International Business

Human Resource
Management
Strategy
Introduction
S4hil
 Quote
Opportunities are never
lost; someone will take
the ones you miss.
- Malik Muhammad Irfan
Objectives & Brief Introduction
of this Chapter
The ways in which multinationals
prepares their people to take on the
challenge of International business .
Human resource management
strategy provides an MNE with
opportunity to truly outdistance the
competition
Critical Areas on which HRMS
focus

Selection
Training
Development
Compensation
Labor relations
 Introduction Of IHRM
Definition:

IHRM is the process of selecting,

training, developing and compensating
personnel in overseas position.

It is important to understand the general

nature of this overall process, which begins
with selecting and hiring.
Cont…..

There are three basic sources of

personnel talent that MNE’s can tap
for position.

Home country nationals

Host country nationals
Third country nationals
Home Country Nationals:

Who reside abroad but are citizens of

the parent country of the
multinationals.

For Example:
A U.S manager assigned to head an R&D
department in Tokyo for IBM Japan.
Host Country Nationals:

Who are local people hired by the

MNE.

For Example:
A British manager working for Ford
Motor in London.
Third Country Nationals:

Who are citizens of countries other

then the one in which the MNE is
headquartered or the one in which
they are assigned to work by the
multinational.
For Example:
French manager working for Mercedes-
Benz in the United States.
Selection &
Repatriation
Mr. Umer Farooq
Two of the major Human Resource
Management challenges facing MNEs
are those of selecting qualified people
for overseas assignments and, in the
case of home country nationals. Then
effectively repatriating them into the
work force upon their return.
International Screening Criteria
& Selection Procedures:
International screening criteria are those
factors that are used to identify individuals
regarded as most suitable for overseas
assignment.

There are a number of screening criteria that

are commonly used in determining whom to
send overseas. These criteria focus on both
individual and family considerations.
 Screening Criteria

Health & Family

Adaptability Status

Motivation
Self-Reliance & Leadership

Age, Experience,
& Education
Adaptability:

An Individual’s ability to adapt to

Cultural change.

In determining how well an individual

will adapt to cultural change, MNE’s
examine a number of Characteristics:
Cont…
1. Work experiences with cultures other
then one’s own.
2. Previous overseas travel.
3. Knowledge of foreign languages.
4. The ability to solve problems within
different frameworks and from different
perspectives.
5. Overall sensitivity to the environment.
Self-Reliance:

Manager who are posted to overseas

assignments must be self-reliant and
independent. Because some time
decisions make on-the-spot without
consulting the home office.
Age, Experience, & Education:

Young mangers are eager for

international assignments and want to
learn more about other cultures. On
the other hand, older managers have
more experience and maturity to bring
to the assignment. For that many
firms send both young and seasoned
personnel to the same overseas post
so that each can learn from other.
Health and Family status:
Expatriates must have good physical
and emotional health.

U.S Multinational founds that the primary

reason for expatriate failure was the
inability of the manger’s spouse to adjust
to a different physical or cultural
environment. For this some firms
interview both the spouse and the
manager before assigning overseas task
Motivation and Leadership:

Important selection Criterion is

individual’s desire to work abroad and
the person’s potential commitment to
the new job.
Selection Procedures:

The common selection procedure is

the interview, however, some
companies also use test for final
choice for overseas assignment.
Selection criteria for international
assignment includes:

Interest in working overseas.

Ability to relate to different cultures
and environments.
Supportiveness of the candidate's
family
Training&
Development
Mr. Asghar Ali Khan
Training:

The process of altering employee

behavior and attitudes in a way that
increases the probability of goal
attainment.
Cont…

Training programs are designed to

provide individuals who are going
overseas with information and
experience related to local customs,
cultures and work habits and thus
help these managers to interact and
work more effectively with the local
workforce.
Development:

Managerial development The process

by which manager obtain the
necessary skills, experience and
attitude that they need to become or
remain successful leaders.
Cont…

Development is typically used to help

managers improve their leadership
skills, keep up to date on the latest
management development, increase
their overall effectiveness and
maintain high job satisfaction.
Types of Training & Development:

Number of types of training and

development programs these can be
grouped into two general categories:

Standardized training programs.

Tailor-made training programs.
Standardize training programs:
Generic programs that can be used
with managers anywhere in the
world.
Tailor-made training programs:
Programs designed to meet the
specific needs of the participants,
typically including a large amount of
culturally based input.
Six Types of programs in
training & Development:
Environment briefing used to provide
information bout such things as
geography, climate, housing and
schools.
Culture orientation design to
familiarize the individuals with
cultural institutions and values
systems of the host country.
Cont…
Language training.
Providing the participants with
intercultural encounter.
Sensitivity training designed to develop
attitudinal flexibility.
Field experience which the participants
to the country of assignment to undergo
some of the emotional stress of living and
working with people from a different
culture.
Compensation
Mr. Sabir Hussain
Compensation:
Compensation is a package of
different benefits, allowances etc.

