AN ASSIGNMENT ON The enduring context of IHRM

                                                AN ASSIGNMENT

ON

The enduring context of IHRM

“As part of the fulfillment of the requirement for the course of HRM 612: International Human Resource Management”

Prepared For:

Dr. M. Ataur Rahman
Professor
Department of Management Studies
Director
MBA (Evening) Program
University of Dhaka

Prepared By:

Name	ID NO.
Md. Sojibur Rahman	1332MBA00875

 

            MANARAT INTERNATIONAL UNIVERSITY         

Date: March 19, 2013

Contents
Titles	Page no.
Introduction of IHRM	03
Definition of HRM	03
Definition of IHRM	04
Objectives of IHRM	04
Importance of IHRM	05
Challenge of international human resource management	06
International human resource management and strategy	06
Dimensions of IHRM	06
Approaches to IHRM	08
Distinction between International Human Resource management and Domestic HRM	08
Significance of IHRM in International Business	09
Role of International HRM	10
Major Issues in International HRM	10
What do you mean by the term “Expatriate?”	11
International assignments create an Expatriate	11
The components that moderate differences between domestic and international Human Resource	12
Factor influencing the global work environment	13
Multiple choice question	17

Introduction

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. Business environment become global business environment.

Internalization of business now experts influence not only on labor markets and staffing requirements but also on HR practices. 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. Globalization of business has probably touched the HR managers more severely than any other functional heads. The HR executives needs to give international orientation to whatever 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.

Definition of HRM

International human resource management is all about the world wide management of human resources – Process of sourcing, allocating, and effectively utilizing their skill, knowledge, ideas, plan and perspective in responding to TQM.

1.      According to Ricky W. Griffin: Human Resource Management is the set of organizational activities directed at   attracting, developing and maintaining an effective work force.

2.      Dr. M. Ataur Rahman: HRM is the organizational function that deals with issues related to people such as compensation, hiring, performance management, organization development, safety, wellness, benefits, employee motivation, communication, administration, and training.

3.      According to Md. Sojibur Rahman: Human Resource Management (HRM) is the function within an organization that focuses on recruitment, management and providing direction for the people who work in the organization. HRM can also be performed by line managers

4.      According to Gary Dessler: “The policies and practices involved in carrying out the “people” or human resource aspects of a management position, including recruiting, screening, training, rewarding, and appraising.”

Definition of IHRM

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.      P. J Dowling: IHRM is a set of activity which include acquisition, motivation, development and maintenance of international manager (working at home or abroad)

2.      According to Md. Sojibur Rahman: International Human Resource Management is the process of sourcing, allocating and effectively utilizing human resources in a multinational organization.

 

Objectives of IHRM

There are some objectives of IHRM discussed below:

        i.            Societal Objectives:

The societal objectives are socially and ethically accountable for the requirements and difficulties of society. In the process, they need to reduce the adverse impact of such demands on the business. The failure of companies to utilize their resources for society’s gain in ethical ways can result in restrictions.

      ii.            Organizational Objectives:

The organizational objectives acknowledge the function of Int. human resource management in organizational effectiveness. HRM isn’t an end in itself; it’s just an effective way to help the business with its main objectives. Basically the HR department is out there to serve the rest of the organization.

    iii.            Functional Objectives:

Functional objectives attempt to maintain the department’s contribution at a level suitable for the organization’s requirements. Human resources need to be adjusted to match the organization’s demands. The department’s level of service should be customized to suit the business it assists.

    iv.            Personal Objectives:

Personal objectives help workers in attaining their personal goals, at least insofar since these objectives boost the individual’s contribution to the organization. Personal objectives of workers should be met if they’re to be maintained, retained and motivated. Otherwise, staff performance and satisfaction might drop giving rise to employee turnover.

 Importance of IHRM

There are the importances of IHRM discussed below:

       I.            Increased Pressure on Costs: Firms move to places where labor and other resources are cheapest and most readily available.

    II.            The search for new Market: For growth and to be able to compete more effectively with global competitors, but also because firms and consumers around the world also seek foreign products and services.

 III.            Government policy: That can come in many forms, such as encouraging foreign investment through tax benefits, or the opening up of markets through regional trade treaties, or through privatizing industries such as telecommunications, health care, and the mass media, or encouraging local firms to export to develop better trade balances and to earn hard currency.

 IV.            Technological development: Which impacts globalization in a number of ways, e.g., multinational enterprises searching the globe for the best technology, the best technology being made or copied everywhere, and new technology allowing smaller, more flexible manufacturing plants to be placed close to markets, no matter where those markets are.

