What is International HRM? Chapter 1 * Outline What is globalization? What is International HRM? What are some key terms in IHRM? Why is IHRM so important? Why is IHRM so complex? What are some best practices in IHRM? * A couple of opening questions What do you think of international means when you heard of it? Different culture, language, customs, employee values Pretty much anywhere else than the country you live in All of these (culture, customs, values, language) are relevant to the meaning of ?international? What do you think of when you think of International Human Resource Management? IHRM has been going for a long time but there are some issues the need to be addressed. IHRM is pretty new appealed but it?s not some thing that HR professional that has a lot of knowledge or experience Layer of complexity introduces the layer of difficulty because (don?t just to learn your environment but learn other environment as well) Some of the issues that is associated with IHRM, to name a few, legal, ethical, and practical issues (these get really difficult and challenging for professionals) * What is globalization? The ever-increasing interaction , and interconnectedness and integration of people, companies, and countries Most study that has been done for IHRM is related to the topic of globalization Globalization means the ever increasing interaction, interconnected and integration of people, companies, countries, and region within countries (textbook definition) Globalization is creating the political, economic and social structure of the new world. International business continues to grow in term of enterprises conducting business across borders, foreign direct investments (FDI) and the value of trade between countries This definition encompasses a lot of issues * As globalization increases? More multinational enterprises (MNEs) More countries are key players More emerging markets (e.g., BRIC = Brazil, Russia, India, China) More types of business that are involved internationally Size Industry * Increasing globalization? > As globalization increases, we see a lot more issues such as multi-national enterprises (MNEs) More countries that are key players?not only big countries such as US, UK, Germany, or other growing countries are key players but also small, medium countries > Emerging market such as BRIC (Brazil, Russia, India, China) are emerging fast and will likely surpass the GDP of today?s wealthiest countries by the mid-point of the century > India & China are getting less and less emerging but consider more established market Work can be done virtually, as a whole, the amount of travel * As globalization Increases: Reading Notes > Smaller countries (Belgium, Switzerland, Denmark, Sweden, Canada, etc) represents more than 30% of their GDP > The international acquisitions and partnership, the nationality of products and service is becoming ever more difficult to identify and for practical purposes, even irrelevant > The core challenge of IHRM is to operate in seemingly borderless firms yet within the constraints of multiple national laws and cultures. > The globalization of business is proceeding at an unexpected and unprecedented rate. > Developments impact HRM > Increasing intensity of competition put great pressure on firms to develop the capacity to operate at lower costs and with higher greater speed, quality, customer service and innovation both at home and abroad. * The impact of globalization Businesses face increasing Travel Communication New technology Ability to trade Migration facilitated by good transportation Education Cultural homogeneity * The impact of globalization Travel ? has become much easier, quicker, and cheaper. Many people travel across national border for business and pleasure to see how people live in other country and experience goods and services that are available. Communication - has increased and the technology facilitates communication has increased allowing it to be possible to not necessary visit suppliers, partners, subsidiaries in person if you can keep good connections or communications with them (Ex: don?t need to send expatriates on assignment in person because you might be able to conduct business facilitated by communication of new technology. Helps create expectations for an ever-increasing quality of life. * New technology ? make it possible to manufacture products and deliver services with world-class quality and service everywhere in the world. (Ex: modern education and information technology) Trade ? the ability to trade when there are more partners has increased as well as trade agreement has increased accountability of the trade agreement Local and national government supports and encourage growing trade and FDI with tax incentives and free trade zones. Migration ? moving from one place to another is facilitated by good transportation and ability for people to communicate Education ? the educational level people has increased; not necessarily across the border but in general people education are at the higher literacy level as it happens overtime Cultural homogeneities ? increased in similarity or the transfer of communication or information has yielded increased cultural homogeneities (meaning that cultures having more in common ?it doesn?t mean that everybody look, act, think the same but it has some similarities overtime in terms of culture because of globalization) * Why ?go international?? Costs Competition Customer demand Because you CAN! What phrase is used in international global business or to go international? To expand your business, market, worth in terms of international market, not just to operates domestically or one country? * Why companies ?go international?? Cost ? conduct business in a lower product cost, cheap labor & supplies. Cost are the big reason to expand internationally to used other country for labor and other resources Competition ? the idea of having new market, new sources of customers, new people to buy your product Be able to grow your market outside the borders of the country that you?re in Other companies that you are competing with are the potentially operating international so to keep up with competition there are some level of pressure to deal business internationally. Customer demand ? in order to offer services at a competitive price for your customer asking for that you cant provide; therefore customer demand is another outlet to go international Because YOU CAN!! * The focus of this class: What is IHRM? The study and application of all human resource management (HRM) activities as they impact the process of managing human resources in enterprises in the global environment * What are some IHRM challenges? Develop a global mindset within the HR function - how to effective attract, engage, and retain MNE employees in different countries to achieve strategic objectives. The role and importance of employees (Ex: expatriates, inpatriates, ST international assignees) Align HR processes and activities to compete globally while responding locally to local issues and requirements Enhance global competencies within the HR function People who do a great job domestically in HR, don?t necessarily have what it takes for IHRM * IHRM Challenges To have a global mindset (can you or how to train someone to have a global mindset? Having to manage their performance and encourage to motivate them?). HR function itself, (people who work in HR) how those people have the global mindset? How do you align the practices and processes of activities that HR function to be a global competitor but to have local responsiveness. How do you tailor your response or accommodate your response in HR such as practices and procedure, locally to different location while still preserving a global strategy in a global culture/organizational culture To have a global mindset as well as global competencies (be able to view IHRM well) Domestic HR professionals are doing a great job in one country of the organization, it doesn?t mean they have the competency and global mindset to operate international * Figure 1.1: International human resource management * Key terms: Categories of countries Parent country Host country Third country (other) * Categories of Countries Parent Country (PC) ? is the headquarter (Ex: HQ = US; PC = US?..HQ = China; PC = China) Host Country (HC) ? where the subsidiary resides or operated (Ex: PC in US and sub in Brazil , operation in Mexico; HC = Mexico & Brazil) Third Country (TC) ? is called ?other?, no subsidiaries, no operation, no HQ but it?s another country to use or find a cheaper labor. Home country is where someone came from. It is not necessarily the parent country because PC is where the HQ is located. It is useful term but it?s ambiguous. * Key terms: Categories of employees Parent-country nationals (PCNs) Host-country nationals (HCNs) Third-country nationals (TCNs) * Categories of Employees PCN ? citizens of the country of the headquarters (Parent Country) and employed by the company in the country of its HQ. They might work in a PC or HC but they are from PC. HCN ? is an employee who is a citizen of a country in which an organization's branch is located, but the organization is headquartered in another country. TCN ? an employee of a country other than the PC or the HC of the subsidiary to work in one of its foreign subsidiaries * Key terms: Categories of employees Expatriates ? an employee who is working or residing in another country (Ex: An American employee working in Japan for 6 months) Expatriates can be HCN, TCN, or basically somebody who is going somewhere else Inpatriates ? an employee of subsidiary that works in host country or employee that come into parent-country (Someone coming into America and leaving their own country to work temporarily) * Let?s get these terms straight? Qualcomm employee Quinn (an American) works in San Diego Sony employee Susie (an American) is sent to work in Sweden for a year Nestlé employee Natalie (a Canadian) works in Canada Parent country PCN Host country HCN Third country TCN Expatriate * Development of IHRM Country Selection Global Staffing Recruitment and Selection Compensation Standardization or Adaptation * Development of IHRM Country selection ? which country make the most sense for locating international operations. Where will be able to recruit & hire employee at a competitive wage? Global staffing ? how many employees need to be relocated to foreign locations to start up the new operations. Hire locally or bring in expatriate employee to train them Recruitment and selection ? what is required to find or recruit talent to make the new international operation successful? Compensation ? how to compensate its new global workforce, both expatriates and local employees Standardization and adaptation ? will HRM policies uniform across the board (standardization or global integration) or should it be tailored to each locations (adaptation or localization) * Why is IHRM so important? Consistent evidence that success or failure in international business is often linked to how well (or how poorly) HRM is handled * Why is IHRM so complex? More HR activities (Ex: international compensation issues are more complex compare to regular compensation issues) Broader perspective of HR More involvement with employees (ex: personal life) Wider mix of employees (diversity) More external influences Greater risk exposure of having more