Unit 1

International human resource management overview

International Human Resource Management (IHRM) can be defined as a set of activities
targeting human resource management at the international level. It strives to meet
organizational objectives and achieve competitive advantage over competitors at national and
international level.

IHRM comprises of typical HRM functions such as recruitment, selection, training and
development, performance appraisal and dismissal done at the international level and
additional exercises such as global skills management, expatriate management and so on.

In short, IHRM is concerned with handling the human resources at Multinational Companies
(MNCs) and it includes managing three types of employees −

 Home country employees: Employees residing in the home country of the company
where the corporate head quarter is situated, for example, an Indian working in India
for some company whose headquarters are in India itself.
 Host country employees: Employees residing in the nation in which the subsidiary is
located, for example, an Indian working as an NRI in some foreign country.
 Third country employees: These are the employees who are not from home country or
host country but are employed at the additional or corporate headquarters.

For example, an Indian MNC, which has its corporate office in America, may employ a French
person as the CEO to the subsidiary. The Frenchman employed is a third country employee.

IHRM vs. HRM

There are many similarities between HRM at the national as well as international level.
However, let us have a look at the differences between them with the help of points given
below −

 Domestic HRM takes place at the national level, that is, within a country and IHRM
takes place at the international level, that is, in between two or more than two
countries.
 Domestic HRM is bothered about managing employees belonging to one nation and
IHRM is bothered about managing employees belonging the home country and host
country as well as third country employees.
  Domestic HRM is concerned with managing limited number of HRM activities at the
national level and IHRM is concerned with managing additional activities such as
expatriate management.
 Domestic HRM is less complicated due to less imprint from the external environment.
IHRM is comparatively more complicated, as it is deeply affected by the external factors
such as cultural distance and institutional factors.

We can conclude that both IHRM and HRM share some grounds of similarities as well as
dissimilarities, but both have their own importance. Further, they contribute to the
development of a country in a combined manner.

Major functions of International Human Resource Management

In International human resource management, there are five functional areas that include
recruitment and selection, development and training, performance evaluation, remuneration
and labor relations. In the first function of IHRM, Recruitment and selection, company employs
new qualified candidates for international operations.

The Selection requires choosing from this pool the candidate whose qualifications most
closely match the job requirements. Staffing is a complex function of international human
resource management.

In the global firms, the managing and staffing approach strongly affects the type of employee
the company prefers. In a company with an ethnocentric approach, parent country nationals
usually staff important positions at headquarters and subsidiaries. In recruitment and selection
methods, firms consider both headquarters’ practices and those widespread in the countries of
its subsidiaries. Local culture also have great impact on recruitment and selection practices, and
in some countries, local laws require a specific approach. In choosing the suitable candidate, it
is needed to make balance between internal corporate consistency and sensitivity to local labor
practices.

Remuneration and benefits is other functional approach of IHRM. Remuneration of employees

plays an important role in hiring new employees because pay is the major source of people to
live in the world. To develop an international system of compensation and benefits, firms have
two primary concerns.

The first is comparability. A good compensation system disperses salaries to employees that
are internally equivalent and competitive within the marketplace. The international
organization must also consider the salaries of people who may transfer from other locations.
The second major concern is cost. Organizations struggle to reduce all expenses, and payroll is
one of the largest.
Another significant function of IHRM is Development and training which is aimed to offer
sufficient training to personnel in a company and enable them to fulfil their goals, as well as
show better performance and growth with their work. At global level, human resource
development experts must have responsibility for training and development of employees
located in subsidiaries around the world, specialized training to prepare expatriates for
assignments abroad, and lastly development of a special group of worldwide minded managers.

International HR development programs may be done in two ways such as centralized and
decentralized. In a centralized approach, training originates at the headquarters and corporate
trainers travel to subsidiaries, often adapting to local situations. This fits the ethnocentric
model. A geocentric approach is also centralized, and trainers could be sent from various
positions in either the headquarters or subsidiaries to any other location in the company. In a
decentralized approach, training is given locally, following a polycentric model. When training is
decentralized, the cultural backgrounds of the trainers and trainees are usually similar. Local
people develop training materials and techniques for use in their own area. It is important that
trainer must be qualified.

Performance evaluation is the effective function of international human resource management.

In companies, the performance evaluation is regularly performed for administration or
development intentions. Usually, administration conduct evaluation when there is doubt of
performance of candidate and there is a need of performance evaluation on work conditions of
employees, promotions, rewards and/or layoffs. In multinational companies, performance
appraisals are usually done annually and use a standardized evaluation form. Performance
evaluation is complex task for International HR managers because the organization must
evaluate employees from different countries working in different subsidiaries. Performance
evaluation depends on the organization’s overall human resource management strategy.

HRM in Globally Competitive Environment

HR professionals are faced with addressing global issues on an ever-increasing basis. This is
true even for organizations that historically only operated in a domestic environment. Issues
include global competition for products and services, global talent management, risk and
privacy, understanding global diversity and cultural issues, flexible reward systems, leadership
challenges, and managing international assignments. While many of the HR competencies apply
to domestic HR practitioners, new and heightened global skills are required for HR practitioners
to deal with international issues.

This article will provide an overview of several key issues and competencies required for global
HR practitioners.
Global Talent Environment

Challenges include working with an ever-increasing mobile workforce with trade and visa
restrictions generally making it easier for employees to move from country to country. HR
professionals must understand the various forms and methods of visas and the employer
responsibilities to effectively promote and manage talent across borders, including employee
taxation issues.

Technology advances have also increased the ability of remote access, telecommunications,
managing employees on a 24/7 basis and project transfer to “follow the sun” as operations
move from one geographic region to another during the workday in other regions.

Different generations in the workplace, combined with country and cultural differences impact
all aspects of talent management including recruitment, selection, onboarding, coaching,
training, performance management, compensation, and retirement issues. A “one size fits all”
approach is not effective so a balancing act between globalization and localization is critical.
Among the talent issues to be addressed:

 Dealing with 24/7 global operations

 Millennial / generational differences regarding values and workplace expectations
 Intellectual capital and knowledge transfer
 Mobility issues
 Market skill shortages and competition for talent
 Phased and early retirement issues

Technology and Privacy Issues

Global technology, data collection, and privacy regulations must be understood and followed.
Identify theft, hacking, privacy notification, and data security factors must be taken into
consideration. HRMS tools must be configured to determined appropriate system design
accounting for tracking personal data, currency conversion, language, pay rates and frequency
methods combined with data encryption.

Global Economy

New competitors, changing labor markets, labor force availability, currency and inflation
factors, tariffs, customs and import laws, grease payments and corporate social responsibility
within global markets must be considered including:

 New and emerging labor markets

 Inflation and corporate/employee taxation
 New skills sets
 Unemployment levels
Understanding Cultural Diversity

A key trait of effective human resource management is to understand and reconcile cultural
differences within the organization and harmonize these relationships. Different cultural norms
and nuances, color and numerology issues, gestures, societal norms, power/distance
relationships, recruiting efforts and performance management must be clearly understood on a
country by country basis.

Agility with Reward Systems

On a country by country basis, total reward systems (base compensation, variable pay and
benefits) must be effectively applied. A total reward philosophy statement may provide
guidance to assist in developing global systems based on what is provided by the home country,
normative practices, taxation levels and employee expectations. For example, in some
countries the government provides comprehensive health care, life insurance, disability and
retirement plans. In other countries, minimum health care may be provided by the government
with a common practice to have the employer provide supplemental health insurance.

Managing Global Leadership

Effective global leaders have several key characteristics, many of which are similar to any
leadership role such as integrity, trust, interpersonal communication skills, people
development, vision, problem solving and strategic planning. Some of the key differences are
greater flexibility and agility to adapt, appreciation for subtle and not so subtle cultural
nuances, diversity and inclusion awareness, influencing skills, international business experience
along with the ability to travel internationally.

Managing International Assignments

Most organizations do not handle expatriation and repatriation well. In general, there is a lack
of assignee assessment and preparation including family interviews, broader cultural and
language training, ongoing feedback and discussion, visa requirements, knowledge of local
customs and laws, tax reconciliation and identification of the repatriation process. International
assignments typically cost three times the individuals base salary and roughly 60% repatriations
result in the assignee leaving within six months after return. Awareness of culture shock and
reverse culture shock will assist in managing assignments. Having additional resources to assist
with managing travel, emergency evacuations, language and cultural training along with
balance sheet evaluation of appropriate compensation and living expenses, tax equalization
and lodging assistance are invaluable.
Communication Skills

Proficiency in multiple language skills are a huge plus. French, Spanish, German and Flemish are
preferred in addition to English. But beyond language skills, understanding cultural nuances and
avoiding US based idioms or phrases may create difficulties and relationship challenges.
Executives with experiences in living in multiple countries will provide greater understanding of
the issues.

International HRM: Role and Distinguishing Activities

Global human resources managers are responsible for recruitment of new employees, training,
professional development, benefits and legal compliance just like any other HR team, but they
do so on a global scale.

Recruitment and Onboarding Process

Attracting, hiring and retaining a skilled workforce is perhaps the most basic of the human
resources functions. There are several elements to this task including developing a job
description, interviewing candidates, making offers and negotiating salaries and benefits.
Although a complex task for any business, it is made more complex in the international arena
due to differences in educational systems from one country to the next and, of course,
difference in languages.

Companies that recognize the value of their people place a significant amount of stock in the
recruitment function of HR, no matter where in the world hiring takes place. There is good
reason for this – having a solid team of employees can raise the company’s profile, help it to
achieve profitability and keep it running effectively and efficiently.

On-the-Job Training

Even when an organization hires skilled employees, there is normally some level of on-the-job
training that the human resources department is responsible for providing. This is because
every organization performs tasks in a slightly different way. One company might use computer
software differently from another, or it may have a different timekeeping method. Whatever
the specific processes of the organization, human resources has a main function in providing
this training to the staff.

The training function is amplified when the organization is running global operations in a
number of different locations. Multiple sessions in numerous international locations may be
called for, although online webinars and training tools can sometimes effectively reach
anywhere on the globe. Having streamlined processes across all locations makes
communication and the sharing of resources a much more manageable task.
Continuing Professional Development

Closely related to training is HR’s function in professional development. But whereas training
needs are centered around the organization’s processes and procedures, professional
development is about providing employees with opportunities for growth and education on an
individual basis. Development often entails moving an employee between departments so that
he or she gains skills in multiple areas. For an international operation, this may also mean
moving employees across boundaries.

Many human resource departments also offer professional development opportunities to their
employees by sponsoring them to visit conferences, external skills training days or trade shows.
The result is a win-win: it helps the employee feel like she is a vital and cared-for part of the
team and the organization benefits from the employee’s added skill set and motivation.

Benefits and Compensation

While the management of benefits and compensation is a given for human resources, the
globalization of companies in the twenty-first century has meant that HR must now adapt to
new ways of providing benefits to an organization’s employees. Non-traditional benefits such as
flexible working hours, paternity leave, extended vacation time and telecommuting are ways to
motivate existing employees and to attract and retain new skilled employees. Balancing
compensation and benefits for the organization’s workforce is an important HR function
because it requires a sensitivity to the wants and needs of a diverse group of people.

Ensuring Legal Compliance

The final function of human resource management is perhaps the least glamorous but arguably
of utmost importance. Ensuring legal compliance with labor and tax law is a vital part of
ensuring the organization’s continued existence. The federal government as well as the state
and local government where the business operates impose mandates on companies regarding
the working hours of employees, tax allowances, required break times and working hours,
minimum wage amounts and policies on discrimination.

This task becomes very much more complex when different laws in different countries need to
be taken into account as well. Being aware of these laws and policies and working to keep the
organization completely legal at all times is an essential role of human resources.
Activities

1. Staffing:

Staffing refers to the process of determining the organization’s current and future human
resource requirements to meet the organizational goals and taking appropriate steps so as to
fulfil those requirements. The process involves identifying the human resource requirement of
an organization, and recruitment, selection, and placement of human resources.