Compensation is now become

primary area of International Human
Resource Management IHRM.
MNE’s want to hire the most
competent employees also want to
control cost and to increase profits.
Direct & Indirect Compensation:

Direct compensation:
Wages
Salary
Bonuses
Commissions
Indirect Compensation:
Pension
Insurance
Ingredients of International
Compensation Package:
Base Salary.
Benefits.
Allowances.
Base Salary:

Base salary is the amount of cash

compensation that an individual
receives in the home country.

For example:
The base salary of the typical upper-
middle manager in United States in
1991 was $125,000, in Japan 129,056.
Benefits:

Package of Social Security, medical

coverage, retirement, expense
payments in case of death or illness in
the family etc.
Allowances:

Allowances is a payment to
compensate for differences in
expenditures between the home
country and the foreign location.
Types of allowances:
Relocation allowances
Housing allowances
Education allowances
Hardship allowances
Relocation Allowances:

Relocation expanses usually include

moving,shipping and storage charges
associated with personal goods that
the expatriate is taking overseas.
Housing Allowance:

MNE’s provides the manager with a

residence while overseas and pay all
expenses associated with running the
house.
Education Allowance:

Education allowance for the

employee’s children such things as
tuition, enrollment fees, books etc.
Hardship allowance

Hardship allowance is a special

payment made to individuals who
are posted to areas which are
regarded as less desirable.
Labor Relation
& International
Democracy
Mr. Ayaz Khan
Labor Relations in the International
Arena
Labor relations
Process through which management and
workers identify and determine the job
relations that will be in effect at the workplace
Specific approaches to labor relations varies
from one country to another
U.S. Approaches to Labor Relations
Collective bargaining
Process whereby formal labor agreements
are reached by union and management
representatives
Involves negotiation of wages, hours, and
conditions of employment and the
administration of the labor contract
Cont…
U.S. Approaches to Labor Relations (cont.)
Union
Organization represents workers in collective bargaining
Has the legal authority to negotiate with the employer and
administrator the labor contract
Unions gain representation rights only after certification
Unions can decertify a union with which the members are
dissatisfied
Workers may strike to support union’s demands
Grievance
Complaint brought by an employee who feels that he/she has
been treated improperly under the terms of the labor agreement
Settlement of grievance attempted at various hierarchical steps
Labor Relations in the
International Arena (cont.)
U.S. Approaches to Labor Relations
Mediator
Person who brings both sides together and
helps them reach a settlement that is mutually
acceptable
Arbitrator
Individual who provides a solution to a grievance
that both sides have been unable to resolve
themselves and that both sides agree to accept
Labor relations are important because they
determine labor costs
(cont.)
Labor Relations in Other Countries
MNEs have to adjust labor relations
strategies because host countries differ in
terms of:
Economic development
Political environments
Strike activity
Regional differences
Great Britain
Labor agreement is not a legally binding
contract
– Violations of the agreement carry no legal penalties
Labor agreements are less extensive than in the
U.S.
Cont…
Labor Relations in Other Countries (cont.)
Germany
Unions and management have been cooperative in the past
Labor harmony not adversely affected by unification of East
and West
Union power is still quite strong
Rights of workers addressed more carefully by
management
Japan
Unions and management have cooperative relationships
Contracts tend to be general and vague
Disputes regarding the labor contract usually settled
amicably
Unions most active during the spring and end of the year
Labor Relations in the
International Arena (cont.)
How Industrial Conflict Is Handled Around
the World
Strike
Collective refusal to work to pressure management
to grant union demands
Lockout
Company’s refusal to allow workers to enter the
facility during a labor dispute
United States
Most contracts outlaw strikes
Rely on grievance procedure to resolve
disputes
Labor Relations in the
International Arena (cont.)
How Industrial Conflict Is Handled Around
the World (cont.)
Great Britain
Strikes more prevalent than in the U.S.
System is not geared toward efficient
resolution of conflicts
Grievance handling is informal, cumbersome,
and costly
Germany
Strikes and lockouts are prohibited while the
contract is in force
Contracts have different expiration dates
Cooperation between union and management
is not unusual
L.R in the International Arena
(cont.)
How Industrial Conflict Is Handled
Around the World (cont.)
Japan
Strikes and lockouts are very rare
Few areas of disagreement between unions
and management
 100
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International Structure of Unions:
Intergovernmental Organizations
International Labor Office (ILO)
U.N. affiliate, consisting of government, industry, and union
representatives, that works to promote fair labor standards
Organization for Economic Cooperation and
Development (OECD)
Government, industry, and union group founded in 1976
that has established a voluntary set of guidelines for MNEs
Transnational Union Affiliations
International Confederation of Free Trade Unions
(ICFTU)
International Trade Secretaries (ITS)
Focus on a particular industry
Industrial Democracy:
Rights that employees have to participate in
significant management decisions
Common Forms of Industrial Democracy
Codetermination
Participation of workers on boards of directors
EU directive requires all companies with more than 50
employees by 2008 to “inform and consult” workers’
representatives about company strategy
Works Councils
Result of either national legislation or collective bargaining
Function to improve company performance, working
conditions, and job security
Industrial Democracy (cont.)
Common Forms of Industrial Democracy
(cont.)
Shop Floor Participation
Variety of approaches available (e.g., quality of work life)
Financial Participation
Profit and productivity sharing
Collective Bargaining
Can be a mechanism to obtain industrial democracy
Industrial Democracy in Selected Countries
United States
Collective bargaining is the most common form
Problem-solving teams
– Employee groups that discuss ways of improving quality,
efficiency, and the overall work environment
Industrial Democracy (cont.)
Industrial Democracy in Selected Countries (cont.)
United States (cont.)
Special purpose teams
– Employee groups that design and introduce work reforms and new
technology
Self-managing teams
– Employee groups that take over supervisory duties and manage
themselves
Great Britain
Collective bargaining and reliance on teams
Germany
Industrial democracy and codetermination are very strong
Work councils perform a number of important functions
Employee Participation in All
Levels of Danish Firms:
Board

