INTERNATIONAL HUMAN RESOURCE MANAGEMENT

Transcription

1 INTERNATIONAL HUMAN RESOURCE MANAGEMENT NEESHU SHARMA MBA (HR & Finance), MA (Economics), B.Sc, Assist. Professor Shriji Govardhan Maharaj, College of Management, Govardhan, Mathura ATUL SHARMA MCA, B.SC (PCM) (An ISO 9001:2008 Certified Company) Vayu Education of India 2/25, Ansari Road, Darya Ganj, New Delhi

2 INTERNATIONAL HUMAN RESOURCE MANAGEMENT Copyright VAYU EDUCATION OF INDIA ISBN: First Edition: All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Publishers. Laser Typesetting : Upasana Graphics, New Delhi Published by: VAYU EDUCATION OF INDIA 2/25, Ansari Road, Darya Ganj, New Delhi Ph.: , Fax: vayueducation@radiff.mailcom, vayueducation1@gmail.com Web:

3 It is point of pleasure in presenting the first edition of the book International Human Resource Management. This edition has been thoroughly revised as the syllabus of different Universities for regular and distance MBA course. International Human Resource Management is vast and complex subject, understanding IHRM is not simple. The book has been made comprehensive, relevant and useful for the students of MBA about IHRM and its uses for HR Managers. The language of the book is easy, clear and understandable. All the fundamental concepts related to IHRM are given in a logical and systematic manner. This book is useful for the BBA, MBA, PGDM, M.Phil and Ph.D and in all other management and business administration degree courses of Indian Universities. I am greatly thankful to the publishers, M/S Vayu Education of India Pvt. Ltd. Delhi for their efforts in publishing this book in a short time. I especially thankful to my family for their support. I welcome to all readers for their valuable suggestions and feedback for the further improvement. Authors

4 CHAPTER - 1: INTERNATIONAL HUMAN RESOURCE MANAGEMENT International Human Resource Management Introduction Nature and Concepts of IHRM Definitions of IHRM International human resource management and strategy Ten Steps to a Global Human Resources Strategy Making IT/Work Managing Overseas Postings Dimensions of IHRM Objectives of IHRM Difference Between domestic and IHRM: How International assignments create an Expatriate? Significance of IHRM in International Business: Major Issues in International HRM: The Advantages of HR Decision Making in International Business Operation However, there are some important limitations in IHRM: 24 CHAPTER - 2: IHRM CHALLENGES IHRM challenges Human Resource Management Challenges The Evolution of HR Professionals Today s Top 10 Human Resource Management Challenges Taking a Closer Look at the Top 3 Human Resource Management Challenges The Numbers Speak Volumes IHRM Introduction Definition 33

5 (viii) Different practices for different regions Challenge of international human resource management Characteristics of international human resource management Internationalism and the human resource management specialist International dimensions and management People and the organization s global environment Difference between Global or IHRM and Domestic HRM 36 CHAPTER - 3: MANAGING WORK FORCE DIVERSITY Managing Work Force Diversity What Is Diversity? Why Is It Important? Managing Diversity through Adherence to Legislation Managing Diversity through Diversity Training Programs Attitude Awareness and Change Programs Characteristics of Successful Diversity Efforts School-to-Work Transition Welfare-to-Work The Use of Expatriates versus Localisation Key Issues in the Management of Expatriates Portfolio Beyond Expatriation: International HRM Strategy 50 CHAPTER - 4: RISK EXPOSURE Risk Exposure Definition What is Business Risk Exposure (BRE)? Introduction Business Risk Exposure Different mitigation strategies will have different impacts on the total BRE score The BRE Steps and BRE Tool Structure More external exposure Introduction External influences Business strategy Political and economic factors Climate Change Strategy Social and technological factors Environmental and legal factors 60