Human resource planning refers to the process of forecasting supply and demand for the
organization and the action plan to meet its human resource requirements. It is the decision-
making process as to what positions a firm has to fill and how to fill them and places optimally
the human resource systems in the organization.

2. Recruitment and Selection:

‘Recruitment’ refers to the process by which an organization attracts the most competent
people to apply for its job openings whereas ‘selection’ refers to the process by which
organizations fill their vacant positions.

The process of recruitment and selection varies widely among countries. For instance, extensive
formal testing and screening techniques are often employed in Asian countries where people
are highly test-oriented and comfortable with formal tests.

Testing is often discouraged in the US due to its negative impact on equal employment
opportunities and affirmative action efforts. Europeans test considerably more than Americans
but not as much as Asians. Rigorous staffing practices such as formal testing are used even less
in Canada where equal employment and human rights legislation is even more restrictive
compared to the US.

3. Managing Expatriates:

People working out of their home countries, also known as expatriates, form an integral part of
a firm’s international staffing strategy, especially for higher management positions. Beside
identifying and recruiting the right personnel with desired skills for international assignments, it
is also extremely important to provide them with a conducive environment to get their
optimum output.

Expatriates also contribute significantly to international remittances. Worldwide remittances

are estimated to have exceeded US$318 billion in 2007, of which developing countries received
US$240 million.
4. Training and Development:

‘Training’ refers to the process by which employees acquire skills, knowledge, and abilities to
perform both their current and future assignments in the organization. Training aims at altering
behaviour, attitude, knowledge, and skills of personnel so as to increase the performance of
employees.

The need for imparting pre-departure training to spouse and children, besides the employee, is
increasingly recognized by MNEs. Pre-departure training is aimed at smooth transition of
expatriates and their families to a foreign location.

5. Performance Management:

‘Performance management’ is a comprehensive term that refers to the process that enables a
firm to evaluate the performance of its personnel against pre-defined parameters for their
consistent improvements so as to achieve organizational goals. The system used to formally
assess and measure employees’ work performance is termed as performance appraisal.

Evaluation of an employee’s performance is required for assessing employee’s contribution to

achieve organizational goals, facilitate administrative decisions related to compensation,
promotion or transfer, etc.

Determination of the evaluation criteria, the choice of the evaluators, and the delivery of timely
and culturally sensitive feedback constitute the principal challenges related to the performance
evaluation of expatriates.

In the international context, performance appraisal becomes more complex due to possible
conflict between the objectives of an MNE’s headquarters and subsidiaries, non-comparability
of information between the subsidiaries, the volatility of international markets, and differences
in levels of market maturity.

Therefore, international HR managers need to reconcile the differences between the need for
universal appraisal standards and the specific objectives of the local subsidiaries, and to
recognize that more time may be needed to achieve results in markets, which enjoy little
supporting infrastructure from the parent company.

MNEs need to evolve systematic processes for evaluation of employees from different
countries who work in different environments. Developing consistent performance evaluation
methods often conflicts with the diverse cultural factors of the host countries.

For instance, it may be appropriate in a country with low-context culture like the US to precisely
point out an employee’s shortcomings directly whereas public criticism in high-context cultures,
such as China, Japan, and to some extent, India may prove counterproductive; in such cultures
the opportunity to save one’s face is extremely important.

6. Compensation:

Compensation refers to the financial remuneration that employees receive in exchange of their
services rendered to the organization. It includes wages, salaries, pay rise, and other monetary
issues.

A good compensation system should be designed within the regulatory framework of the
country of operation of an MNE and should be able to attract and retain the best available
talent. Besides, it should be equitable among employees and motivate them to achieve high
levels of performance.

Organizational structure and HRM

Defining and communicating the human resource terms and definitions used by a company
ensures all personnel use the same terminology.

HR professionals help company leaders and their subordinates define an effective, cohesive
organizational structure that supports the company in achieving its business goals.

Industry associations, such as the Society for Human Resource Management, publish tips, tools
and techniques from which a company can create its own glossary. This helps company leaders
communicate with the rest of the company as well.

FEATURES:
1. The organizational structure should be set as the result of the HR Management Goals and
the defined HR Model.
2. The HR Organization defines clear boundaries around HR Processes. The Compensation and
Benefits unit should be clearly about the compensation of employees and building different
compensation strategies.
3. Each organizational structure restricts the free flow of information. The clear communication
channels should be designed as all HR employees know information significant for their job.
Many HR Functions do suffer from the insufficient information.
4. The HR Organizational Structure should be as flat as possible. The decision making
responsibility should be given to the lowest levels of the HR Organization.
5. The organizational structure has to be flexible. The priorities of the organization should
change quickly and the reaction is needed.
TYPES

1. Horizontal Organization:
In a horizontal organization, only a few layers exist. Instead of a complex hierarchy,
most employees report to the same boss. In these types of organizations, work typically
gets done by functional project teams. This structure works well for small companies
but tends to become unwieldy as the company becomes larger, more diverse and
located in more than one location.
2. Matrix Organization:

Employees who work in a matrix organization report to more than one manager.

This allows valuable, highly trained resources to support different departments.

Employees who work in this type of structure tend to rely on professional organizations or
informal group meetings with people performing similar roles for their own development.

For example, an HR professional may report to both an HR department manager and the
finance department manager. They may work exclusively with finance professionals and attend
only the finance team meetings, relying on informal communication from his HR peers about
industry trends and best practices.
3. Divisional Organisation:
In this case, the organisation is divided into divisions which could be based on the product,
Markets or Geographic area. Each division has its own set of functions like finance, marketing
etc., like small micro organisations within one large organisation.
4 .Vertical Organization:

In a traditional company structure, each function has its own manager, who reports to the
company’s executive leadership. In large companies, this results in multiple layers of managers.
Top-level executives makes decisions for the subordinates. Departments tend to function
independently and not share resources, tools or techniques. Employees in each department
tend to require specialized skills, experience and competency levels.

Global Human Resource Planning

With the advent of globalization, organizations – big or small have ceased to be local, they have
become global! This has increased the workforce diversity and cultural sensitivities have
emerged like never before. All this led to the development of Global Human Resource
Management.

Even those organizations who consider themselves immune to transactions across geographical
boundaries are connected to the wider network globally. They are in one way or the other
dependent upon organizations that may even not have heard about. There is interdependence
between organizations in various areas and functions.

The preliminary function of global Human Resource Management is that the organization
carries a local appeal in the host country despite maintaining an international feel. To
exemplify, any multinational / international company would not like to be called as local,
however the same wants a domestic touch in the host country and there lies the challenge.

We may therefore, enumerate the objectives of global HRM as follows:

1. Create a local appeal without compromising upon the global identity.

2. Generating awareness of cross cultural sensitivities among managers globally and hiring
of staff across geographic boundaries.
3. Training upon cultures and sensitivities of the host country.

The strategic role of Human resources Management in such a scenario is to ensure that HRM
policies are in tandem with and in support of the firm’s strategy, structure and controls.
Specifically, when we talk of structures and controls the following become worth mentioning in
the context of Global HRM.

 Decision Making: There is a certain degree of centralization of operating decision

making. Compare this to the International strategy, the core competencies are
centralized and the rest are decentralized.
 Co-ordination: A high degree of coordination is required in wake of the cross cultural
sensitivities. There is in addition also a high need for cultural control.
 Integrating Mechanisms: Many integrating mechanisms operate simultaneously.
Global HRM and the Staffing Policy

Here also the role is no different i.e. hiring individuals with requisite skills to do a particular job.
The challenge here is developing tools to promote a corporate culture that is almost the same
everywhere except that the local sensitivities are taken care of.

Also, the deciding upon the top management or key positions gets very tricky. Whether to
choose a local from the host country for a key position or deploy one from the headquarters
assumes importance; and finally whether or not to have a uniform hiring policy globally remains
a big challenge.

Nevertheless an organization can choose to hire according to any of the staffing policies
mentioned below:

 Ethnocentric: Here the Key management positions are filled by the parent country
individuals.
 Polycentric: In polycentric staffing policy the host country nationals manage subsidiaries
whereas the headquarter positions are held by the parent company nationals.
 Geocentric: In this staffing policy the best and the most competent individuals hold key
positions irrespective of the nationalities.

Geocentric staffing policy it seems is the best when it comes to Global HRM. The human
resources are deployed productively and it also helps build a strong cultural and informal
management network. The flip side is that human resources become a bit expensive when
hired on a geocentric basis. Besides the national immigration policies may limit
implementation.

Global HRM therefore is a very challenging front in HRM. If one is able to strike the right
chord in designing structures and controls, the job is half done. Subsidiaries are held together
by global HRM, different subsidiaries can function operate coherently only when it is enabled
by efficient structures and controls.
 Unit 2

International Staffing
Staffing (or finding, choosing and placing) good employees is difficult even at home. However,
it becomes more difficult in other countries. For example, until recently in Russia, very few
Russians had resumes available to give to prospective employers with vacant positions.
Consequently, recruiting is often done only by word of mouth. Only recently have more
sophisticated methods—such as structured interviews, testing or work samples—been used on
a limited basis. More systematic selection is becoming necessary in Russia and many of the
former Soviet-bloc countries as younger, more highly educated candidates are being needed by
international firms.

Deciding on the mix of local employees, employees from the home country, and even people
from third countries that will best meet organizational goals is a challenge. In staffing an
overseas operation, cost is a major factor to be considered. The cost of establishing a manager
or professional in another country can run as high as $1 million for a three-year job assignment.
The actual costs for placing a key manager outside the United States often are twice the
manager’s annual salary.

For instance, if the manager is going to Japan, the costs may be even higher when housing
costs, schooling subsidies, and tax equalization payment are calculated. Further, if a manager or
professional executive quits an international assignment prematurely or insists on a transfer
home, associated costs can equal or exceed the annual salary. “Failure” rates for managers sent
to other countries run as high as 45%.

Factors that are most likely to be causes of concern for an employee sent overseas are shown in
Figure. The figure shows that only roughly two-thirds to three-fourths of employees sent to
another country are satisfied with the way the top five support needs are being met.
To meet these needs, organizations are outsourcing various functions, citing gains in cost
effectiveness, expertise, and efficiency. Several respondents to a survey on the subject
suggested that outsourcing certain HR functions to international experts may be a long-term
trend.
Types of International Employees
International employees can be placed in three different classifications.

 An expatriate is an employee working in a unit or plant who is not a citizen of the

country in which the unit or plant is located but is a citizen of the country in which the
organization is headquartered.

 A host-country national is an employee working in a unit or plant who is a citizen of the

country in which the unit or plant is located, but where the unit or plant is operated by
an organization headquartered in another country.

 A third-country national is a citizen of one country, working in a second country, and

employed by an organization headquartered in a third country. Each of these individuals
presents some unique HR management challenges. Because in a given situation each is a
citizen of a different country, different tax laws and other factors apply. HR
professionals have to be knowledgeable about the laws and customs of each country.
They must establish appropriate payroll and record-keeping procedures, among other
activities, to ensure compliance with varying regulations and requirements.

EXPATRIATES
(An expatriate (in abbreviated form, expat) is a person temporarily or permanently residing in a
country and culture other than that of the person’s upbringing.) (A person who leave one’s
native country to live elsewhere)

Many MNEs use expatriates to ensure that foreign operations are linked effectively with the
parent corporations. Generally, expatriates also are used to develop international capabilities
within an organization. Experienced expatriates can provide a pool of talent that can be tapped
as the organization expands its operations more broadly into even more countries. Japanese-
owned firms with operations in the United States have rotated Japanese managers through U.S.
operations in order to expand the knowledge of U.S. business practices in the Japanese firms.

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: These 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: These 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: These individuals are 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: The broadcast category comprises those individuals who move from
one country to another. Often, they prefer to work internationally rather than in the
home country.

