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Why Internationalize? Why Globalize?

It is said that by 2030: Organizations must either Globalize or die More than fifty Percent (50%) of U.S. economy is based on exports and close to 30% of Indian economy

That probably explains why during slowdown, sustaining just on our Domestic Markets is so difficult

Need for International HR Management

Globalization of Businesses therefore necessitates, the need for International Human Resource Management (called IHRM), as distinct from Domestic HRM Just as Success of a Domestic Business depends a lot on its Human Resources, so is the case with International Business Like in the Domestic Business, Results in International Markets can only be achieved by:
HR thrproper: Planning, Attracting, Selecting, Inducting,

Directing/Focusing, Motivating, and Retaining Talent

at Corporate Office and Foreign Plants of an MNC IHRM is however required to be much more varied, complicated, involved, creative and adaptive. 3

Need for International HR Management cont

International Organizations may possess the very best of Human Resources at its home country, but it cannot be totally successful, if it cannot effectively procure, transfer, allocate and utilize the Talent at its Foreign Subsidies. This Process of Procuring, Allocating and effectively Utilizing Human Resources in an International Business is called IHRM i.e. International Human Resource Management IHRM can also be said to be the utilization of International Human resources, to achieve Organizational Objectives, without regard to Geographical Boundaries 4

IHRMs Human Resource Activities

IHRM has three broad activities, which covers the six activities of Domestic HRM

These three activities can be Dovetailed with the Six of Domestic HRM as follows:
HR Planning, Recruitment & Selection (P)
Training & Development, Remuneration (A) Performance Management, IR

(U) 5

INTERNATIONAL HUMAN RESOURCE MANAGEMENT: IHRM IHRM is essentially an interplay of three (3) dimensions : The Human Resource (HR) activities to be carried out, The Countries of Operation, Types of Employees required for International Business.

Countries of Operation in IHRM Countries involved in International Business (3) can be classified as : The Parent or the Home Country, which houses the Headquarters The Host Country, where the Subsidiary is located The Other Country or Countries, which may be a Source of Labour, Finance, etc

IHRM: Types of Employees

Likewise there are three (3) types of EMPLOYEES: Parent or home country Nationals Host country Nationals Third country nationals Thus say MOTOROLA which operates in India will have: A few American experts as Parent country Nationals (Americans or Indo-Americans) A large Indian workforce, as host country Nationals Japanese and Australians from Motorolas Operations in these countries, forming the 8 Third Country Nationals

IHRM v/s Domestic HRM

Several factors differentiate IHRM from Domestic HRM. Main Characteristics of IHRM viz-a-viz Domestic HRM are (GD ?):
Requires a Broader Perspective than HRM More and different HR activities There is much greater involvement in

Employees Personal Life Changing emphasis as Workforce mix of Expatriates and Locals varies Greater Risk Exposure More External Influences
9 GD to bring forth three issues in each of above

In IHRM there is Need for a Broader Perspective (1)

Dealing with Pay in different countries with different currencies that may change in relative value Fringe benefit requires different coverage in different Countries e.g. Health Insurance to family: In one Country you can cover only working person & spouse in another, also children, in third also Parents In still another, multiple spouses, aunts 10 uncles, grandparents, nephews, nieces

In IHRM there is Need for a Broader Perspective ..cont (1)

Norms in different countries differ. IHRM must know! Family man paid more than Single Women for same job (belief very strong in Korea & Japan ) Relations given first / greater opportunities (easier to handle) others countries view this as nepotism .. L&T! Romance at work very appropriate in Korea, not so in Malaysia, Indonesia. More work thru: increased working hours (12 hrs in Korea & Japan) or more people (Australia, Singapore) Rewards more for Seniority less for Performance (Australia 4%, Japan 31%, Korea 40% for Seniority) Job for life (Korea 35%). Job for the present ( Western 11 Expatriates only 3%. They do not want to get stuck)

IHRM deals with more and different HR Activities (2) International Orientation Host Government Regulations Language translation services International Taxation Administrative Services for Expatriates Relocation


In IHRM there is more Involvement in Employees Personal Lives (3)

