international hrm (9) may -july 2012[1]

7/31/2019 International HRM (9) May -July 2012[1]

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Why Internationalize? Why Globalize?

It is said that by 2030:

Organizations must either Globalize or die

More than fifty Percent (50%) of U.S. economy isbased on exports and close to 30% of Indianeconomy

That probably explains why during slowdown,sustaining just on our Domestic Markets is sodifficult


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Need for International HR Management

Globalization of Businesses thereforenecessitates, the need for International HumanResource Management (called IHRM), as distinctfrom Domestic HRMJust as Success of a Domestic Business dependsa lot on its Human Resources, so is the case withInternational BusinessLike in the Domestic Business, Results inInternational Markets can only be achieved by:

HR thrproper: Planning, Attracting, Selecting, Inducting,Directing/Focusing, Motivating, and Retaining Talent

at Corporate Office and Foreign Plants of an MNCIHRM is however required to be much more varied,complicated, involved, creative and adaptive.


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Need for International HR Management cont

International Organizations may possess the very bestof Human Resources at its home country, but itcannot be totally successful, if it cannot effectivelyprocure, transfer, allocate and utilize the Talent at its

Foreign Subsidies.This Process of Procuring, Allocating and effectivelyUtilizing Human Resources in an InternationalBusiness is called IHRM i.e. International Human

Resource Management IHRM can also be said to be the utilization of International Human resources, to achieveOrganizational Objectives, without regard to

Geographical Boundaries


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IHRMs Human Resource ActivitiesIHRM has three broad activities, whichcovers the six activities of Domestic HRM

PROCUREMENT ALLOCATIONUTILIZATION

These three activities can be Dovetailed

with the Six of Domestic HRM as follows:HR Planning, Recruitment & Selection (P)Training & Development, Remuneration (A)

Performance Management, IR (U)


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INTERNATIONAL HUMANRESOURCE MANAGEMENT: IHRM

IHRM is essentially an interplay ofthree (3) dimensions :

The Human Resource (HR)activities to be carried out,

The Countries of Operation,Types of Employees required for International Business.


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Countries involved in InternationalBusiness (3) can be classified as :

The Parent or the Home Country,

which houses the HeadquartersThe Host Country, where theSubsidiary is located

The Other Country or Countries,which may be a Source of Labour,Finance, etc

Countries of Operation in IHRM


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IHRM: Types of EmployeesLikewise there are three (3) types ofEMPLOYEES:

Parent or home country NationalsHost country NationalsThird country nationals

Thus say MOTOROLA which operates in India willhave:A few American experts as Parent countryNationals (Americans or Indo-Americans)

A large Indian workforce, as host countryNationalsJapanese and Australians from MotorolasOperations in these countries, forming theThird Country Nationals


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IHRM v/s Domestic HRMSeveral factors differentiate IHRM from

Domestic HRM. Main Characteristics ofIHRM viz-a-viz Domestic HRM are (GD ?):Requires a Broader Perspective than HRMMore and different HR activitiesThere is much greater involvement inEmployees Personal LifeChanging emphasis as Workforce mix ofExpatriates and Locals variesGreater Risk ExposureMore External Influences

GD to bring forth three issues in each of above


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In IHRM there is Need for a BroaderPerspective (1)

Dealing with Pay in different countries withdifferent currencies that may change inrelative valueFringe benefit requires different coverage indifferent Countries e.g. Health Insurance tofamily:

In one Country you can cover only working

person & spousein another, also children, in third alsoParentsIn still another, multiple spouses, auntsuncles, grandparents, nephews, nieces


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In IHRM there is Need for a BroaderPerspective ..cont (1)

Norms in different countries differ. IHRM must know! Family man paid more than Single Women for samejob (belief very strong in Korea & Japan )Relations given first / greater opportunities (easier to

handle) others countries view this as nepotism .. L&T!Romance at work very appropriate in Korea, not so inMalaysia, Indonesia.More work thru: increased working hours (12 hrs inKorea & Japan) or more people (Australia, Singapore)Rewards more for Seniority less for Performance(Australia 4%, Japan 31%, Korea 40% for Seniority)Job for life (Korea 35%). Job for the present ( WesternExpatriates only 3%. They do not want to get stuck)


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IHRM deals with more and differentHR Activities (2)

International OrientationHost Government Regulations

Language translation servicesInternational Taxation

Administrative Services forExpatriatesRelocation


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In IHRM there is more Involvement inEmployees Personal Lives (3)

