International Human Resource Management (IHRM) – HRM from an International Perspective

International Human Resource Management

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.

The strategic role of HRM is complex enough in a purely domestic firm, but it is more complex in an international business, where staffing, management development, performance evaluation, and compensation activities are’ complicated by profound differences between countries in labor markets, culture, legal systems, economic systems, and the like.

It is not enough that the people recruited fit the skill requirement, but it is equally important that they fit in to the organizational culture and the demand of the diverse environments in which the organization functions.

International Human Resource Management (IHRM)

Today’s economy has globalized in which geographical boundaries of a country have only political relevance; the economic relevance has extended these. Today, the world is known as global village, a term that reflects the state of business in the world. The rise of multinational and transnational corporations has placed new requirements on HR managers. For instance, HR managers must ensure that the appropriate mix of employees in terms of knowledge, skills, and cultural adaptability is available to handle global assignments. A few decades ago, the concept of globalization was mainly discussed in theory. There was no pressing economic need to understand and appreciate the human implications of globalization. However, rapid globalization has compelled management researchers to explore the HRM implications of globalization. The result is the emergence of International Human Resource Management (IHRM) which deals with how a global company can manage its human resources spread throughout the world.

Understanding of international perspective of HRM is required because of cultural diversity, workforce diversity, language diversity, and economic diversity.

1. 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.

The basic implication of cultural diversity for HRM is that same set of HRM practices is not suitable for all cultures; consideration has to be given to cultural diversity.

2. 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:

  1. Parent-country national – permanent resident of the country where the company is headquartered.
  2. Host-country national – permanent resident of the country where the operations of the company are located.
  3. 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:

  1. Expatriate – a parent country national sent on a long-term assignment to the host-country operations.
  2. Inpatriate – a host-country national or third-country national assigned to the home country of the company where it is headquartered.
  3. Repatriate – an expatriate coming back to the home country at the end of a foreign assignment.

Workforce diversity implies that various categories of employees not only bring their-skills and expertise but also their attitudes, motivation to work or not to work, feelings, and other personal characteristics. Managing such employees with pre-determined HRM practices may not be effective but contingency approach has to be adopted so that HRM practices become tailor-made.

3. 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.

4. 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.

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