HRM386
International Dimensions of Human Resource Management
FACULTY OF BUSINESS
Study Guide
201130
*HRM386*
37
International Dimensions of Human Resource Management
HRM386 Study Guide
Faculty of Business
Written and compiled by
Dr Chrys Gunasekara
Educational designer
ED Name
Media publishing officer
Sandra Wait
Produced by Division of Learning and Teaching Services, Charles Sturt University, Albury - Bathurst - Wagga Wagga, New South Wales, Australia.
First Published December 2010
Printed at Charles Sturt University
© Charles Sturt University
Previously published material in this book is copied on behalf of Charles Sturt University pursuant to Part VB of the Commonwealth Copyright Act 1968.
Contents
Page
Overview of the subject 1
Topic 1 Introducing international human resource management 2
Topic 2 Staffing international operations 7
Topic 3 Recruiting and selecting staff for international assignments 11
Topic 4 International compensation 17
Topic 5 International training and development 22
Topic 6 International industrial relations 27
Topic 7 Performance management 31
Topic 8 IHRM Trends: Complexity, challenges and choices
in the future 36
iii
HRM386 Study Guide
Overview of the subject
Welcome to HRM386, and to the interesting and topical area of international human resource management (IHRM).
In this subject we will be looking at aspects of human resource management (HRM) in multinational organisations, that is, organisations that do business across national boundaries. As we will see, the content of HRM practices may be quite similar to those in organisations that operate within one country; for example, in recruitment, training, performance management, and so on. The most important difference between IHRM and domestic HRM is in the variables or factors that shape the way that practices are applied in the international setting.
It has been said that the failure of multinational ventures may be explained in large part by a lack of understanding of IHRM issues (Perkins and Shortland 2006). This is still true today, even though it is true that many managers may be more educated in the ways of doing business across cultures. Having knowledge and being able to use this effectively in practice are different skills, and this is why it is important to learn about the theory and the practice. That is what we will be doing in this subject.
Before we begin, please be clear about the purpose of this Study Guide. The topics and the content of this subject will follow the textbook quite closely. You will be able to read the Study Guide and then look at the textbook and be able to see very clear links between the two. There are two additional reading resources provided for each topic, which will illustrate one or more aspects of the topic.
The Study Guide is intended to guide your reading of the textbook and the additional resources provided. The Study Guide is not a summary of the textbook chapters or the readings – it is a map that will help you to see where you are meant to be going. It is very important, therefore, that you read the textbook, and keep up with your instructor’s lectures and PowerPoint slides. At the end of this session, CSU will be delivering a short series of revision classes. These classes will highlight for you some of the important aspects of each topic, and they will also include practice questions for your exam. This is meant to improve your exam preparation and to help you to succeed.
We hope that you find this subject interesting and enjoyable.
Topic 1 Introducing international human resource management
Introduction
The first topic in this subject introduces the scope and nature of IHRM – what is it? How is it different do domestic HRM? How do we apply a strategic view of IHRM? There are several key pieces of knowledge that you will need to learn in order to understand later topics in the subject. IHRM has quite a lot of jargon or specific terminology that it uses. It can be difficult to keep up with all of the terms. That is why, from the beginning, you should learn the key terms and concepts so that you can use these later to understand other topics, and to answer exam questions.
Learning objectives
Upon successful completion of this topic you should be able to:
· define international human resource management
· describe and apply a model of IHRM
· explain the differences between IHRM and domestic HRM
· describe a model of strategic IHRM.
The nature and scope of IHRM
There are different approaches that have been used in studying IHRM. The approach that we will use in this subject involves the study of aspects of HRM in multinational organisations.
The discipline of HRM involves those activities undertaken by an organisation to effectively manage its human resources, or people. These activities would include:
· Human resource planning
· Staffing (recruitment, selection, placement)
· Performance management
· Training & development
· Compensation (remuneration) and benefits
· Industrial relations.
How do we understand these activities in an international context?
This question is answered in the model of IHRM presented on page 3 of your textbook. As you will see, the model has three dimensions:
· HRM activities
· Countries
· Categories of employees.
It is very important to learn this model and especially, the different terms, such as ‘host’, ‘home’ and ‘third country’. These terms are used constantly in IHRM.
Learning activity
A key piece of terminology that you will see in the models and that you will encounter throughout this subject is, expatriate. In this activity we ask: What is an expatriate? Make notes on this term here.
______
You may be wondering why it is necessary to study IHRM. Why is it important to take this subject in your course?
Read
Reading 1.1: Rollins, A. (November, 2010). West left out in shift in global trade pattern. The Australian Financial Review, p. 23. Retrieved from http://www.afraccess.com
This recent article from The Australian Financial Review helps to answer this question by highlighting recent trends in world trade between the west and the socalled developing countries. The article makes the point that international trade from east to west is ‘the’ big issue in the international economy. This helps to explain why IHRM is so important today.
Read this short article and make your summary notes below.
______
What is different about IHRM?
The next point to consider in this topic is: What makes IHRM different to domestic HRM?
Your textbook provides a good summary of the factors that help to explain why IHRM is different to domestic HRM, on pages 5-16. There are two parts to the explanation.
Firstly, IHRM is more complex than domestic HRM. Six reasons are given for this:
1. More HR activities
2. Need for a broader perspective
3. More involvement in employees’ personal lives
4. Variations in the mix of expatriates and locals
5. Risk exposure
6. Broader external influences.
You need to study these six factors, on pages 5-8, and be able to explain the nature of each one. Learn the examples also, or think or your own examples to illustrate each factor.
