Internattional HRM: Conceptual Framework

Internattional HRM: Conceptual Framework

Introduction:

With the growth of international business, the organizations are spread across different countries, and

hence need workforce to manage their diverse range of operations. These work force differ with respect to their background, culture, and other factors and hence need to be managed by integrating these changes. Internalization of business has greatly influenced the HR function of the firms than any other function. With the changes in organizational structures, nature and scope of business operations, development of technology and communications and wider markets, HR practices have also undergone substantial changes.

International HRM dimensions

P.V. Morgan defines International HRM as the interplay among the three dimensions:

 HR Activities

 Types of Countries

 Types of Employees

HR activities: HR activities performed under IHRM are almost same as that performed under domestic HRM i.e. selection training, development , compensation. The key variable that differentiates domestic HRM activities from international HRM activities such as expatriate management, global skills management etc. is complexity involved in operating in different countries and employing different categories of employees from different nations.

 Types of Countries: The three nations or country categories involved in IHRM activities are: HostCountry, Parent Country and Other Third Countries.

Host country is the country where the subsidiary company of MNC is located.

Parent country is the country where the headquarters of the MNC is located.

Third countries are other countries that may be the source of labor, finance and other inputs

Parent Country National (PCN) or the Home Country National: These employees belong to

the country where the company has its head quarters.

 A PCN is better familiar with the goals, objectives, policies, systems, procedures and practices

    of the headquarters.

 He can more effectively communicate and maintain liaison with home-office personnel.

 He can easily exercise of control over the subsidiary's operations.

     Disadvantages of employing a PCN to the firm:

 It is difficult for a PCN to adapt to the foreign language, culture, socio-economic, political and

     legal environment.

 It is too costly for the firm to send him and his family to the subsidiaries.

 Compensation differences between PCN and HCN may create problems.

 The host countries' nationals lose jobs when the PCN are transferred to the subsidiaries.

 PCNs may not be able to adjust to a new country and hence may even fail to perform their duties

     Effectively

Host Country National or HCNs: Host Country Nationals belong to the country where the   subsidiary is located.

Advantages of HCNs:

 A HCN is familiar with the cultural, social and political factors and business practices in the   host country and can respond effectively to the demands for localization of the subsidiary's

     operations if required.

 A HCN costs less to a company compared to a PCN or TCN.

 An MNC arranges for training and development of employees and provides them   opportunities    for growth which leads to increase in their commitment and motivation.

 No need to obtain work permit to employ them.

Disadvantages :

 Difficulties in exercising effective control over the subsidiary's operations.

 It is difficult for a HCN to communicate with the headquarters compared to PCN.

 HCN gets less opportunity for gaining international and cross-cultural experience.

Third country nationals or TCNs: Third country employees are the employees who are neither

from home country nor from the host country. For example, if a multinational Japanese company

employs a French person in its Indian subsidiary, then French would be a third country employee since

he neither belongs to India nor Japan.

Advantages

 TCNs are compromise between PCNs and HCNs.

 TCN are usually career international business managers.

 TCN are less expensive to employ than PCN.

 TCN may be better exposed about the host environment than PCN

Disadvantages

 Host countries may be sensitive with respect to nationals of specific countries.

 Local nationals are prevented in their efforts to upgrade their own ranks and assume responsible

positions in the multinational subsidiaries

Importance & Purpose of International HRM

IHRM enables the corporate to manage their human resources effectively and attain their objectives,

work efficiently and remain competitive throughout the world. The quality of International human

resource management is the basis of success of any global multinational organization. International HRM enhances employee’s effectiveness to achieve goals of the organization and meet the needs; to develop employees to assume more diverse tasks, face challenges and better understand the cultural differences across the nations. Significance of IHRM in globally business environment can be categorized as follows

Difference between Domestic and IHRM:

IHRM is managing the human resources internationally by the multinational firms. IHRM is a broader

concept which encompasses more functions which are more heterogeneous compared to domestic HRM.

The basic differences between Domestic and International Human Resource Management can be outlined

as follows:

 Domestic HRM is related to HR activities at national level and IHRM is related to HR activities at

     international level.

 Domestic HRM is concerned with managing mainly the home country employees whereas IHRM

     is concerned with managing employees who may be either locals or the expatriates.

     IHRM also covers additional activities such as global skills management, expatriate management

    etc. where as these need not performed at domestic level HRM.

 IHRM requires more involvement in the personal lives of employees than domestic HRM

 IHRM is very complicated as compared to domestic HRM due to heavy influence of external

    factors, differences in the cultural backgrounds, language etc.

 IHRM involves higher risk than domestic HRM.

 International HRM involves more external factors to deal with compared to Domestic HRM.

     The variables either diminish or accentuate differences between domestic and international HRM       are :

 Cultural differences

 The industry with which the multinational is primarily involved.