external influences Need for competency and sensitivity * Why IHRM is complex? More HR activities You potentially have to train a broader pool of employees and select, train, and have interpersonal and company relations with them. Expatriates ? you have to train, relocate, coordinate travel, must learn to communicate internationally, manage their compensation, must go through to selection process to find qualifying candidate to go to another country Broader perspective of HR Ex: An HR professional who is good at managing domestic employee, it doesn?t mean that this person is a good candidate to manage IHRM issues. Must have broader perspective, vision a bigger picture (visionary), understanding of multiple culture, multi-country environment, legal and cultural issues, ethical issues, managing PCN, HCN, TCN employee. It is possible to have diverse employee domestically but international requires a broader perspective * International vs. Domestic HRM More HR functions and activities A broader expertise and perspective More involvement in people?s lives Managing a much wider mix of employees More external factors and influences Greater level of risk * International vs. Domestic? More HR functions and activities ? managing foreign taxes, work visas, assistance with international relocations A broader expertise and perspective ? knowledge about foreign countries employment law and practices and cultural differences More involvement in people?s lives ? as the company relocates employees and their families from country to country Managing a much wider mix of employees ? considerable amount of complexity managing various types of global employees requiring different staffing, compensation, and benefits program More external factors and influences ? dealing issues from multiple governments, cultures, currencies and languages Greater level of risk ? Ex: political risk and uncertainties, early repatriation of employees * What are some best practices in IHRM? Develop global leadership through cross-cultural assignments - cross-cultural assignments are a requirement for upward mobility of an organization. There are a lot of different ways to provide international assignments. Lucinda Smith on developing global leaders (retrieve from SHRM/National) Ensure flexibility in all HR programs - this means balancing the need to tailor things and maintain its degree of customization. Need to be flexible and consider adapting to the local business environment. Ted Tang (Cornell University) on Make HR a strategic partner in global business * Lucinda Smith Video: There?s not exactly some ?best practices? in IHRM because every country is different. However, research suggests that, through two phases, they interviewed some IHR Managers as what are successful traits for IHRM workers. They developed a whole list of practices that are associated with financial performance of the company. A statistically significant relationship between these practice and the financial success of the company. The top three traits are above. * International business are extremely important to AGCO (a US based company and HQ in US but the majority of business is conducted outside of US) How important for the organization to seek out global skills among the executives arising in the organizations? Global mind-set and global skills are very important for people bringing into the org but also people currently working for the company as well as people aspired to grow into larger roles in the company. Succession planning is very deliberate process for AGCO Introduce the ?Triple Two Concept? it means high performer, if they wish to grow in the organization they need to have work across two of the brand (4 different branch) (required to work with 2 other locations but preferred that employee had work in any regions. * Hope that Triple Two concept would round out the individual or help the employee prepare for the expanded roles in the company. What are the advantage of Hybrid approach (succession planning is handled locally and searching for high potential executives must pass the same process and/or the same class)? The local people are the BEST! Must know how to target for future development Makes minor changes each year to keep it going but in the end, it is important to have an actionable developmental plan for the employee Let employee know that they are potential successor or invest in employee because they potential to grow in the organization. * Ted Teng Video Ted Teng says ?forget everything about being right or wrong and approach them with understanding and not judgment, this will allow you to listen a lot better, you can listen , and understand enough to ask and look for things that need improvement or change while maintaining to ethical and legal requirements. Since a lot of expats say that signing of a contract in Asia is the beginning of a negotiation. In Asia they are much more relationship based ithlien in US we area more transactional. In Asia, people are more loyal to their company. They want to make sure that you are someone they can count on to facilitate the contract relationship. Look at it in terms of what you pay in tormnt of them. Don not limit your self to understanding other cultural views and norms. You got to be willing to be flexible on nearly everything. There are some HR programs such as compensation or others that need to remain the same while others might need a bit of change to fit the cultural norms of the host environment. * Forms of IHRM HQ of Multi-national Enterprise (MNE) Home country subsidiary of foreign-owned enterprise Domestic firms Government agencies and non-governmental organizations *
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