International hrm

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International Human Resource Management

Transcript of International hrm

Page 1: International hrm

International Human Resource Management

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Core Functions of International Human Resource Management

1. Recruitment2. Selection Process3. Expatriates4. Performance Appraisal5. Training and Development6. Compensation7. Women in International Business8. Dual Career Groups9. International industrial Relations10. Concerns of Trade Unions11. Participative Management

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Recruitment

• Recruitment sources from the international human resource management { IHRM } point of view can be studied under two levels

• Macro-level – the country from which the human resources are procured and

• Micro-level- institutional sources within a country from which human resources are sourced.

• Organizations involved in international human resource management are essentially two types.

• 1] MNCs and 2] domestic companies.• These organizations search for prospective employees both

from within the country of operation and outside the country.

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Global Recruitment

• Recruitment means the searching for a prospective candidates and stimulating them to apply for jobs.

• IT depends on the Recruitment information given by company is important

• Recruitment helps the global company in finding out the candidates for actual or anticipated vacancies in the company

• Sources of Global Recruitment: 1. Parent Country Nationals2. Host Country Nationals3. Third country Nationals

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Parent country nationals (PCN)

• They are the Citizens of the country where the company’s head quarters are located

• Managers, Heads of Subsidiary companies, technicians, experts and trouble –shooters.

• They visits subsidiary companies and operations-To help them in carrying out their operationsTo make sure that they run smoothlyTo provide advice and control them• Sending parent country nationals involves cost

and causes ego and cultural problems

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Host Country nationals (HCN)

• They are the employees of the company’s subsidiary who are the citizens of the country where the subsidiary is located

• Advantages: They are familiar with native culture They are familiar with local business norms and practices They manage and motivate the local worker efficiently They are familiar with local bureaucrats, market intermediaries and suppliers of

inputs Familiar with the taste and preference of local customers• Disadvantages: They are unaware of the needs of head quarters They are not familiar with objectives, goals and strategies of the parent company They view the company only from the local perspective rather than from the

global perspective It would be difficult to train the host county nationals due to variations in the

views about achievement, equity, the work ethic and productivity of the host country nationals from those of the parent country national

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Third Country Nationals(TCN)

• Mr.Rahul-an Indian citizen-is working for an American Subsidiary in France. Mr. Rahul is called third country national

• Third country national is an employee of a company’s subsidiary located in a country, which is not his home country

• E.g.: Software processionals of India who working American subsidiaries located in various countries of Europe are called third county national

• Advantage: Less cost with required expertise, skill knowledge and foreign language

skills Less risk of employing an Indian third national who speaks English Fluently They have a cultural fit due to their work experience in multicultural

environment• However the local government may impose conditions and regulate in

employing third country nationals.

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Recruitment Sources at Macro Level

• Ethnocentric Approach / Parent Country Nationals• Under ethnocentric approach MNCs at their headquarters

formulate mission, objectives, strategies, product design etc. and also make important decisions for the subsidiaries and expect the subsidiaries to implement them and report back to all functional / line managers at headquarters level.

• They assume that policies , systems that work in parent country will also work in host countries, in subsidiaries. Therefore ,these MNCs source human resources from parent country nationals.

• PCN are preferred as they are trustworthy [unlike other nationals] , possess skills necessary to carry dynamic business, have a sense of belonging and commitment that would improve the business, enhance marketing and financial performance.

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Why do MNCs Prefer Ethnocentric Approach?

• Non-availability of qualified personnel in host [particularly developing] countries.

• Availability of qualified personnel at relatively less cost in the home country.

• High cost of host country nationals for certain class of employees particularly in advanced countries like US, UK, etc.

• Home country nationals when working in foreign country are more committed to the implementation of the company’s strategies than those of the host country.

• Home country nationals when employed in host country exhibit highest sense of belonging to the company than that of host country.

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When Should MNCs Prefer Parent Country Nationals { PCN }?

• During the early stage of the establishment of subsidiary.

• Inadequacy of managerial and technical skills in the host country.