HOST-COUNTRY NATIONALS
Using host-country nationals is important for several reasons. It is important if the organization
wants to establish clearly that it is making a commitment to the host country and not just
setting up a foreign operation. Host-country nationals often know the culture, politics, laws,
and business customs better than an outsider would. Also, tapping into the informal “power”
network may be important. In one Southeast Asian country, foreign companies have learned
that a firm’s problems are resolved more quickly if a family member of that country’s president
is a consultant to the firm or a member of its management. But U.S. firms must take care that
the individuals used actually perform work for the company; the “salary” must not be a
disguised bribe paid in order to obtain contracts. Otherwise, the firms could be in violation of
the FCPA addressing foreign corrupt practices. Another reason to use host-country nationals is
to provide employment in the country. In many lesser-developed countries, compensation
levels are significantly lower than in the United States, so U.S. firms can gain cost advantages by
using host-country nationals to staff many jobs.

Recruiting the first group of local employees can be a challenge. The initial group helps create a
culture for that organization—for better or worse. Yet, the opportunity for serious errors is
great. For example, many countries have very different employment laws, which may make it
difficult to dismiss an employee. In countries where there is a shortage of qualified candidates,
good potential employees may be lost if not approached correctly. To accomplish successful
hiring of host-country nationals, many firms form partnerships with local companies
to help with hiring.

THIRD-COUNTRY NATIONALS
Using third-country nationals emphasizes that a truly global approach is being taken. Often,
these individuals are used to handle responsibilities throughout a continent or region. For
instance, a major U.S.- based electronics company has its European headquarters in Brussels,
Belgium.

While most employees on the clerical staff are Belgians, only about 20% of the professionals
and managers are from Belgium. Most of the rest, except for five U.S. expatriates, are from
other Western European countries.
It is unusual to find third-country nationals in a new multinational enterprise (MNE). These are
usually staffed with qualified nationals and expatriates. Third country nationals are often first
hired when a company has several foreign operations and decides to open another. The choice
is often between transferring another expatriate from headquarters or transferring an
employee from another overseas operation. Third-country nationals are more common in
MNEs with headquarters in North America than in other regions.

TRANSNATIONAL PROJECT TEAMS

There has been a dramatic increase in the number and variety of multicultural or
“transnational” teams. These teams may be temporary or somewhat permanent and are
formed to solve a specific problem or to handle ongoing activities. They often include
headquarters representatives, host-country nationals, and third-country nationals. They are
useful not only as potentially valuable business units but also as development vehicles for
leaders. Eastman Kodak formed a transnational team based in London to launch its photo CD at
the same time in several European countries. The team dealt with complex strategic issues
across geographic and cultural barriers.

Recruiting and Selecting Staff for international Assignments

Business newer-days are recognized to be international and there is a universal belief that this
will prolong in the future. This is why organisations now have the need for international
managers, as the organisation spread worldwide, so must the employees. Human resource
management (HRM) has grown to be one of the most accepted topics in international
management. The employee that is send abroad is known as an expatriate. “Expatriates are
employees/managers who move from the home country to an overseas location.” (Tanner
2009, 360) A successful expatriate usually entail a vast amount of time and money, however, a
botched expatriate can be even more expensive for an organisation. “International business is
all the business transactions involving private companies or governments of two or more
countries.” (Daniels 2009, 864) International human resource management is an imperative
aspect of MNE’s international strategies and the difficulty of managing international
operations. The determination of this study is to gain a better understanding of how
multinational enterprises (MNE) select their expatriate managers. It is important to note that
the selection process is a discrete process and need to function successfully in the
organisations.

1. Multinational Enterprise.

The multinational enterprise (MNE) can be measured as the most powerful organisation in the
world today. Globalization is the development that has a significant impact on how the world
operates today and is mostly driven by the expansion of MNE’s. Internationalisation has lined
the technique for the eradication of boundaries between countries and now multinational
enterprises (MNE’s) can be distributed across the world in exploration of new markets,
opportunities and wherewithal.
“A multinational enterprise (MNE) takes a worldwide view of markets and production.” (Daniels
2009, 63) In simple terms, a Multinational enterprise (MNE) will produce and market their
products anywhere in the world. Operations can also take place in multiple countries, for
example, in the wholesale trade Nestle is an excellent example of an MNE. Nestle has
marketing and production facilities in almost every country, in the world; Nestle Switzerland
operational plants must be managed to use the same set of management styles as their
international counterpart Nestle SA.

A multinational enterprise (MNE) is an organisation that holds a hefty equity share; usually fifty
percent or more of another organisation, functioning in an overseas country. The
multinational enterprise (MNE) can be formed when an organisation in one country makes an
impartiality investment in an organisation, in another country. Foreign direct investment (FDI) is
an investment in an overseas organisation where the overseas financier holds at least ten
percent of the average shares, accepted with the objective of proven a ‘lasting interest’
overseas, a durable bond and momentous influence on the management of the organisation.
International markets and foreign direct investment (FDI) have amplified penetratingly in the
precedent decades. Escalating internationalization has had a remarkable influence on the
competitive spot of numerous countries.

Role of (MNE) in staffing approaches.

Operating internationally, a Multinational Enterprise (MNE) has many vital decisions to make,
how to, best structure the organisation in order to manage business effectively. “According to
(Schuler et al.1992,419-459), The most influential factor that determines the success of the
organisation, is the way in which the Multinational Enterprise differentiates its operating units
internationally and, at the same time, assimilates, control and coordinate its activities.”
Important factor is to balance the need for diversity, to coordinate and manage to produce an
organisation that is internationally, flexible and competitive. Diversity branch as the need to
operate in a rejoinder manner in an array of environments occurs internationally arise.
Multinational enterprise’s (MNE’s) can supply resources to host countries that other
organisations cannot. The host country can persuade them to transmit their compensations
in suitable forms. The compensation that a host country can acquire from foreign direct
investment (FDI) is as follow: 1) Capital, 2) Technology, 3) Skills and Management and 4) Access
to markets.

* Capitals.

Foreign direct investment (FDI) brings to hand financial resources in the form of capital for
countries who can not afford the required capital. The capital inflows received from the FDI
are more constant, and it is much easier to service than trade debt or portfolio investment.
In dissimilarity to other suppliers of capital, MNEs mostly invest in long-
standing assignments compelling risks and repatriating of profits only when
the assignment yield returns.
* Technology.

Embryonic countries tend to insulate in the use of technology, even the technology in
developed countries can be outdated. The MNEs can bring modern technologies and increase
the effectiveness with which technologies can be used. They modify technologies to local
environments, depiction on their knowledge in other embryonic countries. The MNE
can improve technologies as modernization materialize and spending patterns change, they can
also rouse technical competencies in local organisations both suppliers and competitors, by
giving support, acting as role models and increasing competition.

* Skills and Management

The need for training, is regularly not recognised by local organisations, the MNE’s
is mostly in possession of advanced skills and can transfer the resources to the host countries.
They bring to hand experts, setup training facilities and have some of the best management
techniques that offer the host country a gargantuan competitive advantage.
Where association can be integrated into MNE’s networks, they can cultivate capabilities
to service the regional or international system in tasks, products or markets.

* Market Access

The MNEs can provide access to export markets, both for existing activities and new activities.
In order to attract MNEs, a host country must make sure that its policies and regulations are
beneficial, while at the same time protecting the state from opportunistic entities. The process
of internationalization and multinational corporations influence the political area of a host
country, a host country that intends to attract more MNEs and investors need to generate an
image of stability and reliability. This can be done by implementing policies and regulations that
the international community endorse and that make MNE entry more advantageous for both
parties. The main channel for the transfer of human resource management (HRM) across
international boundaries and various cultures is the MNE. Not only are MNEs main cast lists in
international business, but they are also crucial cast lists in the practice of human resource
management (HRM) internationally. The procedure of human resource management (HRM) in
other countries is often culturally specific, and human resource (HR) professionals need
to take this into consideration.

The main focus of an organisation’s human resources programme right through all of
its progression and actions should be the optimum support and reinforcement of the
organisation’s strategy, in attempts and actions involving both strategy formulation and
implementation. The staffing approach has a significant impact on strategic management,
including selection of key MNE managers who have a significant influence in formulating the
MNE’s strategy, and the selection of managers throughout the MNE.
Staffing should shape and strengthen the direction and main concern of the MNE, such as
being steady with its ethnocentric, polycentric, region-centric, and geocentric staffing
approaches in operating international organisations. An organisation’s approach to
international endowment (staffing) must support the way of doing business. Discussion on the
orientations toward staffing in MNE can be traced to the work of Howard Perlmutter, and his
work represents the seminal theoretical contribution to the field. He introduced
a classification of multinationals which differentiated between firms based on their attitude
toward geographic sourcing of their management teams. “According to Perlmutter, 1969. There
are three primary ways in which international organisations can be staffed; a fourth
staffing approach was added later.” The connotations for the staffing functions, mainly
for superior levels of management, held by region-centric, geocentric, ethnocentric and
polycentric strategic approaches can be discussed.

International Staffing Approaches

Organisations involved in international business can be divided into four types international
strategies, 1) Global, 2) Multi-domestic, 3) Transnational and 4) International strategy. When a
MNE has identified their strategy they look to international markets for potential growth
strategies. Management beliefs are a serious matter, because it decides how
an organisation views itself in relation to it wants and needs to manage human resources in
different countries. Employees who mix with the organisation’s culture and have the ability to
engage in the working environment, is extremely useful, for an international human resource
manager in the selection process. Nestle, for example, is hiring employees who have the
necessary skills required to perform actual tasks and whose style, beliefs, and value system
needs to be the same as the organisation. Factors such as local values and international trade
theories need to be taken into consideration when managers create a strategy for international
markets. Ethnocentric, polycentric, geocentric and region-centric is perspectives that managers
themselves present and characterise into question.

2.1 International strategies.

2.1.1 Global Strategy.

“This strategy describes the most mature international strategy, with highly coordinated
activities dispersed geographically around the world.” (Johnson 2008, 306) This strategy offers a
standardised product across a number of national markets, with little or no adjustment to local
needs or expectations. An example of a company that make use of this strategy can be Sony, as
they compete in every country, in the world, and they regulate their products for all markets in
different countries.

2.1.2 Multi- Domestic Strategy.

“This strategy is similarly loosely coordinated internationally, but involves dispersion overseas
of various activities, including manufacturing and sometimes product development.” (Johnson
2008, 305) This strategy also aims at adapting a product for use in national markets responding
to changes in the local market environment. Local adaption can make the overall organisational
portfolio increasingly diversified. This strategy is most desirable in professional services, where
local relationships are extremely valuable.

2.1.3 Transnational Strategy.

“Transnational companies operate in many countries and delegate many decisions to local
managers.” (Boddy 2005, 106)This strategy strives to optimise the trade-offs associated
with productivity, local adaptation and learning.

2.1.4 International Strategy.

This strategy can be based on the dissemination and adaptation of a company’s knowledge and
expertise to foreign markets.

2.2 Staffing approaches.

Once the organisation has chosen their international strategy, they can
now choose and apply one of four staffing approaches in order to manage their staff in an
efficient manner in the organisation.

2.2.1 Ethnocentric approach.

“An ethnocentric attitude is the parochialistic belief that the best work approaches and
practices are those of the home country.” (Stephen 2007, 92) An organisation with
a parent country strategy succeeds with this approach. The headquarter from
the parent country makes the key decisions, most employees from the parent country have
significant work, and the contributory support the parent country, resource management
procedures.

The organisation procedure and culture values of the parent country are predominant when
MNE follow the ethnocentric approach. A managing and staffing approach can be developed by
headquarters and is steadily applied throughout the world. Organisations following this
approach assume that the parent country management system is better, and that staff
members from other counterparts of the world should follow these styles.

2.2.1.1 Advantages of using Ethnocentric approach.

2.2.1.1.1 Transmitting core competencies.

Employees that can be transferred to engage in an international strategy are more likely to be
au fait with and protect the organisation’s core competencies. Organisations intend to continue
with the success of the organisation, when expanding and operating in international markets.
They perpetuate the success by controlling and regulating the use of the organisation’s core
competencies.

