2. IHRM
The process of procuring, allocating and effectively utilizing
human resources in an international business is called
international human resources management (IHRM).
This is the HRM issues and problems arising from the
internationalization of business, and the HRM strategies,
policies and practices which firms pursue in response to the
internationalization process
IHRM is the management of HR in business operations in at
least two nations
Need for IHRM
Managing expatriates
Globalization has forced HRM to have international
orientation
Effectively utilize services of people at both the corporate
office and at the foreign plants2
3. Differences between Domestic HRM and IHRM
More HR activities: taxation, culture orientation, administrative
services
The need for a broader perspective: provide to multiple needs
More involvement in employees’ personal lives: adjustment,
spouses, children etc.
Changes in emphasis as the workforce mix of expatriates and
locals varies: fairness
Risk exposure: expatriate failure, terrorism
Broader external influences: government regulations, ways of
conduct
Complexity involved in operating in different countries, varied
nationalities of employees
The different Cultural Environment
The industry or industries with which the MNC is involved
Attitudes of Senior Management
Extent of reliance of MNC on home country domestic market3
4. Major Diffe. between Domestic HRM and IHRM
Business activities e.g. taxation, international relocation,
expatriate remuneration, performance appraisals, cross-
cultural training and repatriation
Increased complexities e.g. currency fluctuations, foreign
HR policies and practices, different labor laws
Increased involvement in employee’s personal life e.g.
personal taxation, voter registration, housing, children’s
education, health, recreation and spouse employment
Complex employee mix – cultural, political, religious,
ethical, educational and legal background
Increased risks e.g. emergency exits for serious illness,
personal security, kidnapping and terrorism
4
5. Main challenges in IHRM
High failure rates - expatriation and repatriation
Deployment – getting the right mix of skills in the
organization regardless of geographical location
Knowledge and innovation dissemination – managing
critical knowledge and speed of information flow
Talent identification and development – identifying
capable people who are able to function effectively
Barriers to women in IHRM
International ethics
Language (e.g. spoken, written, body)
5
6. Main challenges in IHRM …
Different labor laws
Different political climate
Different stage(s) of technological advancement
Different values and attitudes e.g. time, achievement,
risk taking
Roles of religion e.g. holy objects, prayer, taboos,
holidays, etc
Educational level attained
Social organizations e.g. social institutions, authority
structures, interest groups, status systems
6
9. Indicators of Globalization
International trade is growing at a more rapid rate than
world output
Foreign direct investment (FDI) flows have set record
levels in recent years
Cross-border inter-firm agreements have rise
dramatically during the last 20 years
Social, economic, and political developments
throughout the world have changed the way global
business is conducted.
9
10. Pressures of globalization
Globalization is the system of interaction among the countries of
the world in order to develop the global economy.
Globalization involves technological, economic, political, and
cultural exchanges made possible largely by advances in
communication, transportation, and infrastructure.
The advent of the era of globalization along with the
advancements in information technology (IT) has transferred the
world around us. It has brought to centre stage the importance of
human resources, more than ever before.
The pressures it poses on IHRM include:
- Remaining competitive throughout the world
- Efficient
- Locally Responsive
- Flexible and adaptive
- Capable to transforming learning across their globally
dispersed units.10
11. Global Challenges
International companies face many challenges when try
to make HR Practices consistent across all the
locations/offices.
Top Three challenges included:
Variations in social, political and economic
circumstances.
Different locations/offices have their own way of doing
things are resistant to change.
The perceived value of the HR function varies across
locations/offices.
11
12. Characteristics of IHRM
More involvement in employee personal lives
More HR activities
Need for a broader perspective
Changes in emphasis as the work force mix of
expatriates and local vary
Risk exposure
More external influences.
12
18. Types of International Organizations
There are four types of International Organizations:
1. International Corporations
2. Multinational Corporations
3. Global Corporations
4. Transnational Corporations
1. International Corporations
Domestic firms that builds on its existing capabilities to
penetrate overseas market.
Example : Honda, General Electric
2.Multinational Corporations
- MNCs have operating units (subsidiaries) located in foreign
countries
- Subsidiaries function as autonomous units
Examples : Shell, Philips18
19. Types of International Organizations …
3.Global Corporations
- Maintains control over its worldwide operations
(subsidiaries) through a centralized home office.
- They treat the entire world as a single market
Examples : Matsushita –Panasonic Global
4.Transnational Corporations
- Provides autonomy to independent country operations but
bring these operations together into an integrated whole
through networked structure
- They combines the local responsiveness of an MNC and the
efficiency of a global corporation
Examples : Ford & Unilever
19
26. Different Approaches in Global Compensation
The “Balance Sheet Approach”
Home-country groups of expenses—income taxes, housing,
goods and services, and discretionary expenses—are the
focus of attention.
The employer estimates what each of these four expenses is
in the expatriate’s home country, and what each will be in
the host country.
The employer then pays any differences such as additional
income taxes or housing expenses.
26
27. Different Approaches in Global Compensation
Local Going Rate Approach
This can be desirable in high-paying countries such as the US
of Switzerland
The market rate is also preferred when the assignment is
likely to be long term or permanent.
The main advantage of this method that it is administratively
simpler than the balance sheet.
Hybrid Approach
This approach refer variation of the greater of home or host
system where a balance sheet is compared to local market
rate equivalent.
27