• Greater need for maintaining close communication and coordination with headquarters.

• Greater need for maintaining uniform corporate culture.

• When the headquarters has core competencies in terms of skills and knowledge

• When home country nationals are less costly than host country nationals

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Advantages of Parent Country Nationals { PCN }

• Parent country nationals are familiar with company goals, strategies, tactics, policies and procedures.

• Parent country nationals are more knowledgeable of the company’s products, technology, customer needs and problems and customer service issues.

• Parent country national maintain close communication and coordination with head quarters

• Parent country nationals have close personal network with headquarters' employees and therefore, they can

Get things in headquarters easily Network with headquarters easily.

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Disadvantages of Parent Country Nationals { PCN }

• Absence of opportunities for host country nationals to get better / managerial jobs.

• Reduction in opportunities for human resource development of host country nationals .

• Under employment of host country’s employees.• Decline in morale of and loyalty of host country

nationals towards MNCs• Poor adaptation and lack of effectiveness of

home country nationals in host country . PCN are insensitive to local culture and this practice underutilizes non-PCN talent.

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Polycentric Approach

• MNC under polycentric approach treats each subsidiary as an independent company and decentralizes almost all the operations and delegates decision making authority to its executives.

• Executives of the subsidiary formulate strategies based on mission and vision of the subsidiary, design the products / services based on host country’s environment and exclusive preferences of host country consumers.

• MNC sources employees including senior managers for the subsidiary, from the host country nationals.

• Later PCN provide training and develop HCN managers.

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Why do MNCs Prefer Polycentric Approach?

• MNCs follow the policy of developing and helping the nationals of the country , where the subsidiary is located.

• MNCs feel their responsibility and discharge the same towards the society /community of the country where subsidiary doing business.

• To reduce the cost of human resources by recruiting the host country nationals due to the high cost of expatriates relative to nationals of the host country.

• Host country nationals fit to the culture of customers.• MNCs prefer to become ‘global’ companies – think

globally and act locally.

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When Should MNCs Prefer Host Country Nationals { HCN }?

• During the growth stage of the subsidiary.• When human resources of the host country are

developed and fully qualified to take up the jobs of the subsidiaries of the MNC.

• When the language, culture, customs, ways of serving customers and modes of doing business are distinctive in host country.

• When cost of expatriates is abnormally high affecting profitability of the subsidiary adversely.

• When host country Government stipulates a certain % for employment of HCN

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Advantages of Host Country Nationals { HCN }

• HCN are less costly than expatriates in all developing countries.

• HCN have better knowledge of the country’s culture, customs, language, serving the customers and way of doing the business compared to those of expatriates.

• HCN have fast and effective adaptability to the business subsidiary as well as its organizational culture.

• When MNCs enter foreign market by acquiring existing business in foreign country.

• Enhanced job satisfaction of employees of subsidiary • Appreciation of MNC by host country & its

government.

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Disadvantages of Host Country Nationals { HCN }

• Complexity in coordination of activities, accounts, financial statements etc.

• Managers of headquarters cannot have hands on experience of the subsidiaries’ business practices and vice versa.

• Limits the mobility of employees within the subsidiary as well as headquarters.

• Organizational culture of parent company cannot be adapted in subsidiaries .

• Work culture of parent company and subsidiary cannot be exchanged.

• Employees in HQ & subsidiary do not feel they are of working in a single company.

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Regiocentric Approach

• After establishing operations in a host country, MNC often commence exports from that country to its neighbouring countries. MNC in India exports to Sri Lanka, Bangladesh or Nepal under this regiocentric business approach.

• Similarly the subsidiary sources its employees from the region where it is located.

• Why do MNCs prefer Regiocentric Approach?• 1. Non-availability of qualified personnel in required number in the

host country. • 2. Persons from the neighbouring countries possess similar culture. • 3. Availability of qualified candidates in the region at lesser cost

compared to PCN. • 4. More sense of belonging and commitment relative to PCN.

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When should MNCs prefer RegiocentricApproach?

• During transition between growth and maturity stages.