    V.            Worldwide communication and Information Flow: This creates global knowledge of and demand for world-class products and services.

 VI.            The Integration of Cultures and Values: Through the impact of global communication and the spread of products and services such as music, food, and clothing, which have led to common consumer demands around the world?

VII.             Decreasing Trade barriers and Opening Market: Which expose more firms to foreign competition-often presenting higher quality products and services at a lower cost-and which present-if not make necessary the search for-“overseas” opportunities for markets and investment.

VIII.             E-Commerce: That makes firms “global” from the moment they have a web site up and running, as customers from around the world log on to that web site and order whatever product or service is being offered.

Challenge of international human resource management

Ø  Increase in need for ability of HRM specialists and line managers to accept challenge of IHRM, because of:

·         Globalization

·         Workplace diversity.

Ø  Need to manage beyond domestic and national boundaries.

Ø  Demands likely to be found in:

·         managing complexity of workforce mix

·         managing diversity

·         communications

·         finding the right caliber people

International human resource management and strategy

Ø  International issues must be included in organization strategy.

Ø  Strategic operations decisions to be made:

·         where operational facilities are to be located

·         how operations network should be managed across national boundaries

·         whether operations in different countries are allowed to develop own way of doing business

·         Whether operations practice successful in one part of world can be transferred to another part.

Ø  Where organization should be located is a strategic decision.

Ø  Configuration strategies:

·         home country

·         regional

·         globally coordinated

·         Combined regional and coordinated.

Dimensions of IHRM

According to P.V. Morgan: IHRM is the interplay among 3 dimensions:

a.     HR Activities

b.     Types of employees

c.    Types of Countries

a) Broad activities of IHRM – procurement, allocation and utilization of human resources cover all the six activities of domestics HRM i.e., HR planning, Employees Hiring, Training and Development, Remuneration, Performance Management and Industrial Relations.

b) The three national or country categories involved in IHRM activities

Are:

- The host country where subsidiary may be located

- The home country where the company has its head quarters and

- Other countries that may be sources of labor or finance.

c) The three categories of employees of an international firm:

           i.            Host-country nationals (HCNs):  Employees born and raised in a host country.

Host country: a country in which the MNE seeks to locate or has already located a facility.          

         ii.            Parent-country nationals (PCNs): Employees who were born and live in a parent country. A parent (or home) country: the country in which a company’s corporate headquarters is located.

       iii.            Third-country nationals (TCNs): Employees born in a country other than a parent or host country

For example, IBM which employs Australian citizens in its Australian operations, after sends US citizens to Asia Pacific countries on assignment, and may send some of its Singaporean employees to its Japanese operations.

Approaches to IHRM

s  Cross-cultural management approach

Ø  Examines human behavior within organizations from an international perspective.

s  Comparative HRM

Ø  Seeks to describe, compare and analyses HRM systems in various countries.

s  HRM in multinational enterprises (MNEs)

Ø  Explores the implications of the process of internationalization on HRM activities and policies.

Distinction between International Human Resource management and Domestic HRM

International HRM differs from domestic HRM in a number of ways. One difference is that IHRM has to manage the complexities of operating in, and employing people from, different countries and cultures. The reasons that IHRM is more complex than domestic HRM are described below:

        i.            International HRM addresses a broader range of activities than domestic HRM. These include international taxation, coordinating foreign currencies and exchange rates, international relocation, international orientation for the employee posted abroad, etc.

      ii.            Human resource managers working in an international environment face the problem of addressing HR issues of employees belonging to more than one nationality.

    iii.            International HRM requires greater involvement in the personal life of employees. The HR manager of an MNC must ensure that an executive posted to a foreign country understands all aspects of the compensation package provided in the foreign assignment, such as cost of living, taxes, etc.

    iv.            There is heightened exposure to risks in international assignments. These risks include the health and safety of the employee and family. A major aspect of risk relevant to IHRM today is possible terrorism. Several MNCs must now consider this factor when deciding on international assignments for their employees. Moreover, human and financial consequences of mistakes in IHRM are much more severe than in domestic business. For example, if an executive posted abroad returns prematurely, it results in high direct costs as well as indirect costs.

      v.            International HRM has to deal with more external factors than domestic HRM.  For example, government regulations about staffing practices in foreign locations, local codes of conduct, influence of local religious groups, etc

    vi.             International HRM Addresses a broad range of HRM activities. Whereas domestic HRM deals with issues related to employees belonging to single nationality.

  vii.             Greater exposure to risks in international assignments; human and financial consequences of mistakes in IHRM are very severe.