Giving accurate inputs for foreign postings andservices available (with regards to remuneration,housing, health-care) to Parent and Third CountryemployeesProvide help and service as regards Banking,transfer of money to home country, investments ina foreign land, coordinating the home visits, etc

Provide Schooling for children, or arrange forboarding School in home country, when parentsmove to foreign postingsHelp in searching Jobs for Spouses, Colleges forchildren wanting to pursue Graduation, MBA, etc


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In IHRM there is Change inEmphasis (4)

As International Business matures, the emphasison various HR activities keep changingAs the need for Parent and Third CountryNationals decreases after a while, the focus shifts

to getting more high potential locals to replaceearlier expatriatesThus an increased load in terms of LocalSelection, Training and Management Development

Above results in reduced Emphasis on factors likeExpatriate Taxation, Relocation, etcMovement of high Potential local staff toCorporate Office for Development AssignmentsAll this, calls for a change in emphasis by IHRM


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In IHRM there is a Larger Element ofRisk Factor (5)

Besides the normal risk Domestic HR faces,such as violation of Constitutional & StatutoryProvisions (non-recruitment of Apprentices, SC /ST Quotas, Union problems), IHRM faces many

more:Physical Safety of Employees (not moving outafter 10 pm, not using Elevators when alone)

Risk of employee getting Kidnapped, acts ofTerrorism (1 to 2 % of Revenues are reserved forProtection)Arrange Emergency Evacuation (as in Kuwait,Indonesia)


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In IHRM there is a Larger Element ofRisk Factor (5)cont

Local Government, taking over majoritycontrol of OperationsSudden seizures of MNCs assets in ForeignCountry, for Political reasonsWhere HR Policies antagonize host Country,Powerful Unions and Political Groups, MNCmay be asked to leave the countrySending back Managers who do notperform, thus incurring heavy Financial

losses.


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In IHRM there is more EXTERNALINFLUENCE (6)

MNCs greater visibility requires dealingwith Political figures, Ministers, Economicand Social Groups

There is constant pressure from the hostcountry, like dictating Hiring Procedures(particularly affirmative action)

Follow local ways of doing business (codeof conduct, bribe, gifts) Strict compliance to stringent Labour Laws,

Taxation, Health and Safety


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Basic Steps Involved In EffectivelyManaging IHRM

Human Resource Planning (HRP)Recruitment & Selection

Training & DevelopmentPerformance ManagementRemunerationRepatriationEmployee Relations


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Human Resource Planning (HRP)HRP in the International arena, could be viewed as

successful, if the right Human resources areattracted, selected and efficiently deployed formeeting the Strategic Global ObjectivesKey issues in IHRP are :

Ability to identify Top Management RequirementIdentify the critical Success factors required byInternational Managers (Competencies)Ability to provide Development Opportunities

Tracking Commitment and Progress in InternationalCareerSynergizing HRP with Strategic BusinessrequirementsDealing with multiple Business units with differingStrategies (one Global, other Regional)

ff


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Recruitment & Selection in IHRMTwo important aspects to be ensured forthe purpose of Good Selection :

Right person in the right placeBeliefs and Values of the person selected,must be consistent with those of the firm.

There are three Basic Approaches toStaffing on the International Arena :

EthnocentricPolycentric

Geocentric


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Staffing in IHRM: Ethnocentric Approach All Key positions, both at Headquarters and

Subsidiaries are held by Parent countryNationalsBest Strategy in the early phase, when:

one is transplanting a running Businessparent country nationals are more effectivein representing views of the home office

As an example, 71% of Japanese Companieshad Japanese Presidents onlyDisadvantages are:

it is a costly Processan element of resentment from the home country


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Staffing in IHRM: Polycentric Approach Key positions at Corporate Headquarters aremanned by Parent Country Nationals, howeverSubsidiaries are largely staffed by Host CountryNationals

As ultimate Goal in any Approach is to hand overOperations finally to the host country nationals, ittherefore makes sense to initiate them into theSubsidiary as soon as possible

As an example, in this approach HR can belargely local, receiving and executing Companyguidelines from Corporate HR, but largelyotherwise independent


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Staffing in IHRM: Geocentric Approach

It is a Staffing approach that uses aWorldwide Integrated StrategyThis mode of Staffing seeks the best people

for the key Jobs. This is irrespective of theNationalityGeocentric Approach, matches the underlyingphilosophy of a Global Competition for KeyPositionsThis approach is adopted by truly Globalplayers such as General Motors, Colgate

Palmolive etc


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Staffing in IHRM: Geocentric Approach