2.2.1.1.2 Countering cognitive dissonance.

Organisations make use of the ethnocentric staffing approach, to minimise the level of
cognitive dissonance, as there are various challenges operating in foreign markets; to help them
overcome these challenges, the organisation makes use of reliable and competent employees
to engage in proven working methods, in the foreign market, . An ethnocentric
staffing approach is from time almost impossible. The development and employing of local
workers can be alerted by the hosting government, the preferences of foreign contributory to
hire locals. The MNE is often pushed through immigration laws and workplace set of laws to do
so.

2.1.1.2 Disadvantage of using ethnocentric approach.

2.1.1.2.1 De-motivate staff.

The ethnocentric staffing approach can de-motivate local managers and employees. All “smart”
and competent employees live near headquarters, this sends out a message, to lower-level
employees that the organisation do not appreciate them which lead to less motivated staff.

2.1.1.2.2 Narrow interpretation of foreign operations.

Expatriate managers may struggle to oblige styles which are acceptable in the organisation’s
headquarters, but which may be considered inappropriate in the host country.

2.2.2 Polycentric approach.

“A polycentric staffing policy uses host-country nationals to manage local subsidiaries.” (Daniels
2009, 823) A local employee heads a contributory because headquarters’ managers are not
measured to have sufficient local knowledge. Contributory continually cultivates human
resource management procedures locally. A polycentric staffing approach analyse the
effectiveness of the organisations procedures of the host country operations as equivalent to
those of the parent country.

2.2.2.1 Advantages of using Polycentric approach.

2.2.2.1.1 Maintain motivation and organisational image.

Making use of the host country managers, to engage in a multi-domestic strategy, they can
assist and encourage local initiative and commitment, and to perk up the organisations
local image.
2.2.2.1.2 Continuity of management improves.

It abolishes language barriers, elude adjustment problems of expatriate managers and their
families, and eliminate the need for costly cultural consciousness training courses. Bestow
potential for profit proliferation through elasticity because local managers can
respond immediately to market needs in the vicinity of pricing, production, product life cycle,
and political bustle; deficiency of problems linked with expatriate managers together with
cultural short-sightedness.

2.2.2.2 Disadvantages of using Polycentric approach.

2.2.2.2.1 Gap between local and global operations.

With a polycentric approach, it is more trouble to bridge the gap (policies, communication,
coordination, control and culture etc.) between the host country component and the
organisation’s parent headquarters.

2.2.2.2.2 Lead to corporate lethargy.

The organisation confines understanding of host nationals to their own country. Organisations
headquarters may become isolated from national component and lead to lack of incorporation,
this, in turn, may lead to corporate lethargy.

2.2.3 Geocentric approach.

A geocentric approach can be defined as “A world-oriented view that focuses on using the best
approaches and people around the globe.” (Stephen 2007, 93) When organisations engage in a
geocentric approach they seek the ideal candidate for prime positions throughout the
organisation, despite their origin. Managers that make use of this staffing approach believe that
it is extremely valuable to have an international perspective, both at the organisations
headquarters in the parent country as well as in the foreign host country.

2.2.3.1 Advantages of using Geocentric approach.

2.2.3.1.1 Endorse international learning.

A geocentric staffing approach enables firms pursuing a global or transnational strategy to

establish the necessary framework of international management, who can support global
learning by moving between countries and cultures without forfeiting their success. This
approach also allows the organisation to make best use of its human resources and makes
employees feel at ease working in any culture.
2.2.3.2 Disadvantages of using Geocentric approach.

2.2.3.2.1 Hard to develop and costly to maintain.

The issues that make the geocentric staffing approach hard to develop and costly to maintain
can be issues such as, economic aspects, decision-making and legal contingencies.

2.2.4 Region-centric approach.

Staffing approaches may also occur in the process under an established region-centric strategic
approach, where the organisation’s operations or meticulous functions can be controlled
by various country regions or fundamental economic regions. This staffing approach can be
viewed as the host country has the predominance at a local contributory, however, with an
increased activity of superior host country managers to top up operations in various countries
of the fiscal region.

In this case, it can be noted that headquarter employees signify at regional headquarters, which
provide opportunities for cross-cultural dealings afar from what can be found in the polycentric
staffing approach. The previous host country managers and the international assignments
also acquire useful albeit less culturally remote international career experience; however, they
are still limited to the regional level with a slight chance of upgrading to the top management
strategic working party back at their company headquarters.

2.2.4.1 Advantages of using Region-centric approach.

2.2.4.1.1 Build Competencies.

The region-centric staffing approach possibly will play a role, through this prolonged level of
international assignments, to edifice competent international competencies, signifying an
obliging conversion to an ultimate global strategy introducing a geocentric approach to staffing.

2.2.4.1.2 Encourage communication.

It permits interaction flanked by managers of an organisation’s contributory that transmits to

their organisation’s local headquarters, and managers from the organisation’s headquarters
positioned in the regional headquarters.

2.2.4.2 Disadvantages of using Region-centric approach.

2.2.4.2.1 Career limited.

When an organisation makes use of the region-centric staffing approach, there is a rare
occasion that they can be transferred between regions. This strategy shift employees within
designated regions, rather than transferring internationally.
The multinational enterprise can engage in one of numerous approaches to select international
staff. It may even continue on an unplanned core, rather than analytically selecting one of the
above four staffing approaches. The jeopardy with these approaches can be that the
organisation will choose a staffing approach of making use of parent country nationals in
international management positions by firm will choose for a policy of using parent-country
nationals in foreign management positions by evasion, that is, simply as an routine expansion of
domestic staffing approach, rather than consciously looking for best possible exploitation of
management abilities. There are both advantages and disadvantages of making use of local
nationals and expatriates in foreign contributories. The majority organisations make use of
expatriates only for important positions as senior managers. Expatriates veer to be very costly,
it makes little sense to hire expatriates for positions that can be proficiently filled by foreign
nationals. Numerous countries compel that a evident percentage of the work force need to be
local employees, with omissions frequently made for superior management.

3. Criteria for selecting expatriates.

International human resource is a decisive factor of an organisation’s position and is widely

recognized as an influencing factor for failure and success of international business
environments. International human resource involves developing human resource capabilities
to meet the diverse needs multinationals organisations. Human resources
and competitive international economy are cannot be easily too duplicated, as factors of
production and can, therefore, provide a competitive advantage for the organisation. When
looking at international staffing criteria’s, operating and middle management employees can be
selected locally. Upper management positions can be filled with parent country nationals (PNC),
host country nationals (HCN) and third-country nationals (TCN). The choice of whom to hire is
often influenced by the attitudes of top management teams and the overall staffing policies.
The organisations strategic positions and vision should take the view on international human
resource management and how it can be integrated into the organisation. “According to
Dowling and Schuler, (1990) selection is the process of gathering information for the purpose
of evaluating and deciding who should be employed in a position.” When high-technical
capabilities and when new international organisations recognize that adherence to the
organisations is in greater concern as to the commitment to host countries; expatriates
are usually sending abroad. (Deresky 2003) Technical expertise can be seen as one of the most
critical criteria when selecting employees for international assignments. “Black et al, 1999,
stated focusing on technical skills can result in an instant selection process, where potential
candidates with cross-cultural skills and similar technical skills can be overlooked when
decisions makers are trying to find suitable candidates within the organisation.”

For the human resource practitioner in charge, it can be challenging to determine what
selection criteria to use when selecting employees for international assignments. The factors
involved in the expatriation selection is, 1) Technical Ability 2) Cross-Cultural Suitability 3)
Family Requirements 4) Organisation-Specific Requirements 5) Language and 6) MNE
requirements. These factors are all related so they should not be revised separately. Technical
Ability, Cross-Cultural Suitability and Family Requirements, are the factors related to the
individual, and the Organisation-Specific Requirements, Language and MNE requirements
are mostly influenced by the working situation they need to enter.

3.1.1 Technical Ability.

For the selected candidate to perform a task, technical and the needed managerial skills
is necessary. The assessment of the potential candidate is usually based on
their previous working experience, where statements and evaluation records from the
candidates superiors is available. When the candidate needs to solve a problem in a new
international business environment, it must be noted that experience is not that serious.
Technical abilities are fundamentally the knowledge required to carry out a task; technical
abilities is associated to the working of tools. An example of technical abilities can be that
financial managers need to make use of business appraisal tools to assess and set up financial
statements like the income statement and balance sheet.

3.1.2 Cross-culture suitability.

“According to Dowling and Welch, (2004) important Things to consider when assessing the
candidates cross-culture suitability, is language skills, culture empathy, the attitude toward new
cultures and the level of personnel and emotional stability.” In practice, it is not easy to
evaluate the cross-culture suitability of a candidate as it is hard precisely know what factors
should be included. The multinational enterprise (MNE) emphasizes the importance of
expatriate’s abilities to create and maintain a natural relationship, but means to measure such
abilities is not always accurate enough. Efficient relationships for example, an analysis of the
hypothesis that culture with evident male dominance is more belligerent and it can be
perplexed, because the mock-up of cultures is not autonomous.

3.1.3 Family Requirements.

The success, of the expatriate abroad can be influenced by spouse/family, MNE’s sometimes
focuses too little on the impact that family may have on the expatriate. Families find it difficult
to adjust as they can suffer from segregation due to the subjection to integrate into new
environments. A higher level of organisational assistance in the primitive phases of
expatriation usually links with a higher level of adjustment by the spouse.

3.1.4 Organisation-Specific Requirements.

The human resource practitioner needs to consider the organisations requirements before
selecting a candidate, host country governments can stop the transfer of expatriates. The host
government, is the ones that issue the working permits and visas to the expatriates, therefore,
the parent country need to prove that there is no available host national country. Legislations
and changes of the employee must be addressed; assignments abroad means that the
expatriate must move to another country with family to remote or war-torn environments,
where living conditions can be challenging. Some host countries do not issue work permits to
females, this can make it difficult, for the spouse to adapt. An organisation-specific requirement
is implemented during the formation of an independent relationship flanked by computer
resources, which includes the evaluation of the comparative precedence between default
recommendation and alternative recommendation; and using the highest precedence
recommendations to set up a link among the computer resources.

3.1.5 Language skills.

Language skill is a significant factor, knowledge of the host country’s language can be
considered essential for many top level management positions, along with the aptitude to
communicate successfully. Knowledge of the host country’s foreign language helps the
expatriates and their families/spouse feel more contented in the new environment. When
adopting a corporate language, which is different from what the, expatriate local, language, is
a fundamental that language skills need to be viewed as selection criteria.

3.1.6 Multinational enterprise (MNE) requirements.

The MNE’s requirements have an enormous impact on the decisions and which selection
criteria to use. Training skills are very important, so that expatriates can train locals and
emphasize negotiating skills in new international business environments. The period of the
assignment is another factor influencing family/spouse. “According to Harris and Brewster,
(1999) they suggested that international managers has many similar characteristics as those
managers working in less complex environments, but are in need of additional skills regarding
to handle the problems that may arise internationally.”

Technical abilities is an important factor in the case of selecting international staff, it provides
the employee with the basic understanding of what is included in their tasks and what they
believe they are capable of doing. The multinational enterprise (MNE) view the experience of
expatriate as very important, prolong experience is needed to have the appropriate knowledge
to develop a successful organisation.

Global staffing practices

There are four primary approaches that multinational companies use in staffing decisions,
including geocentric, ethnocentric, polycentric, and regiocentric approaches.

The geocentric staffing approach does not focus on one nationality over the other. Instead,
upper level management positions are held by the most qualified employees selected form a
global pool of candidates. These managers are considered third country nationals, or
TCNs. The most qualified candidates are selected, but no single nationality is stressed.
The Geocentric Approach is one of the methods of international recruitment where the Multi
National Companies recruit the most suitable employee for the job irrespective of their
Nationality.

When a company adopts the strategy of recruiting the most suitable persons for the positions
available in it, irrespective of their nationalities, it is called a geocentric approach. Companies
that are truly global in nature adopt this approach since it utilizes a globally integrated business
strategy. Since the HR operations are constrained by several factors like political and ethnical
factors and government laws, it is difficult to adopt this approach. However, large international
companies generally adopt the geocentric strategy with considerable success.
For international recruitment, especially on foreign soil, organizations generally use manpower
agencies or consultants with international connections and repute to source candidates, in
addition to the conventional sources. For an effective utilization of the internal source of
recruitment, global companies need to develop an internal database of employees and an
effective tracking system to identify the most suitable persons for global postings.

