International Human Resource Management

 

What is International Human Resource Management?

International HRM is a term encompassing all the HR practices involved in managing a global workforce. International HR professionals are responsible for the following within a multinational corporation: 

  • Talent management including recruitment 
  • Expatriation and repatriation 
  • Training and developing 
  • Compensation 

For clarity, a multinational corporation (MNC) is one with a business presence in various countries. Typically, the business will be managed from the ‘parent’ or home country in which it is headquartered, but it will operate from various international locations. Well-known multi-nationals include Apple, Amazon and Unilever, but smaller businesses can class themselves as MNCs if they have subsidiaries in two or more countries. 

As MNCs have globally dispersed employees, they require International HRM specialists to deal with the specific requirements and considerations around recruiting, onboarding and managing them. 

Domestic HRM refers to the management of human resource that’s conducted locally in a business’s home country. International HRM refers to the management of human resource globally.  

Similarities between the two.  

Both involve key HRM functions including talent management, training and development, performance appraisal and compensation. However, International HR Managers deal with unique issues arising from internationalisation which go beyond the ordinary scope of domestic HRM, for example, expatriating staff to a foreign country. 

Activities and considerations unique to IHRM: 

IHRM involves a greater level of complexity as more factors are at play when managing staff beyond national borders.  

  • Understanding the labour laws and cultural practices in each host country and ensuring compliance with these. 
  • Being more involved in staff’s personal lives if expatriating from the home country. For example, an Expatriate Manager might organise visas, housing, spousal support and/or childcare for employees moving overseas. This is extremely important in helping them settle in their host country and complete their expatriate assignment for the business. 
  • Determining appropriate international salaries that account for the cost of living in each host country while ensuring a level of parity with those in similar roles elsewhere. Depending on the location, various other rewards such as the provision of medical insurance might also be necessary. 
  • Facilitating effective communication for employees working with one another across different geographies and time zones. 

What are the main objectives of IHRM?

IHRM shares the same objectives as for HRM, however, the extra challenges that arise from managing a global workforce mean that International HR Managers will have more specific objectives centered on tackling these challenges and mitigating the risks inherent to IHRM.  

These include: 

  1. Recruiting and retaining staff with the specific skillset and global mindset to take on international assignments and meet the business’s strategic goals. 
  2. Training and developing staff in both hard and soft skills. Cross-cultural and local market training is particularly important for expatriate workers who must acclimatise to their new environment. 
  3. Compliance with international laws. International HR Managers must fully understand and comply with the labour and tax laws of each country it operates in. Failure to do so could result in major legal and/or financial penalties for the business.  

What are the different approaches to IHRM?  

Multinational corporations (MNCs) take different approaches to IHRM, starting with the way they choose to structure their HRM functions. 

This might be: 

1. Centralised 

A structure in which all HR administration is conducted centrally, typically from a business’s headquarters. According to Mercer, 50% of MNCs control HR centrally. Generally speaking, HR policies won’t vary significantly across subsidiaries.  

2. Decentralised 

HR administration is handled regionally, and policies and procedures reflect local differences. Mercer reports that 15% of MNCs follow a decentralised structure.  

3. Hybrid or mixed

For international roles, MNCs might choose to hire: 

  1. Home country nationals: employees from the country where the business’s headquarters are located. These employees will be relocated overseas on an ‘expatriate assignment’.
  2. Host country nationals: employees from the country where the company has set up a subsidiary.
  3. Third country nationals: employees who work in either the home or host country for the company, but who aren’t nationals of either. 

 

What are the main challenges of International HRM?

International expansion can offer huge opportunities for businesses looking to take advantage of the global economy.

  • Failed expatriate assignments 

Commonly cited reasons for failure include culture shock, isolation and domestic issues (i.e., spouses or children struggling to settle in the host country).  

  • Ethical dilemmas 

There can be conflicts between the ethics of a company in its home country and the laws and practices of the host countries. For example, western companies have strict child labour laws

·         Navigating host countries’ laws and practices 

As discussed, International HR Managers have their work cut out understanding and complying with the various local labour and tax laws of each host country. However, understanding the cultural practices and communication preferences within these countries is extremely important.

 

 


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