As an example, in Colgate Palmolive, 60 %or more of all Expatriates are fromCountries other than USA. Almost all speakat least two Languages

The Corporate HR function in GeocentricCompanies is highly challenging, as it hasa vast canvas of HR aspects to deal with,due to the differing Global Environment


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Staffing in IHRM: General Policies

How does one decide whether to hireParent Country, Host Country or ThirdCountry Nationals? (These are generallycalled as PCNs, HCNs and TCNs)

This is done through a review by HR withSeniors, based on the possibleconsiderations of Advantages &

Disadvantages in each caseThrough a G.D. please Identify the variousAdvantages and Disadvantages of HiringPCNs, HCNs and TCNs....G.D.


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The Expatriate Manager in MultinationalCompanies (MNCs)

Who are Expatriates?Expatriates are Employees working inthe Parent or Other Countries:

who because of their special Skills /Competencies,

are ideal, for working in the Host country,where they play an important rolebecause of their Experience and pastExposure in International Market


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Staffing in IHRM: Approach for Expats

Deciding on approaches forExpatriates :approaches which rely onExpatriates are : Ethnocentric &Geocentricalso companies rely extensively onPCNs & TCNs for recruitingExpatriates


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Determining the Need for Expatriates Not only from the host countrys requirements,but also for an MNC, it makes sense to have thelarger part of the workforce from the Host CountryMNCs look for an Expatriate only in the followingcases:

Where Special Competencies are not availablelocallyWhere only a Global Manager can expand the

MNCs philosophy, ethics, and the inherentstyle of action/functioning (which is distinct to

the MNC) Maybe more so at the start-up timeTo man Senior Positions, where value addition,intricate knowledge of Organizational Strengthsand Weaknesses, and exposure to InternationalScenario are very essential for success

Stages in the C lt ral adj stments in the Host


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Stages in the Cultural adjustments in the HostCountry for Expatriates (Sinusoidal: 2 Curves)

Tourist Stage :Initial Phase. Expatriate enjoys a great deal ofexcitement.

Disillusionment Stage :

Mood descends, as difficulties with new Culturebecomes clearDifficulty in conversing in the local LanguageProblems in Operation : obtaining Food Supplies

Home sicknessBottom of the Curve is called CULTURAL SCHOCK

Adapting Stage (only if cultural shock is overcome)Accepting, feeling more positiveMore effective at home & work, more satisfying


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Cultural Factors to be taken care of by IHRM

A countrys Culture is a set of Values, symbols,

beliefs, language, norms that guide human behaviorwithin a countryCulture and therefore work culture in particular differsfrom country to country

Even today, changing of jobs in Japan is looked downupon, for their sense of loyalty is still quite large.Thisis not so in Western countries. In India only truly goodcompanies are able to extract a greater sense ofloyalty. Our Culture in this respect has changed overthe yearsRecent studies reveal that Asians and Arabs findWesterners unnecessarily pushy, tend not to sharecredit for joint efforts and want to find solutions based

more on their culture and norms than that prevailing


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Indians understanding of others culture is relatively

much better, however when it comes to meshing withthe host culture, Indians tend to hold themselves moreon their ownSuccessful Expatriates maintain a good balancebetween maintaining their own cultural values whileaccepting those of the Host CountriesCulture also plays a part in determining CompensationIn U.S.A. compensation practices encourageindividualism and high performance.Europe stresses on Social Responsibility, whereas inJapan, Age and number of years Experience is critical

to greater compensation


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While it is the aim of most MNCs to have more host

employees after a while, it must be borne in mind thatcertain critical values of the Parent Company, that isits Corporate Culture, must prevail and pervadeTo ensure above, Parent Companies need to bring in

a critical mass of Expatriates at the time of start-ups,so that these threshold cultural values are ingrainedfrom the beginning for all employeesKnowledge of cultural differences in people fromdifferent countries and also having a good insight tothe Host country workplace, will aid a good HRpractitioner to achieve maximum effectiveness at workNote: TRAINING a critical component of culturebuilding is taken up elsewhere


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Learning from Expatriate Failures in USA

Ranking in priority are:1. Inability of spouse to adjust2. Managers inability to adjust at

work3. Personal and / or Emotional

Maturity4. Other family reasons5. Inability to cope with International

Responsibilities L i f E i F il i


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Learning from Expatriate Failures inJAPAN

Ranking in priority are:1. Inability to cope with International

Responsibility2. Difficulty with Environment

3. Personal or Emotional Problems4. Lack of Technical Competence

5. Inability of Spouse to adjust


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Possible reasons for Expatriate Failuresin INDIA !