The ethnocentric staffing approach heavily focuses on the norms and practices of the parent
company where upper management positions are typically held by corporate personnel from
the home country. These managers are considered parent company nationals, or
PCNs. Japanese and Korean firms follow this approach quite often.

Countries with branches in foreign countries have to decide how to select management level
employees. Ethnocentric staffing means to hire management that is of same nationality of
parent company.

When a company follows the strategy of choosing only from the citizens of the parent country
to work in host nations, it is called anethnocentric approach. Normally, higher-level foreign
positions are filled with expatriate employees from the parent country. The general rationale
behind the ethnocentric approach is that the staff from the parent country would represent the
interests of the headquarters effectively and link well with the parent country. The recruitment
process in this method involves four stages: self-selection, creating a candidate pool, technical
skills assessment, and making a mutual decision. Self-selection involves the decision by the
employee about his future course of action in the international arena. In the next stage, the
employee database is prepared according to the manpower requirement of the company for
international operations. Then the database is analysed for choosing the best and most suitable
persons for global assignments and this process is called technical skills assessment. Finally, the
best candidate is identified for foreign assignment and sent abroad with his consent.

The polycentric staffing approach heavily focuses on the norms and practices of the host
company where upper management positions are typically held by corporate personnel from
the local country. These managers are considered host country nationals, or HCNs. European
firms often follow this approach.
When a company adopts the strategy of limiting recruitment to the nationals of the host
country (local people), it is called a polycentric approach. The purpose of adopting this
approach is to reduce the cost of foreign operations gradually. Even those organizations which
initially adopt the ethnocentric approach may eventually switch over lo the polycentric
approach. The primary purpose of handing over the management to the local people is to
ensure that the company understands the local market conditions, political scenario, cultural
and legal requirements better. The companies that adopt this method normally have a localized
HR department, which manages the human resources of the company in that country. Many
international companies operating their branches in advanced countries like Britain and Japan
predominantly adopt this approach for recruiting executives lo manage the branches.”

The regiocentric staffing approach, a more recently identified approach, is where upper level
management positions are held by employees from a particular region (North American region,
European Region, Asian region, etc.). This approach is similar to the polycentric approach, but
it reflects a specific region rather than a specific country. For instance, a U.S. company in
Mexico may consider hiring an employee from Canada to fill a management role.

The regiocentric approach uses managers from various countries within the geographic regions
of business. Although the managers operate relatively independently in the region, they are not
normally moved to the company headquarters.
The regiocentric approach is adaptable to the company and product strategies. When regional
expertise is needed, natives of the region are hired. If product knowledge is crucial, then
parent-country nationals, who have ready access to corporate sources of information, can be
brought in.

One shortcoming of the regiocentric approach is that managers from the region may not
understand the view of the managers at headquarters. Also, corporate headquarters may not
employ enough managers with international experience.

International Transfer and Repatriation strategies

International Transfer strategies

One of the internal mobility of the employee is transfer. It is lateral movement of employee in
an organization by the employee. “A transfer involves the shifting of an employee from one job
to another without changing the responsibilities or compensation”.

Transfers of employees are quite common in all organizations. This can also be defined as a
change in job within the organization where the new job is substantially equal to the old in
terms of pay, status and responsibilities. Transfers of employees can possible from one
department to another from one plant to another. Transfer may be initiated by the
organization or by the employees with the approval of the organization. It can be also due to
changes in organizational structure or change in volume of work, it is also necessary due to
variety of reasons. But broadly can be done either to suit the conveniences of organization and
to suit the convenience of employees.

The purposes of the Transfer

The transfer are generally affected to build up a more satisfactory work team and to achieve
the following purposes:

 To increase the effectiveness of the organization.

 To increase the versatility and competency of key positions.
 To deal with fluctuations in work requirements.
 To correct incompatibilities in employee relations.
 To correct, erroneous placement.
 To relieve monotony.
 To adjust workforce.
 To punish employees.

Types of Transfers most of the transfers generally carried out four types of transfers which are
discussed below:

Production Transfer: Such transfers are resorted to when there is a need of manpower in one
department and surplus manpower in other department. Such transfers are made to meet the
company requirements. The surplus employees in one department/section might be observed
in other place where there is a requirement.

Replacement Transfers: This takes place to replace a new employee who has been in the
organization for a long time and there by giving some relief to an old employee from the heavy
pressure of work.

Remedial Transfers: As the name suggest, these transfers are made to rectify the situation
caused by faulty selection and placement procedures. Such transfers are made to rectify
mistakes in placement and recruitments. If the initial placement of an individual is faulty or has
not adjusted to work/job, his transfer to a more appropriate job is desirable.

Versatility Transfer: Such transfers are made to increase versatility of the employees from one
job to another and one department to another department. Transfer (Job Rotation) are the tool
to train the employees. Each employee should provide a varied and broader job experiences by
moving from one department to another. This is for preparing the employee for promotion, this
will definitely help the employee to have job enrichment.
Transfer Policy

Every organization should have a fair and impartial transfer policy which should be known to
each employee. The responsibility for effecting transfers is generally entrusted to an executive
with power to prescribe the conditions under which requests for transferred are approved.
Care should be taken to ensure that frequent or large scale transfers are avoided by laying
down adequate selection and placement procedures for the purpose. A good transfer policy
should:

 Specifically clarify the types of transfers and the conditions under which these will be
made.
 Locate the authority in some officer who may initiate and implement transfers.
 Indicate whether transfers, i.e., whether it will be based on seniority or on the skill and
competency or any other factor.
 Decide the rate of pay to be given to the transfere.
 Intimate the fact of the transfer to the person concerned well in advance.
 Be in writing and duly communicated to all concerned.
 Not be made frequently and for sake of transfer only.

A sound, just and impartial transfer policy should be evolved in the organization to govern all
types of transfers. This policy should be clearly specified so that the superiors cannot transfer
their subordinates arbitrarily and subordinates may not request for transfers even for the small
issues. The management must frame policy on transfers and apply it to all the transfers instead
of treating each case on its merit. Such a policy must be based on the following principles:

1. Transfer policy must be in writing and be made known to all the employees of the
organization.
2. The policy must very clearly specify the types and the circumstances under which
company initiated the transfer will be made.
3. Basis of the transfer should be clearly mentioned in the policy, whether it will be based
seniority or on the skill and the competency or any other factors.
4. It should indicate the executives who will be responsible for initiating and approving the
transfers.
5. The policy should specify the region or unit of the organization within which transfers
will be administered.
6. The effect of the transfer on the pay and seniority of the transferred employee may be
clearly evaluated.
7. It should be prescribed in the policy whether the training or retraining is required on the
new job.
8. Transfer should be clearly defined as temporary or permanent.
9. The interest of the organization are not to be forgotten in framing a policy of transfer.
10. Reasons for the mutual transfer of employees or reasons to be considered for the
personal transfers should be specified.
 11. The fact of the transfer should be intimated to the person concerned well in advance.
12. Transfer should not be made frequent and not for the sake of transfer only.

International Repatriation strategies

A successful repatriation not only secures the continued employment of the expat, but results
in an advocate who thrives and becomes a positive promoter of the program. This requires
planning before the expat goes on assignment as well as a mutual understanding of what his or
her return will look like and the commitments the company is willing to make upon the expat’s
return.

While nearly three-quarters of companies with expat programs have formal repatriation
policies, only one in five have repatriation discussions with their expats before their
assignments begin, according to a survey by Brookfield Global Relocation Services. While it is
difficult to prove a correlation between formal career management and expat attrition, the
survey notes that two-thirds of companies with high expat attrition rates had no formal
strategy linked to career management.

Showing participants at the beginning of their assignments that the company is committed to
their professional development will help ensure that expat prospects are comfortable in
accepting the assignment. Following are six primary areas that should be considered when
planning repatriation:

1. Educate and engage others

It sounds simple, but a personal thank you and meeting with senior leadership at the
company can go a long way to making the expat feel valued and welcomed back home.
Further, companies should encourage and help the expat provide colleagues and
prospective expats with a realistic picture of what they achieved, how they developed
professionally, what they had to give up or put on hold to participate, and the cultural
experience of the assignment location. Involve family members where possible and
appropriate to fill in the picture.
2. Compensation
By ensuring at the start of the assignment that all of the assignment-related
compensation is broken out, it will be easier to avoid compensation issues upon return
to the home location and helpful in avoiding discontent from the expat. That said, a
short-term repatriation allowance can help ease the transition as well. In addition,
management should consider offering a retention bonus for staying with the company
for an additional two years after the assignment. Continuing tax support is essential for
trailing tax liabilities in the host and home countries. Through this benefit, management
may also find opportunities to bring cash back to the company and reduce some of the
tax costs of the assignment.
 3. Career development
According to the Brookfield survey, the best method for retaining expats after they
return to their home locations is to offer opportunities to use their international
experience. A good repatriation program will ensure the expat comes back to an
available position that is considered an advancement from pre-assignment; offering a
greater choice of positions is effective as well. In any event, career discussions should
start in earnest six to 12 months before return to the home location.
4. Ongoing support
Regular business trips back to the home country throughout the assignment can ensure
the expat does not return to an unfamiliar and isolating environment. If the return is not
to the original location of departure, continued logistical support can help ease this
transition. For example, connecting expats with mentors who are based in the home (or
eventual) location can help keep expats in the loop and in the minds of their home-
country colleagues throughout their assignments. Transition counseling can help
counter the negative culture shock that a return home can often have on expats and
their families.
5. Families
It can be difficult to overstate the impact of the expat’s family members’ opinions of the
repatriation on the returning expat. After all, family members living with the expat (and,
to some extent, those who stay behind in the home country) made a commitment to
the sponsoring firm as well. Immediate family members may be asked to put their own
careers on hold or raise families in a foreign location. Extended family members may not
see their loved ones for months or years at a time. The impact that families have on the
expat’s future can be significant, and the importance of seeing the return home as
positive experience should not be underestimated.
6. Continuous improvement
Candidly ask the expat for feedback on the assignment and how it can be improved,
then engage the expat in helping to implement those changes. Involve the expat (and,
where appropriate, the expat’s family) in shaping and supporting the next group of
expats.

Global Workforce Training and Development

Training and Developing a Global Workforce

Companies with multicultural workforces face a number of issues with their onboarding,
training and development programs. Companies must ensure that the level of quality of
orientation and training programs is consistent for employees regardless of their country of
origin. Further, when an employee is sent to work in a foreign country, a business must provide
cultural and occupational training that the worker will need to be successful.
Training International Employees

When developing training programs for foreign employees, developers should be aware of the
differences between high context and low context cultures. They must also recognize how the
design of a training program can influence the participation and effectiveness of particular
cultures. Thus, training must be strategically planned for international employees. The goal
must be clearly defined and objectives must be established that support the goal. The
objectives should specify the training methods, media and support material to be utilized.
Depending on an employee’s language and culture, carefully tailored approaches to training will
yield more effective results.

A company must be prepared to have slides, employee manuals, onboarding materials and
other materials translated into the languages of participants and, when necessary, have
interpreters present for training events. In the United States, companies routinely order
the English to Spanish translation of employee manuals, safety manuals, standard operating
procedures and quality manuals to support their domestic workers.

In addition to focusing on cultural and socioeconomic characteristics of new employees,

attention should also be focused on the backgrounds of the trainers. Also characteristics,
including level of education attained, reading comprehension and access to the Internet at
home, will determine the feasibility of online training.

Throughout the development of the training program, managers should be mindful of

situations and conditions that could distract the program from meetings its goal. To ensure the
program stays on course, the goals of the program should be measurable, linked to
performance and approved by top management.

The primary reasons for the failure of an assignment abroad and the pre-return of an expatriate
include cultural differences, loneliness, high cost of living and relationship problems.

