International Human Resource Management
Sem 1, 2015
Focus:
1. Employees’ personal lives in IHRM activities
2. Culture and IHRM activities
3. Standardization and localization in IHRM activities
4. Culture and Cross-Boarder alliances
5. Staffing approaches in MNEs
6. Appraising expatriates performance
7. Pre-departure training program
8. Local Plus compensation
9. Trade unions and strategic choices of MNEs
10. International HRM and terrorism
Lecture 1: Introduction
- Human Resource Management: is an integrated set of personnel activities, linked strategically with
organizational objectives.
o These activities include:
Human resource planning (what job to perform? What kind of ppl and experience?
How many ppl? When will they find suitable ppl to hire?) ,
Staffing (recruitment, selection, and placement) – Put the right ppl into the right job,
how we attract and select and keep them.
Performance management- how we do performance evaluation? What forms,
procedure and criteria? When and how often should we evaluate performance? Who
should do the evaluation?
Training and development- build skills in short term and development in long term,
how do we train and develop employees and how much does it cost?
compensation (remuneration) and benefits – How to compensate/ reward, salary,
bonus, incentive ( financially), benefits, allowances, insurance ( non-financially)
Industrial relations- deal with relationship between employees, employers, Union’s
laws, HR laws, legislation, minimum wages and vacations.
- International Human Resource Management: the field of IHRM is about understanding, researching,
applying and revising all human resource activities in their internal and external contexts as they impact
the process of managing human resources in enterprises throughout the global environment to enhance
the experience of multiples stakeholders, including investors, customers, employees, partners, suppliers,
environment and society.
o The interplay among three HRM dimensions ( HR activities, types of employees and countries
of operation) in an international environment:
, The broad of HR activities – involving same activities with domestic HRM but more of
managing diverse workforce.
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, “other” countries that may be the source of labour, finance and other
inputs.
The three categories of employees of an international firm: host-country nationals,
parent-country nationals, third country national.
o Issues for IHRM including: how important to have overseas operations, If yes, what kind of ppl,
skills, experience and qualification that we need, how many ppl that we need for overseas
operations, how will we find qualified ppl, where and what country to find ppl, will we use local
managers, expatriates third country, how will we recruit and select them, how we do
compensation for their benefits of financial and non-financial components.
- Differences between HRM and IHRM:
o More HR activities: international taxation, international relocation and orientation ( arranging
for pre-departure training, providing immigration and travel details, providing housing,
shopping, medical care, recreation and schooling information as well as determination of
various overseas allowances and taxation treatment), administrative services for expatriates,
host-government relations and language translation services. These services can be complex
and time-consuming due to the conflict with local conditions. Ethical questions can arise
because some practices might be legal and ethical in host country but not home country.
o The need for a broader perspective: there is problem of designing and administering programs
for more than one national group of people. Ex: broader perspective of expatriates benefits for
all employees regardless of nationality. The complexity of equity issue can be one of the major
challenges for IHRM.
o More involvement in employees’ personal lives: they need to ensure expatriate employee
understand housing arrangement, healthcare, and other compensation package providing for
the assignment. Domestic HR has limited involvement in the employee family, for IHRM, they
need to know more about employee personal life ( host country might require marriage
certificate before grating visa), they also need to assist children about schooling and adaptation
for them, there for there is a psychological contract between firm and the entire immediate
family of the international assignee. Therefore they need to advise all potential expatriates
about visa requirement and criteria with regard to marital status and allow candidates to decide
whether they still want to take the assignment.
o Changes in emphasis as the workforce mix expatriates and locals varies: there might be a
requirement to establish a program to bring high potential local staff to corporate headquarters
for developmental assignments.
o Risk exposure: higher risk of human and financial consequences of failure in IHRM. Example:
under-performance while on international assignment, terrorism. Direct cost failure: salary,
training costs, travel cost, relocation expenses). Indirect cost: loss of foreign market share,
damage to key host-country relationships.
o Broader external influences: major factor is type of government, the state of economy and
generally accepted practices of doing business in each of the various host country. Ex: host
country dictates hiring process ( Malaysia).
- What is required to be IHRM managers
o Being responsible for a greater number of functions and activities such as selection, training and
management of international assignees.
o Having to expand one’s area of expertise to include a much broader knowledge of foreign
country employment laws and global organization designs.
o 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 employee.
