International Human Resource Management (IHRM) is concerned with HRM issues that cross national boundaries or are conducted in locations other than the home country headquarters. IHRM is concerned with the relationships between the HRM activities of organisations and the foreign environments in which the organisations operate. IHRM includes comparative HRM studies.
International Business must procure, motivate, retain and effectively utilize services of people both at the corporate office and at the foreign plant. The process of procuring, allocation, effectively utilizing human resources in an international business is called International Human Resources Management.
IHRM can be defined as set of activities aimed managing organizational human resources at international level to achieve organizational objectives and achieve competitive advantage over competitors at national and international level.
The reasons for growing interest in IHRM are:
- Globalization of business leading to the need mobilization of resources;
- Effective management of human resources;
- To minimize the risk of underperformance or failure in overseas assignments;
- Implementation of international strategies by competent managerial personnel to man overseas assignments;
- Movement from traditional hierarchical organizational structures towards the network organization; and
- The need to play a significant role in implementing and control of strategies in an international business.
Types of International Employees
International employees can be placed in three different classifications.
Parent country nationals (PCNs): a parent country national is a person working in a country other than their country of origin. Such a person is also referred to as an expatriate.
Host country nationals (HCNs): they are those employees of an organization who are the citizens of the country in which the foreign subsidiary is located; and
Third Country Nationals: are the citizens of a country other than the country where the organization is headquartered and the country that is hosting the subsidiary.
Several types of expatriates may be differentiated by job assignment, because not all individuals who decide to work as expatriates are similar in the assignments undertaken. Volunteer expatriates are persons who want to work abroad for a period of time because of career or self-development interests.
Often, these expatriates volunteer for shorter-term assignments of less than a year so that they can experience other cultures and travel to desired parts of the world.
Traditional expatriates are professionals and managers assigned to work in foreign operations for one to three years. They then rotate back to the parent corporation in the home country.
Career development expatriates are individuals placed in foreign jobs to develop the international management capabilities of the firm. They may serve one to three “tours” in different countries; so that they can develop a broader understanding of international operations.
Global expatriates comprise those individuals who move from one country to another. Often, they prefer to work internationally rather than in the home country.
International HRM Approaches
There are mainly four IHRM approaches. These include ethnocentric approach, polycentric approach, geocentric approach, and regiocentric approach. The suitability of the type of staffing policy adopted by MNEs depends on the strategy used by the company.
a) Ethnocentric approach
In the ethnocentric approach, all key positions in the host country subsidiary are filled by nationals of the parent company. The policy makes most sense for firms pursuing an international strategy.
Advantages of ethnocentric staffing policy:
- The firm believes there is a lack of qualified individuals in the host country to fill senior management positions;
- The firm sees an ethnocentric staffing policy as the best way to maintain a unified corporate culture; and
- When the firm wants to transfer knowledge of core competencies to the foreign operation.
The disadvantages of ethnocentric approach are:
- It limits the advancement of host country nationals. This can lead to resentment, lower productivity, and increased turnover and it can lead to cultural myopia (the firm’s failure to understand host-country cultural differences that require different approaches to marketing and management).
b) Polycentric approach
Polycentric approaches to staffing policy emphasis on recruiting host country nationals to manage the subsidiaries in their own country. This means that host country nationals are recruited to manage subsidiaries in their own country, while parent country nationals occupy the key positions at corporate headquarters. This allows the MNE to take lower profile in sensitive economic and political situations and helps to avoid intercultural management problems. This approach minimizes the dangers of cultural myopia, but it also helps create a gap between home and host country operations. The polycentric policy is best suited to firms pursuing a localization strategy.
The advantages of the polycentric policy are that the firm is less likely to suffer from cultural myopia and it may be less expensive to implement.
The disadvantages of the polycentric policy are that host country nationals have few opportunities to gain foreign experience and so cannot progress beyond senior positions in their own subsidiaries as well as a gap can form between host country managers and parent country managers
c) Geocentric approach
This approach utilizes the best people for all key jobs throughout the organization, whatever their nationality or whatever the geographical location of the post to be filled. In this way an international executive team can be developed. This approach is consistent with building a strong unifying culture and informal management network. It makes sense for firms pursuing either a global or transnational strategy to adopt geocentric staffing policies. However immigration policies of national governments may limit the ability of a firm to pursue geocentric staffing policy.
The advantages of a geocentric approach to staffing are that it:
- Enables the firm to make the best use of its human resources;
- Builds a cadre of international executives who feel at home working in a number of different cultures.
The disadvantages of geocentric approach include difficulties with immigration laws and high costs associated with implementing the strategy.
Training and Development in an International Context
Training and development refer to the efforts of the MNC to provide education and other programs to better equip its employees to do their job. Such training at work may involve formal training, informal training, learning embedded in the workplace and other forms of learning.
Training and development increases in complexity as MNEs moves abroad.
Some of the training programs involve:
- Environmental briefing regarding geography, climate, housing and schools;
- Cultural orientation designed to familiarize the individual with cultural institutions and value systems of the host country;
- Cultural assimilations to provide participants with inter-cultural encounters;
- Language training;
- Sensitivity training designed to help develop attitudinal flexibility; and
- Field experience which sends the participants to the country of assignment to get them used to the emotional stress of living and working with people of different culture.