Cross-Cultural Preparation

Prior to relocating an employee to a foreign country, a business often provides cross-cultural

preparation to the worker and his family. In the past, cross-cultural preparation wasn’t
something that U.S. businesses provided. However, American companies have witnessed large
numbers of employees returning home prior to completing their assignments. One study
suggests that U.S. companies lose $2 billion annually from overseas assignments that were
terminated prematurely by the employee. Cross-cultural preparation teaches the employee
how to conduct business and get things done by introducing business practices and cultural
norms of the foreign country.
Generally, the first step in a program involves identifying candidates who are most likely to
succeed overseas. Ideal candidates are highly proficient in their job, effectively communicate at
home and abroad, display patience rather than vagueness, express cultural sensitivity, show
enthusiasm and self-motivation and are interested in learning new languages and cultures.
However, the most important determinant to the success of a candidate is the long-term
support of the employee’s spouse.

After careful screening of employee and spouse, a cross-cultural preparation program should
be designed that includes three stages: Preparation, Acclimation and Repatriation.

Preparation

Preparation takes place before the employee is sent overseas. This training includes training on
the language, culture and customs of the country. The employee, spouse and children are
briefed on housing, shopping, healthcare, education and other information needed for general
daily life. Employees meet with managers who brief the employee on career growth
projections. Instruction typically includes presentations and exercises that allow for interaction
with others who have successfully completed similar assignments.

Acclimation

The employee and family receive more comprehensive training once they arrive in the host
country. The host family enters a mentoring program that helps them assimilate into their new
environment. The employee is typically assigned to a mentor at work who counsels the
employee on the new work environment.
Repatriation

Coming back home can sometimes be a traumatic experience. While the employee and family
have been away, sometimes for several years, significant changes in their community and in the
company may have occurred. Colleagues, managers and other confidants may have left the
company. During their time away, employees should be encouraged to stay current and build
relationships with changes at home. This can be done through employee newsletters and by
making effective use of the occasional return trips.

Performance Management in International Organization

A MNE is not uniform across all of its subsidiaries and therefore, a number of environmental
contingencies must be considered in relation to the various subsidiaries. These contingencies
are the mental distance between the parent and host country, entry modes and the role of the
subsidiaries (Colakoglu et al., 2009). There are several staffing models that are considered while
filling up positions in the subsidiaries. In the geocentric staffing model, companies employ the
most competent person irrespective of the country the employee actually belongs to. On the
other hand, regiocentric is a geographic strategy and a subset of the geocentric approach
whereby employees remain within a particular geographic region, allowing managers to enjoy
regional autonomy (Schuler et al., 2002). In the ethnocentric staffing model, parent-country
nationals (PCNs) are employed to fill up the higher level positions, whereas in the polycentric
staffing model, host-country nationals (HCNs) are employed with the belief that the company
will benefit from their local knowledge (Varma et al., 2005). Furthermore, the ethnocentric and
geocentric staffing models also require integration and transfer of knowledge inside the host
country unit in order to enable better performance from the subsidiary. Moreover, this will
mean that the particular staffing strategy adopted will have an impact on the subsidiaries
performance (Colakoglu et al., 2009).

The diverse business strategies of an organisation along with the dynamic global environment
create the need for strategic HRM. It has become necessary to strategically manage the human
resources of an organisation with the aim that they fit into the global environment and perform
well. The operation of MNEs involves two dimensions, these being multiculturalism and
geographic dispersion. These two aspects are balanced by adopting a mix of a centralised and
decentralised approach since they both have their own benefits. Strategically, it is vital that the
HRM fits with the business strategy of the organisation. Furthermore, there is complete control
from the headquarters and this centralised approach makes it imperative to develop uniform
performance evaluation criteria all throughout the subsidiaries of the MNE (Caliguiri, 2006). In
this strategy local responsiveness is very important, whereas global integration is not required.
The decentralised approach makes them develop performance evaluation criteria depending on
the host country, with the performance evaluation being aligned with the subsidiary’s strategy.
Moreover, these organisations experience immense pressure for local responsiveness along
with global integration and therefore, performance evaluation will also take into consideration
the global as well as the local perspectives (Caliguiri, 2006). This means that the success of
MNEs can very much depend on the performance of expatriates.

Performance appraisal of an expatriate is a crucial task, with the possibility of conflict between
the subsidiary manager and the headquarters. But it is up to the subsidiary managers to set
precise targets and establish clear criteria for performance measurement in order to avoid such
conflict. Furthermore, the mental distance between the parent and host country can make
managing the subsidiary a difficult task due to the cultural differences, language barriers, as
well as the social and political conditions. It is for this reason that companies tend to hire more
PCNs within subsidiaries, as they are more able to create an informal communication network
in the organisation and build social capital in the corporation, all the while having a dual
commitment to both the subsidiary and the organisation as a whole (Colakoglu et al., 2009). As
a result, the PCN will further enable the subsidiary to have greater knowledge of what is
happening in the MNE. Therefore, subsidiaries will no longer exist in isolation with strong
control from headquarters, since they will experience greater integration and autonomy.
However, there is at times a conflict of interest between the headquarters and the subsidiaries
which can make managing international operations a huge challenge (Boussebaa, 2009).

Performance management of expatriates is undoubtedly more difficult than in the case of

domestic managers. The performance of an expatriate will depend on a variety of issues such as
the compensation, cultural adjustments, tasks and job roles, as well as support from
headquarters and the host environment. The expatriate will face a number of problems when
they take up a job within a foreign country. For example, the tasks and job roles are often
defined in the context of the expatriate’s home country and therefore they may not be able to
understand their particular job role in the foreign environment (Newlands and Hooper, 2009).
Furthermore, the expatriate may face difficulty in adjusting to the foreign culture, and it will be
up to the MNE to ensure that they acclimatise, as this is vital to the expatriate being able to
perform at their best in terms of the job in hand. The host environment will also pose
challenges due to a combination of several other factors such as, social, economic, legal,
technological and physical complications. Therefore, taking everything into account it is
absolutely vital as well as a crucial performance variable that a sufficient level of support is
provided to the individual and their family by both the headquarters and hosts (Dowling et al.,
2008).

International Performance Appraisal Methods

The performance appraisal of expatriates can involve a number of complicated issues. As such,
the data available for carrying out the appraisal may be unreliable, the international
environment can be complex and dynamic, it is difficult to carry out an appraisal in a volatile
environment, and the geographical distance along with the different time zones often make the
appraisal difficult to conduct. Furthermore, as mentioned earlier, the local culture can also have
a significant impact on appraisals.
A MNE may carry out an appraisal using the home-based approach or the host-based approach.
In practice, these appraisals would be carried out once a year in order to ensure better
performance management of the expatriate (Dowling et al., 2008). Alternatively, expatriate
appraisals may be carried out using the home-based approach, while the host system is used
for appraising third-country nationals (TCN) and HCN. An integrative approach can also be used
by combining both the home and host performance appraisal policies in order to create an
effective balance. Furthermore, in terms of who will carry out the appraisal, HCNs may be made
to conduct appraisals as they can help in devising a suitable appraisal system while helping the
acculturation process. An ex-expatriate may also be an option, while self-evaluation may
additionally be used, allowing the expatriate to evaluate themselves (Armstrong, 1998).
Moreover, the 360-degree feedback could also be employed. This can assist in the issue of
biasness as it involves multiple sources for feedback, including peer’s who work within close
proximity of the expatriate.

Nevertheless, an IPA will generally be carried out by different nationals, including HCNs and
PCNs. However, there may be conflicting opinions and perspectives, and several biases may
take place when a PCN conducts the appraisal. The geographical distance can also make it
difficult for the PCN to carry out the appraisal in an effective manner and therefore, not
allowing an appropriate evaluation criteria to be set. Furthermore, it is difficult for the PCN to
understand the global business scenario and evaluate performance in context to the
international scenario as they may fail to understand the business challenges that exist in the
global environment (Shen, 2005). The PCN is forced to rely only on subsequent data while
making the evaluation, and therefore they are only able to judge the performance on the basis
of quantitative data and not qualitative data. On the other hand, despite overcoming the
dilemma of cultural adaptation, a HCN may also have certain biases while conducting a
performance appraisal, as they may not feel trusting towards the expatriate, while doubting
their intentions.

Performance appraisal in MNEs can also often involve assessment by the immediate manager,
where a narrative report is prepared by the manager annually regarding the expatriates work
quality and output. Measurement techniques like simple rankings, behavioural checklist, and
comparison with objectives are used. This is likely to be based on the appraisal practices within
the host country, which can involve certain cultural issues. We already know that language
barriers can pose a problem, however, a MNE may also face difficulties in developing countries
where performance appraisal constraints exists in the form of ‘face saving’, as well as in the
authoritarian societies where employee involvement in appraisals is very limited (Brewster and
Harris, 1999).

However, the main challenge is in maintaining global consistency and local fit. A MNE realises
that performance appraisals require local adaptation, and consequently managers from
different cultures will perceive different appraisal methods as appropriate. The performance
evaluation criteria should therefore be easy to understand and should motivate managers
irrespective of their culture and nationality (Paauwe and Dewe, 1995 cited in Shen, 2005).
Furthermore in terms of setting performance goals, MNEs may either set hard goals or soft
goals. Hard goals are quantifiable goals and can be measured through return on investments,
profits and market share, whereas, soft goals are qualitative and based on relationships or
traits, including customer relations, effort, cooperation, initiative communication skills and
leadership skills. MNEs will have the three choices of host standards, home standards or
integrative standards when determining the criteria for expatriates. The performance
expectation should therefore be effectively communicated to expatriates, while appraisal forms
should also be customised according to the understanding of the HCN and PCN, and it should
be ensured that the appraisal is conducted in a non-biased manner (Shen, 2005). Moreover,
MNEs will often exempt the expatriate from management duties and appraisal in order to
enable them to adjust into the new environment. Consequently, it could also be argued that
performance appraisal can be improved in the subsidiaries of the MNEs by setting clear
evaluation criteria.

Approaches to international Compensation and Benefits

There are two basic approaches to determine the international compensation package:

1. Going Rate Approach

This is based on the local market rates. It relies on comparisons of survey of the local
nationals, expatriates of same nationality and expatriates of all nationalities’ pay packages.
In this approach, the compensation is based on the selected survey comparison. The base pay
and benefits may be supplemented by additional payments for low pay countries.

The advantages of Going Rate Approach are,

 Equality with local nationals

 Simplicity
 Identification with the host country
 Equity amongst different nationalities

The disadvantages of Going Rate Approach are,

 Variation between assignments for the same employees

 Rivalry between expatriates of the same nationality in getting assignments to some
countries
 Potential re-entry problems in the home country
2. Balance Sheet Approach:

The Balance Sheet Approach to international compensation is a system designed to equalize

the purchasing power of employees at comparable position levels living abroad and in the
home country and to provide incentives to offset qualitative differences between assignment
locations. The balance sheet approach is widely used by international organizations to
determine the compensation package of the expatriates. The basic objective is the
maintenance of living standards of the home country plus financial inducement.

1. Goods and Services: Outlays incurred in the home country for food, personal care,
clothing, household furnishing, recreation, transportation and medical care.
2. Housing: All major costs associated with housing in the host country.
3. Income Taxes: Parent country and host country income tax expenditures.
4. Reserve: Contribution to savings, payments for benefits, pension contributions,
investments, education expenses, social security taxes etc.

The advantages of the Balance Sheet Approach are:

 Equality between assignments and between expatriates of the same nationality.

 Facilitates expatriate re entry
 Easy to communicate to the employees

The disadvantages of the Balance Sheet Approach are:

 It can result in considerable disparities between the expatriates of different nationalities

and between expatriates and local nationals.
 It can be quite complex to administer due to changing economic conditions, taxation
etc.
 Unit 3

Industrial relation and International practices in Industrial relation

A number of human resources best practices can help you develop a productive and collegial
relationship between management and organized labor. Up-to-date information about labor
laws, leadership training on basic industrial relations practices and well-constructed negotiation
strategy are elements that will improve your organization’s labor-management relations. Turn
what traditionally has been an adversarial relationship into one that benefits your company and
employees.