, o Being involved with greatly expanded and constantly changing mix of employees ( from the host
countries and foreign locals), adding considerable diversity and complexity to HR tasks/
o Having no cope with more external influences; for example : the impact of foreign culture and
laws.
o Additional responsibilities like translation of language, both at headquarters and subsidiary
level, organizing schooling and housing for expatriates and providing administrative services
o Management for differential compensation due to variety of allowances and adjustment.
o More emphasis on activities such as 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.
o More contacts with government officials for obtaining visas, work permits , tax certificates ,
more coordination and travel to assess performance of expatriates and solve problems, more
risk management as threats from terrorists, kip-nappers and protecting intellectual property
right of firms.
A model of the variables that moderate differences between domestic and international HRM:
The cultural
environment
Extent of The industry
reliance of the (or industries)
multinational within which
on its home- the
coutntry Domestic multinational
domestic and is primarily
market international involved
activities of
the HRM
function
Complexity involved
in operating in
different countries
Attitudes of and employing
senior different national
management categories of
employees
- The culture environment: people required to live and work overseas may experience culture shock- a
phenomenon experienced by people who move across cultures because there are requirement to many
adjustment in the relatively short period, challenging people frame of references, it can lead to negative
feelings about the host country and its people and a longing to return home. It is essential to appreciate
of cultural differences. An awareness of cultural differences is essential for HR manager at corporate
headquarters as well as host country.
- Industry Type: because the patterns of international competition vary widely from one industry to
another. The continuum with two end which are multi-domestic industry ( in which competition in each
country is essentially independent of competition in other countries) and global industry ( in which a
firm’s competitive position in one country is significantly influenced by its position in other countries).
- Extend of reliance of the multinational on its home-country domestic market: for most of firms, a small
home market is one of the key drivers for seeking new international markets. A large domestic market
will influence the attitudes of senior managers towards their international activities and will generate
large number of managers with an experience based of predominantly domestic market experience.
- Attitudes of senior management to international operations : if senior manager does not have a strong
international orientation, the importance of international operations maybe underemphasized,
therefore they tend to focus more on domestic issues and minimize the differences between
international and domestic environment. The challenge is to fostering the desired ‘global mindset’ to
able to think globally and implement HR policies that facilitate the development of globally oriented
staff.
- Applying a strategic view of IHRM: the use of PESTEL analysis for macro-international factors that may
influence MNEs because external factors have direct influence on both internal/organization factors and
SHRM strategy and practices. A framework for Strategic HRM in multi-national enterprises including
, External factors ( PESTEL, organizational links with other MNEs and with national governments,
asymmetric events and environmental dynamics), organizational factors ( balance of global integration
and local responsiveness, structure, size and maturity, strategy, corporate governance, international
orientation and culture), MNE performance ( financial performance, social performance and enterprise
resilense).
o .
Lecture 2: Cultures and IHRM activities:
- Culture: is a set of socially constructed meanings that shape the behavior of people in a particular
society. With the globalization of business and economics, cultures are affected by other cultures and
some overlapping takes place. However, particular cultural ‘perspectives’ remain despite some
homogenization.
- Hofstede’s dimension of cultural values:
o power distance dimension: the scale in which the members of a culture accept that power is
not distributed equally in institutions. High power distance culture: high power inequality,
hierarchical organization structures. Low power distance culture: equal power distribution,
demand explanation for any instance of formalized power inequality.
o Uncertainty avoidance: extent to which the members of a culture feel threatened by uncertain,
ambiguous or unstructured situations and try to avoid them. Strong uncertainty avoidance
culture: strict belief and behavioral code, do not tolerate people and idea that deviate from
these. Weak uncertainty avoidance: high tolerance for deviation.
o Femininity versus masculinity: based on the assumption that values can be distinguished as
more masculine or more feminine. Masculine orientation culture: the pursuit of financial
success, heroism and strong performance approach. Feminine orientation culture: preferences
for life quality, modesty and interpersonal relationship.
o Individualism versus collectivism: the extent to which individual initiative and caring for oneself
and the nearest relatives is preferred by society as opposed to public assistance or the concept
of extended family. Individualistic culture: merely a casual network of relationships between
people. Collective culture: closer, more clearly defined system of relationship.
- Impact of culture context on HRM practices:
HRM Practices Impact of the cultural context
Recruitment and selection Individualistic culture: individual achievement
represent important selection criteria
Collective culture: the emphasis in the
recruiting process is more on team-related skills
than on individual competencies
Training and development High on gender egalitarianism culture: the same
chances for vertical career advancement as men
Low on gender egalitarianism culture: female
managers are rare
Compensation High uncertainty avoidance culture: employees
tend to be rather risk averse and prefer fixed
compensation packages or senior-based pay
Low uncertainty avoidance culture: employees
tend to be rather risk-raking and accept high
income variability through performance-based
pay
Task distribution Collective culture: ten to emphasize group
work
Individual culture: rather attribute individual
Sem 1, 2015
Focus:
1. Employees’ personal lives in IHRM activities
2. Culture and IHRM activities
3. Standardization and localization in IHRM activities
4. Culture and Cross-Boarder alliances
5. Staffing approaches in MNEs
6. Appraising expatriates performance
7. Pre-departure training program
8. Local Plus compensation
9. Trade unions and strategic choices of MNEs
10. International HRM and terrorism
Lecture 1: Introduction
- Human Resource Management: is an integrated set of personnel activities, linked strategically with
organizational objectives.
o These activities include:
Human resource planning (what job to perform? What kind of ppl and experience?