Giving accurate inputs for foreign postings and services available (with regards to remuneration, housing, health-care) to Parent and Third Country employees Provide help and service as regards Banking, transfer of money to home country, investments in a foreign land, coordinating the home visits, etc Provide Schooling for children, or arrange for boarding School in home country, when parents move to foreign postings Help in searching Jobs for Spouses, Colleges for children wanting to pursue Graduation, MBA, 13 etc

In IHRM there is Change in Emphasis (4)

As International Business matures, the emphasis on various HR activities keep changing As the need for Parent and Third Country Nationals decreases after a while, the focus shifts to getting more high potential locals to replace earlier expatriates Thus an increased load in terms of Local Selection, Training and Management Development Above results in reduced Emphasis on factors like Expatriate Taxation, Relocation, etc Movement of high Potential local staff to Corporate Office for Development Assignments 14 All this, calls for a change in emphasis by IHRM

In IHRM there is a Larger Element of Risk Factor (5)

Besides the normal risk Domestic HR faces, such as violation of Constitutional & Statutory Provisions (non-recruitment of Apprentices, SC / ST Quotas, Union problems), IHRM faces many more: Physical Safety of Employees (not moving out after 10 pm, not using Elevators when alone) Risk of employee getting Kidnapped, acts of Terrorism (1 to 2 % of Revenues are reserved for Protection) Arrange Emergency Evacuation (as in Kuwait, 15 Indonesia)

In IHRM there is a Larger Element of Risk Factor (5)cont

Local Government, taking over majority control of Operations Sudden seizures of MNCs assets in Foreign Country, for Political reasons Where HR Policies antagonize host Country, Powerful Unions and Political Groups, MNC may be asked to leave the country Sending back Managers who do not perform, thus incurring heavy Financial 16 losses.

In IHRM there is more EXTERNAL INFLUENCE (6)

MNCs greater visibility requires dealing with Political figures, Ministers, Economic and Social Groups There is constant pressure from the host country, like dictating Hiring Procedures (particularly affirmative action) Follow local ways of doing business (code of conduct, bribe, gifts) Strict compliance to stringent Labour Laws, 17 Taxation, Health and Safety

Basic Steps Involved In Effectively Managing IHRM

Human Resource Planning (HRP) Recruitment & Selection Training & Development Performance Management Remuneration Repatriation Employee Relations

Human Resource Planning (HRP)

HRP in the International arena, could be viewed as
successful, if the right Human resources are attracted, selected and efficiently deployed for meeting the Strategic Global Objectives Key issues in IHRP are :

Ability to identify Top Management Requirement Identify the critical Success factors required by

International Managers (Competencies) Ability to provide Development Opportunities Tracking Commitment and Progress in International Career Synergizing HRP with Strategic Business requirements Dealing with multiple Business units with differing 19 Strategies (one Global, other Regional)

Basic Steps Involved In Effectively Managing IHRM

Human Resource Planning (HRP) Recruitment & Selection Training & Development Performance Management Remuneration Repatriation Employee Relations

Recruitment & Selection in IHRM

Two important aspects to be ensured for
the purpose of Good Selection : Right person in the right place Beliefs and Values of the person selected,
must be consistent with those of the firm.

There are three Basic Approaches to

Staffing on the International Arena :

Ethnocentric Polycentric Geocentric


Staffing in IHRM: Ethnocentric Approach

All Key positions, both at Headquarters and
Subsidiaries are held by Parent country Nationals Best Strategy in the early phase, when:

one is transplanting a running Business parent country nationals are more effective
in representing views of the home office

As an example, 71% of Japanese Companies

had Japanese Presidents only Disadvantages are: it is a costly Process 22 an element of resentment from the home country

Staffing in IHRM: Polycentric Approach

Key positions at Corporate Headquarters are
manned by Parent Country Nationals, however Subsidiaries are largely staffed by Host Country Nationals As ultimate Goal in any Approach is to hand over Operations finally to the host country nationals, it therefore makes sense to initiate them into the Subsidiary as soon as possible As an example, in this approach HR can be largely local, receiving and executing Company guidelines from Corporate HR, but largely otherwise independent 23

Staffing in IHRM: Polycentric Approach


Subsidiaries can be be manned by third

Country Nationals also Advantage of Polycentric Approach is: Hosts have thorough / better knowledge of
Culture, Politics, Law, Business etc, of their Country

