• Suppose, you are student of

an international university
located in Paris.
• You are taken for an
excursion in which you have
50 students from different
nationalities such as Nepal,
Bangladesh, Pakistan, India,
China, Thailand, Malaysia,
France, Germany, UK, Kenya,
South Africa, Canada, Brazil
and Argentina.
For the fun activities in the excursion, which nationalities’
friends do you prefer to join?
 Organising and Managing Across Cultures - HR6060

Week 7 Lecture

International
Human Resource Management (IHRM):
Cross-cultural issues and implications

Achut Bhattarai
Topics to be discussed:

• Concept and dimensions of IHRM, and its significance

• Diversity management in IHRM
• Staffing in IHRM
• Control mechanisms of IHRM and its types.
International Human Resource Management (IHRM)

 Also known as ‘Global HRM’

 Can be defined as the set of activities
involved in a general HR functions (such as
• recruitment,
• training and development,
• performance management, and appraisal,
• monitoring and controlling,
• compensations and welfares, etc.)
of the employees hired to manage the
operations of a company, for operating
its international business activities.
 In other words, IHRM includes the
process of managing people worldwide
(through staffing, training, developing, and compensating employees
in international organisations both local and expatriates).
Morgan’s Model of International HRM

 Defines IHRM as Interplay between 3 dimensions :

Morgan’s Model of International HRM:
Analyses:
• Which HR activities conducted?
• In which country?
• By which nationality’s employee?
More specifically, the dimensions of IHRM include:
• Selection and recruitment of qualified
individuals capable for furthering organisational goals.
• Training and development of personnel at
all levels to maximise organisational performance.
• Assessment of employee performance to
ensure that organisational goals and objectives are met.

• Retention/engagement of competent
personnel, who can continue to facilitate the attainment of organisational
goals.

• Management of the conflicts between

labour and management to ensure a smooth organisational
functioning

in an international level.
‘Imported HRM’ or ‘Exported HRM’?
IHRM implies (i.e. in a subsidiary company in a host
country):
• either implementing the same HRM
model of the parent/home company -
which might be different as compared to the local model
of the host country (imported),

• or implementing the local HRM

model of the subsidiary/host company
in a new/different way to meet the
parent company’s needs (exported).
Why IHRM?
• Increasing the movement of firms and
their employees all over the world.
• Increasing the trend of outsourcing – Many
MNCs use employees from other countries, physically and virtually

• Increasing necessity of a common HR

approach (when two international companies merge/joint-
venture/partner)

Managing multinational/multicultural
workforce has become crucial.
Diversity management in IHRM
Because of the following variables, HRM activities in a global firm differ from a domestic firm:

A. Cultural Diversity which can be understood

or observed from different national cultural
dimensions such as:
• Individualism versus Collectivism (working in a group or
individually)
• Power distance (hierarchical orders or flat structure)
• Uncertainty avoidance (be proactive or reactive)
• Masculinity v Femininity (level of competitiveness)
• Time orientation (Monochronic v Polychronic)

• The same set of HRM practices is not suitable for all cultures e.g.
Employees from Asian countries generally prefer long-term job
contracts and long-term benefits while the employees from the
West usually prefer immediate/short-term benefits and an
autonomous working environment.
B. Workforce Diversity:
• Because of different individual preferences of employees, workforce
diversity is increasingly becoming common for large companies.
• In global firms, additional
workforce diversity emerges
because of hiring personnel from
different countries.
• The key factors that create more
workforce diversity in MNCs
include the increase of :
• Races
• Nationalities/ethnicities
• Religions/beliefs
• Languages
• Mobility (movability).
Workforce Diversity
based on the employees’ nationalities:
1. Parent-country
Nationals (PCNs)/
Home country nationals: Employees
belonging to the country where a company’s
headquarter is located. (India)

2. Host-country Nationals (HCNs):

Employees belonging to the country where the company
has set up a subsidiary or a manufacturing facility
(Australia).

3. Third-country Nationals (TCNs):

Employees who work in the home or host country
facility of the company but is from a third country (e.g.
China)
Contd…
 Workforce Diversity

Based on the employees’ mobility

from one country to another for their jobs.

Categorised as:
1. Expatriate: A parent country national sent on a long-term assignment
to a host country

2. Inpatriate: A host country national/third country national brought in

home/parent country of the company

3. Repatriate: An expatriate returned back to the home country after

the foreign assignment ends
C. Language Diversity:
• People in MNCs speak different
languages
• Use different communication styles

• Meaning, global companies should

consider the contingencies for a
smooth communication in the
workplace between international
employees e.g. hiring language efficient employees,
arranging translators.
 D. Economic Diversity:
• People from different economic
situations of the parent and
host countries work together.
• Financial expectations of the
employees’ and their spending
attitudes.
• Can be expressed according to the economic indicators of the country such as per capita income, inflation
rate, exchange rates etc.

• The principle of “equal pay to all employees” may not be applicable to all employees i.e. people
from different countries have different economic status, different lifestyles and spending attitudes.

