ITB TERM PAPER ON International Human Resource Management (IHRM)

Presented By: Sourav Mohanty (11161) Vinay Reddy M Nagaraj G Arun Pradeep P Patel

Human Resource Management (HRM)

Refers to the activities an organization carries out to use its human resources effectively Four major tasks of HRM
o o o o Staffing policy Management training and development Performance appraisal Compensation policy

International human resource management

Strategic role: HRM policies should be congruent with the firms strategy and its formal and informal structure and controls Right People, Right Place, Right Time Task complicated by profound differences between countries in labor markets, culture, legal and economic systems

Staffing Policy
Staffing policy
o Selecting individuals with requisite skills to do a particular job o Tool for developing and promoting corporate culture

Types of Staffing Policy

o o o o Ethnocentric Polycentric Geocentric Regiocentric

Ethnocentric
All key management positions are filled by parent country nationals. Ones own culture is superior Overlooks important cultural factors Host country lacks qualified professionals Maintain a unified corporate culture Create value by transferring core competencies Limits advancement opportunities for host country nationals Leads to resentment, lower productivity, and high turnover in employees. E.g.: Procter & Gamble, Toyota

Polycentric:
Decentralized control Business Units in different countries have autonomy from home office, like a local Co. No standard forms or procedures Recruits host country nationals to manage subsidiaries, while parent country nationals occupy key positions at corporate HQ. Firm is less likely to suffer from cultural myopia.

Geocentric:
It seeks the best people for key jobs, throughout the organization, regardless of nationality. Hybrid of Ethno and Poly Based on informed knowledge of home and host countries. Enables firms to make best use of its HR Helps the firm to build a cadre of international executives, who feel at home working in No. of countries

Expatriate Problem
Expatriate: citizens of one country working in another
o Expatriate failure: premature return of the expatriate manager to his/her home country Cost of failure is high: estimate = 3X the expatriates annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)

Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer

Expatriate Selection
Reduce expatriate failure rates by improving selection procedures An executives domestic performance does not (necessarily) equate his/her overseas performance potential Employees need to be selected not solely on technical expertise but also on cross-cultural fluency

Training & Development

Training: Obtaining skills for a particular foreign posting
o Cultural training : Seeks to foster an appreciation of the host-countrys culture o Language training : Can improve expatriates effectiveness, aids in relating more easily to foreign culture and fosters a better firm image o Practical training: Ease into day-to-day life of the host country

Performance Appraisal
Problems:
o Unintentional bias
Host-nation biased by cultural frame of reference Home-country biased by distance and lack of experience working abroad

Expatriate managers believe that headquarters unfairly evaluates and under appreciates them In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment either detrimental or immaterial to ones career

Guidelines for Performance Appraisal

More weight should be given to onsite managers evaluation as they are able to recognize the soft variables Expatriate who worked in same location should assist home-office manager with evaluation

Compensation:
Two issues:
o Pay executives in different countries according to the standards in each country? or
Equalize pay on a global basis?

o Method of payment

Compensation Issues

Expatriate Pay
Acc. To Balance Sheet Approach, it equalizes purchasing power across countries so employees can enjoy the same living standard in their foreign posting, as the enjoyed at home. It also provides financial incentives to offset qualitative differences between assignment locations

 Base Salary

Components of Expatriate Pay

o Same range as a similar position in the home country
o Extra pay for work outside country of origin

Foreign service premium Allowances Taxation Benefits

o Hardship, housing, cost-of-living and education allowances

o Firm pays expatriates income tax in the host country o Level of medical and pension benefits identical overseas

International Labour Relations

Key Issue
o Degree to which organized labor can limit the choices of an international business Multinational can counter union bargaining power with threats to move production to another country Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants

Thank You