The second part of the explanation of why IHRM is different to domestic HRM relates to moderating variables. These are discussed on pages 9-16 of your textbook. There are four variables or factors that influence the way that HRM practices are applies across national boundaries. These moderators are:
a. The cultural environment
b. The industry environment
c. Extent of reliance by the multinational on its home-country domestic market
d. The attitudes of senior management.
Many of these concepts are not new to you. They were covered in your previous studies in management and HRM. Here, we are looking at them from an international perspective. Model 1-4 on page 9 of your textbook provides a good summary of these factors.
You should learn about these moderators, be able to explain them, and be able to use an example to illustrate each one. You can use an example from the textbook or think of your own example.
Read
Reading 1.2: Saha, S. K. (June, 1993). Managing human resources: China vs. The West. Canadian Journal of Administrative Sciences, 10(2), 167–177.
This reading is a comparative study of HRM practices in Chinese and western organisations. This reading will give you some insights into the practice of IHRM and the factors that help to explain why there are different approaches taken in different national settings.
______
The third and last point to consider in this topic is a model of strategic HRM in multinational organisations. The model presented in Figure 1-5 of your textbook (page 17) makes three points:
- IHRM must support organisational goals. This is an interactive relationship, where IHRM strategy shapes goals, and goals shape IHRM strategy.
- IHRM strategy influences, and is influenced by internal organisational factors, such as structure.
- External factors have a direct influence on internal organisational factors, IHRM strategy and organisational goals.
The purpose of a model such as this is to help you in analysing what needs to be done to address a specific problem in an organisation. Your analysis will be guided by theory about the way that IHRM strategy works. This model gives you a theoretical tool for this purpose.
Tutorial
The purpose of tutorial activities in this subject is to help you to understand the subject content better. They are also good preparation for your exam.
There are two questions to look at in the tutorial for this topic.
- Using the model of IHRM on page 3 of your textbook, think of examples of how this model could be used to look at staffing in:
- A Chinese company based in Changchun, with operations in San Francisco and Brazil.
- A Brazilian company with operations in Changchun and in New Delhi
- Indonesians employed by a Chinese company based in Changchun, with operations in Changchun and New Delhi.
- China has a large domestic market. It is also a major exporter of commodities and goods to the world. How would this affect IHRM strategy in Chinese multinationals? Look at page 14-15 of your textbook.
Topic summary
In this first topic we have set down some foundations. We’ve looked at the meaning of IHRM – what makes it different from domestic HRM. We have also started to define some key terms that relate to this discipline. Finally, we have seen two important models – one that describes the basic structure of IHRM, and a second model that shows how we can think of IHRM in a strategic way.
Read
Text: Dowling, Festing, Engle. 2008. Chapter 1
Additional reading
Gerhart, B., & Fang, M. (2005). National culture and human resource management: Assumptions and evidence. International Journal of Human Resource Management, 16(6), 971-986.
Harvey, M., Novicevic, M., & Speier, C. (2000). Strategic global human resource management: The role of inpatriate managers. Human Resource Management Review, 10(2), 153-175/
Hofstede, G. (1983). The cultural relativity of organisational practices and theories. Journal of International Business Studies, 14(2), 75-89.
Perkins, S., & Shortland, S. (2006). Strategic international human resource management: Choices and consequences in multinational people management (2nd ed.). London: Kogan Page.
Topic 2 Staffing international operations
Introduction to the topic
In the first topic we set the scene for this subject by examining the meaning and scope of IHRM. In this second topic we begin our look at specific aspects of HRM in the international context. Staffing is the logical starting point: what approach do multinationals take to staffing their operations? How are international assignments developed? How do we measure the return on investment of international assignments? How should the HRM function be organised in a multinational organisation? These are the key questions that we will be looking at in this topic.
It is important to remember that sending staff overseas on international assignments is costly, and there are significant risks of failure. This is why organisations need to look very carefully at the need, the process and the return from using different approaches to staffing their operations. You will find that there are several more new terms in this topic. It may be worthwhile making your own glossary of terms and learning them throughout the session.
Learning objectives for this topic
Upon successful completion of this topic you should be able to:
· describe four approaches to staffing multinational organisations, and explain the advantages and disadvantages of each approach
· explain the HR implications of international staffing approaches
· understand the main elements of investment and return on international assignments, and be able to use this knowledge in providing an example.
Approaches to staffing
There are four approaches to staffing of multinational organisations. These approaches refer to managerial attitudes that reflect the sociocultural environment in which the internationalising firm is embedded. They are:
1. Ethnocentric - where all key strategic decisions are made at headquarters, and all international appointments are from the parent country, i.e., PCNs.
2. Polycentric - where subsidiaries have some decision making authority, and where subsidiary operations are managed by host country nationals, i.e., HCNs.
3. Geocentric - where a global approach is taken and nationality is ignored in favour of ability.
4. Regiocentric - where staffing is based on ability, but movements are confined to a specific geographic area, such as South East Asia.
Note that the freedom and flexibility of multinationals to follow one or more of these approaches may be limited by demands of host governments, for example, that key managerial positions are filled by its nationals.
Each approach has advantages and disadvantages. You need to learn these.
Read
Reading 2.1: Gong, Y. (2006). The impact of subsidiary top management team national diversity on subsidiary performance: Knowledge and legitimacy perspectives. Management International Review, 46(6), 771-790.
This reading is a study of the impacts of diverse top management teams on subsidiary performance. In regard to the approaches listed above, this article will give you insights into some of the practicalities of making choices about which of the four approaches to use.