Ranking in priority are:

1. Family reasons2. Inability to adjust with

Environment3. Emotional Problems4. Lack of Technical Competence

S & F il f E t i t


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Success & Failure for Expatriates

MNCs have to focus on the following areas to ensureSuccess for Expatriates or action in case of a failure:First determine the Need for ExpatriatesIdentify & Select the Right CandidateArrange Pre -assignment Training prior to Departure Ensure Post -arrival Orientation & Training Chances are, he Successfully completes his termIn case of a Crises if Adjustment is possible(overcomes cultural shock), he can be reassigned(maybe in same or in a slightly different role) in host

nationIn case of further Failure, crises and where noadjustment in host country is possible, the person hasto be Repatriated and Adjusted in the home nationThis premature return to the home country ispopularly termed Expatriate Failure. Draw a Sequential Diagram

The Coco Cola way of Global HR Management


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The Coco-Cola way of Global HR Management

One of the most successful MultinationalEnterpriseOperates in 200 countries, and 80% operatingincome from businesses outside USHeadquartered in Atlanta: US, with a local face ineach country of OperationPhilosophy think globally, act locally, depicts itscross border management mentalityNational Businesses have the freedom of

operation appropriate to local markets, while atthe same time possessing an overriding CommonMindsetManages its Global Operations through 25

Operating Divisions, under 6 Regional Groups


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The Coco- Cola way of Global HR Management cont

Corporate HRM function is charged with providing the

glue that binds various Groups and Divisions into onefamilyIt achieves this by propagating a common HRphilosophy within the company and by developing a

group of Internationally minded mid-level Executivesfor Senior Management responsibilitiesLocal HR is then empowered to develop its own HRpractices e.g. compensation which is competitive inthe local marketTwice a year Corporate HR conducts a two- weekprogram for all local HR staff members from all its 25divisions ( helps to translate HR philosophy intoaction in local business, and great benefits in termsof information sharing between Divisions)


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Operations staffed with majority of locals and verylimited Internationals, as philosophy is that localsunderstand local business better.Internationals / Expatriates are needed only for

two reasons. One to fill specific skill-sets, notavailable locally (expatriate of Polish descent inEastern Europe to fill up specific FinancialManagers Vacancy ) and to expand employees

skill base. A global Company requires SeniorManagers necessarily with International ExposureAbout 500 High- Level Managers involved in itsGlobal service Program



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The Coco- Cola way of Global HR Management cont These High-Level Managers not only have verygood knowledge of their specialized field but also

of the company, having served at variouslocationsThese Expatriates are able to not only add value toeach assignment, but also enhance their

contribution to the company through differingInternational ExperienceOut of 500, about 200 move each year. As againstlocal benchmarks, these Expatriates are paid US

benchmark salariesUltimate Goal of Coca-Cola is to build a cadre ofInternationally minded high level Managers fromwhich to draw the Senior Managers to head even

Corporate Office. G.D: Key Factors, Propagate Philosophy, Role of IHRM

Th S l i P


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The Selection ProcessMajor reason for Expatriate failure is Wrong

SelectionOne of the reason is the assumption, that aperson with the required Competence in theHome Nation, will be automaticallysuccessful in the Host countryTwo major Factors need to be broadlyviewed, for SHOR-LISTING at Recruitmentstage, before embarking on SelectionThese factors fall under two categories;namely: Individual and Situational

GD : Please find three factors under each


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Short listing based on INDIVIDUAL FACTORS

Technical Ability & Competence for thejob (job in the host country, not thepresent)Cross-cultural suitability (N. Veg / Veg,food taste, non-smoker, non-drinker,non-believer, strong opinionated

culture-wise)Family requirements (working wife,children studying in critical years, old

parents)

Short Listing based on SITUATIONAL FACTORS


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Short Listing based on SITUATIONAL FACTORS

Country-cultural Requirements: is the ability tojell with the host countries culturalrequirements such as:

drinking or smoking habits in public,headgear a must for all women, children disallowed

in drama halls, strict observance of dress codespersonal contact by opposite sex in public

Language: ability to pick-up and learn (wantingto learn at least the host language)MNC requirements: openness towards meetingdifferent goals and targets in host country,through less budgets, less manpower (asrequirements differ for start-ups & others)


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Selection MethodsGenerally Tests and Interviews alongwith other Selection Methods is adaptedfor this very critical Process:Biographical Data (Past Experiences, Resumes etc)Psychometric, Personality, IQ, Trade andother TestsWork Samples (Technical Skills, typing etc)

InterviewsAssessment Centers (Leadership, Administration) References


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CONSIDERATIONS IN SELECTION

MNCs have over the years designed anumber of appropriate Personality andPsychological Tests, but these are mainly

used as inputs during selection process.