• When subsidiaries expand their operations to the neighbouring countries through direct and indirect exports.

• Inadequacy of managerial and technical skills in host country consequent on increase in demand for such skills.

• When neighbouring country nationals with required skills are available at less cost compared to that of the host country nationals.

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Advantages of Regiocentric Approach

• Cultural familiarity of the candidates with that of the host country.

• Less cost of staff compared to parent country nationals.• Subsidiary can perform efficiently in neighbouring

countries by recruiting nationals from those countries.• Greater loyalty and commitment towards the

subsidiary.• Stability in employment of neighbouring country

nationals relative to other foreigners.• Can employ talented and skilled people from host &

other countries.

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Disadvantages of RegiocentricApproach

• Subsidiary cannot get highly qualified and suitable candidates.

• Subsidiary cannot fully satisfy the host country nationals in human resource development and employment..

• Subsidiary cannot reduce the cost of human resource to the lowest extent.

• Neighbouring country nationals may search for jobs in other MNCs in other countries.

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Geocentric Approach / Global Recruitment Approach

• Under geocentric business approach, the entire world is just like a single country for MNCs. They source all kinds of inputs like materials, parts finance, human , technology and equipment from all countries in the world based on exclusive business principles of procuring the best quality at the lowest price and market the products / services in the entire world where ever the product can be sold at more favourable terms and conditions.

• Under geocentric approach to recruitment , MNCs source for the best prospective employees in terms of suitability for the job from the entire world, regardless of nationality or ethnic group or any other consideration. US multinationals have geocentric approach to recruitment of even CEO of their organization.

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Advantages Geocentric Approach to Recruitment

• Competent Pool :• Helps attracting most qualified people willing to serve globally,

maintain a pool of applicants and select the best among them.• Shared Learning: • The competent employees who work in subsidiaries and

headquarters throughout the world share and transfer their skills to other employees of the MNC, which in turn, leads to human resource development , career and succession planning and development.

• Core Competencies:• MNC can develop core competencies as well as distinctive

competency in skills, talent and knowledge and compete successfully.• Flexibility and Adaptability:• Helps develop global culture that brings flexibility and adaptability,

bilingual and multi lingual skills that suit various situations.

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Advantages Geocentric Approach to Recruitment

• Reduction in Resentment:• It brings third country nationals who invariable bring

acceptance between parent country and host country nationals in case of top level positions.

• Best talent at Less Cost:• MNCs can place adequate emphasis on reduction in

the cost of staff at the same time recruiting talent in case of geocentric approach.

• Transpatriates– MNCs with global approach recruit the people from any country. Such employees are termed ‘transpatriates’ , replacing the term expatriates. They offer varied benefits to the MNC

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Disadvantages Geocentric Approach to Recruitment

• Immigration controls by host country Government :• Host country desires MNCs to employ nationals and therefore

imposes restrictions on employment of foreigners.• Immigration Formalities: • Many advanced and some developing companies lay down

unnecessary and time consuming formalities , documentation and high fee for recruiting and employing foreign nationals.

• Opposition from Nationals:• People from host country oppose geocentric approach as it robs

them of job opportunities.• Nationals from advanced countries like USA & UK have also

organized protests against geocentric policies.• Additional Costs:• Extra costs of training in culture, language etc.

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Recruitment Sources at Micro Level: Centralised vs decentralised

• Merits of centralized recruitment• Under centralized recruitment candidates for headquarters

and subsidiaries are recruited at headquarters.• Merits of this system are –• 1. Least cost of recruitment per candidate/unit due to

scale.• 2. Recruitment by experts.• 3. Uniform standards of education, skill, knowledge, talent

etc. in recruitment.• 4. Malpractices, abuse of power, favouritism, nepotism

avoided.• 5. Facilitates interchangeability of staff.

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Recruitment Sources at Micro Level: Centralised vs decentralised

• Merits of decentralized recruitment• 1. Subsidiary sources candidates from its normal channels and thereby

reduces cost of recruitment.• 2. Subsidiary gets most suitable candidates as it is fully aware of its

requirements of the jobs regarding cultural, traditional, family background aspects, local factors, social factors etc.

