Unit 1

MBA 4th

International Human Resource

Management
Definition of IHRM: IHRM is defined as, performing HRM and its related
activities and arranging for related and necessary cultural and immigration
facilities for prospective and current employees, by organizations operating
in domestic and/or foreign countries.

Thus, it is clear that IHRM deals with all functions of HRM in addition to
performing other functions exclusively for expatriates. However, certain
additional functions like resolving the disputes between domestic and foreign
employees, cross-cultural management at varying levels and collaborating
domestic employees and foreign employees are also to be performed under
IHRM.

“IHRM as the interplay among human resource activities (viz.,

Procure, allocate and utilize) types of employees (viz., host-country

nationals, parent country nationals and third country nationals) and countries
. This definition is silent about certain human resource activities that are
peculiar to IHRM like arranging for immigration facilities. In addition, this
definition ignores the expatriates/foreign employees other than host country
nationals, parent country nationals and third country nationals, i.e., foreign
employees working in a domestic company.

“IHRM stands for International Human Resource Management. It’s a field that
focuses on managing human resources in multinational corporations or
organizations operating across different countries and cultures. It involves
dealing with various challenges related to recruitment, training,
compensation, and other HR functions in a global context”.

International HRM

Let us first examine what activities constitute HRM. All those activities
undertaken by an

organization to utilize its human resources effectively makes HRM. Those

activities include:

• Human Resource Planning

• Staffing
• Performance management
• Training and development
• Compensation and benefits
• Labor relations

The above activities will have a change whenever a firm or its HRM goes
international.

Three Dimensions of International HRM activities:

1. Procurement, allocation, and utilization of human resources. These are

listed under HRM.
2. Three national or country categories involved in international HRM
activities are:

• the host country where a subsidiary may be located,

• the home country where the firm is headquartered, and,

• the ‘other’ countries that may be source of labor or finance.

3. The three types of employees of an international firm:

• the host country nationals (HCNs),

• the parent-country nationals (PCNs), and

• the third country nationals ( TCNs).

Thus, for example, IBM employs Australian citizens (HCNs) in its Australian
operations,

Model of IHRM
The classification

1. Host country
2. Parent country,
3. Third country.

is often used in the context of international assignments and refers to the

countries involved in the deployment of expatriate employees:
1. Host Country: This refers to the country where the expatriate employee
is sent to work temporarily or permanently. The host country is where the
employee will be carrying out their job responsibilities, interacting with
local colleagues, and potentially experiencing a different culture and work
environment.

2. Parent Country: The parent country is the home country of the

organization that sends the expatriate employee on an international
assignment. It’s where the company headquarters are located and where
the employee typically has their employment contract and ties.

3. Third Country: Sometimes, an international assignment may involve

neither the home country nor the host country. In such cases, the
employee may be transferred to a third country for various reasons, such
as regional headquarters, specialized training, or project assignments.
The third country is neither the employee’s home country nor the country
where they will be working temporarily.

these distinctions is crucial for HR managers and expatriate employees to

effectively plan and manage international assignments, considering factors
such as cultural adaptation, legal requirements, taxation, and benefits.
Characteristics of IHRM

1. Global Perspective: IHRM operates worldwide, so HR managers need to

understand diverse cultures, laws, and business environments to make
decisions that fit the global context.

2. Complexity: Managing employees across borders adds layers of

complexity due to different laws, languages, and cultural norms, making
IHRM more challenging than domestic HR management.

3. Strategic Alignment: IHRM strategies must align with the organization's

global goals to support expansion into new markets and stay competitive
internationally.

4. Mobility and Expatriation: International assignments, like sending

employees to work abroad, are common in IHRM, requiring careful planning
and support for employees in unfamiliar environments.

5. Cross-Cultural Competence: Understanding and respecting cultural

differences are vital in IHRM to foster effective collaboration and build strong
relationships with employees from diverse backgrounds.

6. Global Talent Management: IHRM involves attracting, developing, and

retaining talent on a global scale, requiring HR managers to identify and
nurture employees across different countries.