Interviews form a significant part of any

selection process, preceded by,Biographical Data and followed byAssessment Centers, and References


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CONSIDERATIONS IN SELECTION

As Selection plays a vital Role in Success orFailure with respect to an Expatriate, theremay be a large number of Interview roundsprior to final Selection (Google)At most times it has been found prudent tointerview all members of the family and seektheir opinion, on suitability for a foreign

postingFinally what matters is that, the KEYFACTORS are reviewed while Selecting an

Expatriate. What are these Key Factors?

Key Success Factors to be reviewed


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Key Success Factors to be reviewedduring SELECTION

Professional Competencies :Technical (Knowledge & Skills)Experience

Administrative SkillsSocial Skills :Cultural Empathy,Tolerance to ambiguity

Flexibility for adapting to new ideasInterpersonal SkillsAdapting to StressLeadership

Key Success Factors to be reviewed during


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y gSELECTION

Motivation for International Assignment :

genuine desire for Foreign Assignmentsinterest in new Culturescommitment to Goalsassignment in sync with faster Development

Family Support :spouses willingness to go abroadspouses career goalsspouse in sync with husbands Career Goals,spouses ability for building relationships,children's educational requirementsold parents willingness to stay backhealth factor in family

Language:Willingness to learn host language besides English

Basic Steps Involved In Effectively


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TRAINING & DEVELOPEMENT


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TRAINING & DEVELOPEMENTAn Expatriate requires Pre-departureand Post-arrival Training, as this is animportant input to prevent Failure,besides proper Selection (G.D. whyrequired and what is required?)

Training required is:

Cultural TrainingLanguage TrainingPractical Training


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CULTURAL TRAINING

Aids in empathizing with host culture andenhancing effectiveness in interacting with thehost country citizens (Indians in Australia)Cultural training also helps in understanding theculture, local customs, history, politics, economy,religion, social and business practices of thehosts

Given the big problem of adaptation in the hostcountry, Organizations arrange familiarizationtrips not only for Managers but also for Spouseand Children, before actual transfer

CULTURAL TRAINING


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CULTURAL TRAININGAs maximum and quick assimilation of the Host CountryCulture is one of the key factors in preventing ExpatriateFailure, nothing is left to chance by way of CulturalTraining, including teaching the required etiquette atwork and even things like etiquette while eating!Cultural Training is also imparted when Expatriatesreturn to the Parent Company. It includes Counseling onreturn to Parent firm, to prevent the phenomena ofReverse Cultural Shock. Inputs as regards the currentWorkplace and Lifestyles in the Parent Company are

included in the TrainingRealizing the importance of Cultural Training,Companys abroad and in India, now -a-days spendsubstantial amounts on Cultural Training.

LANGUAGE TRAINING


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LANGUAGE TRAININGLanguage Training is desirable and obvious,but MNCs do not give the desiredimportanceAs English is an International Language,it iswrongly assumed that it is sufficient toCommunicateParticularly in Non-English speakingCountries lie China, Japan, Russia, andFrance, this can be a big problemKnowledge of host country language helpsbuild rapport and improve effectiveness.This training is a must.

PRACTICLE TRAINING


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PRACTICLE TRAININGPractical training seeks to help the Expatriatefamily at home in the host country

Sooner they settle down in the new country andenvironment, better are the prospects of successat workTraining in practical aspect before departurecannot be overemphasized:

How to address in publicWhat to talk, what not to talk,How to dress: formally and informallyHow to socialize, etc

A fast way to practical learning is to quickly mixwith your countries Expatriate community andlearn from their knowledge and experience (part ofpost arrival Training)


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Developing International Staff and MNC Teams

International Staff and MNC Teams havePrograms for continual Development suchas:

Expanding operational knowledge and skillsDevelopment Programs for honingManagerial SkillsDevelopment through expansion ofassignment / greater responsibilitiesProjects in different countries (exposure)Opportunities for growth

Management Development as a Strategic Tool


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g p g

While MDPs aid in honing and developing

Managerial skills and Competencies MNCs alsouse these to spread their Multinational Strategies :Bring about a spirit of togetherness and loyalty to theMain Organization (through songs, picnics, sporting

events, get-togethers)Sharing of different cultures w.r.t. host, home and othercountriesUnderstanding locational Strengths and Weaknesses