• 3. The subsidiary can recruit candidates as and when they are required without any delay.

• 4. The subsidiary would enjoy freedom in finding out , developing the source, in selecting and employing techniques to stimulate the candidates.

• The subsidiary would relatively enjoy advantage about the availability of information, control and feedback and various functions / processes of recruitment.

• 6. The subsidiary would enjoy better familiarity and control over the employees it recruits rather than on employees selected by the parent company.

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Recruitment Sources at Micro Level

Techniques of Recruitment• Offers for promotions and transfers.• Employee referrals.• Scouting.• Advertising. Print & electronic media.• Walk-in interviews.• Consult –in• Head-hunting.• Body shopping.• Business Alliances.• Tele-recruitment

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Selection Techniques for Global JobsSelection Criteria for Overseas Employment: • Self-orientation• Orientation towards others• Ability to perceive accurately• Cultural Variations• Technical and Managerial Competence• Adaptability• Age, Experience and Education• Spouse Educational Background, Interests and Adaptability• Achievement Motivation and Leadership• Family Status• Language• Strong Desire to Transfer Knowledge and Skills• Positive Attitude

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Expatriates

• Employees of global companies and their family members working and/or living in foreign countries are called expatriates in the foreign country

• Expatriates are those living or working in a foreign country• The parent country nationals working in foreign subsidiary and third country

nationals are expatriates• Expatriates normally have adjustment problems.• International Adjustment: The international adjustment is the degree to which the

expatriate feels comfortable living and working in the host culture; This significantly influences job performance

• The expatriate is completely new to host country environment, social rules, norms, etc.

• The expatriates has a strong desire to reduce psychological uncertainty in the new environment also called as Cultural Shock.

• Cultural Shock: the frustration and confusion that result from being bombarded by un-interpretable cues

• Students in USA drink beverages in the classroom, people in US wish you immediately when there is eye-to-eye contact with you, Africans leave their classrooms at end of the lecture before teacher leaves the class

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The U-Curve of Cross Cultural Adjustment

Honeymoon Stage: The expatriate and his family members are fascinated by the culture of the host country, the accommodation, the transportation facilities, educational faculties to the children, etc. during the early stage of arrival. This stage lasts up to 2-3 months period.Culture Shock Stage: The company takes care of the new arrivals and completely neglects the previously arrived employee and his family after three monthDuring this stage, the employee has to take care of himself and his family members. Expatriate gets frustrated, confused and unhappy with living and working abroadHis social relations are disillusioned during this stageHe gets shock of the existing cultureAdjustment stage: The expatriate slowly learns the values, norms, behavior of the people and their culture, and adjust himself to the culture of the foreign country.Mastery Stage:The expatriate after adjusting himself with the culture of the foreign culture can concentrate on working efficiently. He behaves and functions as citizen at this stage.

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The World's Friendliest Countries-

1/06/2012• Living abroad doesn’t have to lead to homesickness. That’s especially true for

people who have relocated to New Zealand, Australia or South Africa.• These are the three nations where it’s easiest to befriend locals, learn the local

language, integrate into the community and fit into the new culture, according to the results of HSBC’s Expat Explorer Survey, released last month.

• The least friendly country for expats, according to the Forbes formula, was the United Arab Emirates.

• And among the countries most challenging for expats overall were Saudi Arabia, Qatar, Russia and India, according to this year’s HSBC survey results. India ranked in last place for the second year in a row.

• Respondents rated their host countries on a slew of factors related to economics, raising children and overall experience.

• To determine which were the friendliest, Forbes isolated the results in four categories: ability to befriend locals, success in learning the local language, capacity for integrating themselves into the community, and ease in which they fit into the new culture.