7. Legal and Ethical Considerations: IHRM must comply with international

laws and ethical standards, making it crucial for HR professionals to stay
informed about legal requirements in various countries.
8. Technology and Connectivity: Technology has transformed how IHRM
operates, enabling virtual collaboration and the use of HRIS to streamline
global HR processes.

By embracing these characteristics, HR professionals can effectively manage

human resources in international settings and contribute to their
organization's success in the global marketplace.

Major Functions of IHRM

1. Global Staffing: This involves sourcing, selecting, and deploying

talent across borders. HR managers must identify the right candidates
for international assignments, considering factors such as cultural fit,
language proficiency, and international experience.

2. Cross-Cultural Training and Development: Providing training and

development programs to help employees adapt to different cultures
and work environments is essential in IHRM. This includes cultural
awareness training, language courses, and support for adjusting to
new roles and responsibilities.

3. Compensation and Benefits: Developing compensation packages

that are competitive and compliant with local regulations in each
country of operation is crucial in IHRM. This involves balancing global
consistency with local market practices to attract and retain top talent.

4. Global Mobility Management: Managing the logistics of

international assignments, including visa and work permit assistance,
relocation support, and family assistance programs, is a key function of
IHRM. Ensuring the well-being and success of expatriate employees
and their families is paramount.

5. Performance Management: Implementing performance

management systems that account for cultural differences and align
 with global business objectives is essential in IHRM. HR managers must
establish clear performance expectations, provide feedback, and
support career development for employees working in diverse
locations.

6. Legal and Compliance: Ensuring compliance with international labor

laws, taxation regulations, and immigration policies is critical in IHRM.
HR professionals must stay informed about legal requirements in each
country of operation and implement practices that uphold ethical
standards and legal obligations.
7. Global Talent Development: Developing talent management
strategies that identify and nurture high-potential employees on a
global scale is a key function of IHRM. This involves succession
planning, leadership development programs, and creating
opportunities for career advancement within the organization.

8. Employee Relations and Communication: Building strong

relationships with employees and fostering open communication across
borders is essential in IHRM. HR managers must address cultural
differences, resolve conflicts, and promote a positive work environment
to ensure employee engagement and retention.

Developments leading to international HRM

perspectives
1. Globalization: The increasing interconnectedness of economies and societies
worldwide has driven organizations to expand their operations across borders. As
companies internationalize, they encounter new challenges related to managing
human resources in diverse cultural, legal, and economic contexts.
2. Technological Advancements: Advances in technology, particularly in
communication and transportation, have facilitated global business operations.
Virtual collaboration tools, internet connectivity, and faster transportation have made
it easier for organizations to manage geographically dispersed workforces and
conduct business internationally.
3. Liberalization of Trade and Investment: Trade liberalization policies and the
removal of barriers to foreign investment have encouraged companies to seek
opportunities in new markets. As firms expand into international markets, they must
adapt their HRM practices to comply with local regulations, attract local talent, and
compete effectively.
4. Emergence of Multinational Corporations (MNCs): The rise of multinational
corporations with operations in multiple countries has necessitated the development
 of HRM practices that can effectively manage a diverse and globally dispersed
workforce. MNCs face unique challenges related to coordinating HR policies and
practices across borders while accommodating local differences.
5. Increased Mobility of Labor: The ease of international travel and the growing
mobility of labor have led to greater diversity in the workforce. Organizations now
have access to a wider talent pool from which to recruit, but they also face
challenges related to managing expatriate assignments, cross-cultural
communication, and global talent development.
6. Cultural Diversity and Inclusion: Organizations are recognizing the importance of
cultural diversity and inclusion in driving innovation, creativity, and organizational
performance. IHRM perspectives emphasize the need to embrace cultural differences,
foster inclusive work environments, and leverage diversity as a strategic advantage
in the global marketplace.
7. Rise of Emerging Markets: The economic growth of emerging markets in regions
such as Asia, Latin America, and Africa has created new opportunities and challenges
for multinational companies. IHRM perspectives highlight the need to adapt HRM
practices to the unique characteristics of emerging markets, including differences in
labor regulations, talent pools, and business cultures.