Disadvantage of Polycentric Approach can

be: Experience of Expatriates (Parent country
Nationals) may be sorely missed

Staffing in IHRM: Geocentric Approach

It is a Staffing approach that uses a
Worldwide Integrated Strategy This mode of Staffing seeks the best people for the key Jobs. This is irrespective of the Nationality Geocentric Approach, matches the underlying philosophy of a Global Competition for Key Positions This approach is adopted by truly Global players such as General Motors, Colgate 25 Palmolive etc

Staffing in IHRM: Geocentric Approach

As an example, in Colgate Palmolive, 60 %

or more of all Expatriates are from Countries other than USA. Almost all speak at least two Languages

The Corporate HR function in Geocentric

Companies is highly challenging, as it has a vast canvas of HR aspects to deal with, due to the differing Global Environment

Staffing in IHRM: General Policies

How does one decide whether to hire

Parent Country, Host Country or Third Country Nationals? (These are generally called as PCNs, HCNs and TCNs) This is done through a review by HR with
Seniors, based on the possible considerations of Advantages & Disadvantages in each case Through a G.D. please Identify the various Advantages and Disadvantages of Hiring PCNs, HCNs and TCNs....G.D.

The Expatriate Manager in Multinational Companies (MNCs)

Who are Expatriates? Expatriates are Employees working in the Parent or Other Countries:
who because of their special Skills /

Competencies, are ideal, for working in the Host country, where they play an important role because of their Experience and past Exposure in International Market 28

Staffing in IHRM: Approach for Expats

Deciding on approaches for

Expatriates : approaches which rely on
Expatriates are : Ethnocentric & Geocentric also companies rely extensively on PCNs & TCNs for recruiting Expatriates

Determining the Need for Expatriates

Not only from the host countrys requirements, but also for an MNC, it makes sense to have the larger part of the workforce from the Host Country MNCs look for an Expatriate only in the following cases: Where Special Competencies are not available locally Where only a Global Manager can expand the MNCs philosophy, ethics, and the inherent style of action/functioning (which is distinct to the MNC) Maybe more so at the start-up time To man Senior Positions, where value addition, intricate knowledge of Organizational Strengths and Weaknesses, and exposure to International Scenario are very essential for success

Stages in the Cultural adjustments in the Host Country for Expatriates (Sinusoidal: 2 Curves)
Tourist Stage :
Initial Phase. Expatriate enjoys a great deal of


Disillusionment Stage :
Mood descends, as difficulties with new Culture

becomes clear Difficulty in conversing in the local Language Problems in Operation : obtaining Food Supplies Home sickness Bottom of the Curve is called CULTURAL SCHOCK

Adapting Stage (only if cultural shock is overcome)

Accepting, feeling more positive

More effective at home & work, more satisfying


Cultural Factors to be taken care of by IHRM

A countrys Culture is a set of Values, symbols, beliefs, language, norms that guide human behavior within a country Culture and therefore work culture in particular differs from country to country Even today, changing of jobs in Japan is looked down upon, for their sense of loyalty is still quite large.This is not so in Western countries. In India only truly good companies are able to extract a greater sense of loyalty. Our Culture in this respect has changed over the years Recent studies reveal that Asians and Arabs find Westerners unnecessarily pushy, tend not to share credit for joint efforts and want to find solutions based 32 more on their culture and norms than that prevailing

Cultural Factors to be taken care of by IHRM

Indians understanding of others culture is relatively much better, however when it comes to meshing with the host culture, Indians tend to hold themselves more on their own Successful Expatriates maintain a good balance between maintaining their own cultural values while accepting those of the Host Countries Culture also plays a part in determining Compensation In U.S.A. compensation practices encourage individualism and high performance. Europe stresses on Social Responsibility, whereas in Japan, Age and number of years Experience is critical to greater compensation 33

Cultural Factors to be taken care of by IHRM

While it is the aim of most MNCs to have more host employees after a while, it must be borne in mind that certain critical values of the Parent Company, that is its Corporate Culture, must prevail and pervade To ensure above, Parent Companies need to bring in a critical mass of Expatriates at the time of start-ups, so that these threshold cultural values are ingrained from the beginning for all employees Knowledge of cultural differences in people from different countries and also having a good insight to the Host country workplace, will aid a good HR practitioner to achieve maximum effectiveness at work Note: TRAINING a critical component of culture building is taken up elsewhere

