International Human Resource Management

this is Anthony kolosso from durgadevi Institute of Management Studies and we are going to discuss about international HRM we would be trying to understand what international HRM means what is the key difference between domestic and international HRM and what are the key factors that moderate these differences as you would be aware organizations of today are dynamic and there is a constant change that is happening things that happen in one part of the world impact or have a bearing on things that are happening in other part of the world a lot of things have changed with the advent of globalization companies that existed in one particular country are no longer existing in silos but they are existing across the borders existing across the globe we have examples like Amazon IBM where they have gone on to have presence in not only just a single countries or single continent rather multiple countries thereby increasing the demand of people who are required to run the operations in those countries in addition the technology has also impacted technology has made it possible to be present or virtual have virtual presence in any part of the world we have organizations of the software industry the best example of virtually working people who are working we have one person who is from Australia working or collaborating a person in India working for a company that is based in US and servicing a client which is based in Europe that is the impact these are the things that are demanding the way people or organizations function should take into consideration the need of the people because at the end of the day it is the people who are doing this operations and that is the reason why it makes global HRM a key thing to study and understand when we are looking at global HRM we are not just looking at one particular country as I said before since we have multiple countries we have multiple cultures that is where cross-cultural management comes into the play again it is very significant to note that each and every culture of our organization has a bearing of its parent country let us say Tartus for the example Trust is a key factor for Tatas you go to Japan the quality is key factor and Toyota is again a name synonymous with quality now it is very clear and evident that the cross culture management is to the fore whatever things whatever is the culture of the country has an impact or bearing on the culture of the organization the same organization when it goes into a different country it makes needs to look at it from a different perspective likewise they cannot ignore the culture so likewise if you have a Tata going and setting up its shop in u.s. what are the things that it needs to be aware about what if Japan wants to go and set up its shop or company in Japan wants to go and set up its shop in Europe what are the things it should be aware about then we have the rules and regulations that exist in a particular company or particular country Japan has its own set of HR systems and processes likewise the US will be having likewise India would be having so what are the things what is the kind of industrial relations that exist in u.s. what are the industrial relations that exist in the European countries what are the industrial relations that exist in the African countries we need to have an understanding where they are similar where they need to differ what are the things that could be standardized what are the things that need to be adapted and this both things that is the cross-cultural management aspect and the comparative HR and I our systems that exist in various countries we need to look at them from a perspective of international human resource management in a multinational context these three things overlap to form the basis or the foundation of international human resource management coming to speak of it when we are defining international human resource management we need to take into consideration international human resource management is completed by the human resource activities that is we

have training recruitment selection so all those would be forming the part those activities that are there the second dimension that is there which we need to consider is the type of countries the host country the home country and the other country and the types of employees these three things are also known as the dimensions of international HRM that is the human resource activities the countries the type of countries and the type of employees that are there so when we are discussing or when we are defining international human resource management therefore we define it as the various HR activities that happen in a cause cross boundary set up impacting an organ multinational in the way it operates in an environment now we need to understand three things that is who exactly is the host country national who is a parent country national and who is the third country national we will start with the parent country national that is the piece Ian’s as they are known as let us take an example of IBM is a company that is headquartered in US and it is having its presence in India now a person of US national working in IBM when he gets deputed or delegated to India he becomes a parent country national what we also known as what we also know as expatriate so person from IBM coming and working in India becomes a parent country national then we have the host country national so those people in India working for IBM would be the host country Nationals and then we have the third country nationals that is let us say IBM also has its presence in Australia iBM has its operations in India and obviously it is headquartered in u.s. so when IBM recruits an Australian citizen to come and work in India he becomes a third country national likewise is the concept of the countries that is there the country of origin is known as the home country so since IBM is headquartered in u.s. us would be the home country of IBM since it is having its operations in India India would become the host country likewise if it’s having its operations in Australia or Singapore then they would become the other countries that are there so as we said now we will just go into in depth or try and get a better understanding of what are the various HR activities that happen it all starts with human resource planning which is done in conjunction with the strategy of the organization what is the number of people that we are going to require what kind of people obviously these issues will also get addressed in staffing whether it is a greenfield project whether it is a expansion project so what are the kind of people that we are going to need the second and the other important thing that is there is the training and development aspect people need to be sensitized to the culture of the organization to the culture of the country where they will be going how to interact with the people over there how to deal with them what are the laws and regulations all these things would be taken care of or will be addressed in training and development we then go on to compensation and benefits the key factor compensation is acts as an inducing element getting people to go abroad what is that additional thing which I will get if I go on an international assignments it is one of the key things which cannot be ignored and then obviously we have the Industrial Relations what are the industrial relations that exist in Japan as a country what are the industrial relations that exist in us in India just to cite an example it is very easy or relatively easy to hire and fire people in the US visa we it is quite difficult and tough to hire and fire people in

