by International Human Resource Management (IHRM) involves ascertaining the corporate strategy of the company and assessing the corresponding human resource needs; determining the recruitment, staffing and organizational strategy; recruiting, inducting, training and developing and motivating the personnel; putting in place the performance appraisal and compensation plans and industrial relations strategy and the effective management of all these functions from an international perspective.
Economic Diversity
Economic diversity is expressed in terms of per capita income of different countries where a global company operates. Economic diversity is directly related to international compensation management, that is, paying wages/salaries and other financial compensation to employees located in different countries. One of the basic principles of paying to employees is that “there should be equity in paying to employees.” However, putting this principle in practice is difficult for a global company because its operations are located in different countries having different economic status. In such a situation, some kind of parity should be established based on the cost of living of host countries.
Language Diversity
Language is a medium of expression but employees coming from different countries have different languages. Though English is a very common language, it does not serve the purpose adequately as it does not cover the entire world. While employees coming from different countries may be encouraged to learn the language of the host country for better dissemination of the information, it does not become feasible in many cases. An alternative to this is to send multilingual communications. It implies that anything transmitted to employees should appear in more than one language to help the message get through. While there are no hard-and-fast rules in sending such messages, it appears safe to say that such a message should be transmitted in the languages the employees understand to ensure adequate coverage.
Workforce Diversity
Workforce is the building block of any organization but there is workforce diversity in global companies. Based on their place of origin, employees of a typical global company can be divided into the following groups:
- Parent-country national: Permanent resident of the country where the company is headquartered.
- Host-country national: Permanent resident of the country where the operations of the company are located.
- Third-country national: Permanent resident of a country other than the parent country and the host country.
Further, workforce diversity can be seen in the context of employee mobility from one country to another country for performing jobs. On this basis, an employee can be put in one of the following categories:
- Expatriate: A parent country national sent on a long-term assignment to the host-country operations.
- Inpatriate: A host-country national or third-country national assigned to the home country of the company where it is headquartered.
- Repatriate: An expatriate coming back to the home country at the end of a foreign assignment.
Cultural Diversity
Culture is one of the most important factors affecting HRM practices. However, when we consider international perspective of HRM, we find cultural diversity across the globe, that is, culture of two countries is not alike. Cultural diversity exists on following dimensions:
Individualism and Collectivism. Individualism is the extent to which people place value on themselves; they define themselves by referring themselves as singular persons rather than as part of a group or organization. For them individual tasks are more important than relationships. Collectivism is the extent to which people emphasis the good of the group or society: They tend to base their identity on the group or organization to which they belong. At work, this means that relationships are more important than individuals or tasks; employer-employee links are more like family relationships.
Power Orientation. Power orientation, also known as orientation to authority, is the extent to which less powerful people accept the unequal distribution of power; people prefer to be in a situation where the authority is clearly understood and lines of authority are never bypassed. On the other hand, in culture with less orientation to power, authority is not as highly respected and employees are quite comfortable circumventing lines of authority to accomplish jobs.
Uncertainty Avoidance. Uncertainty avoidance also known as preference for stability, is the extent to which people feel threatened by unknown situations and prefer to be in clear and unambiguous situations. In many countries, people prefer unambiguity while in many other countries, people can tolerate ambiguity.
Masculinity. Masculinity, also known as assertiveness or materialism, is the extent to which the dominant values in a society emphasize aggressiveness and the acquisition of money and material goods, rather than concern for people and overall quality of life.
Time Orientation. Time orientation dimension divides people into two categories: long-term orientation and short-term orientation. People having longterm orientation focus on future, prefer to work on projects having a distant payoff, and are persistent and thrift. People having short-term orientation are more oriented towards past and present and have respect for traditions and social obligations.
Factors
- The nature of IHRM may be restricted by government policies and legal regulations in the host country.
This is especially felt in developing countries, where management and technical training within the host country’s educational system is rudimentary and the local government views the presence of MNCs as a means of developing local expertise.
- Culture, particularly national culture at the headquarters, plays a role in determining IHRM practices. Culture may affect HQ decisions in two ways:
(a) Some cultures are simply more comfortable than others in taking an ethnocentric approach to management.
(b) The mix of cultures in the subsidiaries of an MNC and the level of cultural difference among the subsidiaries of an MNC will restrict the IHRM approach taken.
- MNCs with extensive international experience have had the opportunity to develop more diverse methods of maintaining coordination and control over their foreign operations.
- The method used to establish operations in foreign locations may also affect HR policies. For example, HR practises in the acquired/ merged operation will reduce the wholesale exportation of home-country HR systems into the subsidiary.
- An MNC opening subsidiaries in developed countries face a much different IHRM challenge than one opening subsidiaries in developing countries. Developed countries have well educated staff having technical and management experience.
Therefore, there is the opportunity to develop polycentric or geocentric IHRM strategies. Whereas in developing countries a more centralised IHRM strategy is necessary.
For technologically sophisticated products, or services, the need to maintain specific production standards and quality controls necessitates a greater degree of centralisation of IHRM functions at the MNCs headquarters. Whereas in some products like food items, the host-country tastes have to be looked into to succeed in the local market.