Learning from Expatriate Failures in USA

Ranking in priority are: 1. Inability of spouse to adjust 2. Managers inability to adjust at work 3. Personal and / or Emotional Maturity 4. Other family reasons 5. Inability to cope with International Responsibilities

Learning from Expatriate Failures in JAPAN

Ranking in priority are: 1. Inability to cope with International Responsibility 2. Difficulty with Environment 3. Personal or Emotional Problems 4. Lack of Technical Competence 5. Inability of Spouse to adjust

Possible reasons for Expatriate Failures in INDIA !

Ranking in priority are: 1. Family reasons 2. Inability to adjust with Environment 3. Emotional Problems 4. Lack of Technical Competence

Success & Failure for Expatriates

MNCs have to focus on the following areas to ensure Success for Expatriates or action in case of a failure: First determine the Need for Expatriates Identify & Select the Right Candidate Arrange Pre-assignment Training prior to Departure Ensure Post-arrival Orientation & Training Chances are, he Successfully completes his term In case of a Crises if Adjustment is possible (overcomes cultural shock), he can be reassigned (maybe in same or in a slightly different role) in host nation In case of further Failure, crises and where no adjustment in host country is possible, the person has to be Repatriated and Adjusted in the home nation This premature return to the home country is 38 popularly termed Expatriate Failure. Draw a Sequential Diagram

The Coco-Cola way of Global HR Management

One of the most successful Multinational Enterprise Operates in 200 countries, and 80% operating income from businesses outside US Headquartered in Atlanta: US, with a local face in each country of Operation Philosophy think globally, act locally, depicts its cross border management mentality National Businesses have the freedom of operation appropriate to local markets, while at the same time possessing an overriding Common Mindset Manages its Global Operations through 25 Operating Divisions, under 6 Regional Groups39

The Coco-Cola way of Global HR Management cont

Corporate HRM function is charged with providing the glue that binds various Groups and Divisions into one family It achieves this by propagating a common HR philosophy within the company and by developing a group of Internationally minded mid-level Executives for Senior Management responsibilities Local HR is then empowered to develop its own HR practices e.g. compensation which is competitive in the local market Twice a year Corporate HR conducts a two- week program for all local HR staff members from all its 25 divisions ( helps to translate HR philosophy into action in local business, and great benefits in terms 40 of information sharing between Divisions)

The Coco-Cola way of Global HR Management cont

Operations staffed with majority of locals and very limited Internationals, as philosophy is that locals understand local business better. Internationals / Expatriates are needed only for two reasons. One to fill specific skill-sets, not available locally (expatriate of Polish descent in Eastern Europe to fill up specific Financial Managers Vacancy ) and to expand employees skill base. A global Company requires Senior Managers necessarily with International Exposure About 500 High-Level Managers involved in its Global service Program 41

The Coco-Cola way of Global HR Management cont

These High-Level Managers not only have very good knowledge of their specialized field but also of the company, having served at various locations These Expatriates are able to not only add value to each assignment, but also enhance their contribution to the company through differing International Experience Out of 500, about 200 move each year. As against local benchmarks, these Expatriates are paid US benchmark salaries Ultimate Goal of Coca-Cola is to build a cadre of Internationally minded high level Managers from which to draw the Senior Managers to head even 42 Corporate Office. G.D: Key Factors, Propagate Philosophy, Role of IHRM

The Selection Process

Major reason for Expatriate failure is Wrong Selection One of the reason is the assumption, that a person with the required Competence in the Home Nation, will be automatically successful in the Host country Two major Factors need to be broadly viewed, for SHOR-LISTING at Recruitment stage, before embarking on Selection These factors fall under two categories; namely: Individual and Situational 43 GD : Please find three factors under each

Short listing based on INDIVIDUAL FACTORS

Technical Ability & Competence for the job (job in the host country, not the present) Cross-cultural suitability (N. Veg / Veg, food taste, non-smoker, non-drinker, non-believer, strongopinionated culture-wise) Family requirements (working wife, children studying in critical years, old parents)

