ITB TERM PAPER ONInternational Human Resource

Management (IHRM)

Presented By:Sourav Mohanty (11161)

Vinay ReddyM Nagaraj

G ArunPradeep P Patel

Human Resource Management (HRM)

• Refers to the activities an organization carries out to use its human resources effectively

• Four major tasks of HRM o Staffing policyo Management training and developmento Performance appraisal o Compensation policy

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• Strategic role: HRM policies should be congruent with the firm’s strategy and it’s formal and informal structure and controls

• Right People, Right Place, Right Time• Task complicated by profound differences

between countries in labor markets, culture, legal and economic systems

Staffing Policy• Staffing policy

o Selecting individuals with requisite skills to do a particular job

o Tool for developing and promoting corporate culture

• Types of Staffing Policyo Ethnocentrico Polycentrico Geocentrico Regiocentric

Ethnocentric All key management positions are filled by parent –

country nationals. One’s own culture is superior Overlooks important cultural factors Host country lacks qualified professionals Maintain a unified corporate culture Create value by transferring core competencies Limits advancement opportunities for host country

nationals Leads to resentment, lower productivity, and high

turnover in employees. E.g.: Procter & Gamble, Toyota

Polycentric: Decentralized control Business Units in different countries have

autonomy from home office, like a local Co. No standard forms or procedures Recruits host country nationals to manage

subsidiaries, while parent country nationals occupy key positions at corporate HQ.

Firm is less likely to suffer from cultural myopia.

Geocentric: It seeks the best people for key jobs, throughout

the organization, regardless of nationality. Hybrid of Ethno and Poly Based on informed knowledge of home and host

countries. Enables firms to make best use of its HR Helps the firm to build a cadre of international

executives, who feel at home working in No. of countries

Expatriate Problem• Expatriate: citizens of one country working

in anothero Expatriate failure: premature return of the expatriate manager to

his/her home country• Cost of failure is high: estimate = 3X the expatriate’s annual salary

plus the cost of relocation (impacted by currency exchange rates and assignment location)

• Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer

Expatriate Selection• Reduce expatriate failure rates by improving

selection procedures• An executive’s domestic performance does not

(necessarily) equate his/her overseas performance potential

• Employees need to be selected not solely on technical expertise but also on cross-cultural fluency

Training & Development

• Training: Obtaining skills for a particular foreign postingo Cultural training : Seeks to foster an

appreciation of the host-country’s cultureo Language training : Can improve expatriate’s

effectiveness, aids in relating more easily to foreign culture and fosters a better firm image

o Practical training: Ease into day-to-day life of the host country

Performance Appraisal• Problems:

o Unintentional bias• Host-nation biased by cultural frame of reference• Home-country biased by distance and lack of experience working

abroad

• Expatriate managers believe that headquarters unfairly evaluates and under appreciates them

• In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment either detrimental or immaterial to one’s career

Guidelines for Performance Appraisal• More weight should be given to onsite manager’s

evaluation as they are able to recognize the soft variables

• Expatriate who worked in same location should assist home-office manager with evaluation

Compensation:• Two issues:

o Pay executives in different countries according to the standards in each country?

orEqualize pay on a global basis?

o Method of payment

Compensation Issues

Expatriate Pay Acc. To “Balance Sheet Approach”, it equalizes

purchasing power across countries so employees can enjoy the same living standard in their foreign posting, as the enjoyed at home.

It also provides financial incentives to offset qualitative differences between assignment locations

Components of Expatriate Pay

• Base Salaryo Same range as a similar position in the home

country• Foreign service premium

o Extra pay for work outside country of origin• Allowances

o Hardship, housing, cost-of-living and education allowances

• Taxationo Firm pays expatriate’s income tax in the host

country• Benefits

o Level of medical and pension benefits identical overseas

International Labour Relations

• Key Issueo Degree to which organized labor can limit the

choices of an international business• Multinational can counter union bargaining power

with threats to move production to another country

• Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants

Thank You