INTERNATIONAL

HRM
(PHS 3213)
Lecture 1
An Introduction

Assoc. Prof. Dr. Mohd Fuad Mohd Salleh

January 2017
Objective 1

The importance of
studying IHRM
Understanding the
difference between
HRM, Strategic HRM
and International HRM?
Questions to consider

What are the key

elements of best
practice in HRM?
Can the best practices be
applied on a global level?
To what extent are the
principles of managing
people universal and to
what extent culture
specific?
Lets Revisesomething that you forget

HR
The resource that resides in the
knowledge, skills, and motivation of
people.
Human resource is the least mobile of the
four factors of production, and (under right
conditions) it improves with age and
experience, which no other resource can
do. It is therefore regarded as the
scarcest and most crucial productive
resource that creates the largest and
longest lasting advantage for an
organization.
 Introduction to International
Human Resource Management
How the world is
changing,
Importance of
globalization,
IHRM as a key factor in
the success of
international business.
An overview of domestic
HRM and discussion on
what is different in IHRM.
International HRM Differences

Greater Number of
Services
Special Services to
Unique Group
Compensation Complexity
Foreign Exchange Rate
Attention
Language and Cultural
Differences
Increasing Importance of Global Human
Resources Understanding
International
Mergers and
Acquisitions

Importance of
Foreign Human Global Human Global
Resources Resources Competition
Management

Market Access
Opportunities
Composition of the Cultural Environment of
International Business
Religion Values and Attitudes
Language
sacred objects Toward:
spoken
philosophical time
written language
systems achievement
official language
beliefs & norms work
linguistic pluralism
prayer wealth
language hierarchy
taboos change
international languages
holidays scientific method
mass media
rituals risk-taking

Education
Law
formal education
common law
vocational training
code law
primary education
foreign law
secondary education
home country law
higher education
antitrust policy
literacy level
international law
human resources
regulation
planning
Technology and
Politics Material Culture Social Organization
nationalism transportation kinship
sovereignty energy systems social institutions
imperialism tools & objects authority structures
power communications interest groups
national interests urbanization social mobility
ideologies science social stratification
political risk invention status systems
Key Issues in International HRM
1. Worldwide Human Resources
Planning
Recruiting and Selection
Expatriate orientation and training
Repatriation
Performance appraisal
2. Compensation
Dealing with inflation and unexpected
changes in exchange rates
Providing sufficient pay to keep
individuals
Should company pay hardship
allowance?
Dissatisfaction with cost of living
allowances
3. Housing (Complex problems at
home and overseas)
Key Issues in International HRM
4. Benefits Planning
Developing equity among employees
Several plans necessary for different
categories of personnel
5. Taxation (Proliferation of new laws)
6. Communication of HR Policies and
Programs Worldwide
Treat communication as a continuous
process
Face-to-Face contact frequently
Make policy manuals brief and simple
Be sensitive to needs of receiver
Send regular written explanations of
policy changes
Periodic rotation of overseas HR
managers desirable
Security
Global Manufacturing
International Corporation

Domestic firm that uses

its existing capabilities to
move into overseas
markets.
Multinational Corporation (MNC)

Firm which independent

business units operating
in multiple countries.
Global Corporation

Firm that had integrated

worldwide operations
through a centralized
home office.
Transnational Corporation

Firm that attempts to

balance local
responsiveness and
global scale via a network
of specialized operating
units.
 Types of Organizations

Global Transnational
Specialized facilities permit
Views the world as a single
High local responsiveness;
market; operations are
complex coordination
controlled centrally from the
mechanisms provide global
corporate office.
Global integration.
Efficiency
International Multinational
Several subsidiaries
Low Uses existing capabilities to
operating as stand-alone
expand into foreign
business units in multiple
markets.
countries.

Low High

Local Responsiveness
The Multi-National Corporation
(MNC)

Home Country
Employment
External Country
Employment
Managing in a Foreign
Environment

Attitudes Vary
Motivational Tools
are Distinctly
Different
 Cultural Environment
of International Business
Clustering Nations Approach

Geography
Languages Work Goals
Religion Values
Job Attitudes Needs
Managerial Values

Role of Competition
Role of Blame
Role of Shame
Role of Participation:
Japan (hi)
Role of Autocratic: Europe
(hi) and South America
(hi)
Sources of Managerial Talent

Home Country Nationals

(Expatriates)
Host Country Nationals
(Natives)
Third Country Nationals
(Non-Home/Host)
Advantages of Different Sources
for Overseas Managers

Host Country Home Country Third Country

Less cost Talent available Broad
within company experience
Preference of
host country Greater control International
government outlook
Company
Knowledge of experience Multi-lingualism
environment
Mobility
Language
facility Experience
provided to
corporate
executives
 SOME OF THE LARGEST U.S.
MULTINATIONALS
AT&T General Electric Microsoft