Short Listing based on SITUATIONAL FACTORS

Country-cultural Requirements: is the ability to jell with the host countries cultural requirements such as:
drinking or smoking habits in public,
headgear a must for all women, children disallowed

in drama halls, strict observance of dress codes personal contact by opposite sex in public

Language: ability to pick-up and learn (wanting to learn at least the host language) MNC requirements: openness towards meeting different goals and targets in host country, through less budgets, less manpower (as 45 requirements differ for start-ups & others)

Selection Methods
Generally Tests and Interviews along
with other Selection Methods is adapted for this very critical Process:
Biographical Data (Past Experiences, Resumes etc) Psychometric, Personality, IQ, Trade and other Tests Work Samples (Technical Skills, typing etc) Interviews Assessment Centers (Leadership, Administration) References

MNCs have over the years designed a number of appropriate Personality and Psychological Tests, but these are mainly used as inputs during selection process. Interviews form a significant part of any selection process, preceded by, Biographical Data and followed by Assessment Centers, and References

As Selection plays a vital Role in Success or Failure with respect to an Expatriate, there may be a large number of Interview rounds prior to final Selection (Google) At most times it has been found prudent to interview all members of the family and seek their opinion, on suitability for a foreign posting Finally what matters is that, the KEY FACTORS are reviewed while Selecting an Expatriate. What are these Key Factors?48

Key Success Factors to be reviewed during SELECTION

Professional Competencies :
Technical (Knowledge & Skills) Experience Administrative Skills

Social Skills :
Cultural Empathy, Tolerance to ambiguity Flexibility for adapting to new ideas Interpersonal Skills Adapting to Stress Leadership


Key Success Factors to be reviewed during SELECTION Motivation for International Assignment :
genuine desire for Foreign Assignments interest in new Cultures commitment to Goals assignment in sync with faster Development

Family Support :
spouses willingness to go abroad spouses career goals spouse in sync with husbands Career Goals, spouses ability for building relationships, children's educational requirements old parents willingness to stay back health factor in family

Willingness to learn host language besides English

Basic Steps Involved In Effectively Managing IHRM

Human Resource Planning (HRP) Recruitment & Selection Training & Development Performance Management Remuneration Repatriation Employee Relations


An Expatriate requires Pre-departure and Post-arrival Training, as this is an important input to prevent Failure, besides proper Selection (G.D. why
required and what is required?)

Training required is:

Cultural Training

Language Training
Practical Training

Aids in empathizing with host culture and enhancing effectiveness in interacting with the host country citizens (Indians in Australia) Cultural training also helps in understanding the culture, local customs, history, politics, economy, religion, social and business practices of the hosts Given the big problem of adaptation in the host country, Organizations arrange familiarization trips not only for Managers but also for Spouse and Children, before actual transfer

As maximum and quick assimilation of the Host Country Culture is one of the key factors in preventing Expatriate Failure, nothing is left to chance by way of Cultural Training, including teaching the required etiquette at work and even things like etiquette while eating! Cultural Training is also imparted when Expatriates return to the Parent Company. It includes Counseling on return to Parent firm, to prevent the phenomena of Reverse Cultural Shock. Inputs as regards the current Workplace and Lifestyles in the Parent Company are included in the Training Realizing the importance of Cultural Training, Companys abroad and in India, now-a-days spend substantial amounts on Cultural Training.

Language Training is desirable and obvious, but MNCs do not give the desired importance As English is an International Language,it is wrongly assumed that it is sufficient to Communicate Particularly in Non-English speaking Countries lie China, Japan, Russia, and France, this can be a big problem Knowledge of host country language helps build rapport and improve effectiveness. 55 This training is a must.