How many ppl? When will they find suitable ppl to hire?) ,
Staffing (recruitment, selection, and placement) – Put the right ppl into the right job,
how we attract and select and keep them.
Performance management- how we do performance evaluation? What forms,
procedure and criteria? When and how often should we evaluate performance? Who
should do the evaluation?
Training and development- build skills in short term and development in long term,
how do we train and develop employees and how much does it cost?
compensation (remuneration) and benefits – How to compensate/ reward, salary,
bonus, incentive ( financially), benefits, allowances, insurance ( non-financially)
Industrial relations- deal with relationship between employees, employers, Union’s
laws, HR laws, legislation, minimum wages and vacations.
- International Human Resource Management: the field of IHRM is about understanding, researching,
applying and revising all human resource activities in their internal and external contexts as they impact
the process of managing human resources in enterprises throughout the global environment to enhance
the experience of multiples stakeholders, including investors, customers, employees, partners, suppliers,
environment and society.
o The interplay among three HRM dimensions ( HR activities, types of employees and countries
of operation) in an international environment:
, The broad of HR activities – involving same activities with domestic HRM but more of
managing diverse workforce.
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, “other” countries that may be the source of labour, finance and other
inputs.
The three categories of employees of an international firm: host-country nationals,
parent-country nationals, third country national.
o Issues for IHRM including: how important to have overseas operations, If yes, what kind of ppl,
skills, experience and qualification that we need, how many ppl that we need for overseas
operations, how will we find qualified ppl, where and what country to find ppl, will we use local
managers, expatriates third country, how will we recruit and select them, how we do
compensation for their benefits of financial and non-financial components.
- Differences between HRM and IHRM:
o More HR activities: international taxation, international relocation and orientation ( arranging
for pre-departure training, providing immigration and travel details, providing housing,
shopping, medical care, recreation and schooling information as well as determination of
various overseas allowances and taxation treatment), administrative services for expatriates,
host-government relations and language translation services. These services can be complex
and time-consuming due to the conflict with local conditions. Ethical questions can arise
because some practices might be legal and ethical in host country but not home country.
o The need for a broader perspective: there is problem of designing and administering programs
for more than one national group of people. Ex: broader perspective of expatriates benefits for
all employees regardless of nationality. The complexity of equity issue can be one of the major
challenges for IHRM.
o More involvement in employees’ personal lives: they need to ensure expatriate employee
understand housing arrangement, healthcare, and other compensation package providing for
the assignment. Domestic HR has limited involvement in the employee family, for IHRM, they
need to know more about employee personal life ( host country might require marriage
certificate before grating visa), they also need to assist children about schooling and adaptation
for them, there for there is a psychological contract between firm and the entire immediate
family of the international assignee. Therefore they need to advise all potential expatriates
about visa requirement and criteria with regard to marital status and allow candidates to decide
whether they still want to take the assignment.
o Changes in emphasis as the workforce mix expatriates and locals varies: there might be a
requirement to establish a program to bring high potential local staff to corporate headquarters
for developmental assignments.
o Risk exposure: higher risk of human and financial consequences of failure in IHRM. Example:
under-performance while on international assignment, terrorism. Direct cost failure: salary,
training costs, travel cost, relocation expenses). Indirect cost: loss of foreign market share,
damage to key host-country relationships.
o Broader external influences: major factor is type of government, the state of economy and
generally accepted practices of doing business in each of the various host country. Ex: host
country dictates hiring process ( Malaysia).
- What is required to be IHRM managers
o Being responsible for a greater number of functions and activities such as selection, training and
management of international assignees.
o Having to expand one’s area of expertise to include a much broader knowledge of foreign
country employment laws and global organization designs.
o 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 employee.
