Globalization

and HRM
 Why International Human Resource
Management?

 Increasing globalization, firms and

employees in them moving all over the
world.
 Major problems in international operations
because of human resource management
blunders
 Hence need to understand human resource
management in a global perspective

1–2
 Why International Human Resource
Management? (cont’d)

 The role of HR in International Operations

 Managing a Multicultural Workforce
 Developing Managerial Talent in a Global
Business Environment

1–3
Globalization, Uncertainty, Complexity and
IHRM
Globalization
and
New Technologies

New Environment – Increased Environmental

Uncertainty

More Complexity
More Dynamism
Less Richness
1–4
Globalization and importance of IHRM

Uncertainty, Complexity, Hypercompetition

Need to Refocus on Persons, Roles and

Integration for Global Performance HR

Capabilities
People Processes
Persons in Roles
1–5
Diversity as an
Organizational
and HR
Challenge in
MNE

Source: Marilyn Loden and Judy B. Rosener, Workforce America: Managing Employee Diversity as a Vital Resource, p. 20.
1–6
 A Definition of Human Resource
Management
• Human Resource Management (HRM)
involves all management decisions and
practices that directly affect the people who
work for the organization.
• “Human Resources” the people who work
for the organization.
organization

1–7
 A Definition of Human Resource
Management (cont’d)
 “Human” represents the dimension of HRM which
relates to the soft aspects such as commitment of
employees through participation and the most
important assets being the employees.
 “Resource” represents the hard aspects such as the
strategy link of HRM and the importance of efficient
utilization of employees.
 “Management” represents the role of HRM as part of
management that implies that it’s not only an
administrative function that carries out the
formulated policies but also a managerial function
that contributes to strategy formulation.
1–8
 The General Field of HR

 Major Functions and Activities

– Human resource planning
– Staffing
• Recruitment
• Selection
• Placement
– Performance appraisal
– Training and development
– Compensation and benefits
– Industrial relations
1–9
What does IHRM add into the Traditional
Framework of HRM?
• Types of employees
– Within and cross-cultural workforce diversity
– Coordination
– Communication
• Human resource activities
– Procurement
– Allocation
– Utilization of human resources
• Nation/country categories where firms expand
and operate
– Host country
– Parent country
– Third country
1–10
The strategic role of International HRM

The four strategies that are pursued in the

international business are:
• Multi domestic- under this strategy the
firms try to create value by emphasizing
local responsiveness.
• International- under international strategy
the firms try to create value by
transferring core competencies overseas.

1–11
The strategic role of International HRM

• Global- under this strategy the firms try

to create value by realizing experience
curve and location economies
• Transnational- under this strategy firms
try to create value by doing all the
above things simultaneously.

1–12
A Model of IHRM

1–13
 STAFFING POLICY

• Ethnocentric: All management positions are

filled with employees from the parent company 
• Polycentric: Host country nationals are
recruited to manage subsidiaries while
management at headquarters is staff by
parent-company nationals.
• Geocentric: Seeks the best people for the job
regardless of where they come from.

1–14
 Some Terms Defined

• Host Country National (HCN): Belongs to

the Country where the subsidiary is located
• Parent Country National (PCN): Belongs to
the Country where the firm has its
headquarters
• Third Country Nationals (TCN): Belongs to
any other country and is employed by the
firm

1–15
 Approaches To International Human
Resource Management

• Ethnocentric: Highly centralized. HQ controls

PCNs dominate.
• Polycentric: Decentralized. Each subsidiary
has some degree of decision making
autonomy. HCNs manage subsidiaries.
• Geocentric: Ignores nationality in favor of
ability and competence needs in a worldwide
integrated business strategy.

1–16
 Who is an Expatriate?
 An employee who is working and temporarily
residing in a foreign country
• Some firms prefer to use the term “international
assignees”

– Expatriates are PCNs from the parent country

operations, TCNs transferred to either HQ or another
subsidiary, and HCNs transferred into the parent
country

1–17
International Assignments Create
Expatriates:

1–18
 The Expatriate Problem
• High Expatriate Failure Rates
• Average cost per failure to the parent firm can
be as high as three times the expatriate’s
annual domestic salary plus the cost of
relocation
• Between 16% & 40% of all American
employees sent abroad to developed nations,
and almost 70% sent to less developed
nations return home early
1–19
 Reasons for Expatriate Failure

1. Inability of spouse to adjust

2. Manager’s inability to adjust
3. Other family problems
4. Manager’s personal or emotional maturity
5. Inability to cope with larger overseas
responsibility
6. Lack of technical competence
7. Difficulties with new environment
1–20
Differences between Domestic HRM and IHRM

 More HR activities: taxation, culture

orientation, administrative services
 The need for a broader perspective: cater to
multiple needs
 More involvement in employees’ personal
lives: adjustment, spouses, children
 Changes in emphasis as the workforce mix of
expatriates and locals varies: fairness
 Risk exposure: expatriate failure, terrorism
 Broader external influences: government
regulations, ways of conduct
1–21
Differences between Domestic HRM
and IHRM: variables
• Complexity involved in operating in different
countries, varied nationalities of employees
• The different Cultural Environment
• The industry or industries with which the
MNC is involved
• Attitudes of Senior Management
• Extent of reliance of MNC on home country
domestic market
1–22
Variables that Moderate Differences between
Domestic HR and IHRM

1–23
 Expatriate Selection

• Self orientation

• Others orientation

• Perceptual ability

• Cultural toughness

1–24
Factors that Influence the Global Work Environment

1–25
 Performance Appraisal

• Is a method by which the job

performance of an employee is
evaluated (generally in terms of quality,
quantity, cost, and time) typically by the
corresponding manager or supervisor

1–26
Guidelines for Performance Appraisal

• More weight should be given to on site

manager’s appraisal, than to the off- site
manager’s appraisal.
• The home country officer while
preparing the appraisal should consult
an on- site manger to make the
appraisal more authentic.

1–27
 Compensation

• “All
forms of financial returns
and tangible services and
benefits employees receive as
part of an employment
relationship"

1–28
Expatriates Pay

• Base salary
• Foreign Services Premium
• Allowances
– hardship allowances,
– housing allowances,
– cost of living allowances and
– education allowances
• Taxation
• Benefits

1–29
1–30