Labor Laws

Fundamental to the labor-management relationship is clarity about applicable laws, such as the
National Labor Relations Act. The act establishes employees’ rights and sets out the obligations
and responsibilities of employers and labor unions. In addition to understanding basic labor
law, HR best practices include staying abreast of changes in the laws and decisions of the
National Labor Relations Board that affect your industry and your workplace.

Leadership Training

Much of leadership training covers how to assign work and provide feedback about
performance and basic employment law, such as Title VII of the Civil Rights Act and preventing
workplace harassment. Supplement your supervisory training with labor-management-related
components, such as union contract interpretation, conflict resolution and, if your workforce
isn’t unionized, how to maintain a union-free workplace. Supervisors and managers have the
most direct contact with workers, and workforce management principles suggest that HR equip
them with the skills necessary to be first responders concerning labor-management issues.

Collective Bargaining

HR best practices in collective bargaining include developing management strategy and

proposals for contract negotiation at least six months before the contract expiration date.
Assess the negotiating team’s workload and reassign long-term projects that could interfere
with their availability for bargaining sessions. The NLRA requires that both management and
the union make themselves available for contract negotiations, as that demonstrates good
faith. If you anticipate changes in your employee benefits package, get clarification from your
compensation and benefits specialist on how the group health plan, pension and other benefits
will affect negotiations.
Resources

Take advantage of resources available to HR staff, supervisors and managers. Continuing

education courses, workshops and seminars on building relationships with labor union
representatives generally are sponsored by law firms, management consulting groups and
colleges. Use social media and Internet research to learn about union-organizing drives,
including the occupations and industries that labor unions are targeting.

Union-Free Workplace

If your employees aren’t union workers, improve your employee relations practices. Strengthen
the employer-employee relationship by addressing workplace issues as soon as possible to
avoid the lingering effects of conflict that often lead employees to seek unionization. Conduct
routine vulnerability assessments to determine the likelihood of your employees supporting a
union. Vigilance pays off — showing interest in and appreciation for your employees keeps job
satisfaction high so they won’t seek union representation.

Grievance Handling

HR management should address union grievances as soon as they arise. When a union
employee feels that he has been unjustly reprimanded or terminated, he can file a grievance.
The HR manager or a labor relations specialist is responsible for processing a union-employee
grievance, which usually is a three-step process. The process includes a union steward who
represents the employee’s interests. If the matter isn’t resolved within the allotted three steps,
the case goes to arbitration. The arbitration process can be as lengthy and costly as litigation,
both being processes that HR management would like to avoid whenever possible.

Shifts in IHRM and IR

There have been several shifts in International Human Resource Management (IHRM) and
Industrial Relations (IR) over the years. Here are some of the key shifts:

Globalization: With the increasing globalization of business, there has been a shift towards
managing a more diverse workforce across different countries and cultures. This has led to a
greater emphasis on IHRM, including managing international assignments, cross-cultural
training, and developing global compensation and benefits packages.

Technological advancements: The rise of technology has enabled more remote working and
collaboration across borders, leading to a greater need for managing virtual teams and ensuring
effective communication and collaboration.
Economic changes: Changes in the global economy have led to increased competition for
talent, as well as changes in the demand for skills and the nature of work. This has led to a
greater emphasis on talent management and workforce planning in IHRM.
Legal and regulatory changes: Changes in labor laws, immigration policies, and other legal and
regulatory frameworks have impacted how organizations manage their workforce across
borders. This has led to a greater need for compliance and risk management in IHRM.
Changing attitudes towards work: There has been a shift in attitudes towards work, with
employees placing greater importance on work-life balance, job satisfaction, and purpose-
driven work. This has led to a greater emphasis on employee engagement and well-being in
IHRM.

Digitalization and AI: The rise of digitalization and artificial intelligence has led to new ways of
managing the workforce, including the use of HR analytics, talent assessment tools, and
chatbots for employee support.

In summary, there have been several shifts in IHRM and IR, driven by changes in the global
economy, technology, legal and regulatory frameworks, and changing attitudes towards work.
These shifts have led to new challenges and opportunities for organizations to effectively
manage their workforce across different countries and cultures.

SHRM: Definition, Need and Importance

Strategic human resource management or SHRM is a branch of HRM. It emerged from the
discipline of human resource management and is a fairly new field. Strategic HRM is defined as
“the linking of human resources with strategic goals and objectives in order to improve
business performance and develop organizational culture that foster innovation and
competitive advantage.” SHRM in an organization means “to accept and involve the functions
of HR as a strategic partner in formulating and implementing the company’s strategies through
human resource activities which may involve recruiting, selecting, rewarding and training
company personnel. In spite of the similarity in names, HRM and SHRM are two different
practices; SHRM is basically a part of the complete HRM process. Besides that SHRM focuses
more on long-term objectives rather than the in-house objectives with employees dealt by
HRM. In the late 1980’s writers started stating strong opinions for a much more strategic
approach to managing people than was the standard practice of that time. They clamored for
the change of traditional management practices of industrial relations and people to the
modern more improved ones.

The center point of SHRM is to address and solve problems that effect management programs
centering on people in the long run and more than often globally. We can say that the main
goal or objective of SHRM is to increase productivity not only in the employees but in the
business overall, it achieves this by focusing on business problems and obstacles outside of the
human resources range. SHRM identifies important human resource areas where strategies can
be implied for the improvement of productivity and employee motivation. To achieve good
results communication between human resource and top management of the organization is of
utmost importance as cooperation is not possible without active participation.

KEY FEATURES OF SHRM

The key features of strategic human resource management are given below:

 Some organizing strategies or schemes link individual human resource interventions so

that they are ‘mutually supportive’
 A great amount of responsibility is transferred down the line for the management of HR
 There is a precise link between overall organization strategy, organization environment,
HR policies and practices.

DEVELOPMENT IN SHRM

In recent times HRM professionals have been facing challenges with employee participation,
performance management, employee reward systems, high commitment work systems and
human resource flow because of globalization. Traditional models and techniques have no
place in today’s business world; also local companies which go global cannot use the same
tactics in the global business world. Top managements and HR professionals that are involved
in strategic human resource management face a wide range of issues which include some of the
following:

 Rapid change in technology

 Introduction of new concepts of general management
 Globalization of market integration
 Increased competition, which may not necessarily be local
 Resultant corporate climates
 Constantly changing ownership

International labour Standards

International labour law is the body of rules spanning public and private international law which
concern the rights and duties of employees, employers, trade unions and governments in
regulating the workplace. The International Labour Organization and the World Trade
Organization have been the main international bodies involved in reforming labour markets.
The International Monetary Fund and the World Bank have indirectly driven changes in labour
policy by demanding structural adjustment conditions for receiving loans or grants. Issues
regarding Conflict of laws arise, determined by national courts, when people work in more than
one country, and supra-national bodies, particularly in the law of the European Union, has a
growing body of rules regarding labour rights.
International labour standards refer to conventions agreed upon by international actors,
resulting from a series of value judgments, set forth to protect basic worker rights, enhance
workers’ job security, and improve their terms of employment on a global scale. The intent of
such standards, then, is to establish a worldwide minimum level of protection from inhumane
labour practices through the adoption and implementation of said measures. From a
theoretical standpoint, it has been maintained, on ethical grounds, that there are certain basic
human rights that are universal to humankind. Thus, it is the aim of international labour
standards to ensure the provision of such rights in the workplace, such as against workplace
aggression, bullying, discrimination and gender inequality on the other hands for working
diversity, workplace democracy and empowerment.

While the existence of international labour standards does not necessarily imply
implementation or enforcement mechanisms, most real world cases have utilised formal
treaties and agreements stemming from international institutions. The primary international
agency charged with developing working standards is the International Labour Organization
(ILO). Established in 1919, the ILO advocates international standards as essential for the
eradication of labour conditions involving “injustice, hardship and privation”. According to the
ILO, international labour standards contribute to the possibility of lasting peace, help to
mitigate potentially adverse effects of international market competition and help the progress
of international development.

Implementation, however, is not limited to the ILO nor is it constrained to the legislative model
that the ILO represents. Other alternatives include direct trade sanctions, multilateral
enforcement, and voluntary standards. In addition to controversies that arise over each of
these models, greater issues have also been raised concerning the debate over the need for
international labour standards themselves. However, while critics have arisen, the international
community has largely come to a consensus in favour of basic protection of the world’s labour
force from inhumane practices.

Associated with the development of successful international labour standards is proper

monitoring and enforcement of labour standards. Most monitoring occurs through the ILO, but
domestic agencies and other NGOs also play a role in the successful monitoring of international
labour standards.

Objective of ILO

 Formulation of international policies and programmes to promote basic human rights,

improve working and living conditions, and enhance employment opportunities;
 Creation of international labour standards in the form of Conventions and
Recommendations, backed by a unique system to supervise their application;
 An extensive programme of international technical cooperation.
 Training, education, research, and publishing activities to help advance all of these
efforts.
  To promote and realize standards and fundamental principles and rights at work;
 To create greater opportunities for women and men to secure decent employment;
 To enhance the coverage and effectiveness of social protection for all.

STRUCTURE OF ILO

Some of the most important organisational structure of ILO are as follows:

1. International Labour Conference (ILC)

2. Governing Body
3. International Labour Office (ILO).

(1) INTERNATIONAL LABOUR CONFERENCE (ILC)

This is the Apex body of ILO which makes labour policies for international labour. The ILC holds
its sessions at a frequency not less than once in a year. The delegates from three group’s viz.
the government, the employers’ and the workers attend ILC sessions in the ratio of 2:1:1
respectively. Each representative has a vote. The representatives from the Government are
mostly ministers, diplomats or officials.

The conference is empowered to appoint committees to deal with different matters relating to
labour during each session. Examples of such committees are the selection committee, The
Credential Committee, The Resolution Committee, The Drafting Committee, The Finance
Committee, etc. All committees except Finance Committee are tripartite in nature.

The functions performed by the ILC are to:

1. Formulate international labour standards.

2. Fix the amount of contribution to be paid by the member states.
3. Decide budget and submit the same to the Governing Body.
4. Study the labour problems submitted by the Director General and assist in their
solutions.
5. Appoint committees to deal with different problems during its sessions.
6. Elect the president.
7. Select members of the Governing Body.
8. Develop policies and procedures.
9. Seek advisory opinion from International Committee of Justice.

 Confirm the powers, functions and procedure of Regional Conference.

(2) GOVERNING BODY

It is also a tripartite body. It implements decisions of the ILC with the help of the International
Labour Organization. It consists of 56 members in the same ratio of 2:1:1, i.e. 28
representatives of the Government, 14 of the employers and 14 of the workers. Of the 28
representatives of the Government, 10 are appointed by the members of the States of Chief
Industrial Importance and remaining 18 are delegates of the other governments.

Industrial population is the criteria for chief Industrial Importance. India is one of the ten states
of chief Industrial Importance. The tenure of the office of this body is 3 years. It meets
frequently in a year to take decisions on the programmes of the ILO.

The functions of the Governing Body are to:

1. Co-ordinate work between the ILC and ILO.

2. Prepare agenda for each session of the ILC.
3. Appoint the Director General of the office.
4. Scrutinize the budget.
5. Follow up with member states in regard to implementation of the conventions and
recommendations adopted by the ILC.
6. Fix the date, duration, schedule and agenda for the Regional Conferences
7. Seek as and when required, advisory opinion from the International Court of Justice
with the consent of the ILC.

(3) International Labour Office:

This is the secretariat of the ILO in Geneva and is the third major organ of the ILO. The Director
General (DG) of the ILO is the Chief Executive Officer of the Secretariat appointed by the
Governing Body. He also serves as the Secretary General of the ILC. His tenure is for 10 years
and extendable by the Governing Body.

The Director General is assisted by two Deputy Director Generals, six Assistant Director
Generals, one Director of the International Institute of Labour Studies, and one Director of the
International Centre for Advanced Technical and Vocational Training, Advisors, Chief of
Divisions from 100 nations.