6 (ix) CHAPTER - 5: INTERNATIONAL HUMAN RESOURCE MANAGEMENT APPROACHES International human resource management approaches Ethnocentric Organization Polycentric Organizations Regiocentric Organization Geocentric Organization Philosophy toward staffing 67 CHAPTER - 6: DIFFERING STAGES OF INTERNATIONALIZATIONS Differing Stages of Internationalizations The Impact of Internationalization 69 CHAPTER - 7: INTERNATIONAL DIVISION International division Global product divisions A multinational firm s organizational structure New International Structure for MNE There are three organizational structures 77 CHAPTER - 8: CHAPTER OUTLINE Introduction: value creation through strategic management Strategic management Strategic, Comparative and Organizational Perspectives on IHRM Three perspectives on strategy implementation: Effective IHR Strategy Implementation 89 CHAPTER - 9: OBJECTIVES OF HUMAN RESOURCE PLANNING (HRP) Objectives of Human Resource Planning (HRP) Benefits/Importance of Human Resource Planinng Concept, objectives, scope, importance of Human resource planning Concept of human resource planning Objectives of Human resource planning/ manpower planning: Scope of Human resource planning/ manpower planning: Importance of Human resource planning/ manpower planning: Human Resource Planning Process Or Steps Of HR Planning Recruitment Concept And Meaning Of Recruitment 98

7 (x) Recruitment Process Or Steps Of Recruitment Factors Affecting Recruitment Advantages Of Internal Recruitment Disadvantages Of Internal Recruitment Selection Process 101 CHAPTER - 10: NATIONAL LABOR RELATIONS ACT National Labor Relations Act The structure of the international labor market and implications for diversity programs Population Growth and Immigration Competition in World Labor Market Share of the World s labor Force from Advanced and Less Advanced Nations Effect of Aging of Populations in More vs Less Advanced Nations on Labor Markets The United States is the largest consumer of internatio-nal labor Population and Workforce Diversification Changing Ethnic Composition of the American Workforce The United States as the Engine of the Global Knowledge Economy Implications for Diversity Programs Recruitment and selection Personnel Selection for Overseas Assignments* Expatriate Selection selection in other countries The Bottom Line on Staffing Staffing Approaches 116 CHAPTER - 11: TYPES OF INTERNATIONAL EMPLOYEES Types of International Employees Implications for Expatriates and Their Families: Cross-Cultural Training Implications of Cultural Differences for Training Types of Employees in Global Companies Three Types of Employees Hired in Batam s EPZS Competency-based recruitment Employee Development Strategies International talent management International Migration 139 CHAPTER - 12: SELECTING AND USING ASSESSMENTS Selecting And Using Assessments Selection Assessment Methods 164

8 (xi) 12.3 Common Misconceptions About Selection Tests (All Myths) What Are Selection Criteria And How Are They used? How Do Applicants Address Selection Criteria? Structure of the Document Developing an effective workforce Developing effective workforce 171 CHAPTER - 13: EMPLOYEE ORIENTATION PROGRAMS Employee Orientation Programs Anticipatory Socialization Programs Realistic Recruitment Late Retiirement Work Family Balance Policies on Hiring Couples and Relocation Assistance Work Family Programs Flexible Work Arrangements and Telecommuting Maternity and Paternity Child Care and Elder Care Services Effectiveness of Programs Basic Skills Training Life Lon Learning Melting the Glass Ceiling Union-Management Succession Planning Toxic Managers Training Systems Employee Training and Learning Training Links to Business Strategy Strategic Employee Training Training and Development Training Metrics Managers Roles Top Management Support Integration of Business Units Business Conditions Human Resource Management Practices Human Resource Planning Unionization Staff Input Methods of Training 225

