more organizational structure simultaneously.

Strategies of international, multinational, global & transnational organizations

Transnational organization - Use specialized facilities to permit local responsiveness; more complex coordination mechanism to provide global integration

Global efficiency and local responsiveness of different types of firms

High Global efficiency Low

Global

Transnational

International

Multinational
High

Local responsiveness

Orientation to international operations

(1) Australian organization with international operations
All senior and many middle management positions held by Australians Highly centralized in Australia, large head office Instruction and advice from Australian head office to subsidiaries HR policies and practices are predominantly Australian with some modification to satisfy foreign requirements Australian corporate culture

Orientation to international operations

(2) Australian multinational organization
Localization of some management positions but all top corporate positions held by Australians Some decentralization to regional or area headquarters Regional headquarters is the main source of communications; instructions from Aust head office to regional headquarters HR policies and practices are mixed Mix of Australian and host country culture

Orientation to international operations

(3) Australian global organization All management positions are open to everyone regardless of nationality Decentralized decision making Two-way or multiple-way communication between headquarters HR policies and practices are benchmarked on best international practices International corporate culture

Example from Japanese MNCs

Campbell, N. (1991). How Japanese multinationals work so well. Prism, 4, 61-69.

1. Borderless structure and bottom-up decision-making processes that encourage communication and information flow among all components of the company and extend the network to its key suppliers, distributors, and other business partners. 2. Custodial leadership that emphasizes values and vision and is skillfully unassertive, while energizing and challenging middle managers with demanding targets. 3. Human resource management, including socialization, training, and promotion via a hierarchy of ranks, job rotation, and appraisal systems that promote hard work, commitment, and competition among peers.

4. Incremental planning and control that help a company expand little by little, focusing on new products and the relentless pursuit of operating improvements, rather than "grand designs" for competitive advantage.
5. An extended family model that encourages and rewards commitment.

IHRM - a shift in thinking

Explicit recognition by parent org of the existence of assumptions and values of home & host cultures Explicit recognition by parent org ethnocentrism is neither good/bad, has strengths and weaknesses Explicit recognition of subsidiaries preferences which may be different

IHRM - a shift in thinking

Laurent (1986)

Willingness to acknowledge cultural difference discuss and learn Genuine belief in creative and effective ways of managing people through crosscultural training/learning

Important lessons for global firms

The need to manage change The need to respect local cultures The need to understand a corporations culture The need to be flexible The need to learn

Main challenges in IHRM

High failure rates of expatriation and repatriation Deployment getting the right mix of skills in the organization regardless of geographical location Knowledge and innovation dissemination managing critical knowledge and speed of information flow Talent identification and development identify capable people who are able to function effectively Barriers to women in IHRM International ethics Language (e.g. spoken, written, body)

Main challenges in IHRM

Different labor laws Different political climate Different stage(s) of technological advancement Different values and attitudes e.g. time, achievement, risk taking Roles of religion e.g. sacred objects, prayer, taboos, holidays, etc Educational level attained Social organizations e.g. social institutions, authority structures, interest groups, status systems

Strategies for managing a global workforce

(1) Implement the aspirational career strategy
Get people from everywhere (geocentric approach) Expats work in multiple countries during the course of their career Gain a lot of knowledge about different cultures & operations Develops in-depth knowledge Use previous knowledge for new assignment Extremely high cost Mainly managers, not technicians

Strategies for managing a global workforce

(2) Implement the awareness-building assignment strategy
Expose a candidate to cultural training exercises Usually for short term (3 months to one year) Family members usually not required to relocate Usually used to train candidates for future assignments Learn from foreign assignment and bring experience back to HQ

Strategies for managing a global workforce

(3) Implement the SWAT team strategy
Highly mobile teams for short term assignments Deployed throughout the organization to different parts of the world No development agenda, plain troubleshooting Transfer technical knowledge to locals as they fix problems E.g. technical troubleshooters

 IHRM is about the worldwide management of human resources The purpose of IHRM is to enable the firm, the multinational enterprise (MNE), to be successful globally This entails being: (a) competitive throughout the world; (b) efficient; (c) locally responsive; (d) flexible and adaptable within the shortest of time periods; and (e) capable of transferring knowledge and learning across their globally dispersed units.

IHRM Issues
Although the MNE is separated across several nations, it remains a single enterprise and therefore must consider how to balance competing pressures for differentiation and integration MNEs are firms that need to be global and local (multidomestic) at the same time. MNEs, however, need to achieve different levels of globalness and localness

IMPORTANT ISSUES RELEVANT TO IHRM Can MNEs link their globally dispersed units through human resource policies and practices? How do MNEs facilitate a multidomestic response that is simultaneously consistent with the need for global coordination and the transfer of learning and innovation across units through human resource policies and practices?

IHRM STRATEGIC NEED OF THE BUSINESS

The growing importance of MNEs and use of complex global strategic business decisions have generated the linkage of IHRM with the strategic needs of the business

IHRM Functions
IHRM functions represent three areas: a) an MNE's human resource orientation b) the resources (time, energy, money) allocated to its human resource organization c) c) and the location of those resources and HR decision making.

IHRM Policies and Practices

Interunit Linkagesbalancing the needs of variety (diversity), coordination, and control for purposes of global competitiveness, flexibility, and organizational learning (and transfer of knowledge)

IHRM to strengthen interunit linkages

(a) comprehensive human resource planning, ensuring that the MNE has the appropriate people in place around the world at the right time (b) staffing policies that capitalize on the worldwide expertise of expatriates, third country nationals (TCNs), and host-country nationals (HCNs) (c) performance appraisals that are anchored in the competitive strategies of MNE headquarters and host units (d) compensation policies that are strategically and culturally relevant (e) training and development initiatives that prepare individuals to operate effectively in their overseas locations and to cooperate with other MNE units.

IHRM FUNCTIONS
Human Resource Planning. Human resource planning should be an indispensible means of engineering effective interunit linkage, most notably by synchronizing the staffing, appraisal, and compensation subsystems of IHRM

HUMAN RESOURCE PLANNING ISSUES FACING MNES Identifying top management potential at the earliest possible career stage Identifying critical success factors for the future international manager Providing developmental opportunities Tracking and maintaining commitments to individuals in international career paths Tying strategic business planning to human resource planning, and vice versa Dealing with the organizational dynamics of multiple (decentralized) business units while attempting to achieve global and regional (e.g., Europe) focused strategies Providing meaningful assignments at the right time to ensure adequate international and domestic human resources

10 MAJOR PLANNING AND PROCESSING ACTIVITIES THAT INTERNATIONAL HR EXECUTIVES NEED TO ADDRESS

assignment and cost planning candidate selection assignment terms and condition documentation relocation processing and vendor management cultural and language orientation/training compensation administration and payroll processing tax administration career planning and development handling spouse and dependent matters immigration processing.

International Human Resource Staffing

Repatriation

Appraising Performance
appraisal mechanisms varied from quantitative (e.g. graphic scale) to qualitative (e.g. MBO or narrative). For the expatriate assignment, in contrast to the domestic assignment, MNEs need to evaluate dimensions of performance not specifically job-related, such as cross-cultural interpersonal qualities; sensitivity to foreign norms, laws, and customs; adaptability to uncertain and unpredictable conditions; and the host location's integration with other MNE units.

Compensating the Expatriate

How can MNEs develop pay structures that are cost-effective, fair, and adaptable to different employee groups? How can MNEs develop more culturally sensitive compensation schemes that recognize country differences, yet are equally motivating and still equitable? How can international-assignee compensation be better linked to the strategy and industry characteristics of a given MNE?