Cisco General Motors Procter and Gamble

Citicorp. Hewlett-Packard RJR Nabisco

Coca-Cola IBM Texaco

DuPont Intel United Technologies

Exxon/Mobil Oil J.P. Morgan Wal-mart

Ford Motor Johnson & Johnson Xerox

Motorola
6 Major Reasons for American Expatriate
Failures in Foreign Environment

Inability of the managers spouse to

adjust to a different cultural
environment.
The managers inability to adapt to a
different physical or cultural
environment. Other family-related
problems.
The managers personality or
emotional immaturity.
The managers inability to cope with
the responsibilities posed by the
overseas work.
The managers lack of technical
competence.
The managers lack of motivation to
work overseas.
Selection Methods

Interviews (executives
and psychologists)
Assessment Centers
(exercises)
Tests (language and
special tests)
Role of Family
 Flowchart of the Selection-Decision Process
Start the Selection Process

YES Select local national and subject him/her to training

Can the position be filled by a local national? basically aimed at improving technical and managerial
skills.

NO

Identify degree of interaction required with local

community using a 7- or 9- point scale, ranging from Emphasis* on tasks variables.
LOW
low to high, indicate the degree of interaction with Second but by no means unimportant question is to
local community required for successful performance ask whether the individual is willing to serve abroad.
on the job.
HIGH YES NO

Is candidate willing? Probably not suitable for position

YES
NO Identify degree of similarity /
dissimilarity between cultures using
a 7- or 9-point scale, ranging from
Probably not suitable for position similar to highly diverse, indicate the
magnitude of differences between the
VERY SIMILAR two cultures, Start orientation
(moderate to high rigor)
Emphasis* on task variables HIGHLY DIVERSE

Emphasis* on relational abilities

factor.
Start orientation
Family situation factor must also be
(moderate to high rigor)
taken into consideration.

Start orientation (most rigorous)

Preparing for an International
Assignment
Study the following subjects:
Social and business etiquette.
History and folklore.
Current affairs, including relations between
the country and the United States.
The cultures values and priorities.
Geography, especially the cities.
Sources of pride: artists, musicians, novelists,
sports, great achievements of the culture,
including things to see and do.
Religion and the role of religion in daily life.
Political structure and current players.
Practical matters such as currency,
transportation, time zones, hours of business.
The language.
Cultural Shock

"A Disorientation that

Causes Perpetual Stress"

Disorienting Incidents
Impossible Communication
Telephone Difficulties
Family Frustrations
Special Considerations

Career Development
Risks
Reentry Problems
Managing Family Life
Terrorism
Recruitment

Government Regulations
Work Permits Universally
Required
Recruitment of Locals
Varies
Guest Workers
Role of Church, Family,
Politics
Selection
Merit Versus Best Family
Family Ties
Social Standing
Origin
Industrialized versus Less
Developed
Training Issues

Local Resources
Less Technical
Capabilities
Apprenticeship Strengths
in Europe
Management
Development (US Leader)
Language (English Need)
Compensation

Host Country Employees

Production Standard or
Time or Combination
Benefits (often higher than
U.S.)
Profit Sharing (may be
Required)
Managers
Narrowing of Salary Gap
with USA
Expatriate Compensation

Base Pay
Differentials
Incentives
Company Assistance
Cost: 3-4 times USA Rate
Compensation of Expatriate Managers

To be effective, a compensation
program must:

1. Provide an incentive to leave the

united states.
2. Maintain an American standard
of living.
3. Facilitate reentry into the united
states.
4. Provide for the education of
children.
5. Maintain relationships with
family, friends, and business
associates.
Compensation Elements of an Expatriate

Programs used by most U.S. Based

MNCs have four elements:
Base pay equal to pay of domestic
counterparts in comparably evaluated
jobs.
Differentials to offset the higher
costs of overseas goods, services,
and housing.
Incentives to compensate the
person for separation from family,
friends, and domestic support
systems.
Company assistance programs to
cover added costs such as moving
and storage costs, automobile, and
education expenses.
 The Price of an Expatriate
Note: Additional costs An employers typical first-year expenses
often incurred arent of sending a U.S. executive abroad.
listed above, including Direct Compensation Costs

language and cross- Base Salary 100%

Foreign-service premium 15%
cultural training for
Goods and services differential 20%
employee and family,
Housing costs 20-40%
and costs of selling
home and cars in the Transfer Costs
U.S. before moving. Relocation allowance 5%
Air fare 2%
*Figures take into
Moving household goods 25%
account payments by
employee to company Other Costs
based on hypothetical Company Car 15%
U.S. income tax and Schooling (two children) 20%
housing costs. Annual home leave (four people) 5%
Personal income tax abroad 50%
*It is not unusual to
triple costs compared Total = Salary plus 187-207%
to USA earnings.