International Human Resource Management (IHRM) involves a set of activities which focus on managing organizational human resources at international level to achieve organizational objectives and attain a competitive advantage at national and international levels.
P. V. Morgan defines International Human Resource Management (IHRM) as, “the interplay among three dimensions — human resource activities, types of employees and countries of operation.”
A broad view of domestic and international HRM reveals that they are similar in all aspects.
Learn about:-
1. Introduction to International Human Resource Management 2. Definition of International Human Resource Management 3. Approaches 4. Activities. 5. IHRM Practices Compared with Domestic HR Practices
6. MNCs and International Organisation 7. Difference between Domestic HRM and International HRM 8. HR Challenges in International Joint Ventures.
International Human Resource Management: Definition, Approaches, Activities, Differences and Other Details
International Human Resource Management — Introduction to IHRM
With Globalization, many companies moved into the new development of International Human Resource Management (IHRM), the way in which international companies manage their human resource activities and the function in different countries with the headquarters in the home country.
A separate body of knowledge and practice has developed alongside Globalization. Internalization of business and the development of IHRM are parallel to each other. In this context, IHRM has gained strategic importance. When companies fail to recognize this importance, their joint-ventures and other forms of collaborations fail to materialize. IHRM has become an important activity of International business.
According to Dowling, Welch, and Schuler, the following factors differentiate between Human Resource Management (HRM) and the International Human Resource management (HRM):
1. IHRM has to look after relatively more activities. Translation of communications, International taxation policies, Immigration matters, public and government matters
2. Personal matters of expatriates and their families Education for children, housing, medical benefits, insurance coverage, etc.
3. At times, they may have to deal with the requirements of people from different nationalities.
4. There is more risk involved in international business. Such risks have to be anticipated and dealt with.
5. Formulating HR strategy to suit the needs and conditions of multiple countries.
The above complexities have to be taken into consideration while planning human resource activities for subsidiaries in a country. The more bureaucratic a country is, the more problems the department has to deal with. When compared to Human Resource Management, International Human Resource management is much more complex and involves many more activities which are much broader in scope.
IHRM involves a set of activities which focus on managing organizational human resources at international level to achieve organizational objectives and attain a competitive advantage at national and international levels.
International Human Resource Management — Definition of IHRM
It is not easy to provide a precise definition of International Human Resource Management. What an HR manager does in a multinational corporation varies from firm to firm. It also depends on whether the manager is located in the MNC’s headquarters or on site in a foreign subsidiary.
P. V. Morgan defines International Human Resource Management (IHRM) as, “the interplay among three dimensions — human resource activities, types of employees and countries of operation.” A broad view of domestic and international HRM reveals that they are similar in all aspects.
The functions of a domestic HR manager are similar to that of a HR manager of a multinational corporation, except that the latter has to manage employees from different nationalities and ethnic backgrounds. This difference in managing people of different nationalities has led to the development of various IHRM approaches. We shall analyse Morgan’s definition of IHRM and its elements individually.
The primary strategic objective of human resource management in MNC’s is to balance “the needs of autonomy, co-ordination, and control for the purpose of global competitiveness, flexibility, and learning” Whereas some argue that IHRM is not unlike HRM in domestic settings, others point out that there are significant differences.
Specifically, IHRM requires a much broader perspective, encompasses a greater scope of activities, and is subject to much greater risks than is domestic HRM.
Obviously, IHRM is highly interdependent with the human resources processes of the parent organization. Simply put, IHRM is “HRM that cuts across national boundaries”.
Domestic Versus International Human Resource Management – When compared with domestic human resource management, IHRM requires a much broader perspective on even the most common HR activities. This is particularly so for HR managers operating from the MNC’s headquarters (HQ).
For example, when dealing with pay issues, the HQ – based HR manager must co-ordinate pay systems in different countries with different currencies that may change in relative value to one another over time. An American expatriate in Tokyo who receives a salary of $ 100,000 (U.S.) may suddenly find the buying power of that salary dramatically diminished if the Japanese yen strengthens in value relative to the U.S. dollar.
A U.S. dollar purchased 248 yen in 1985 but less than 100 yen in 1994. In the case of fringe benefits provided to host country employees, some interesting complications might arise. For example, it is common in the U.S. companies to provide health insurance benefits to the employee and the employee’s family, which normally means spouse and children.
In some countries, however, the term “family” may encompass a more extended group of relatives-multiple spouses, aunts, uncles, grandparents, nephews and nieces. How does the firm’s benefit plan deal with these different definitions of family?
Although such issues are important for the HQ – based manager, they are also relevant to the HR manager located in a subsidiary. This manager must develop systems that are not only acceptable in the host country but also compatible with the company-wide systems being developed by his or her HQ – based counterpart.