Practical training seeks to help the Expatriate family at home in the host country Sooner they settle down in the new country and environment, better are the prospects of success at work Training in practical aspect before departure cannot be overemphasized:
How to address in public What to talk, what not to talk, How to dress: formally and informally How to socialize, etc

A fast way to practical learning is to quickly mix with your countries Expatriate community and learn from their knowledge and experience (part of 56 post arrival Training)

Developing International Staff and MNC Teams

International Staff and MNC Teams have Programs for continual Development such as:
Expanding operational knowledge and skills

Development Programs for honing

Managerial Skills Development through expansion of assignment / greater responsibilities Projects in different countries (exposure) Opportunities for growth 57

Management Development as a Strategic Tool

While MDPs aid in honing and developing Managerial skills and Competencies MNCs also use these to spread their Multinational Strategies :
Bring about a spirit of togetherness and loyalty to the

Main Organization (through songs, picnics, sporting events, get-togethers) Sharing of different cultures w.r.t. host, home and other countries Understanding locational Strengths and Weaknesses Build informal networks for future Aids in handling changing assignments in various locations Overall gives shape to a common company culture in 58 the firms globally dispersed operations

Basic Steps Involved In Effectively Managing IHRM

Human Resource Planning (HRP) Recruitment & Selection Training & Development Performance Management Remuneration Repatriation Employee Relations

One of the most Challenging tasks of IHRM is managing the Performance of Organizations varies facilities located all over the globe PM in the International arena is a process that enables MNCs to evaluate and facilitate continuous improvement of Individuals, of Subsidiary and Corporate Performance, against clearly defined pre-set Goals and Targets

Performance Management has therefore to be much more Comprehensive, in as much as it includes Assessment of not only the Individuals Performance but also of the Parent Firm and its Subsidiaries Each MNC has its own strategic goals and expectations from the foreign affiliates in terms of market performance, contribution to total profits, and competitiveness


While a subsidys performance needs to be assessed in terms of fulfillment of its Headquarters' expectations, the constraint within which the subsidiary functions, must be taken care of Physical distance, time difference and frequency of contacts, complicates correct assessment In spite of Internet, fax, teleconferencing, there is no substitute for a face-to- face interaction between a Subsidiary Manager 62 and his Corporate Head

Basic Steps Involved In Effectively Managing IHRM

Human Resource Planning (HRP) Recruitment & Selection Training & Development Performance Management Remuneration Repatriation Employee Relations


Organizations that are successful in the Global Arena, have aligned their Human Recourses in support of their Strategic Business Plans One of the major Component is in the manner Human Resources Total Compensation Program, supports the way Business is structured, organized and operated both Globally and Domestically In Compensation related matters, Organizations should think Globally and Act locally


International HR Managers give considerable attention in designing of attractive remuneration package for expatriates. Criteria's considered in designing are: Attract those whose special competencies are required for International assignments Remuneration should not be a hindrance in transferring an employee from home to subsidiary, from subsidiary to subsidiary, and subsidiary to home country Provide consistent and reasonable relationship between pay levels of employees at headquarters, domestic affiliates and foreign subsidiaries Be cost effective, by reducing unnecessary expenses (incentive v/s on-going premium) 65

Problems in designing an International Remuneration Package

Discrepancy in pay between parent, host and third country nationals (payment in India less than in USA for same job) Need to vary Expatriates Compensation depending on the stage of life cycle of his family (child: young, schooling, grown) Remuneration on re-entry in parent country Remunerations to deal with changes in International Businesses (e.g. pay in India 66 hiked after transfer to host country)

REMUNERATION PACKAGE Any Expatriates remuneration package seeks to equalize the cost of living at home and abroad. Package generally contains:

In Domestic setting Base Salary is the cash component , and is related to Benefits such as PF, Bonus For Expatriates Base Salary is related also to the package of allowances (such as foreign service premium, cost of living, housing), besides in-service benefits and pension etc Payment can be made in the home country or the host country currency Base Salary is the foundation block for International Remuneration, whether person is a Parent or Third Country National 68

BENEFITS (Housing, Car, Medical)

Benefits constitute a large portion of Expatriates Remuneration Problematic issues in Benefits are:
Whether to consider for home country benefits,

especially if tax free? Whether to consider for host country benefits only and make up the difference? Will termination effect employee in host country? (e.g. :no medical on termination) Whether home or host country will be responsible for Social Security? 69

BENEFITS (Housing, Car, Medical)

Problematic issues in Benefits are: ..Cont
Whether Benefits should meet the

requirements of home or the host country Which country should pay the Benefits? Whether other benefits should be used to offset any shortfall in the coverage Whether home country benefits should be made available to local citizens