India likewise all these activities will be going and dependent upon what the stages of internationalization are companies usually when they are getting into an international HRM role they start with basically exporting where the presence or requirement of international human resource is hardly any slowly and steadily as the exports build up the company decides to set up with cell-surface or a self subsidiary where a few professionals representing the organizations start working in the host country host country again is the company a country where the people from the parent country would be working as an when the slowly and steadily the cells start to build up the company might go in for having a full-fledged operations in that particular country thereby increasing the demand for quality HR professionals at this point we also need to know understand that the need for quality HR professionals is very big you are hardly any professionals available or those who are available a handful few in addition you not only need experience and exposure to multiple cultures and countries but also try and understand and adapt understand the culture of the country where you would be working in so adaptability also comes into play likewise if you do not want to set up your full-fledged operations licensing or subcontracting are the other ways in which you could look at internationalizing your business expansion plans and that brings us to what is an expatriate because when we are setting up a full-fledged operations in a country we will obviously need people who would go there and help us set up the operations maintain the culture of the helpers transfer the culture of the organization into that subsidiary where we are setting it up retain the control over the subsidiary and that is what an expatriate is required to do now an expatriate who you see or what do we mean by the term expatriate they also refer to as international assignees who is an expatriate an expatriate is an employee who is working and temporarily residing in a foreign country it is very critical to note and understand that the person should be working and temporarily residing in a foreign country the duration could vary from three months to a year or up to five years as well depending upon the tenure of the assignments that are there now along with the expatriate is very important to note that the expatriate has to be the parent country national as it is shown in the diagram over here okay a parent country operations if a person is going into subsidiary let us say subsidiary o be take charge run the operations of subsidiary operations in country B then that person becomes an expatriate at the same time if a person who is working with the company in country B goes and take charge of subsidiary operations in country a then he becomes a third country national and there is a constant interaction between the parent country and the subsidiary countries there is a movement in terms of the parent country national moving to the subsidiary companies the subsidiary companies moving to the parent country on various assignments depending upon the need and requirement that are there now what are the things that differentiate between international HRM and domestic HRM the basic activities remain the same that is when we are talking of international HRM or HRM in an international context we still talk about recruitment training selection development yes but then the number of things which need to be done are more let us take an example for recruitment when we are talking about recruitment in a domestic setup we are well versed the laws that are there are within or with reference to one particular country when we look at in an international context the num as the number of countries increases the number of compliance is the requirements that have to be fulfilled for recruitment

also increase same would be the case for training and development same would be the case for compensation and benefits especially because you could easily relate we would be having lot of international taxation treaties that are there what are the taxation terms and conditions over there what is the currency valuations that are there so which unlike in a domestic operation we would never be considering use domestic organisation tree we would be looking at this from a world single perspective so the number of HR activities that is there increases is you could take an example of training and development as well training in an Internet domestic setup would be focusing on providing developmental inputs or training related to a specific key area whereas in an international context you are not just focusing on performance but you are also focusing on sensitizing the person with terms of exposing him to the cultures and cultures of the international companies where the person would be working then there is a need for a broader prospective when we are talking about a broader perspective is if I am going and working in an international context it is not just me is the people whom I am going to be working over there and there are high chances that I am not the only person I could be working with people from multiple nationalities multiple cultural backgrounds multiple ethnic backgrounds so I need to be aware and respect their I need to be aware about the perspectives which they are bringing to the work and need to value and respect them as well then the level of involvement in the employees personal lives also increases in a domestic set up if you are looking at we could be looking at the person joints is relocation expenses are hardly any or it is a matter of just few things but when you are looking at person who is relocating abroad the employment norms the visa norms all these things have to be fulfilled in addition to that if there is moving along with this family then that needs to be also addressed then the schools for the children of the person who is moving abroad the health and other facilities health and medication facilities all also have to be taken care of so the involvement HS involvement in the employees personal lives also increases then we have changes in the workforce changes in the emphasis of for folks workforce mix of expatriates and local varies let us say a regional headquarter is set up over there when we have a regional headquarters we would be having parent country nationals working in the regional headquarters we will be having host country nationals working in the regional headquarters and we will be also having third country nationals working in a headquarter regional headquarters the side an example let us say Toyota has is regional headquarters in India and this regional headquarters looks after let us say China let us say Nepal Sri Lanka and other neighbouring Southeast Asian countries what we will have in this context is person from Japan the parent company working in India you will have people from Nepal who would be the third country nationals people from sri lanka again would be the third country nationals and we will have people from india will be the host country nationals so we have a workforce workforce mix that is coming from various regions and various countries and communities then the risk exposure that is there the cost of managing a particular employee is let us say if it’s X then the cost of managing expatriate is three times or five times the cost in addition we also have to consider the broader external influences the risk exposure and the broader external influences are both connected and interdependent we are all aware about operation rahat which the Government of India carried out where why it had to evacuate 5000 people residing in mmm it was because of political instability but then people where they are working probably you could take an example like Iran and Sudan where Isis is having its presence the exposure to terrorism so these are the key things which also need to be addressed in addition to that broader external influences we will have be having a country with its own specific