Build informal networks for futureAids in handling changing assignments in variouslocationsOverall gives shape to a common company culture in

the firms globally dispersed operations



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Training & DevelopmentPerformance Management RemunerationRepatriationEmployee Relations


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PERFORMANCE MANAGEMENT

One of the most Challenging tasks of IHRM ismanaging the Performance of Organizationsvaries facilities located all over the globePM in the International arena is a process thatenables MNCs to evaluate and facilitatecontinuous improvement of Individuals, of

Subsidiary and Corporate Performance,against clearly defined pre-set Goals andTargets


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PERFORMANCE MANAGEMENT

Performance Management has therefore tobe much more Comprehensive, in as muchas it includes Assessment of not only the

Individuals Performance but also of theParent Firm and its SubsidiariesEach MNC has its own strategic goals and

expectations from the foreign affiliates interms of market performance, contributionto total profits, and competitiveness

PERFORMANCE MANAGEMENT cont


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PERFORMANCE MANAGEMENT ..contWhile a subsidys performance needs to be

assessed in terms of fulfillment of itsHeadquarters' expectations, the constraintwithin which the subsidiary functions, mustbe taken care ofPhysical distance, time difference andfrequency of contacts, complicates correctassessmentIn spite of Internet, fax, teleconferencing,there is no substitute for a face-to- faceinteraction between a Subsidiary Managerand his Cor orate Head



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GLOBAL COMPENSATION


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GLOBAL COMPENSATIONand BENEFITS

Organizations that are successful in the GlobalArena, have aligned their Human Recourses insupport of their Strategic Business PlansOne of the major Component is in the mannerHuman Resources Total CompensationProgram, supports the way Business isstructured, organized and operated both

Globally and DomesticallyIn Compensation related matters,Organizations should think Globally and Actlocally

COMPENSATION for EXPATRIATES


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COMPENSATION for EXPATRIATESInternational HR Managers give considerable

attention in designing of attractive remunerationpackage for expatriates. Criteria's considered indesigning are:

Attract those whose special competencies arerequired for International assignments

Remuneration should not be a hindrance intransferring an employee from home tosubsidiary, from subsidiary to subsidiary, andsubsidiary to home countryProvide consistent and reasonable relationshipbetween pay levels of employees atheadquarters, domestic affiliates and foreignsubsidiariesBe cost effective, by reducing unnecessary

expenses (incentive v/s on-going premium)

Problems in designing an


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Problems in designing anInternational Remuneration Package

Discrepancy in pay between parent, hostand third country nationals (payment inIndia less than in USA for same job)

Need to vary Expatriates Compensationdepending on the stage of life cycle of hisfamily (child: young, schooling, grown)

Remuneration on re-entry in parent countryRemunerations to deal with changes inInternational Businesses (e.g. pay in India

hiked after transfer to host country)

REMUNERATION PACKAGE


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REMUNERATION PACKAGEAny Expatriates remunerationpackage seeks to equalize the costof living at home and abroad.Package generally contains:

BASIC SALARYBENEFITS

ALLOWANCESINCENTIVES

TAXES BASE SALARY


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BASE SALARYIn Domestic setting Base Salary is the cashcomponent , and is related to Benefits suchas PF, BonusFor Expatriates Base Salary is related alsoto the package of allowances (such as

foreign service premium, cost of living,housing), besides in-service benefits andpension etcPayment can be made in the home countryor the host country currencyBase Salary is the foundation block forInternational Remuneration, whether person

is a Parent or Third Country National

BENEFITS (Housing Car Medical )


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BENEFITS (Housing, Car, Medical) Benefits constitute a large portion ofExpatriates RemunerationProblematic issues in Benefits are:

Whether to consider for home country benefits,especially if tax free?Whether to consider for host country benefitsonly and make up the difference?

Will termination effect employee in hostcountry? (e.g. :no medical on termination)Whether home or host country will beresponsible for Social Security?