 Reliance of the multinational on its home-country domestic market.

 The attitudes of senior management.

Difference between Domestic and IHRM:

IHRM is managing the human resources internationally by the multinational firms. IHRM is a broader concept which encompasses more functions which are more heterogeneous compared to domestic HRM.

The basic differences between Domestic and International Human Resource Management can be outlinedas follows:

 Domestic HRM is related to HR activities at national level and IHRM is related to HR activities at international level.

 Domestic HRM is concerned with managing mainly the home country employees whereas IHRM is concerned with managing employees who may be either locals or the expatriates

 IHRM also covers additional activities such as global skills management, expatriate    management etc. where as these need not performed at domestic level HRM.

 IHRM requires more involvement in the personal lives of employees than domestic HRM

 IHRM is very complicated as compared to domestic HRM due to heavy influence of    external factors, differences in the cultural backgrounds, language etc.

 IHRM involves higher risk than domestic HRM.

 International HRM involves more external factors to deal with compared to Domestic HRM.

The variables either diminish or accentuate differences between domestic and international HRM are :

 Cultural differences

 The industry with which the multinational is primarily involved.

 Reliance of the multinational on its home-country domestic market.

 The attitudes of senior management.

INTERNATIONAL STRATEGY:

Introduction

Today when you go to a mall or to a park for your morning walk you will see people wearing Nike or Reebok, with their apple iPods or Dell computers, listening to Hindi rock or a English rock band or working on their smart phone branded by a company in developed country but probably made in China. You’ll find people driving BMS or an Audi on Indian roads. This convergence of consumer needs across globe has translated for companies as opportunity to continue gaining double digit growth rates by venturing abroad. It was this convergence of needs that today you’ll find Kentucky Fried Chicken (KFC), Coach, Nike, Reebok, IBM etc all having a presence in many countries outside their home country. This is referred to as international strategy. The current lesson tries to answer why companies go international, when does a company adopt this strategy and how.

International Strategies

International expansion is a form of diversification because the company has chosen to operate in a different market. A firm’s international strategy is how it approaches the cross-border business activities of its own company and competitors and how it contemplates doing so in the future. International strategy reflects the choices a firm’s executives make about sourcing and selling its goods in foreign markets.

Reasons for Going International Strategy

The reasons for companies exploring new markets could be either one of the following

1. Saturation of their domestic markets and as a result stagnation in the growth rates of these companies. In such cases to realize their sales and profit targets companies have to move out.

2.  In some cases the companies move out because of attractive cost structures. For example the development of Indian service sector and Chinese manufacturing sector are success stories of cost advantages which companies could reap in these countries. The labor cost and competitiveness motivated companies to relocate their operations from developed countries across the Globe to India.

3. Countries and continents are in different stages of development. Sometimes companies go global with a product which might have become obsolete in their own market would be considered as a new product in another market. For example Apple Iphone has used this strategy very successfully with a phased new product introduction strategy. Under this strategy a product which has been phased out in USA or Europe is introduce and sold as a product range in a developing country.

4. Some companies go global in pursuit of competitiveness and perfection. Technically because of difference in factors of production, each country has competitiveness in

ORGANISATIONAL  CULTURE:

Introduction

Organizational culture is a structure of shared assumptions, values &beliefs, which administers how people act in organizations. These shared values have an abundant control on the people in the organization and utter how they tackle, act upon, &accomplish their responsibilities. Every organization builds up & maintains selected culture, which provides guidelines& boundaries for the activities of the employees of the organization. The unique personality of an organization is mentioned to as its culture. In groups of people who work cooperatively, organizational culture is an invisible but powerful strength that impacts the behaviour of the members of that group.

Types of Organizational Culture

Academy Culture

Academy culture relies on employees who are highly accomplished, serious and welcome further training and advancement. This type of work place environment thrive off of strong training for employees being brought on board and ongoing training for the employees previously there. Organizations that wish to chase this kind of culture are extremely particular about who they employ, their existing skill sets and their willingness to learn and grow.

Normative Culture

This culture is very cut and dry, following severe rules and guidelines that support the policies of the

organization. Employees hardly ever diverge from their precise job role, break rules or do anything

other than what is asked of them. These types of organizations run a tight ship and are not suited for

every type of employee

Pragmatic Culture

In this culture the customer or client comes before anything or anyone else. Since each customer is unlike, these types of work places are very contradictory to the normative culture environment as employees don’t adhere to strict rules.