Following are the main functions of this office:

1. Prepare briefs and documents for agenda of ILC.

2. Assist the Governments of the States to form labour legislation based on
recommendations of the ILC.
3. Bring out publications relating to industrial labour problems of international nature and
interest.
4. Carry out functions related to the observance of the conventions.
 5. Collect and distribute information on international labour and social problems.
6. To promote and realize standards and fundamental principles and rights at work;

THE ROLE OF THE ILO

The mission of the International Labour Organization (ILO) is to promote social justice and
internationally recognized human and labour rights, based on the founding principle that social
justice is essential to universal and lasting peace.

Decent Work Agenda

As part of its mission, the ILO aims to achieve decent work for all by promoting social dialogue,
social protection and employment creation, as well as respect for international labour
standards. The ILO provides technical support to more than 100 countries to help achieve these
aims, with the support of development partners.

International labour standards

The ILO sets international labour standards with Conventions, which are ratified by member
states, or Recommendations, which are non-binding.

Conventions are drawn up with input from governments, workers’ and employers’ groups at
the ILO. Conventions are adopted by the International Labour Conference, which meets every
year in Geneva.

The ILO’s supervisory role

The ILO monitors the implementation of ILO Conventions ratified by member states. This is
done through:

 The Committee of Experts on the Application of Conventions and Recommendations

 The International Labour Conference’s Tripartite Committee on the Application of
Conventions and Recommendations
 Member states are also required to send reports on the progress of the implementation
of the Conventions they have ratified.

ILO Declaration on Fundamental Principles and Rights at Work

Adopted in 1998, the Declaration commits member states to respect and promote eight
fundamental principles and rights in four categories, whether or not they have ratified the
relevant Conventions.
They are:

 Freedom of association and the right to collective bargaining (Conventions 87 and 98)
 The elimination of forced or compulsory labour (No. 29 and No. 105)
 The abolition of child labour (Conventions No. 138 and No. 182)
 The elimination of discrimination in respect of employment and occupation

Global Union Federations

Global Union Federations are the international representatives of unions organizing in specific
industry sectors or occupational groups. Most AFL-CIO unions belong to the union federation
for their sector.

Building and Wood Workers International represents 326 free and democratic unions in the
building, building materials, wood, forestry and allied sectors, representing about 12 million
members in 130 countries. Its mission is to promote trade unions around the world, and to
promote and enforce workers’ rights in the context of sustainable development.

Education International is the voice of teachers and other education employees around the
globe. A federation of 401 associations and unions in 171 countries and territories, it represents
30 million educators and support professionals in educational institutions from early childhood
centers to universities.

Industrial Global Union represents 50 million workers in 140 countries in the mining, energy
and manufacturing sectors. It is a force in solidarity fighting for better working conditions and
trade union rights around the world.

International Arts and Entertainment Alliance (IAEA) The alliance has three sections: the
International Federation of Actors (FIA), the International Federation of Musicians (FIM), and
the Media, Entertainment and Arts section of the UNI Global Union (UNI-MEI).

International Domestic Workers Federation is a membership-based global organization of

domestic and household workers that is made up of both unions and associations.

The International Federation of Journalists is the world’s largest organization of journalists.

First established in 1926, the federation represents about 600,000 members in 134 countries. It
promotes international action to defend press freedom and social justice.

The International Transport Workers’ Federation consists of about 700 unions representing
more than 4.5 million transport workers from some 150 countries. Its mission is to promote
respect for trade union and human rights worldwide, to work for peace based on social justice
and economic progress, to help its affiliated unions defend member interests, and to provide
research and information services to its affiliates.
The International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied
Workers’ Associations represents workers employed in agriculture and plantations, the
preparation and manufacture of food and beverages, hotels, restaurants and catering services,
and all stages of tobacco processing. It is currently composed of 388 trade unions in 125
countries representing more than 12 million workers. Founded in 1920, it strives to build
solidarity at every stage of the food chain, organize within transnational companies, and lead
global action to defend human, democratic and trade union rights.

Public Services International brings together more than 20 million workers represented by 669
unions in 154 countries and territories. Dedicated to promoting quality public services in every
part of the world, its members—two-thirds of whom are women—work in social services,
health care, municipal and community services, central government, and public utilities such as
water and electricity.

UNI Global Union represents more than 20 million workers from more than 900 trade unions in
the fastest-growing sectors in the world—skills and services. Its charge is to ensure these jobs
are decent and workers’ rights are protected, including the right to join a union and engage in
collective bargaining.

Trade Union Advisory Committee

The Trade Union Advisory Committee is an international trade union organization that has
consultative status with the Organization for Economic Cooperation and Development and its
various committees. TUAC affiliates consist of more than 58 national trade union centers from
the 30 OECD member countries, which together represent 66 million workers. TUAC’s role is to
represent organized labor’s views within the new organization and to help ensure that global
markets are balanced by an effective social dimension. AFL-CIO President Liz Shuler serves as its
president.

International Labour Organization: The only tripartite United Nations agency, since 1919 the
ILO brings together governments, employers and workers representatives of 187 member
states, to set labor standards, develop policies and devise programs promoting decent work for
all women and men.

Regional integration and Framework Agreements

Regional Integration is a process in which neighboring states enter into an agreement in order
to upgrade cooperation through common institutions and rules. The objectives of the
agreement could range from economic to political to environmental, although it has typically
taken the form of a political economy initiative where commercial interests are the focus for
achieving broader socio-political and security objectives, as defined by national governments.
Regional integration has been organized either via supranational institutional structures or
through intergovernmental decision-making, or a combination of both.
Past efforts at regional integration have often focused on removing barriers to free trade in the
region, increasing the free movement of people, labour, goods, and capital across national
borders, reducing the possibility of regional armed conflict (for example, through Confidence
and Security-Building Measures), and adopting cohesive regional stances on policy issues, such
as the environment, climate change and migration.

Intra-regional trade refers to trade which focuses on economic exchange primarily between
countries of the same region or economic zone. In recent years countries within economic-
trade regimes such as ASEAN in Southeast Asia for example have increased the level of trade
and commodity exchange between themselves which reduces the inflation and tariff barriers
associated with foreign markets resulting in growing prosperity.

Regional integration has been defined as the process through which independent national
states “voluntarily mingle, merge and mix with their neighbors so as to lose the factual
attributes of sovereignty while acquiring new techniques for resolving conflicts among
themselves.” De Lombaerde and Van Langenhove describe it as a worldwide phenomenon of
territorial systems that increases the interactions between their components and creates new
forms of organization, co-existing with traditional forms of state-led organization at the
national level. Some scholars see regional integration simply as the process by which states
within a particular region increase their level interaction with regard to economic, security,
political, or social and cultural issues.

In short, regional integration is the joining of individual states within a region into a larger
whole. The degree of integration depends upon the willingness and commitment of
independent sovereign states to share their sovereignty. The deep integration that focuses on
regulating the business environment in a more general sense is faced with many difficulties.

Regional integration initiatives, according to Van Langenhove, should fulfill at least eight
important functions:

 The strengthening of trade integration in the region

 The creation of an appropriate enabling environment for private sector development
 The development of infrastructure programmes in support of economic growth and
regional integration
 The development of strong public sector institutions and good governance
 The reduction of social exclusion and the development of an inclusive civil society
contribution to peace and security in the region
 The building of environment programmes at the regional level
 The strengthening of the region’s interaction with other regions of the world.

The crisis of the post-war order led to the emergence of a new global political structure. This
new global political structure made obsolete the classical Westphalian concept of a system of
sovereign states to conceptualize world politics. The concept of sovereignty became looser and
the old legal definitions of the ultimate and fully autonomous power of a nation-state are no
longer meaningful. Sovereignty, which gained meaning as an affirmation of cultural identity,
has lost meaning as power over the economy. All regional integration projects during the Cold
War were built on the Westphalian state system and were designed to serve economic growth
as well as security motives in their assistance to state building goals. Regional integration and
globalization are two phenomena that have challenged the pre-existing global order based
upon sovereign states since the beginning of the twenty-first century. The two processes deeply
affect the stability of the Westphalian state system, thus contributing to both disorder and a
new global order.

Regional integration agreements

Regional integration agreements (RIAs) have led to major developments in international

relations between and among many countries, specifically increases in international trade and
investment and in the formation of regional trading blocs. As fundamental to the multi-faceted
process of globalization, regional integration has been a major development in the international
relations of recent years. As such, Regional Integration Agreements has gained high
importance. Not only are almost all the industrial nations part of such agreements, but also a
huge number of developing nations too are a part of at least one, and in cases, more than one
such agreement.

The amount of trade that takes place within the scope of such agreements is about 35%, which
accounts to more than one-third of the trade in the world. The main objective of these
agreements is to reduce trade barriers among those nations concerned, but the structure may
vary from one agreement to another. The removal of the trade barriers or liberalization of
many economies has had multiple impacts, in some cases increasing Gross domestic product
(GDP), but also resulting in greater global inequality, concentration of wealth and an increasing
frequency and intensity of economic crises.

The number of agreements agreed under the rules of the GATT and the WTO and signed in each
year has dramatically increased since the 1990s. There were 194 agreements ratified in 1999
and it contained 94 agreements form the early 1990s.

The last few years have experienced huge qualitative as well as quantitative changes in the
agreements related to the Regional Integration Scheme. The top three major changes were the
following:

 Deep Integration Recognition

 Closed regionalism to open model
 Advent of trade blocs
Recent regional integration

Regional integration in Europe was consolidated in the Treaty on the European Union (the
Maastricht Treaty), which came into force in November 1993 and established the European
Union. The European Free Trade Association is a free trade bloc of four countries (Iceland,
Liechtenstein, Switzerland and Norway) which operates in parallel and is linked to the European
Union. In January 1994, the North American Free Trade Agreement was formed when Mexico
acceded to a prior-existing bilateral free trade agreement between the US and Canada. In The
Pacific there was the ASEAN Free Trade Area (AFTA) in 1993 which looked into reducing the
tariffs. The AFTA started in full swing in 2000.

Alternative Regional Integration

In the last decade regional integration has accelerated and deepened around the world, in Latin
America and North America, Europe, Africa, and Asia, with the formation of new alliances and
trading blocks. However, critics of the forms this integration has taken have consistently
pointed out that the forms of regional integration promoted have often been neoliberal in
character, in line with the motives and values of the World Trade Organization, the
International Monetary Fund and the World Bank – promoting financial deregulation, the
removal of barriers to capital and global corporations, their owners and investors; focusing on
industrialization, boosting global trade volumes and increasing GDP. This has been
accompanied by a stark increase in global inequality, growing environmental problems as a
result of industrial development, the displacement of formerly rural communities, ever-
expanding urban slums, rising unemployment and the dismantling of social and environmental
protections. Global financial deregulation has also contributed to the increasing frequency and
severity of economic crises, while Governments have increasingly lost the sovereignty to take
action to protect and foster weakened economies, as they are held to the rules of free trade
implemented by the WTO and IMF.

Advocates of alternative regional integration argue strongly that the solutions to global crises
(financial, economic, environmental, climate, energy, health, food, social, etc.) must involve
regional solutions and regional integration, since they transcend national borders and
territories, and require the cooperation of different peoples across geography. However, they
propose alternatives to the dominant forms of neoliberal integration, which attends primarily
to the needs of transnational corporations and investors. Renowned economist, Harvard
professor, former senior vice president and chief economist of the World Bank, Joseph Stiglitz
has also argued strongly against neoliberal globalization. Stiglitz argues that the deregulation,
free trade, and social spending cuts or austerity policies of neoliberal economics have actually
created and worsened global crises. In his 2002 book Globalization and Its Discontents he
explains how the industrialized economies of the US, Europe, Japan, South Korea and Taiwan
developed not with the neoliberal policies promoted in developing countries and the global
South by the WTO, IMF and World Bank, but rather with a careful mix of protection, regulation,
social support and intervention from national governments in the market.