BENEFITS (H i C M di l )


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BENEFITS (Housing, Car, Medical)

Problematic issues in Benefits are: ..Cont Whether Benefits should meet therequirements of home or the host country

Which country should pay the Benefits?Whether other benefits should be used tooffset any shortfall in the coverage

Whether home country benefits shouldbe made available to local citizens

ALLOWANCES


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ALLOWANCESCost of Living Allowance: It is a payment for

the difference between home country andoversees cost of living, or to provideequivalent standard of livingCOL Allowance may cover a variety ofexpenses including :

Relocation expenses ( transport, travel etc )HousingHardship (depending on the country andlocation)Spouse assistance: to offset spouse income inhome country (or help in getting a job in homecountry or employment in firms foreign

subsidy)

Incentives and Taxes


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Incentives and TaxesIncentives: are one time Lump-sum Amounts,given as an inducement to accepting a foreignAssignment (more used now against giving an on-going premium)Advantages of Incentives are threefold:

They are paid on accepting Oversees Assignments(payments tend to retain Motivating factor)Cost to Company works out less (no futurefinancial commitment)Large sums received by Expats, can be used for

saving or spendingTAXES: there are two approaches to InternationalTaxation followed by Companies. These are:

Tax EqualizationTax Protection

T il i th C ti P k


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Tailoring the Compensation PackageWorking within the Components discussed,MNCs try to tailor remuneration packagesin order to fit specific situations.Take the situation of the highest paid CEOand the lowest paid Workmen:

in USA the ratio is 60:1in Sweden it is 8:1in Japan it is 4:1.

Therefore each countrys package istailored accordingly.In designing an Expatriates remuneration,MNCs follow a number of approaches,

which are detailed behind:

TAILORING THE RENUMERATION PACKAGE


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TAILORING THE RENUMERATION PACKAGEBalance Sheet Approach: expatriate does not

loose out anything and maintains home countryliving standard, besides receiving some financialinducementsLocalization: pay local salary for those taking up

long-time assignments early in their career ( nocomparison required with home country)Lump-sum Approach: give lump-sum and letemployee decide how he wants to use entire

amountCafeteria Approach: give him a series ofindividual options within the overall fixed amountRegional System: Difference based on Region.e.g. Europe less, US more.



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p yManaging IHRM



REPATRIAION


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REPATRIAIONRepatriation is the activity of bringing theExpatriate back to the home countryCare has to be taken to ensure, that shedoes not suffer re-entry or reverse culturalshock (new assignment/people, less status)Generally shock occurs as Expatriates are lessprepared for re-entry compared to when

expatriatedSuccess at relocating Expatriates in the homecountry, depends on how well the firm handles

repatriation Programs

PROCESS f REPATRIAION


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PROCESS of REPATRIAION

PREPERATION:Involves developing a plan for shifting,taking his opinion on a list of choices atwork. Then making plans to shift his family

back home, or to other countryPHYSICAL RELOCATION:

Personalized help by HR goes a long way inreducing stress and disruption. Help fromarranging a farewell party to aiding intransportation, to ensuring they are settledat residence and in office

PROCESS of REPATRIAION


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PROCESS of REPATRIAIONTRANSITION: Arranging first for

temporary (hotel) and then forpermanent housing, schooling , admintasks, such as renewing drivinglicense, opening bank accounts

READJUSTMENTS: aid in coping withreverse shock due to anxiety on return

home, adjustment to home country,doubts about placement, isolation asold kingdom is lost, feeling devalued,less status and even pay.

FORMAL REPATRIAION PROGRAM


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MNCs give great importance toRepatriation Programs by assigningMentors ( a respected Senior known to theExpatriate) who:

tries to remove sense of alienation bygiving valued inputs about workplace andher new assignmentAnd keeping mentee involved as regardsimportant decisions

All these aid the Expatriate to be so muchbetter prepared and face re-entry with a lot

of confidence Basic Steps Involved In Effectively


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p yManaging IHRM



IR Issues in MNCs


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Organized Labour in foreign locations can be abig Constraining factor, in pursuit of an MNCs

Global StrategyTherefore IHRM must learn to understand thenuances and the importance of handling foreignlabour in a most efficient manner

Where understanding and/or importance wasmissing on the part of management and more sowith IHRM, it has lead to disastrous results asfollows:

GE bought peace by agreeing not to integrateand consolidate operations in a most efficientmannerDaewoo went bankrupt because labour

resisted trimming their labour force

KEY ISSUES IN INTERNATIONAL


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LABOUR RELATIONS Mgmt Angle

Who should handle Labour Relations, theHeadquarters or the Subsidiary Plant?National differences in economic, political, and legalsystems produce different Labour relations, therefore it

is generally delegated to foreign subsidiesHowever MNCs do get involved in agreements, toensure that no precedents are made as these mayaffect International Plans

