World in the 21 st Century: The Need for IHRM

1. World in the 21st Century: The Need for IHRM Dr Preeti S. Rawat

2. Going Global • Globalization • The trend toward opening up foreign markets to international trade and investment. • Impact of Globalization • Partnerships with foreign firms • Communication and connectivity have made the world smaller • There is a better understanding of foreign opportunities leading to increased trade and businesses operating across national borders • Lower trade and tariff barriers (economies around the world are better integrated) • NAFTA, EU, APEC trade agreements • WTO and GATT • “Anything, anywhere, anytime” markets

3. Going Global (cont’d) Embracing New Technology • Knowledge Workers • Workers whose responsibilities extend beyond the physical execution of work to include planning, decision making, and problem solving. • The Spread of E-commerce • The Rise of Virtual Workers

4. Going Global (cont’d) Containing Costs • Downsizing • The planned elimination of jobs (“head count”). • Outsourcing • Contracting outside the organization to have work done that formerly was done by internal employees. • Employee Leasing • The process of dismissing employees who are then hired by a leasing company (which handles all HR-related activities) and contracting with that company to lease back the employees.

5. Going Global (cont’d) Managing Change • Types of Change • Reactive change • Change that occurs after external forces have already affected performance • Proactive change • Change initiated to take advantage of targeted opportunities • Formal change management programs help to keep employees focused on the success of the business.

6. Going Global (cont’d) Impact of Globalization • Realization that customer requirements and behavior vary from culture to culture • Cross National Convergence and Divergence

7. Going Global (cont’d) Convergence • Increased similarity in behavior around the world • Cross-national differences around the world not as different as was 50 yrs ago • Reason • Media (common public opinion eg environment, pollution, global warming). • Fashion (jeans and T-shirt universal) • MNCs (convergence of attitudes, values and behaviors) • Regional economic integration (EU,NAFTA,)

8. Going Global (cont’d) Divergence • Cross national difference continue and are important (eg cultural differences of customer preferences, cultural orientation, resurgence of national identity • Sensitivity to cultural differences also perpetuate differences

9. Going Global (cont’d) • Impact on HRM • Different cultures, laws, and business practices • Issues: • Identifying capable expatriate managers. • training programs suited for working in foreign culture and work practice. • Adjusting compensation plans for overseas work.

10. Going Global (cont’d) Social Issues • Attitudes Toward Work and Family • Day care • Flextime • Job sharing • Alternative work schedules • Elder care • Job rotation • Parental leave • Telecommuting

11. Why Study IHRM? • To understand how to make HR effective in the MNCs • Effective management of HRM internationally is increasingly being recognized as a major determinant ofsuccess or failure in international business • Shortage of good international HR managers • Business failure in the international arena may often be linked to poor management of HR (Expatriate failure) • Work force multicultural and geographically dispersed • HR should support the rapid pace of internationalization of companies and enhance and maintaintheircompetitiveness in the market place.

12. Why Study IHRM? • Need for HR Localization (NHRL) High/Low • Need for Human Resource Consistency (NHRC) High/Low Umbrella HRM NHRL- H NHRC- H (Polycentric) Worldwide HRM NHRL-L NHRC-H (Geocentric, consultancy assignments ) Decentralised HRM NHRL- H NHRC- L (JV,Licence) Adhoc HRM NHRL- L NHRC- L

13. IHRM: Definition • IHRM is HRM issues, functions, policies, and practices that result from the strategic activities of multinational enterprises and that impact on the international concerns and goals of those enterprises (Schuler et al.,1993)

14. Task/ Challenges of IHRM • Coordinating various functions (planning, marketing, accounting, HR ) with the parent company and enabling the company’s overall strategy • Building a global culture to encourage global mindsets and attitudes to cope with global customers and global transactions • Developing the managerial leadership and structure to support global strategies and operations

15. Task/ Challenges of IHRM • Gaining management interest and involvement in HRM processes • Ensuring quality professionals to serve global customers • Developing technical and managerial skills (talent) to work effectively at the global level • Ensuring global and local approaches to T&D, succession planning, and improved performance

16. Problems of International Research • Pieper (1990) No universal model of IHRM is possible because • HRM seems to be more theoretical construct than a applied reality. What companies practice is personnel management than HRM and so ignore cultural contextual differences in pursuing HRM • Practical and theoretical concepts in various nations vary widely (eg. Collectivism vs. individualism) • Culture has been exaggerated in its influence on HRM practices • Lack of data

17. Model of IHRM (Morgan ‘86) • Three broad human activities: procurement ,allocation, utilization • Three national or country category: Host ,parent ,third country • Three national or country employees: Host (HCN), parent (PCN), third country (TCN) nationals • In domestic HRM all HR activities are in single country. The complexity of operating in different country with employees of different cultures is the key to difference between HRM & IHRM

18. Dowling ‘88 on difference between HRM and IHRM • More HR activities: international taxation which often is both domestic & host country tax liabilities; care to be taken that no tax disincentives are associated with international assignment • Need for a broader perspective: treatment to PCN and TCN to be similar (at times not there eg. Inpatriates) • More involvement in employees personal lives: in handling their banking, investment, and loans while on assignment, compensation aspects like cost of living allowances (COLA), repatriation • Changes in emphasis on workforce mix of expatriates and local : emphasis on high potential local staff to be trained in headquarters for smooth transition

19. Dowling ‘88 on difference between HRM and IHRM • Risk exposure: expatriate failure ans issues attached with it • External influences: complying to foreign countries laws eg affirmative laws in Malaysia requiring employment to indigenous population, culture shock and psychological disorientation differences in values eg Indonesia nepotism vs. loyalty to the family • ‘index of trans nationality’ : ratio of foreign assets to total assets, foreign sales to total sales, foreign employment to total employment (the Economist ’97) Nestle highest ranking, others in top ten Seagram, ABB,Unilever, Roche • Coca Cola and McDonalds rank lower because of dbig domestic market

20. Thank you