Club Culture

This type of culture requires employees to be incredibly expert and capable in their position of work. Educational qualifications, prior work experience and even personal interests are taken into deliberation before an employee is hired. Club culture can be seen in organizations like the FBI, commercial pilots and specialty branches of the military. The hiring process can be pretty intense for

these work environments, requiring multiple interviews, background checks and so on. These types of

organizations frequently reward hard work with promotions but with that are frequent appraisals of

your work and role within the company

Baseball Team Culture

It can be the finest type of organizational culture from an employee’s stand point. As long as the workers are contented, relaxed and feel respected, the work will get done and the employees will want to attach with the company for the long run. Google is a good instance of a baseball team culture, the employees get to pretty much do what they want, soup up their offices with whatever makes them feel creative – and it’s on the company dime. Company outings are a regular thing, social events within the office and incentives are a big component of this type of culture.

 Fortress Culture

  Opposed to baseball culture, fortress culture could be the worst for employees. This type environment is all about the numbers. If the organization is doing well as a result of the employee’s productivity then the employees carry on having a job. If the organization starts to see a downfall in success then the individuals that aren’t pulling their weight are ended.

 Tough Guy Culture

Tough guy culture is essentially another way of saying micro-management. Employees are monitored

Every  step of the way and when something does not meet the standards or expectations of the company   the employee is given guidance and monitored further. It can be a tough (hence the name)

environment   for some to work in particularly if you are independent and have a creative mind.

 Process Culture

This type of office culture gives a set of rules and procedures that the employees follow. It’s different than the normative culture as the regulations are not a bullet-pointed list of do’s and don’ts so much as it is an philosophy that the employees adhere to. Employees know what they are getting into when they sign-up and are often self-starters. Unlike tough guy culture, these employees are not micromanaged and they rarely are given performance reviews. If they are given reviews it’s annually and it’s to assess their work on a large scale, their aspirations within the company and potentially a discussion about salary. More often than not, government agencies run operate under the process

 CROSS CULTURAL THEORY

Introduction

Cross-cultural communication has become strategically important to companies due to the growth of global business, technology, and the Internet. Understanding cross-cultural communication is important for any company that has a diverse workforce or plans on conducting global business. This type of communication involves an understanding of how people from different cultures speak, communicate, and perceive the world around them. It is important for employees to understand the factors that are part of an effective, diverse workforce. Cross-cultural communication in an organization deals with understanding different business customs, beliefs and communication strategies. Language differences, high-context vs. low-context cultures, nonverbal differences, and power distance are major factors that can affect cross-cultural communication. In individualistic cultures, such as in the United States, Canada, and Western Europe, an independent figure or self is dominant. This independent figure is characterized by a sense of self relatively distinct from others and the environment.

Cross Cultural Communication

Communication is the process of transferring meanings from sender to receiver. On the surface, this appears to be a fairly straightforward process. On analysis, however, there are a great many problems in the cross cultural communication that can result in the failure to transfer meanings correctly. Communication may be Verbal or Non-Verbal.

Verbal Communication

Context plays a very important role in explaining the cross cultural communication. Context is

information that surrounds a communication and helps convey the message. The concept of high- and

low-context culture relates to how an employee's thoughts, opinions, feelings, and upbringing affect how they act within a given culture.

Downward Communication: - Downward communication is the transmission of information from

manager to subordinate. The primary purpose of the manager-initiated communication flow is to convey orders and information. Managers use this channel to let their people know what is to be done and how well they are doing. The channel facilitates the flow of information to those who need it for operational purposes

Upward Communication: - Upward communication is the transfer of information from subordinate to superior. The primary purpose of this subordinate-initiated upward communication is to provide feedback, ask questions, or obtain assistance from higher-level management

Non Verbal Communication

Another major reason for perception problems is accounted for by nonverbal communication, which is the transfer of meaning through means such as body language and use of physical space.

Kinesics

Kinesics is the study of communication through body movement and facial expression. Primary areas of concern include eye contact, posture, and gestures. For example, when one communicates verbally with someone in the United States, it is good manners to look the other person in the eye. This area of communicating through the use of eye contact and gaze is known as oculesics. In some areas of the world oculesics is an important consideration because of what people should not do, such as stare at others or maintain continuous eye contact, because it is considered rude to do these things.

Proxemics

Proxemics is the study of the way that people use physical space to convey messages. For example, in the United States, there are four “distances” people use in communicating on a face-to-face basis. Intimate distance is used for very confidential communications. Personal distance is used for talking with family and close friends. Social distance is used to handle most business transactions. Public distance is used when calling across the room or giving a talk to a group.

Challenges and Issues in Human Resource Management

Human resource management (HRM) is adopted by many companies because of its benefits. But at the same time, various challenges and issues may emerge in front of managers of human resource department while performing their duties.

Any capable HR manager would work on these issues and challenges to prevent the organizational activities from being obstructed. But they must first identify these issues. Such issues and challenges are described here.