9 (xii) CHAPTER - 14: ORGANIZATIONAL LEARNING 231Z 14.1 Organizational learning Models Organizational knowledge Individual learning Learning organization Diffusion of innovations Learning theories and training Training approach Define and Explain International Business Strategy Philosophy Developing a Training Strategy for the International Business Where to begin Corporate and Learner Benefits What are the components of an effective Pre-departure training Program? 240 CHAPTER - 15: CROSS-CULTURAL TRAINING Cross- cultural training Aspects of expatriate training Cultural differences Culture Assimilator and Cross-Cultural Under-standing Theoretical Background of Culture Assimilators Basic features of the culture assimilator 245 CHAPTER - 16: REPATRIATES Repatriates 246 CASE STUDY 250 REFERENCES 253 INDEX 261

10 Chapter - 1 INTERNATIONAL HUMAN RESOURCE MANAGEMENT 1.1 INTERNATIONAL HUMAN RESOURCE MANAGEMENT Introduction In all these international organizations or multinational enterprises (MNEs) human resource management (HRM) is a key to success. For the vast majority of organizations, the cost of the people who do the work is the largest single item of operating costs. Increasingly, in the modern world, the capabilities and the knowledge incorporated in an organization s human resources are the key to success. So on both the cost and benefit sides of the equation, human resource management is crucial to the survival, performance and success of the enterprise. For international organizations, the additional complications of dealing with multicultural assumptions about the way people should be managed and differing institutional constraints become important contributors to the chances of that success. The need for human resource specialists to adopt an increasingly international orientation in their functional activities is widely acknowledged and becoming ever clearer.it is important not just to people working in the giant MNEs but also to many in small to medium-sized enterprises (SMEs). The freer economic environment of the twenty-first century, the reduction of restrictions on labour movement in areas such as the European Community, and the advent of new technology have combined to mean that many fledgling enterprises operate internationally almost as soon as they are established. It is also worth reminding ourselves that international organizations do not have to be in the private sector. Many international organizations such as those in the UN family, the OECD, the regional trade bodies, etc, have employees who work across national borders. So do many charities and religious groups (Brewster and Lee, 2006). Any review of world events over the last few years will emphasize the essentially unpredictable and rapidly changing nature of political, economic and social upheavals. Vaill (1989; p.2) used the metaphor of permanent white water to describe the nature of doing business in the latter part of the twentieth century:

11 2 International Human Resource Management Most managers are taught to think of themselves as paddling their canoes on calm, still lakes Sure, there will be temporary disruptions during changes of various sorts periods when they will have to shoot the rapids in their canoes but the disruptions will be temporary, and when things settle back down, they ll be back in a calm, still lake mode. But it has been my experience that you never get out of the rapids! Managers working in an international environment are obviously more subject to the impact of multi-country, regional and global change and dynamism than managers in a single-country operation. And this applies to HR managers as muchas any others (Stiles, 2006). Hardly surprisingly, choices in this context become complex and ambiguous. International Human Resource Management International HRM examines the way in which international organizations manage their human resources across these different national contexts. The international context adds extra complexity to the management of people beyond that found in a purely national setting. The organization that manages people in different institutional, legal, and cultural circumstances has to be aware not only of what is allowed and not allowed in the different nations and regions of the world, but also of what makes for cost-effective management practices. To take one oftenquoted example: a performance appraisal system which depends upon US-style openness between manager and subordinate, each explaining plainly how they feel the other has done well or badly in their job, may work in some European countries. However, it is unlikely to fit with the greater hierarchical assumptions and loss-of-face fears of some of the Pacific countries. It may even be unlawful in some states. The literature is replete with examples of such home-country practices that may be allowed in other countries but which depress rather than improve productivity and effectiveness. Organizations that address IHRM, therefore, have to deal not just with a variety of practices but also with a range of policy and even strategy issues. IHRM explores how MNEs manage the demands of ensuring that the organization has an international coherence in and cost-effective approach to the way it manages its people in all the countries it covers, while at the same time ensuring that it is responsive to the differences in assumptions and in what works from one location to another. This includes, in particular, the management of those people who have to work internationally Nature and Concepts of IHRM International human resource management (IHRM) has many similarities with domestic human resource management (HRM), but there are also some important differences. In IHRM, the familiar HRM activities are placed in a global context. Among the results of this are circumstances such as: Organizations bringing their operations into social contexts with which they are unfamiliar; Employees from different cultural backgrounds working together; and Movement of employees to unfamiliar foreign work and social environments. Consequently, this creates an additional set of challenges for HRM. This unit will examine some of these, with a particular focus on issues such as:

12 International Human Resource Management 3 Impacts of culture on work and the organization of work; Differences between HRM in different countries; Challenges of maintaining an international workforce; and Relations between parent companies and employees working in other countries. Approaches to such issues vary according to organizational factors (e.g. the nationality of the multinational enterprise (MNE), the stage of internationalization, organizational strategy, and the headquarters orientation and corporate culture), as well as environmental factors such as national culture, the industry in which the MNE is operating, and regional economic development. This unit will explore both successful approaches and potential pitfalls. While the focus of this unit is on IHRM, it should be remembered that many of the topics can apply equally to a domestic environment, especially where multicultural factors are part of the work context. The advent of the era of liberalization and globalization along with the Advancements in information technology (IT) has transferred the world around us. It has brought to centre stage the importance of human resources, more than ever before. The purpose of human resource management (HRM) is to enable appropriate deployment of human resource so that the quality culture can maintain and satisfy the customers not only in national level but to in global level. In a competitive scenario, effective utilization of human resources has become necessary and the primary task of every organization is to identify, recruit and channel competent human resources into their business operations for improving productivity and functional efficiency. Emergency of trade blocks with the formation of different economic and political forums like European Union, North American Free Trade Association, Asia Pacific Economic conference and expanding role of World Trade Organization have now significantly changed the business environment in terms of competition/liberalization and open end marketing opportunity. Business environment become global business environment. Internalization of business now experts influence not only on labour markets and staffing requirements but also on HR practices. Multi domestic operations (MDOs), Joint Ventures (JVs) and strategic Alliance (SA) are common forms of business structures across regions. Changes in organizational structures, relationships with overseas operations, state of the art communications technology and global market now demand different HR approaches for managing MNCs. Globalization of business has probably touched the HR managers more severely than any other functional heads. The HR executives needs to give international orientation to whatever he or she does employee hiring, training and development, performance review, remuneration, motivation, welfare, or industrial relations. International orientation assumes greater relevance as business get increasing interlinked across nations. Since an international business must procure, motivate, retain, and effectively utilize services of people both at the corporate office and at the foreign plants, therefore, the process of procuring, allocating and effectively utilizing human resources in an international business is called International Human Resource Management.

13 4 International Human Resource Management Definitions of IHRM IHRM encompasses: the worldwide management of people in the multinational enterprise (Poole, 1990; p1). Human resource management in an international environment. problems created in an MNC performing business in more than one country, rather than those posed by working for a foreign firm at home or by employing foreign employees in the local firm. (Briscoe and Schuler, 2004; p1) How MNCs manage their geographically dispersed workforce in order to leverage their HR resources for both local and global competitive advantage. (Scullion, 2005; p5) A branch of management studies that investigates the design of and effects of organizational human resource practices in cross-cultural contexts. (Peltonen, 2006; p523) All issues related to the management of people in an international context including human resource issues facing MNCs in different parts of their organizations and comparative analyses of HRM in different countries. (Stahl and Björkman, 2006; p1)...complex relationship between organization, national systems and companies which provides us with three distinct levels of analysis for interpreting and understanding HRM strategies and practices the organization effect, the regional and national effect, and the organization effect. (Edwards and Rees, 2008; p22)...the subject matter of IHRM must be covered under three headings: cross-cultural management; comparative human resource management; and international human resource management (Brewster et al, 2007, p5)...how MNCs manage the competing demands of ensuring that the organization has an international coherence in and cost-effective approach to the way it manages its people in all the countries it covers, while also ensuring that it can be responsive to the differences in assumptions about what works from one location to another. (Dickmann et al, 2008; p7)...the ways in which the HRM function contributes to the process of globalization within multinational firms. (Sparrow and Braun, 2008; p96)...the implications that the process of internationalization has for the activities and policies of HRM. (Dowling et al, 2008; p293). International human resource management is all about the world wide management of human