Significance of IHRM in International Business

Scullion (2001) outlined 10 major significance of IHRM in globally business environment. This significance can categorize in 5 key areas:

1.      CHALLENGE:

Ø  Rapid growth of internalization and global competition has increased the nos. and significances of MNCs – resulting in the increased mobility of human resources.

Ø  Increasing no. of strategic alliances and cross border mergers and acquisitions has increased the strategic implementation of IHRM as Global business.

2.      COMMITMENT:

Ø  Worldwide recognition of management of human resources in international business and cross cultural management.

Ø   Business Networks and Horizontal communication and HR plays a vital role.

3.      COST EFFECIVENESS:

Ø  The performance of expatriates. (poor performance of expatriate may affect the market share and damage to foreign relations)

Ø   Growing Importance of Expatriates in International Business.

4.      COMPETENCE:

Ø  Global Strategy Implementation.

Ø   Success or failure of international business based on effectiveness of management of HR.

5.      CONGRUENCE:

Ø  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.

Ø  Knowledge management is an important source of comp. advantage for MNCs, where IHRM is the key partner and plays a central role.

Role of International HRM

International human resource management is the basis of success of any global multinational organization. International HRM enhances employee’s effectiveness to achieve goals of the organization and meet the needs; to develop employees to assume more diverse tasks. IHRM department deals with heterogeneous functions and has to give additional focus on various aspects, such as:

        i.            More involvement in the employee’s personal life.

      ii.            Deal with different groups of employees i.e. PCN, HCN and TCN for which HR policies and practices may differ. International HR managers have to understand cultural differentiation in multicultural environment.

    iii.            Manage external influences, i.e. host government authorities, business and other interest pressure and labor groups, etc.

    iv.            Lay different emphasis on management training to deal diverse workforce, their orientation and to meet international environment and

      v.             Provide guidance on taxation and compensation aspects.

However, there are some important limitations in IHRM

v  Management is basically the principle based on local cultures, traditions, practices and needs of the organizational growth. It is not universal for everywhere, especially in the field of human resources management.

v  HRM methods and systems developed by one society cannot always be transferred and applied to another.

v  HRM and industrial relations practices differ across countries as these have their historic origin in countries.

v   Personnel management and industrial relations are embedded in societal rules, norms, values, ideologies and no MNC can afford to ignore the influence of local culture.

Major Issues in International HRM

According to Hendry (1994), there are three main Issues in IHRM:

1. The management and development of expatriates- selection, training, compensation and repatriation of expatriate failures.

2. The internationalization of management throughout the organization (host country, parent country and other third countries)

3. The need to internationalize the whole organization by creating a new corporate culture reflecting the need for greater international experiences across the whole organization, due to the increasing frequency of cross cultural interactions of doing business at home as well as abroad mainly Cultural communication & gauge and Language and communication.

What do you mean by the term “Expatriate?”

Ø  The staffs who are moved across national boundaries into various roles within the international firm’s foreign operations; this employees are called ‘expatriates’.

Ø   An expatriate is an employee who is working and temporarily residing in a foreign country

International assignments create an Expatriate

Here we have to remember that IHRM Department is purely heterogeneous in nature because it deals the diverse cultures Workforce. (PCN, HCN and TCN). What types of people required where or

Which unit it is depends on the following points:

• Availability of useful human resources

• Economic Justification / cost effectiveness

• Employee motivation and performance

• Global exposure for need of the organization

• Development of Cross cultural Management

• Brand Loyalty or International fame.

The components that moderate differences between domestic and international Human Resource

The components that moderate differences between domestic and international HRM with diagram are given below:

1.      The cultural environment: key terms

s  Culture: A distinct way of life, shared by members of a group or society, with common values, attitudes and behaviors that are transmitted over time in a gradual, yet dynamic, process.

s  Culture shock: A phenomenon experienced by people who move across cultures. They experience a shock reaction (or psychological disorientation) when exposed to new cultural experiences, because they misunderstand or do not recognize important cues.

s  the emic-etic distinction:

                                i.            Emic : Culture-specific aspects of concepts or behavior

                              ii.            Etic: Culture-common aspects of concepts or behavior.

s  the convergence hypothesis: The hypothesis that management practices around the world would converge, based  on two assumptions:

                                i.            That the principles of sound management would hold, regardless of national environment.