Cost of Living Allowance: It is a payment for the difference between home country and oversees cost of living, or to provide equivalent standard of living COL Allowance may cover a variety of expenses including :
Relocation expenses ( transport, travel etc ) Housing Hardship (depending on the country and

location) Spouse assistance: to offset spouse income in home country (or help in getting a job in home country or employment in firms foreign 71 subsidy)

Incentives and Taxes

Incentives: are one time Lump-sum Amounts, given as an inducement to accepting a foreign Assignment (more used now against giving an ongoing premium) Advantages of Incentives are threefold:
They are paid on accepting Oversees Assignments

(payments tend to retain Motivating factor) Cost to Company works out less (no future financial commitment) Large sums received by Expats, can be used for saving or spending

TAXES: there are two approaches to International Taxation followed by Companies. These are:
Tax Equalization Tax Protection

Tailoring the Compensation Package

Working within the Components discussed, MNCs try to tailor remuneration packages in order to fit specific situations. Take the situation of the highest paid CEO and the lowest paid Workmen:
in USA the ratio is 60:1 in Sweden it is 8:1 in Japan it is 4:1.

Therefore each countrys package is tailored accordingly. In designing an Expatriates remuneration, MNCs follow a number of approaches, 73 which are detailed behind:


Balance Sheet Approach: expatriate does not loose out anything and maintains home country living standard, besides receiving some financial inducements Localization: pay local salary for those taking up long-time assignments early in their career ( no comparison required with home country) Lump-sum Approach: give lump-sum and let employee decide how he wants to use entire amount Cafeteria Approach: give him a series of individual options within the overall fixed amount Regional System: Difference based on Region. 74 e.g. Europe less, US more.

Basic Steps Involved In Effectively Managing IHRM

Human Resource Planning (HRP) Recruitment & Selection Training & Development Performance Management Remuneration Repatriation Employee Relations

Repatriation is the activity of bringing the Expatriate back to the home country Care has to be taken to ensure, that she does not suffer re-entry or reverse cultural shock (new assignment/people, less status) Generally shock occurs as Expatriates are less prepared for re-entry compared to when expatriated Success at relocating Expatriates in the home country, depends on how well the firm handles 76 repatriation Programs

PREPERATION: Involves developing a plan for shifting, taking his opinion on a list of choices at work. Then making plans to shift his family back home, or to other country

Personalized help by HR goes a long way in reducing stress and disruption. Help from arranging a farewell party to aiding in transportation, to ensuring they are settled at residence and in office

TRANSITION: Arranging first for temporary (hotel) and then for permanent housing, schooling , admin tasks, such as renewing driving license, opening bank accounts READJUSTMENTS: aid in coping with reverse shock due to anxiety on return home, adjustment to home country, doubts about placement, isolation as old kingdom is lost, feeling devalued, less status and even pay. 78


MNCs give great importance to Repatriation Programs by assigning Mentors ( a respected Senior known to the Expatriate) who:
tries to remove sense of alienation by

giving valued inputs about workplace and her new assignment And keeping mentee involved as regards important decisions

All these aid the Expatriate to be so much better prepared and face re-entry with a lot 79 of confidence

Basic Steps Involved In Effectively Managing IHRM

Human Resource Planning (HRP) Recruitment & Selection Training & Development Performance Management Remuneration Repatriation Employee Relations

Organized Labour in foreign locations can be a big Constraining factor, in pursuit of an MNCs Global Strategy Therefore IHRM must learn to understand the nuances and the importance of handling foreign labour in a most efficient manner Where understanding and/or importance was missing on the part of management and more so with IHRM, it has lead to disastrous results as follows: GE bought peace by agreeing not to integrate and consolidate operations in a most efficient manner Daewoo went bankrupt because labour 81 resisted trimming their labour force

IR Issues in MNCs


Who should handle Labour Relations, the Headquarters or the Subsidiary Plant?
National differences in economic, political, and legal

systems produce different Labour relations, therefore it is generally delegated to foreign subsidies However MNCs do get involved in agreements, to ensure that no precedents are made as these may affect International Plans
In exceptions, like where Transnational Sourcing

takes place (where subsidy of one country relies on a foreign subsidy as a source of components), Labour relations are generally Centralized at MNCs 82 Headquarters


