International Human resource management

Meaning and Definition of IHRM

The drivers of internationalization of business

•Customer demands
•Globalization of competitors
•Regulations and restriction
•Growth opportunities
•Economic factors
•Incentives
•Resource assets & cost saving
•Cultural factors
•Political-legal factors
•Labour relations factors
Different setting of International Human Resource
Management

•Headquarters of multinationals
•Home country subsidiaries of foreign owned firms
•Domestic firms
•Government agencies and Non-governmental organizations.
Development of IHRM
Development of IHRM
 Development of IHRM

•Global competition
•Need for effective management
•Need for international managers
•Traditional hierarchical organization structures are becoming redundant
•Developing different organizational cultures
•Strategic alliances, cross borders, mergers and acquisitions are increasing
•Learning, knowledge acquisition and adaptation
•Knowledge management
•Expatriation in International firms
Difference between IHRM & Domestic HRM
Difference between IHRM & Domestic HRM
 Strategic Human Resource Management SHRM

•The word strategic means a comprehensive decision plan that sets critical direction for an
organization and guides the allocation of resources.
•The goal of strategic management in an organization is to deploy and allocate resources in
order to provide a competitive advantage to management.

•HRM means an integrated strategy and planned development process for effective
utilization of human resources for achievement of organizational mission and objectives.

•Strategic HRM is the pattern of planned human resource deployments and activities
intended to enable an organization to achieve its goals.
•SHRM can be defined as HRM issues, functions, policies and practices that result from the
strategic activities of multinational enterprises and that impact on the international concerns
and goals of those enterprises.
Models of IHRM

•Matching model
•Harvard model
•Contextual model
•5p model
•European model
Matching model
The Michigan/Matching Model

 The Michigan model was propounded by Fombrun Tichy and Devanna (1984) at the Michigan Business School.

They also named this model a matching model of HRM.

Precisely, the matching aspect of this model demonstrates that the model is inclined towards the harder side of
HRM.

This is because the matching model emphaizes more on “tight fit” between the HR strategy and the buisness
strategy.

 It demands that available human resources must be matched with jobs in the organization.

The HR strategy must be highly calculative in terms of the quantity of the human resources required to achieve
the objectives enshrined in the business strategy.

Business strategy takes the central stage in this model hence human resources are taken like any other resource
which must be fully utilised together with the other resoruces to achieve organizational objectives.
Devanna (1984)

The point of departure in the Michigan Model is the pre-eminence and pre-dominance of a business
strategy, which must strictly be achieved by the available resources regardless of whether, they are able
to do so or not.

In fact the business strategy must be achieved through minimum labour costs enhanced by structural
re-organization, Performance Related Pay and staff reduction.
 Stakeholder Interests
Harvard model
Shareholders Feedback loop
Management
Employee groups
Government
Community
Unions Long-term
Human resource
HRM policy choices consequences
outcomes
Employee influence Individual well being
Commitment
Reward system Organizational
Competence
Work system effectiveness
Cost effectiveness
Societal well being
Situational factors
Workforce characteristics
Business strategy
Management philosophy
Labour market
Task technology
Laws & societal values
The Harvard Model

The Harvard Model was postulated by Beer et al (1984) at Harvard University.

The authors of the model also coined it the map of HRM territory.

The Harvard model acknowledges the existence of multiple stakeholders within the organization.

These multiple stakeholders include shareholders various groups of employees, government and the community
at large.

This model emphasizes more on the human/soft side of HRM.

 Basically this is because this model emphasizes more on the fact that employees like any other shareholder are
equally important in influencing organizational outcomes.

In fact the interest of the various groups must be fused and factored in the creation of HRM strategies and
ultimately the creation of business strategies.
A critical analysis of the model shows that it is deeply rooted in the human relations tradition.

Employee influence is recognized through people motivation and the development of an organization culture
based on mutual trust and team work.

The factors above must be factored into the HR strategy which is premised on employee influences, HR flows,
reward system etc.

The outcomes from such a set up are soft in nature as they include high congruence, commitment, competencies
etc.

The achievement of the crucial HR outcomes has got an impact on long term consequences, increased
productivity, organizational effectiveness which will in turn influence shareholder interests and situational factors
hence making it a cycle.