Safety
Director(s)
committee

Cooperation
Upper/middle management
committees
Partly
Safety
Autonomous
group
Groups
Shop
Employees
steward

Trade union club

Industrial Democracy (cont.)
Selected Countries (cont.)
Sweden
Industrial democracy geared toward ensuring the quality of
work life
Workers sit on some boards of directors
China
Little known about industrial democracy in China
Two policy-making committees within Chinese enterprises
Japan
Industrial democracy used to enhance workers’
performance
Quality circle
Enterprise unions
– Represent both the hourly and salaried employees of a
particular firm
Strategic Management of
International Labor Relations
Philosophical Backdrop
MNEs can use a number of starting points for their
approach to labor relations
Ethnocentric
Polycentric
Geocentric
Labor Costs
Wages differ greatly from country to country
Sweatshops are common throughout the world
Hours worked are inversely related to hourly
compensation
High paying jobs are transferred to low paying
regions
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Strategic Management of
International Labor Relations (cont.)
New Labor Force Trends
Companies are trying to regain lost
competitiveness due to high labor costs
When national values collide with the realities of
global competition, the latter is likely to win
Major industrial countries will have to increase
immigration to have the workforce to maintain
economic momentum
Increased reliance on flexible working
arrangements that contain costs and link work
demands with employees
Part-Time Work
– Most widely used form of flexibility in Europe
Manufacturing Labor Costs (per unit of output, annual
average percentage change: 1990-1997)
4

Norway

Japan
Canada

Denmark
Belgium
Taiwan

Britain
Germany
Italy
South Korea

United States
France
-1
Sweden

-2

-3

-4

-5
Local currencies

Dollar terms
Strategic Management of
International Labor Relations (cont.)
New Labor Force Trends (cont.)
Flexible working arrangements (cont.)
Shiftwork
– Popular in Europe
Nonpermanent Employment
– Temporary employees
– Fixed-term contractual agreements
Subcontracting
– Replace employment contracts with commercial contracts
– Many creative subcontracting approaches
Organizing International Industrial Relations
Degree of centralization-decentralization control
Degree of employment flexibility
A Final Word
International management will be one of
joint partnerships and agreements
Virtual corporation
Network of companies that exploits fast-changing
opportunities and shares costs, skills, and access to
global markets
Theories of international management must
be continually subjected to review
An important question: “Why some MNEs
do better than others?”
Strategic fit - aligning resources to match the
environment
Strategic stretch - use of resources to achieve
more challenging goals
 Strategic
Management
and Ihrm
strategies
Mr. Usman Shahed
Strategic management and IHRM
strategies:
There are a number of human resource
management (HRM) strategies
currently receiving attention form
MNEs. There are three types of ihrm
strategies
Language training
Cultural adaptation
Competitive compensation
Language training
Advantage of language training is
that it allows the manager to monitor
the competition more effectively.
For Example:
In recent years a growing number of
US MNEs have set up operations in
Japan.

It is also useful in recruiting local

talent and developing good relations
with local organizations.
Cont…

It also benefits of language training is

for monitoring competitions’ also
useful in helping to learn about the
culture of type country and in
interacting socially with the people.
Cultural adaptation:

Closely tied to which to language

training is the need for managers to
understand the culture of the country
to which they are assigned.
Cultural Assimilators:

A programmed learning technique

designed to expose members of one
culture to some of the basic concepts
attitudes role perceptions customs
and values of another culture
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