Recruiting new staff

Companies sometimes need to recruit new talent for various reasons such as increase in project scope, operations. While recruiting, HRM faces major challenges i.e. selecting the best candidate and making the hired candidate familiar with the environment and culture.

HRM has to select such candidates which are not only technically expert but socially too because company cannot receive expected output from employees who are unable to socialize. This affects the productivity of the company.

Retention

Hiring employees is not only the challenge that HRM faces; retaining them is also one. Retention of employees is essential to minimize employee turnover  This is a major challenge for HRM because of following reasons:  

 Contingent workforce

Contingent workforce includes part-time, temporary contract and work-at-home employees. Maintaining such employees in the company is a challenge because they are less attached with the company. So it becomes a major duty of HRM to make such employees feel that they are a part of the company in order to retain them for a long term.

 Demand of expert employees

Personnel with greater professional and technical knowledge are highly demanded in the job market as such employees have the ability to keep their company ahead in the race. Such employees are invaluable asset for any company and HRM should focus on maintaining them.

Training

Skilled workers are the key to smooth functioning of organization. Therefore, HRM should manage on-site (within the workplace) as well as off-site (outside the workplace) job trainings for employees.

So how is training a challenge to HRM? Before organizing training programs, HRM should answer following questions:

·         What kind of training programs are currently required?

·         What is the objective of the training?

·         How to make them effective?

·         Who are the target groups?

·         How much does the programs cost the company?

Not always, are these questions easy to answer. Finding out all the factors affecting the training like time, location, cost, etc. and making a clear roadmap in establishing an impactful event can be a big issue and working it out, a big challenge.

Productivity

Maximizing profit and minimizing cost is the essence of productivity. Higher the productivity level, more successful will be the company. HRM should always focus on maintaining high productivity level.

Despite HRM's continuous effort, company might sometimes get unsatisfactory result. In such case, it should thoroughly analyze the situation and make a proper conclusion i.e. whether it is the result of inefficient employee or inadequate resources. If inefficient employee is the case, HRM should look forward to train employee, or even recruiting new staffs while it should find alternative resources for sufficient input if inadequate resources is the case.

It is one of the essential functions of HRM to collect its staff’s complete information, including health information. It is necessary for employee’s personal safety. Keeping health information about employees help the company in knowing what kind of tasks or activities are safe for their employees to participate in.

Maintaining health information is also necessary to avoid the risk of legal complications. Several companies at present provide health insurance to its employees as a fringe benefit. In lack of proper health information about employees, various legal issues may arise when such insurance is claimed.

Workforce diversity

Composition of workforce is getting diverse at present situation. Here diversity is not only created by age, gender, educational background and religion but also by the nature, personality and background of workers.

With more diversification of workforce, issues related to bullying, harassment, discrimination, etc may arise, to control which HRM should formulate and implement strict rules and regulations.

Payroll

Payroll is a written document which provides information about the company’s employees along with the amount of remuneration to be paid.

HRM has to conduct a number of tasks every day. In this process, HR manager might forget to pay its employees, if not then he can forget the amount to be paid to individual employee.

With proper maintenance of payroll, HR manager will be able to pay right amount to right employee at right time, which is very essential for extracting satisfactory output from employees.

Globalization

Globalization is a process by which a business firm or organization starts operating on an international scale, creating international influence.

Internationalization of firms is obviously a Sign of Success but it is a challenge at the same time, because globalization invites issues related to unknown language, laws, work ethics, attitudes, management approach, culture and tradition.

A human resource manager will need to deal with more heterogeneous functions such as scheduling meetings, holiday management, human resource outsourcing,etc to overcome with the challenge. 

Discipline

Discipline is one of the important issues that HRM needs to handle at present days. Lack of discipline causes various problems which ultimately affect the productivity of the company.

For an instance, when discipline is not maintained, employees neglect their responsibilities and duties. They may procrastinate their tasks and may misbehave with co-workers, leading to conflict that consume time as well as energy to resolve. The ultimate result of these activities is decreased productivity of the company.

Advancement in technology

With rapid advancement in technology, companies nowadays require such human force that has ability to learn and cope with the changes at an opportune moment.

Technological changes must be taken into consideration by any kind of company. It is because the present world demands every firm to move along with the change, or else be left behind and get extinct.

Technological changes influence overall nature of work and the company will need to find out employees that are capable to adjust with the change. During this process, unemployment as well as employment opportunities arise, creating new challenges for HRM.

Management of information

Up-to-date information is essential for operation of any company. Information may be collected internally as well as externally. Once collected, all the information  should be safely maintained so that they would be readily available when needed in future.

On the other hand, information is also essential to clear queries of employees. HRM should be able to present relevant facts and data while clearing such queries.

Managing any kind of information is a challenge to HRM because it should know which information are actually useful and which are not. After distinguishing these information, it should select such method of storing information which is safe as well as reliable.