                              ii.            That the universality of sound management practices would lead to societies becoming
more and more alike in the future

s  the divergence hypothesis: In opposition to the convergence hypothesis, the notion that societies and management practices around the world will remain, or become more, dissimilar

2.      Industry type: There are two types of industry that moderate differences between domestic and international HRM such as;

a.       Multi-domestic industry: An industry in which competition in each country is essentially independent of competition in other countries.

b.      Global industry: An industry in which a firm’s competitive position in one country is significantly influenced by its position in other countries

3.      Extent of MNE reliance on domestic market:

A pervasive but often ignored factor which influences the behavior of multinationals and resultant HR practices is the extent of reliance of the multinational on its home-country domestic market.

a.      Nestlé (Switzerland)

b.      Thomson (Canada)

c.       Holderbank Financière (Switzerland) [now Holcim]

d.      Seagram (Canada)

e.       Solvay (Belgium)

f.       Asea Brown Boveri (Sweden/Switzerland)

g.      Electrolux (Sweden)

h.      Unilever (Britain/Netherlands)

i.        Philips (Netherlands)

j.        Roche (Switzerland)

4.      Attitudes of senior management to international operations

Ethnocentrism:

ü  The assumption that one’s own cultural approach is superior to any other.

ü  An ethnocentric approach to international staffing typically results in all key management positions being held by PCNs.

ü  Also, international HRM activities are typically developed and administered by PCNs.

Factor influencing the global work environment

There are three factors that influence the global work environment in international aspects:

1.      Forces for change

Ø  Global competition

Ø   Growth in mergers, acquisitions and alliances

Ø  Organization restructuring

Ø   Advances in technology and telecommunication

2.      MNE Requirement

v  Need for flexibility

v  Local responsiveness

v  Knowledge sharing

v  Transfer of competence

3.      Managerial responses

·         Developing a global ‘mindset’

·         More weighting on informal control mechanisms

·          Fostering horizontal communication

·          Using cross-border and virtual teams

·          Using international assignments

    

4.      Survival & Growth

Our discussion up to this point has suggested that a broader or more strategic view of IHRM is required to better explain the complexity and challenges of managing IHRM issues. An example of a theoretical framework that has been derived from a strategic approach using a multiple methodological approach is that of De Cieri and Dowling. Their framework is depicted in Figure 1-5 and assumes that multinational Firms operate in the context of worldwide conditions, including the external contexts of industry, nation, region, and inter-organizational networks and alliances. An example of the latter would be the impact of the removal of internal trade barriers and integration of national markets following the recent expansion of the membership of the European Union. These external factors exert direct influence on internal organizational factors, HRM strategy and practices, and multinational concerns and goals.

The internal organizational factors are shown in order of most ‘tangible’ to most ‘intangible’. MNE structure refers to both the structure of international operations, intra-organizational networks and mechanisms of coordination that are discussed in more detail. The life cycle stage of the firm and the industry in which it operates are important influences on HRM strategy and practices in multinationals, as are the various international modes of operation and levels of firm strategy. The most intangible organizational factors are experience in international business and headquarters international orientation. Following developments in the literature, such as that of Taylor, Beechler and Napier who take an integration of resource dependence and resource-based perspective, the model suggests that there are reciprocal relationships between organizational factors, strategic HRM and multinational concerns and goals. With regard to HR strategy and practices, reciprocal relationships between strategic issues and HRM strategy and practices have been highlighted by research taking a resource-based perspective. In addition, several studies have shown that HR activities such as expatriate management are influenced by both external and internal factors. A more strategic approach to HRM is expected to assist the firm in achieving its goals and objectives. This view is influenced by the emerging body of strategic HRM literature that examines the relationships between endogenous characteristics, HRM strategy and practices and firm performance or competitive advantage. While some research has suggested that multinationals will gain by utilizing and integrating appropriate HRM strategy and practices, to enhance firm performance, the evidence is inconclusive and important questions remain about the nature of this relationship. The model offered by De Cirri and Dowling aims to assist in the cross-fertilization of ideas to further develop theory and empirical research in strategic HRM in multinational firms.

Multiple Choice Questions

1.      What is meant by HRD?

a.      Human Regulation Development.

b.      Human Resource Development.

c.      Human Resource Division.

d.      Human Resource Deployment.