, o Being involved with greatly expanded and constantly changing mix of employees ( from the host
countries and foreign locals), adding considerable diversity and complexity to HR tasks/
o Having no cope with more external influences; for example : the impact of foreign culture and
laws.
o Additional responsibilities like translation of language, both at headquarters and subsidiary
level, organizing schooling and housing for expatriates and providing administrative services
o Management for differential compensation due to variety of allowances and adjustment.
o More emphasis on activities such as 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.
o More contacts with government officials for obtaining visas, work permits , tax certificates ,
more coordination and travel to assess performance of expatriates and solve problems, more
risk management as threats from terrorists, kip-nappers and protecting intellectual property
right of firms.
A model of the variables that moderate differences between domestic and international HRM:
The cultural
environment
Extent of The industry
reliance of the (or industries)
multinational within which
on its home- the
coutntry Domestic multinational
domestic and is primarily
market international involved
activities of
the HRM
function
Complexity involved
in operating in
different countries
Attitudes of and employing
senior different national
management categories of
employees
- The culture environment: people required to live and work overseas may experience culture shock- a
phenomenon experienced by people who move across cultures because there are requirement to many
adjustment in the relatively short period, challenging people frame of references, it can lead to negative
feelings about the host country and its people and a longing to return home. It is essential to appreciate
of cultural differences. An awareness of cultural differences is essential for HR manager at corporate
headquarters as well as host country.
- Industry Type: because the patterns of international competition vary widely from one industry to
another. The continuum with two end which are multi-domestic industry ( in which competition in each
country is essentially independent of competition in other countries) and global industry ( in which a
firm’s competitive position in one country is significantly influenced by its position in other countries).
- Extend of reliance of the multinational on its home-country domestic market: for most of firms, a small
home market is one of the key drivers for seeking new international markets. A large domestic market
will influence the attitudes of senior managers towards their international activities and will generate
large number of managers with an experience based of predominantly domestic market experience.
- Attitudes of senior management to international operations : if senior manager does not have a strong
international orientation, the importance of international operations maybe underemphasized,
therefore they tend to focus more on domestic issues and minimize the differences between
international and domestic environment. The challenge is to fostering the desired ‘global mindset’ to
able to think globally and implement HR policies that facilitate the development of globally oriented
staff.
- Applying a strategic view of IHRM: the use of PESTEL analysis for macro-international factors that may
influence MNEs because external factors have direct influence on both internal/organization factors and
SHRM strategy and practices. A framework for Strategic HRM in multi-national enterprises including
, External factors ( PESTEL, organizational links with other MNEs and with national governments,
asymmetric events and environmental dynamics), organizational factors ( balance of global integration
and local responsiveness, structure, size and maturity, strategy, corporate governance, international
orientation and culture), MNE performance ( financial performance, social performance and enterprise
resilense).
o .
Lecture 2: Cultures and IHRM activities:
- Culture: is a set of socially constructed meanings that shape the behavior of people in a particular
society. With the globalization of business and economics, cultures are affected by other cultures and
some overlapping takes place. However, particular cultural ‘perspectives’ remain despite some
homogenization.
- Hofstede’s dimension of cultural values:
o power distance dimension: the scale in which the members of a culture accept that power is
not distributed equally in institutions. High power distance culture: high power inequality,
hierarchical organization structures. Low power distance culture: equal power distribution,
demand explanation for any instance of formalized power inequality.
o Uncertainty avoidance: extent to which the members of a culture feel threatened by uncertain,
ambiguous or unstructured situations and try to avoid them. Strong uncertainty avoidance
culture: strict belief and behavioral code, do not tolerate people and idea that deviate from
these. Weak uncertainty avoidance: high tolerance for deviation.
o Femininity versus masculinity: based on the assumption that values can be distinguished as
more masculine or more feminine. Masculine orientation culture: the pursuit of financial
success, heroism and strong performance approach. Feminine orientation culture: preferences
for life quality, modesty and interpersonal relationship.
o Individualism versus collectivism: the extent to which individual initiative and caring for oneself
and the nearest relatives is preferred by society as opposed to public assistance or the concept
of extended family. Individualistic culture: merely a casual network of relationships between
people. Collective culture: closer, more clearly defined system of relationship.
- Impact of culture context on HRM practices:
HRM Practices Impact of the cultural context
Recruitment and selection Individualistic culture: individual achievement
represent important selection criteria
Collective culture: the emphasis in the
recruiting process is more on team-related skills
than on individual competencies
Training and development High on gender egalitarianism culture: the same
chances for vertical career advancement as men
Low on gender egalitarianism culture: female
managers are rare
Compensation High uncertainty avoidance culture: employees
tend to be rather risk averse and prefer fixed
compensation packages or senior-based pay
Low uncertainty avoidance culture: employees
tend to be rather risk-raking and accept high
income variability through performance-based
pay
Task distribution Collective culture: ten to emphasize group
work
Individual culture: rather attribute individual