It is thus important to note that the Harvard model is premised on the belief that it is the organization’s human
resources that give competitive advantage through treating them as assets and not costs.
 5p Model Strategic business needs

HR philosophy

Expressed in statements defining business Expresses how to treat & value people
values and cultures

HR Policies

Expressed as shared values Establishes guidelines for action on people

Related business issues and HR programs
HR programmes

Articulated to HR strategies
Coordinates efforts to facilitate change to
address major HR related business issues
HR practices

For leadership, managerial & operational roles Motivates needed role behaviour

HR Processes
Defines how these activities are carried
For the formulation & implementation of other activities out
 5p Model

• This model was proposed by Schuler.

• The field of IHRM became more important in early 1990’s due to globalization and rapid changes in social, legal,
technological and workforce conditions.
• MNC’s became more interested to integrate HRM into business strategy on an International or global platform.
• This model moulds various Human Resource activities to strategic needs.
• These activities include philosophy, policies, programs, practices and processes.
• Strategic needs represent the overall corporate plan for survival, growth, adaptability and profitability.
• This model explains the importance of SHRM activities in accomplishing the organization’s strategic needs.
• This model views HR functions as fully subservient to corporate and business level strategy and organizational
level strategy as ultimately determining HR policies and practices once the business strategy has been determined
and HR strategy is implemented to support the competitive strategy.
• Therefore HR strategy is concerned with the challenges of 5p’s.
• This will stimulate employee role behavior appropriate for each competitive strategy.
 Contextual Model
Socio-economic
Technical Outer context
Political-legal
competitive

Inner context
Culture
Structure
leadership
Task-technology
Business strategy content HRM context
Role
Objectives
Definition
Product-Market
Organization
Strategy & tactics
HR outputs

HRM content
HR flows
Work systems
Reward system
Employee relations
Contextual model was proposed by Martin Alcazar.

The contextual model of HRM emphasizes the importance of environmental factors by

including variables such as the influence of social, institutional and political forces that
have been underestimated in other models.

The latter, at best, consider the context as a contingency variable. The contextual
approach is broader, integrating the human resource management system in the
environment in which it is developed.

A broader set of stakeholders is involved in the formulation and implementation of

human resource strategies that is referred to by schuler and jackson as a ‘multiple
stakeholder framework’.

These stakeholders may be external as well as internal and both influence and are
influenced by strategic decisions.
 European model
• This model was proposed by Brewster in 1993.
• Environment-established legal framework
• Objectives-social concern, people as a key resource.
• Focus-cost/benefits and environment analysis
• Relationship with employees-Unions and non-unions
• Relationship with line managers-specialist/line liason
• Role of HR specialist-specialist managers, ambiguity, flexibility.
• This model is based on the premise that European organizations operate with restricted
autonomy.
• It deals with all constraints set on European union, national culture and legislation,
organizational ownership and trade union involvement.
• It shows an interaction between HR strategies, business strategies, HRM practices, and their
interaction with external environment consisting of national culture, power system, legislation,
employee representation and education system.
Business strategies
Business strategies (1)
Domestic

 New products or services for the domestic market

 Foreign markets and international managerial skills largely irrelevant

24
Business strategies (2)
International

 Competition increases
 Companies expand internationally
 Hierarchical structure
 Structural and cultural dominance
 First home country managers abroad as expatriates

25
Business strategies (3)
Multinational

 Least-cost and standardized products and services

 Worldwide lines of business
 Decisions made by people from a wider range of cultures
 Values of the headquarter’s national culture dominate
 Senior managers need to understand the world business environment

26
Business strategies (4)
Transnational

 Global competition
 Identical products are distributed worldwide
 Research and development
 Firms become less hierarchically structured
 Transnational human resource strategies are being developed

27
IHRM & BUSINESS STRATEGIES

 AUTONOMUS IHRM STRATEGIES

 RECEPTIVE BUSINESS STRATEGIES
 ACTIVE BUSINESS STRATEGIES

28
 Evolution of MNE’s

• License
• Export through agent or distributor
• Export through own sales representative or sales subsidiary
• Local packaging and assembly
• FDI
Approaches to IHRM
Ethnocentric approach (1)
 Parent country nationals (PCNs) take all key positions in a
multinational company
 In the early stages of internationalization

 Reasons for pursuing this policy:

 Lack of qualified host country nationals (HCNs)
 Ability of the parent country nationals (PCNs) to coordinate
subsidiary
 Transferring Know-how

31
Ethnocentric approach (2)

 Problems that may occur:

 Adaptation of PCNs to a host country may take a long time
 Promotion opportunities of local managers are limited
 PCNs’ lack of sensitivity

32
Polycentric approach (1)
 Companies following this staffing policy use HCNs in their
subsidiaries and PCNs in corporate headquarters

 Advantages:
 No more language barriers and adjustment problems of
expatriates
 The employment of HCNs is less expensive
 Morale and career opportunities of local stuff

33
Polycentric approach (2)

 Disadvantages:
 Weak links between the independent national units and
headquarters
 Lack of experience of both HCNs & PCNs is a liability in an
increasingly competitive international environment

34
Geocentric approach (1)
 Best people get key jobs, nationality is not important

 Advantages:
 A pool of senior international managers is developed
 Tendency of national identification of managers with subsidiary
units is reduced

35
Geocentric approach (2)
 Disadvantages:
 Immigration laws which require the employment of local nationals
are used by many host countries
 Difficult to implement because of increased training,
compensation and relocation costs
 Longer lead times and more centralized control of the staffing
process are required

36
Regional approach
 Staffing strategy with emphasis on different regional markets

 Factors for staffing decisions:

 Need of area expertise

 Need of product expertise

37
Barriers in effective global HRM

•Worldwide variations
•Human resource functions
•Attitudes & actions
•Resistance to change
•Cultural differences
•Management of communication channels
•Management of legal and industrial issues
•Management of divergent economic systems
Organizational dynamics and IHRM: Socio-cultural context

Role of culture in International HRM

•Recruitment & selection

•Compensation & benefits
•Performance appraisal
•Training & development
Country & regional cultures

•Hofstede’s cultural dimensions

•Trompenar’s cultural dimensions
•Kluckhohn and Strodtbeck cultural dimensions
•GLOBE cultural dimensions
 Hofstede’s cultural dimensions
•Hofstede defined culture as a set of collective beliefs and values that distinguish people from one
nationality w.r.t other.
•His study was conducted while he was working at IBM as a psychologist which involved
1,00,000 individuals from 50 countries and three regions.

•His 5 important cultural dimensions are as listed below

•Uncertainty avoidance
•Power distance
•Individualism versus collectivism
•Masculinity versus femininity
•Confucianism Dynamism
•Long-term orientation versus Short-term orientation
Trompenar’s cultural dimensions
groups
 Kluckhohn & Strodtbeck cultural dimensions

Orientation of people Ways of behaviour or thinking

1. What is the nature of people? Good, evil or mixed

2. What is a person’s relationship to nature? Dominant, Harmony,
Subjugation
3. What is a persons relationship to others? Hierarchical, Collective,
Individualistic
4. What is the modality of human activity? Doing, Being or containing, thinking
5. What is the temporal focus of human activity? Future, present, past
6. What is the conception of space? Private, public or mixed.
 GLOBE cultural dimensions
• GLOBE is expanded as Global Leadership and Organizational Behaviour Effectiveness.
• A project carried out by Prof. Robert J. House
• The researchers of this project were from different cultural backgrounds which led to the in-
depth contribution towards the study.
• The project was launched at Canada
• It consists of 9 cultural dimensions
1. Assertiveness
2. Future orientation
3. Performance orientation
4. Human orientation
5. Gender differentiation
6. In-group collectivism
7. Collectivism
8. Power distance
9. Uncertainty avoidance
Country culture Versus MNE culture
 Culture & employee management issues

•Attitude to power and authority and its implication for employee management.
•Tolerance for ambiguity and attitude to risk and their implications for employee management.
•Interpersonal trust and its implications for employee management
•Individualism and collectivism and their implications for employee management
•Preference for certain leadership behaviors and its implications for employee management.
 Impact of country culture on IHRM

•Country culture refers to the extent to which leadership, teams and employee activities are
socially valued and supported.
•Country culture impacts a firm by selecting and formulating certain organizational values and
norms that managers perceive as consistent w.r.t their countries.
•Country culture influences attitudes towards negotiations, investments, trade in the
International setting.
•Influences the pay system.
•Emphasis on organizational hierarchies and centralization.
•Attitude towards a job and career mobility.