requirements we have certain countries would be citing an example we would have countries where if you want to recruit somebody you have to inform the local government and it is mandatory that you recruit people from the local country itself or the host country in addition there is another example how broader influences come into play likewise if a international company wants to set up a shop in India okay the government of India has made it mandatory for them to source 30% of their raw materials from India so these are some of the broader external influences that impact the way international HRM would be operating now in addition to that we have certain variables that are there that is what are the differences between domestic and international HRM which impact so we have the cultural environment the industry within which the multinational is primarily involved we have the complexity involved in operating different countries attitudes of senior management and last but not the least the extent of reliance of the multinationals on its home country or domestic market again when we are talking about cultural environment what are the beliefs what are the values what are the assumptions of the people in a particular country and as I said at the start that the company which the culture of the country impacts the culture of the organization as well it has a significant bearing so that is the cultural environment we are talking about then we have the industry within which the multinational is primarily involved what is the industry whether the industry is in growth stage whether it is in maturity stage whether it is in the declining stage what is the competitiveness what are the threats for what are the threats and opportunities that exists so all these things will impact the kind of HR profile the kind of people whom you are going to recruit and HR accordingly has to devise strategies to address this issues then we have complexities involved in different operating countries and employing different nationals okay let me say cite an example of the acquisition process of Airtel where it acquired Xen telecom now Xen telecom is a company that is headquartered in Kuwait Airtel obviously is headquartered in India the deal was done for South Africa and the for the african continent’s involving Xen telecoms operations for which a little incorporated a subsidiary in Netherlands now if you look at it we have already four countries involved in one single transaction wood is just a simple acquisition or a merger process of Zen’s telecom operations by a retail but then if you look at the four countries that are involved it increases the complexities with these four countries we have the loss of this particular four countries that are there we have people from this four countries with different ethnic backgrounds religious backgrounds cultural backgrounds that are there we have different laws taxation treaties that are there which are going to come and play so we can imagine the kind of complexities that are going to be involved attitudes of senior management what is the attitude of senior management towards the subsidiary country or the country where the subject is going to be set up do they have a feeling of inferiority that is they believe that they are superior they have an ethnocentric orientation or do how do they really value the market do they have the skills and expertise to understand the market environment in the subsidiary country that will impact the way they interact with the subsidiary company so that is about attitudes of senior management an example of this could be Apple did not consider India as a prominent market till of late then we have the extent of reliance of the multinational on its home country or the domestic country market this point is much elaborated by this particular study which was

conducted by the United Nations conference of Trade and Development there were index where they identify countries who are having multinational or rather transnational presence now if you look at it there is hardly a US company in the top ten multinationals that exist now why is this so this has something to do with the extent of reliance of the multinational on its home country or the domestic country market the u.s. in itself is a very big market and if you take Canada and Mexico then the market potential is huge this so most of the US multinationals are focus on this three part this particular region because the kind of business and volumes they get is significant to suffice their operations Apple has been very strongly focused on the US market for that matter now if you come to the other countries that are there that is Switzerland foreign region or Sweden or Belgium these are relatively smaller companies a smaller countries though the economy is well developed in this countries so the economy is well developed in this countries the extent of market availability is less that is the reason why these people will be focusing more on international markets because the scope to grow if they want to grow and survive it has to come from nations abroad so that explains the extent of reliability of the multinationals on its domestic or home country market going forward we have factors that influence working in a global environment we have forces for change we have requirements of the multinational enterprises and how is the manager or how is the management of that particular organization going to respond to those changes on which its survival and growth depends first let us consider the forces for change we have global competition today we have companies competing not just in the markets in India but we are competing internationally as well we have a country a company like Hero competing with wound up which was its joint venture partner for 25 years we have Flipkart competing with Amazon so the competition we have automobile manufacturers that are there competing with again with the multinational brands so competition is global it is no longer limited or limited to or restricted to a particular country we have growth in mergers and acquisitions and alliances that are there recent examples would be going back few years Tatas acquisitions of Corus the recent acquisition of Jaguar Land Rover we have companies international companies acquiring Indian companies that is again jabong acquiring jungle calm organizational restructuring that is happening advances in technology and telecommunications in terms of global competition companies that are there today are no longer competing in a domestic market they are competing for a global scale you could look at examples of flip cut with Amazon we took at examples of no matter going on to acquire six or seven different companies across the world in six with inspark six months that is also related to growth in terms of mergers and acquisitions we have Tata chorus acquiring Tata acquiring chorus we have Tata Motors acquiring Jaguar Land Rover this thing’s what they are telling when we are competing in an international market we need people with international exposure standing in order to drive the growth we need we need people who have expert and skills to manage and runs these options it is no longer going to work working in a ring of focus in one particular country likewise goes for organizational restructuring the recent most recent example of organization restructuring is