14 International Human Resource Management 5 resources Process of sourcing, allocating, and effectively utilizing their skill, knowledge, ideas, plan and perspective in responding to TQM. The process of procuring, allocating and effectively utilizing human resources in an international business is called International Human Resource Management or IHRM. International Human Resource Management is the process of sourcing, allocating and effectively utilizing human resources in a multinational organization. 1.2 INTERNATIONAL HUMAN RESOURCE MANAGEMENT AND STRATEGY International issues must be included in organization strategy. Strategic operations decisions to be made: where operational facilities are to be located how operations network should be managed across national boundaries whether operations in different countries are allowed to develop own way of doing business whether operations practice successful in one part of world can be transferred to another part. Where organization should be located is a strategic decision. Configuration strategies: home country regional globally coordinated combined regional and coordinated Ten Steps to a Global Human Resources Strategy Creating an effective global work force means knowing when to use expats, when to hire locals and how to create that new class of employees the glopats. The scarcity of qualified managers has become a major constraint on the speed with which multinational companies can expand their international sales. The growth of the knowledge-based society, along with the pressures of opening up emerging markets, has led cutting-edge global companies to recognize now more than ever that human resources and intellectual capital are as significant as financial assets in building sustainable competitive advantage. To follow their lead, chief executives in other multinational companies will have to bridge the yawning chasm between their companies human resources rhetoric and reality. H.R. must now be given a prominent seat in the boardroom. Good H.R. management in a multinational company comes down to getting the right people in the right jobs in the right places at the right times and at the right cost. These international managers must then be meshed into a cohesive network in which they quickly identify and leverage good ideas worldwide.

15 6 International Human Resource Management Fig. 1.1 Such an integrated network depends on executive continuity. This in turn requires career management to insure that internal qualified executives are readily available when vacancies occur around the world and that good managers do not jump ship because they have not been recognized. Very few companies come close to achieving this. Most multinational companies do not have the leadership capital they need to perform effectively in all their markets around the world. One reason is the lack of managerial mobility. Neither companies nor individuals have come to terms with the role that managerial mobility now has to play in marrying business strategy with H.R. strategy and in insuring that careers are developed for both profitability and employability. Ethnocentricity is another reason. In most multinationals, H.R. development policies have tended to concentrate on nationals of the headquarters country. Only the brightest local stars were given the career management skills and overseas assignments necessary to develop an international mindset. The chief executives of many United States-based multinational companies lack confidence in the ability of their H.R. functions to screen, review and develop candidates for the most important posts across the globe. This is not surprising: H.R. directors rarely have extensive overseas experience and their managers often lack business knowledge. Also, most H.R. directors do not have adequate information about the brightest candidates coming through the ranks of the overseas subsidiaries. H.R. managers also frequently lack a true commitment to the value of the multinational company experience, notes Brian Brooks, group director of human resources for the global advertising company WPP Group Plc. The consequent lack of world-wise multicultural managerial talent is now biting into companies bottom lines through high staff turnover, high training costs, stagnant market shares, failed joint ventures and mergers and the high opportunity costs that inevitably follow bad management selections around the globe. Companies new to the global scene quickly discover that finding savvy, trustworthy managers for their overseas markets is one of their biggest challenges. This holds true for companies across the technology spectrum, from software manufacturers to textile companies that have to manage a global supply chain. The pressure is on these newly globalizing companies to cut the trial-and-error time in building a cadre of global managers in order to shorten the leads of their larger, established competitors, but they are stymied as to how to do it.

16 International Human Resource Management Publisher : Vayu Education ISBN : Author : NEESHU SHARMA, ATUL SHARMA Type the URL : Get this ebook