• Source: http://www.forbes.com/sites/bethgreenfield/2012/01/06/the-worlds-friendliest-countries-2/

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PERFORMANCE APPRAISAL

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Challenges of international performance management

• Total Company versus Parts of it.• Standard format versus Customized format.• Uniformity of Data of Performance.• Environmental variations• Validity of performance criteria.• Time and distance variations.• Varied levels of maturity.• Rater’s competence.• Rater’s bias.• Host environment.• Cultural adjustments.

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Compensation and Benefits

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International Industrial Relations• Complex relation between: Employees Employee’s Unions Employer Employer’s association Government• It’s the outcome of the practices of human researches management and basis

for reformulation of HRM policies• The important areas of Industrial Relations are: Trade Unions Grievance Procedure Disciplinary Procedure Collective Bargaining Industrial Conflicts including Strikes and Lockouts Worker’s Participation in Management Quality Circles Quality of Work life Profit-Sharing and Employee Ownerships/Employee Stock Option

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Trade unions

• Trade unions generally present the worker’s problems in Collective Bargaining-USA, UK, Japan-try to reach on agreement collectively and see that the management implements the agreements

• However trade unions fail to influence the management for fair labor practices

• Germany-Work’s CouncilWorking conditionsWage Rates Stand of employee Conduct• Settled issues through arbitration

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Participative Management

• Type of management in which employees at all levels are encouraged to contribute ideas towards identifying and setting organizational-goals, problem solving, and other decisions that may directly affect them. Also called consultative management.

• Germany-Works Council

• UK-Collective Bargaining and Joint Consultative Machinery

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Why Global Employer Branding • Scarcity of Talent

• Competitive edge

• Impression Management

• Organizational Loyalty

• TO increase the recruitment and Selection Ratio

• To enhance HR utilization

• Retain Talent

• Reduces Job Misfit

• Social Branding and business Brand

• HRM Standards-Values

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What constitutes Employer Branding:

Interesting work Appreciation and Recognition for the work done Feel-in-on-things-Freedom and involvement of

decision-making Sympathetic understanding of personal problem Climate of Feel of Ownership Attractive Benefits and salary Personal loyalty to works Empowerment Career planning and development including

promotional opportunities

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The Best Global Employer Brands-2012Website: : www.universumglobal.com (first powerful global index of employer

attractiveness)

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Training

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Why Cross-cultural Training for HCN also?

• Cross cultural adjustment is crucial not only for expatriates and their families, but also for the host country nationals.

• HCN interact with expatriates both at the work settings as well as at social settings.

• Host country nationals should understand at least a part of the expatriates’ culture as the expatriates of different countries either exhibit or are immersed in their culture while interacting with the host country subordinates or superiors or colleagues.

• The expatriates are primarily responsible to adjust to host country culture but host country nationals should also understand and adapt to core aspects of cultures of expatriates.

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Why Job Training:

• In addition to cross-cultural training, TNCs also provide training in technical and functional aspects of the job., though mostly expatriates possess them.

• Training is arranged mostly due to the changing technology as well as shifting job priorities, job description, specification, team specifications and varying systems and procedures in subsidiaries and headquarters.

• Added to this, host country national need to be trained in technical and job aspects from time to time .

• Therefore, MNCs provide training in technical and functional aspects , though their magnitudes differ widely from that of cross cultural training.

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Training for expatriates

• Normally failures of expatriates are due to cultural & environmental factors rather than due to lack of confidence.

• Pre-departure training is provided to take care of cultural & environmental factors and thus it reduces expatriate failure rates.

• Training is provided , therefore, to expatriate as well as his /her family.• Training is provided through a mix of pedagogical tools like Field Experience,

In house Training programs, Outside Agency Workshops and on the job Training Assignments.

• On the job training involves i] coaching from the superiors : superior provides critical skills , tactics and crucial knowledge through face to face coaching. ii] working as an understudy : employee studies the superiors with regard to interpersonal skills, adapting to culture, decision making etc. iii] multiple management skills: are acquired by the employee from global assignment in different subsidiaries and iv] development of global mind-set; assignments in countries with varied and conflicting cultures allows employee to slash the preconceived mind set and acquire new mind-set that appreciates new work cultures.