Google where they introduce they restructure the whole operations under holding company by the name of alphabet that is in order to address the issues and demands of various HR related as not only just HR related aspects technology related aspects but also in addition related aspects these are the forces which are changing which are forcing the organizations to change Microsoft in addition after absorbing Nokia has gone on to release are close to around 18,000 people from their jobs we also have advances in technology and telecommunication today we are speaking about technology that is virtual people from one part of the world working with people from other part of the world we are talking about telemedicine we are talking about Internet penetration we are talking about payment gateways we are talking about mobile payments or payment banks then this is bringing in whole new focus and whole new set of demands that are there we are looking at going digital again the skill sets and the expertise that would be required would be totally different from what we are having today so that also enhances the need for international HRM how this impacts the multinational management is obviously yes they need to be flexible the knowledge sharing has to be there technology and telecommunication has ensured that knowledge sharing does happen then the transfer of competence that is what are the skill sets of the parent company if it is quality whether the subsidiary company is able to deliver on that if it is trust and ethics whether the subsidiary company is able to deliver on that if it is the manufacturing process and engineering precision whether the subsidiary company is able to deliver on that and not only just the subset of the company being able to deliver it or not but it is also equally important that the multinational parent is able to transfer the competence or transfer its learning to the local subsidiary company and last but not the least what is a foundation or key thing for international HRM is the local responsiveness how well-versed is the organization or the multinational enterprise that is there with the low requirements of the local people not only in terms of the culture not only in terms of the lands of the laws it it is in totality how the people work they interact what are the societal things that are there what makes or breaks them what motivates them what are their aspirations all these things need to be taken care of so a multinational working in an international HRM setup needs these things to go forward and this is precisely what will help the multinational or the management of a multinational enterprise to cater their or make their responses that is they will have to develop of global mindset now when we are looking at a global mindset we are not just looking at one particular thing but we are looking at people who understand that the next big thing could come from any part of the world they respect various cultures they respect various people like Google is another prime example Google has a person who is of Indian origin who was named at this CEO that is a global mindset we have people who are born and brought up from a different background altogether than the parent company going on to take charge at the parent company then what are the informal control mechanisms which the organization can through which the organization can retain control they need to be validated as well because the informal control mechanisms work best what is the kind of understanding that the manager has not only in terms of rules and regulations but in formal way can he touch base them without going into the nitty gritties of laws or other aspects that are there and fostering horizontal communication understanding the people reaching out to them speaking their language it has been again a proven fact that expats who have got hold of language of the subsidiary company or the subsidiary country have been able to do much better in terms of their not only growing the business but adapting to the local culture rather

than expats who have refrained from understanding the language or the local culture again the demands of an international assignments are going to be heavy the you may probably one may have to stay away from his family it is very important to understand it could understand the risks understand the political scenario understand the cultural scenario and then when you are working with cross-border and virtual teams you need to understand the dynamics that are there like if you are looking at people person who is coming from us their respect punctuality in India punctuality is not so much valued okay so if these two are working together they need to understand each other so these are some of the things or challenges again in terms of the virtual teams I which they face a major challenge in terms of the time zones that are there person in u.s. we have a person in Australia working in collaboration with the person in India they have all different time zones it’s again very demanding on your personal life as well so how do you address how do you respond to these things is what the managerial or the management of a multinational corporation needs to take into consideration we have understood what international we have defined international HRM we have understood the term expatriate we have understood what the host country national is what the parent country national is or the third country national is what the host country is but a parent country is and what the third country is if multinational enterprise has to be successful in these areas then it has to understand that there is a need for a broader perspective that is in terms of understanding the culture the lives of the people the way they behave what motivates them what are their aspirations you have to understand the workforce dynamics that is changing people of multiple religions multiple ethnicity multiple cultures working together you have to understand what are the risks that is the political legal social environment that is there we already discussed about operation wrath which was a political this thing we talked about terrorists exposure to terrorist activities which is there we there is also a risk of corporate or the expatriate failure we’re probably the expat may feel homesick and returning back to his home country even before the assignment is completed and then the cost just gets exploded these are the things which are essential for an organization working a multinational corporation working in a globalized world it needs to address and cater to and that is what international HRM tries to do thank you very much