2.      The activity an organization carries out to utilize its _____ effectively is referred to as human resource management.
a. Customers                                                              b.External stakeholders
c. Human resources                                                  d. Suppliers

3.      IHRM requires

a. Less involvement in employee’s personal life

b. More involvement in employee’s personal life

c. Detached view with respect to employee’s personal life

d. None of the above

4.      In IHRM, which of the following becomes important?

           a. Procurement of people                                          b. Allocation of people

           c. Utilization of people                                             d. All of the above

5.      International HRM deals with

           a. HR activities                                                           b. Types of employees

           c. Countries of operation                                          d. All of the above

6.      The country where the headquarters of a multinational company is located is known as

           a. Host country                                                           b. Home country

           c. Third country                                                         d. None of the above

7.      Which of the following factors distinguishes international HRM from domestic HRM?

a.      Activities must be culturally sensitive and effective in a multinational context

b.      Activities must be coordinated worldwide

c.       Activities must be carried out simultaneously

d.      All of the above

8.      A (n) _____ manager is a citizen of one country who is working abroad in one of his or her firm's subsidiaries.
a. Expatriate                                                              b. Cross-divisional
c. Cross-cultural                                                       d. Repatriate

9.      The differences in a country’s business climate are known in the language of international management as _________________.

            a. Economies of location                                        b. Economies of scale

            c. Economies of language                                       d. Economies of trade

10. _____ is the premature return of an expatriate manager to his or her home country.
a.  Expatriate relief                                                   b. Expatriate failure
c. Expatriate rotation                                               d. Expatriate timing

11. _____ is a subset of expatriates who are citizens of a foreign country working in the home country of their multinational employer.
a. Immigrants                                                             b. Inpatriates
c. Third-country nationals                                      d. Hyperpatriate

12.  According to the results of a study of R.L. Tung, the number one reason that Japanese expatriate managers fail is:
 a. the inability of spouse to adjust.

 b. the lack of technical competence.
 c. personal or emotional problems.
d. the inability to cope with larger overseas responsibilities.

13.  Changing human resource management activities to attract and retain health care specialists due to increased needs for those workers is an example of what kind of environmental change factor?

a. Marketplace                                                           b. Technology

           c. Labor markets                                                         d. economic

14.  Which of the following is not an internal force of change?

a. Technology                                                            b. strategy

c. workforce                                                               d. employee attitudes

15.  Falling interest rates are an example of what external force?

a. Marketplace                                                       b. government laws and regulations

     c. Labor markets                                                   d. economic changes

16. What is meant by 'reverse culture shock'?

a.      Disillusionment of expatriate workers on return to their home country after a foreign assignment.

b.      Disillusionment of expatriate workers during their foreign assignment.

c.       Disillusionment of expatriate workers before taking a foreign assignment.

d.      Disillusionment of expatriate workers on arrival to their foreign assignment

17. All of the following are major causes of expatriate failure EXCEPT:

a.       Selection based on headquarters criteria.    b. inadequate training.

                c. lack of headquarters support.                         d. host government intervention. 

18. A state of disorientation and anxiety about not knowing how to behave in an unfamiliar culture is called ____________.

                a. Culture shock                                                    b. Assimilation

                 c. cultural contingency                           d. integration

19. ____________ occurs as the migration of management and workplace practices around the world results in the reduction of workplace disparities from one country to another.

a.      Convergence

b.      Divergence

c.       Diversification

d.      Contradiction

20. What is meant by 'reverse culture shock'?

a.      Disillusionment of expatriate workers on return to their home country after a foreign assignment.

b.      Disillusionment of expatriate workers during their foreign assignment.

c.       Disillusionment of expatriate workers before taking a foreign assignment.

d.      Disillusionment of expatriate workers on arrival to their foreign assignment.

Answer:

             1 (b)                                           8 (a)                                          15 (d)

            2 (c)                                            9 (c)                                           16 (a)

            3 (d)                                            10 (b)                                         17 (d)

4 (d)                                           11 (b)                                          18 (a)

5 (d)                                           12 (d)                                          19 (a)

6 (b)                                           13 (c)                                           20 (a)

7 (a)                                           14 (a)

Reference:

1. Rahman, Ataur, Dr. M, (2011-2012), “Human Resource management” (1^st Edition), Neela Publications, Dhaka.
2.  Dessler, Gary, (2006-2007), “Human Resource management” (10th Edition), New Delhi, Prentice-Hall of India Private Limited.
3. Decenzo, A, David & Robbins, P, Stephen (2004-2005), “Human Resource Management’ (7^th Edition), New York, John Wiley & Sons, Inc.
4. Dowling p. j, (2007-2008), “International Human Resource Management’ (Fourth Edition), Cengage Learning Private Limited.
5. http://www.shrm.org/
6. http://www.shrmglobal.org/
7. http://www.ihrim.org/
8. www.gogle.com