In exceptions, like where Transnational Sourcingtakes place (where subsidy of one country relies ona foreign subsidy as a source of components),Labour relations are generally Centralized at MNCs

Headquarters



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LABOUR RELATIONS Wkmn Angle

What should be the Unions Position inDealing with MNCs?The most potent weapon with the Union is a Strike a temporary suspension of operations designed to

exert pressure upon ManagementHowever Unions are vary today of using thisweapon, because for one in the present globalcontext they seem to be loosing strength and

secondly they do not posses the staying power tomatch MNCs financial cloutClout is in terms of absorbing losses at one placeand making up through increased profits in another

subsidy



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LABOUR RELATIONScont What should be the Unions Position in Dealing

with MNCs? contClout is also in terms of capacity to move from onelocation to another, at fairly short notice. Unions areaware of this fire-power.

On their side, the Unions have formed InternationalTrade Secretariats (ITSs), in order to achievetransactional bargaining with MNCsFinally Labour also seeks intervention from ILO(International Labour Organization), for work-placerelated principles, to be observed by all nationsThe best would be to mutually respect each otherand look at the overall interest of the Business of theOrganizations, and hence its people

Global Unions and Labour Agreements


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Global Unions and Labour AgreementsWhile Unionism is on a decline in some countries,

particularly after Globalization, in other countries ithas still maintained strength28% of employees in Japan are Unionized; 43% inGermany; 50% in U.K.; 96% in Sweden;and around90% in IndiaStrength differs from mild to relatively strong, evenmilitant unionsIn most countries the Government laws make itdifficult to fire workmen, so companies are reluctantto hire Permanent workmenIn some countries (not in India), generous and lengthyunemployment benefits discourage jobless fromseeking new work

Global Unions and Labour Agreementscont


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The North American Free Trade Agreements,

called NAFTA has a side agreement on Labor,designed to protect workers of individualcountries (Canada, Mexico, U.S.A.)

Organizations in each of these countries haveto comply with the Labor Laws of NAFTALaws pertain to Health & Safety, Child Labor,HRD, Work Benefits, Social Programs,Productivity, Employment Standards and more.Non-compliance of these Laws can lead tomassive fines upto or even more than 20

Million Dollars per violation

Global Unions and Labour Agreements cont


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Labor unions have also formed a world-wideInternational Trade Secretariats (ITSs) There are 15 of them. They provideworldwide links in terms of information andalso aid in Transnational bargaining withMNCs A world body like the ILO is much sought

after for intervention by Labor Unions. A lotof pressure is exercised on MNCs to followILOs Work -place related Principles, as

these are respected by all nations Emerging Trends in Employee Relations and

Employee Involvement


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MNCs are today not only educating but alsoinvolving their Workmen on the Goals, Issuesand Problems encountered by them through avariety of means such as:

Weekly meetings to discuss schedules and workingout solutions on the progress of the jobsSeeking Technical inputsInterfacing with Customers (how difficult)Imparting knowledge about Competition faced Formation of Quality Circle Teams (wkmn as aLeader!)

Communicating Strategic decisions (new product)

Emerging Trends in Employee Relations and


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Atmosphere so created, through above actionsresults in:

Trust and Joint ownership of all problems

Fast resolution of critical issuesCost cutting becomes an on-going matterOpenness in discussing questions, leading togreater ideas and greater scope for improvements Greater understand of workmen problems, resultingin expeditious resolution directly (w.o union)Reduced clout of union as most subject matter is

known better to workmen

International Labor Organization & its


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International Labor Organization & it sStandards

The ILO is a Global Body devoted to obtainingdecent and productive working conditions of

Freedom, Equity, Security, and Human DignityIts main aim is to promote rights at work,encourage decent employment opportunities,enhance social protection and strengthendialogue in dealing with work related issuesILO is responsible for drawing and overseeingInternational Labor Standards

International Labor Organization & its Standards


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Working with member States ILO seeks toensure that the Labor Standards arerespected in practice as well as in principleFor applying the Standards, ILO is backed by aSupervisory System that is unique at

International Level. The system helps to ensurethat countries implement conventions theyratifyILO regularly examines the application of

Standards in Member States and points outareas where they could be better applied.ILO also assists in case of problems

ILO STANDARDS


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O S S

There are 22 Standards formulated andimplemented by ILO. Few of these are listedbelow

Freedom of association, collective bargaining & IR

Forced LaborElimination of Child LaborEquality of Opportunity and Treatment Employment Policy and PromotionWagesWorking TimeOccupational Safety and Health


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international hrm (9) may -july 2012[1]

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