What should be the Unions Position in Dealing with MNCs?
The most potent weapon with the Union is a Strike

a temporary suspension of operations designed to exert pressure upon Management However Unions are vary today of using this weapon, because for one in the present global context they seem to be loosing strength and secondly they do not posses the staying power to match MNCs financial clout Clout is in terms of absorbing losses at one place and making up through increased profits in another 83 subsidy

What should be the Unions Position in Dealing with MNCs? cont


Clout is also in terms of capacity to move from one

location to another, at fairly short notice. Unions are aware of this fire-power. On their side, the Unions have formed International Trade Secretariats (ITSs), in order to achieve transactional bargaining with MNCs Finally Labour also seeks intervention from ILO (International Labour Organization), for work-place related principles, to be observed by all nations The best would be to mutually respect each other and look at the overall interest of the Business of the 84 Organizations, and hence its people

Global Unions and Labour Agreements

While Unionism is on a decline in some countries, particularly after Globalization, in other countries it has still maintained strength 28% of employees in Japan are Unionized; 43% in Germany; 50% in U.K.; 96% in Sweden;and around 90% in India Strength differs from mild to relatively strong, even militant unions In most countries the Government laws make it difficult to fire workmen, so companies are reluctant to hire Permanent workmen In some countries (not in India), generous and lengthy unemployment benefits discourage jobless from seeking new work 85

Global Unions and Labour Agreementscont

The North American Free Trade Agreements, called NAFTA has a side agreement on Labor, designed to protect workers of individual countries (Canada, Mexico, U.S.A.) Organizations in each of these countries have to comply with the Labor Laws of NAFTA Laws pertain to Health & Safety, Child Labor, HRD, Work Benefits, Social Programs, Productivity, Employment Standards and more. Non-compliance of these Laws can lead to massive fines upto or even more than 20 86 Million Dollars per violation

Global Unions and Labour Agreementscont

Labor unions have also formed a world-wide International Trade Secretariats (ITSs) There are 15 of them. They provide worldwide links in terms of information and also aid in Transnational bargaining with MNCs A world body like the ILO is much sought after for intervention by Labor Unions. A lot of pressure is exercised on MNCs to follow ILOs Work-place related Principles, as 87 these are respected by all nations

Emerging Trends in Employee Relations and Employee Involvement

MNCs are today not only educating but also involving their Workmen on the Goals, Issues and Problems encountered by them through a variety of means such as:
Weekly meetings to discuss schedules and working

out solutions on the progress of the jobs Seeking Technical inputs Interfacing with Customers (how difficult) Imparting knowledge about Competition faced Formation of Quality Circle Teams (wkmn as a Leader!) 88 Communicating Strategic decisions (new product)

Emerging Trends in Employee Relations and Employee Involvement

Atmosphere so created, through above actions results in:
Trust and Joint ownership of all problems Fast resolution of critical issues

Cost cutting becomes an on-going matter

Openness in discussing questions, leading to

greater ideas and greater scope for improvements Greater understand of workmen problems, resulting in expeditious resolution directly (w.o union) Reduced clout of union as most subject matter is 89 known better to workmen

International Labor Organization & its Standards

The ILO is a Global Body devoted to obtaining decent and productive working conditions of Freedom, Equity, Security, and Human Dignity Its main aim is to promote rights at work, encourage decent employment opportunities, enhance social protection and strengthen dialogue in dealing with work related issues ILO is responsible for drawing and overseeing International Labor Standards

International Labor Organization & its Standards Working with member States ILO seeks to ensure that the Labor Standards are respected in practice as well as in principle For applying the Standards, ILO is backed by a Supervisory System that is unique at International Level. The system helps to ensure that countries implement conventions they ratify ILO regularly examines the application of Standards in Member States and points out areas where they could be better applied. ILO also assists in case of problems

There are 22 Standards formulated and implemented by ILO. Few of these are listed below
Freedom of association, collective bargaining & IR Forced Labor

Elimination of Child Labor

Equality of Opportunity and Treatment Employment Policy and Promotion

Working Time Occupational Safety and Health