• Employees’ financial incentives should be established

based on the host and home country’s overall economic
situation.
• Other benefits e.g. a leave should be able to acknowledge
the cultural/traditional values of the employees.
Staffing in IHRM (The EPRG Model)

• Like in other fields of international

business such as Marketing or
Management, the EPRG
Framework is in practice
regarding the recruitment of
key executive positions in
international companies.
• Introduced by Howard V
Perlmutter, Jerry Wind and
Douglas in 1969.
 1. Ethnocentric Staffing Policy:
Hiring and promoting employees from
the same ethnicity (basically from the
home-country of the parent company)
eg. A Japanese company operating in China
may hire only Japanese
employees/expatriates.
Advantages: Disadvantage:
• No communication and cultural barriers between • Less chances to understand the local cultures and
employees. business practices.
• Company should not rely on international employees as it • Fewer innovation.
can use domestic experts.
• Helps to develop local mangers and transfer of home • Possibility of less efficient employees without
country expertise. international experience.
• Less efforts required to fulfil the positions. • Higher employment costs for the company
• Less training costs. (employees need extra benefits such as travel
• Helps to transfer the business culture and practices to the expenses, accommodation expenses etc. to go to a
host country. foreign subsidiary).
2. Polycentric Staffing Policy:
Hiring local people of the host-country
where the subsidiary company operates
eg. An American company operating in
Germany may hire local German
employees.

Advantages: Disadvantage:
• Local employees can bring different business • Communication and cultural barriers.
perspectives and ideas. • Problems of coordination and control.
• Better understanding of local markets, politics and • High training cost.
laws. • Local hires may not be familiar with the
• Low employment costs. company and its system.
• Good relationship with the host country and its • Chances of employee’s domination/pressure.
people.
• High image in local market.
• Opportunity to understand the local business
practice and local culture.
3. Regiocentric Staffing Policy:
Using human resources from various
countries within the geographic region of
the company operating. eg. An Indian
business operating in Australia may hire
employees from South Asian countries such
as Bangladesh, Pakistan or Sri Lanka.

Advantages: Disadvantage:
• Similar cultural backgrounds of the employees.
• Communication barriers.
• It can overcome problems associated with home
or host country nationals. • Higher employment costs.
• Helps to maintain good relation with neighbouring • Higher training costs.
countries and supports regionalism. • Managers may lack the international
• Good image of the company in the region. experience.
4. Geocentric or Global
Staffing Policy: Hiring and
promoting employees on the
basis of their quality and ability
without considering their race,
country or nationality. eg. A
French company operating in India
may hire a Japanese manager.

Advantages:
• Possibility of hiring the best person.
• HRM strategy consistent across all subsidiaries.
• High possibility of new skills, innovation and R&D from •
the employees from different backgrounds.
• Global reputation of the company.
Disadvantage:
• Barriers of immigration laws/rules to employ
global employees, especially in a third country.
Communication and cultural barriers.
• High communication and travel costs.
• High training/educational costs.
• Chances of conflicts between staff.
Control Mechanisms of IHRM
 Controlling is the monitoring whether an
expected result of a process is right or if the
outcome deviates from the expectation. If there is a
deviation, corrective actions need to be taken.

 the main objective of

According to Henri Fayol,
management control is to identify the mistakes
and rectify, and also prevent the recurrence of
the mistakes.
 HR control helps managers to regulate the
quality of employees, and to monitor their
performance and development.
 It also prevents employees abuse.
Types/Modes of Control Mechanisms

Personal/Direct Control: Based on

personal contacts with the
subordinates/employees.
• Most widely used type of control
mechanism in small firms for
providing direct supervision of
operational and employee
management.
• Used to construct relationship
processes between managers at
different levels of employees in
multinational companies.
Bureaucratic Control: Based on the requirement
of approvals from the top management.
• Associated with the inherent bureaucracy in an
international firm.
• Is composed of some system of rules and
procedure to direct and influence the actions of
sub-units.
• Most commonly used in cases of capital spending
rules that require top management’s approval
when it exceeds a certain limit.
Output Control: Based on the
outputs/results of performance.
• Major criteria for evaluating output
controls include measuring the
achieved level of productivity,
profitability, growth, market share, and
quality of products, etc.
• Used to set goals for the subsidiaries
and achieve the targeted
outputs/results more specifically.
Cultural/Ethical Control: Based on the norms
and values preached by a firm to its employees.
 Works perfectly when:
• Employee/managers have followed the moral
values themselves,
• Employees tend to self-control their
behaviours.
• Employees of the firm adopt the norms and
values taught.
• Reduces the need for other types of control
mechanisms.
Quiz:
1. In a geocentric staffing, staff are hired from
• the same country
• from the same region
• anywhere in the world.
2. Ethnocentric staffing means
• Hiring staff from the same region.
• Hiring staff the same culture.
• Hiring staff from the same country.
3. In a regiocentric staffing, staff from the __________ are hired. For
example: __________
4. In polycentric staffing, staff from the __________ are hired. For
example: __________
Thank You!
Organising and Managing Across Cultures - HR6060
Week 7 Tutorial

• Explain why IHRM is different to HRM.

• Discuss Morgan’s Model of International HRM with some
examples.
• Explain the options of staffing in MNCs and their features with
some examples.
• Explain the options of controlling mechanisms in IHRM.
Organising and Managing Across Cultures - HR6060
Week 7 Workshop

Group discussion and presentation:

• Discuss why IHRM is more challenging than HRM?
• Based on your own knowledge/experience/research,
discuss some pros and cons of different staffing
methods in IHRM.
• Discuss the Cultural Control in MNCs and its
practicality.
HRM
 Activities undertaken by an organisation to
effectively utilise its human resources.
 Include:
• Human resource planning,
• Staffing (recruitment, selection,
placement)
• Performance management and appraisal,
• Training and development,
• compensations (remuneration) and other
benefits,
• Industrial relations.
 International employees do not only take/bring
their skills and expertise but
• also their attitudes, motivation to work,
feelings, and other personal characteristics
while moving to different countries.

 Managing such employees with a pre-

determined HRM practices may not be
effective,
 HRM practices need to be tailor-made.