Topics for Discussion

• Introduction
• Meaning
• Factors affecting IHRM
Meaning

• International Human Resource Management (IHRM) is the process of procuring ,

allocating , and effectively utilising human resources in a multinational corporation,

For Example
Organizations like Procter & Gamble, IBM, Pepsi and Coca Cola have had extensive
International experience and their success can only be attributed to their capability of
constantly deploying the right people at the right place, facilitating knowledge and innovation
dissemination and constantly identifying and developing talents on a global basis. Thus, for
Ford which has a global HR perspective —“The company requires understanding different
cultures, what motivates people from different societies, and how they are reflected in the
structure of International assignments.”

2
IHRM comprises of typical HRM functions such as recruitment, selection, training and
development, performance appraisal and dismissal done at the international level and
additional exercises such as global skills management, expatriate management and so on.

In short, IHRM is concerned with handling the human resources at Multinational Companies
(MNCs) and it includes managing three types of employees −
• Home country employees − Employees residing in the home country of the company
where the corporate head quarter is situated, for example, an Indian working in India for
some company whose headquarters are in India itself.
• Host country employees − Employees residing in the nation in which the subsidiary is
located, for example, an Indian working as an NRI in some foreign country.
• Third country employees − These are the employees who are not from home country or
host country but are employed at the additional or corporate headquarters.
For example, an Indian MNC, which has its corporate office in America, may employ a French
person as the CEO to the subsidiary. The Frenchman employed is a third country employee.

SELF

3
International HRM is a term encompassing all the HR practices involved in managing a global
workforce. International HR professionals are responsible for the following within
a multinational corporation: 
• Talent management including recruitment 
• Expatriation and repatriation 
• Training and developing 
• Compensation 

For clarity, a multinational corporation (MNC) is one with a business presence in various

countries. Typically, the business will be managed from the ‘parent’ or home country in
which it is headquartered, but it will operate from various international locations. Well-
known multi-nationals include Apple, Amazon and Unilever, but smaller businesses can
class themselves as MNCs if they have subsidiaries in two or more countries. 

SELF

4
Factors affecting IHRM
1. Differences in labour market characteristics
2. Cultural differences
3. Differences in the Legal Environment
4. Attitude towards employment
5. Differences in conditions of employment
6. Staffing policy
7. International negotiation perspectives
8. Economic Factors
9. Education and Skills
10. Technology and Infrastructure
11. Ethical and Social Responsibility
12. Organizational Strategy
5
Differences in Labor Market Characteristics

• The skill levels, the demand and supply conditions and the behavior characteristics of labor
in the international perspective may vary widely between countries. The fast changing skills
and behavioral attributes of human resources in various countries and wage differentials in
compensation packages offered to these professionals are causing a tremendous challenge
to HR professionals in terms of policy making.
• Apart from this, changing labor market characteristics have been also causing global
restructuring of business processes and industries. Further, with the spree of international
mergers and acquisitions, the scope and nature of International HRM has become
complicated and challenging. HR professionals need to constantly focus on paradigm shifts
in people management practices and retain talented professionals in their organizations.

6
Cultural Differences

• Cultural differences of expatriates and professionals from various countries cause a great
challenge to IHRM. The behavioural attitude of employees from different backgrounds, the
social environment, values, beliefs, outlooks, etc. affect industrial relations, and people
engagement practices in organizations. In this context, diversity management programs
and cross-cultural assimilation programs play a crucial role.

Differences in the Legal Environment

• MNCs operating in different countries have to cope up with diverse challenges pertaining
to the business environment. Host government policies, labor legislations, statutory
compliances vary from one country to another. Hence, it has become mandatory for HR
professionals to be constantly aware of these regulatory compliances and make necessary
changes in their organization’s HR policies.

7
Attitude towards Employment

• The attitudes of employers and employees towards employment of people show great
variations in different nations. In some countries hire and fire is the common thing whereas
in a number of countries the ideal norm has been lifetime employment. In countries like
India employees generally perceive that they have the right to change organizations and
demand lifetime employment in the organization they are being employed.

8
Differences in Conditions of Employment

• Apart from the attitude towards employment, there are several conditions of employment
which cause significant challenges to IHR practices in organizations. The compensation
management policies, promotion, incentives schemes and motivational strategies, labor
welfare initiatives and social security measures, CSR initiatives, etc., vary significantly
between one country of operation to the other.

9
Staffing Policy

• With reference to the choice of the nationality of the people hired for key management
positions, there are four types of staffing policies in MNCs, namely, ethnocentric,
polycentric, regiocentric and geocentric strategies.

10
International Negotiation Perspectives

• In a number of cases the foreign market entry and strategy implementation involve
negotiation with the government of the foreign country and/or foreign firm. This is
subsequently reflected in the organization’s HR policies and practices.

11
• Economic Factors: Economic conditions, such as exchange rates, inflation rates, labor costs,
and market demand, influence IHRM decisions. Organizations need to consider these
factors when determining compensation packages, setting up operations in foreign
countries, or conducting international hiring and staffing.
• Education and Skills: The availability and quality of education and skills in different
countries impact IHRM strategies. Organizations may need to invest in training and
development programs to bridge skill gaps or develop talent locally. Access to skilled
workers and their mobility across borders also influence IHRM decisions.
• Technology and Infrastructure: Technological advancements and infrastructure capabilities
vary across countries. IHRM professionals need to consider the availability of technological
resources, digital infrastructure, and connectivity when implementing HR systems, remote
work arrangements, or global communication platforms.

12
• Ethical and Social Responsibility: Ethical considerations and social responsibility have
gained prominence in IHRM. Organizations must adhere to ethical standards, respect
human rights, and address social issues related to labor practices, diversity, equity, and
inclusion. Failure to do so can damage the organization's reputation and affect employee
morale.
• Organizational Strategy: The overall strategic direction of the organization influences IHRM
decisions. Factors such as the global expansion plans, market entry strategies, mergers and
acquisitions, and outsourcing decisions impact how HR functions are designed and
managed in an international context.

These factors highlight the complex and dynamic nature of IHRM. Successful IHRM requires a
deep understanding of these factors and their interplay to effectively manage a global
workforce and align HR practices with organizational objectives.

13