In general, the scope of IHRM activities is much larger than the scope of domestic HRM activities. For HQ – based managers, the most obvious contrast is that they must coordinate the procurement, allocation, and use of employees in more than one country. For on-site managers, there are many complications that arise from this greater scope.
It is not unusual for subsidiary HR managers to be involved in arranging housing, health care, transportation, education and recreational activities for expatriate and local staff. For example, a manufacturing facility in Taiwan provides dormitory housing for local assembly workers; this housing is managed by the HR staff at the plant.
Furthermore, expatriates often find themselves in a situation in which both home and host countries claim the right to tax their income. Procedures must be designed to deal with this problem of dual taxation-something that does not occur in domestic HRM.
IHRM activities are influenced by a greater number of external forces than are domestic HRM activities. The HQ – based manager may have to set Equal Employment Opportunities (EEO) policies that meet the legal requirements of both the home country and a number of host countries.
International Human Resource Management — Approaches for Studying HRM at International Level
For studying HRM at an international level, different organisations adopt different approaches.
Some of these approaches are:
1. Ethnocentric approach – organisations favours the home country rather than the host country in most aspects.
2. Polycentric approach – organisations favours the host country rather than the home country.
3. Regiocentric approach – organisations favours development of a particular region rather than home or host countries.
4. Geocentric approach – organisations does not favour any region or country but views the whole world as a unified market.
Factors Affecting the Approach to IHRM:
MNCs adopt different approaches to IHRM depending upon the host country’s work culture, political policies, legal regulations, etc.
The factors that affect the approaches to IHRM can be divided mainly into four types:
1. Political policies and, legal regulations of the host country
2. Technology and the nature of the product
3. Organisational life-cycle
4. Level of education and technological advancement of the host country
1. Political Policies and Legal Regulations of the Host Country:
MNCs have to follow the rules and regulations of the host country when they start a subsidiary. If an MNC adopts an ethnocentric approach to manage its human resources, then it may try to recruit manpower from the parent country but if the host country has restrictions on hiring people from its own country, then they have to recruit host country nationals or third country nationals.
Host countries, usually, impose such restrictions so that the people of their country get employment opportunities. Also, the training and development provided by the MNC improves the quality of workforce in the host country. These kind of legal restrictions are mostly seen in developing countries because the Governments view MNCs as vehicles for the country’s development.
2. Technology and Nature of the Product:
The approach adopted by MNC differs depending upon the technological inputs needed by the product during various stages of its development. In case the product is highly technology-dependent and requires great degree of quality control, then it adopts an ethnocentric approach.
This approach is advisable because the MNC can use the technical expertise which it has developed in its parent country to maintain the quality and standards in the subsidiary. On the other hand, products which are to be customised keeping in mind the taste of the local people, needs a polycentric approach.
The organisational life-cycle consists of four stages.
They are:
i. Initiation stage
ii. Functional growth stage
iii. Controlled growth stage
iv. Strategic growth stage
An organisation adopts different approaches depending upon the stage:
i. Initiation Stage:
In the initiation stage, organisations again opt for an ethnocentric approach. There is a high degree of control over the subsidiary and all its operations are closely monitored. The subsidiary limits its operations as the focus is to establish itself in the host country’s market.
ii. Functional Growth Stage:
A polycentric approach is adopted in the functional growth stage. The organisational operations become extensive. The organisations open a number of subsidiaries and the local headquarters is in- charge of the operations while the home country headquarters assumes a more strategic role.
iii. Controlled Growth Stage:
In the controlled growth stage, organisations adopt a regiocentric approach. The focus is to cut costs and enhance productivity. The idea is to integrate businesses at a regional and domestic level and to attain economies of scale. The regiocentric approach is a step towards adopting a geocentric approach.
iv. Strategic Growth Stage:
In this stage an organisation becomes a global player, as it has established subsidiaries in a number of countries. It faces stiff competition from the domestic and international firms. To consolidate its position, it establishes joint ventures and strategic alliances. A geocentric approach is adopted so that the domestic and international operations are integrated in terms of product development, marketing and distribution.
4. Level of Education and Technological Advancement of Host Country:
When an organisation plans to open a subsidiary in a developing country, it has to look at the availability of skilled and unskilled labour in that country and also at the country’s educational system and the technological advancement. It is generally believed that the quality of education in a country is reflected in the quality of its workforce.
A good technical and management education system helps in better planning of human resources. This in turn helps the management to adopt the right approach to IHRM. For example, an MNC opening a subsidiary in a backward country needs to invest more in training and development as the host country nationals may not be highly skilled.
International Human Resource Management — 5 Activities of IHRM
In discussing these activities, the term international will be affixed at appropriate places to distinguish these activities from those of domestic HR.
Activity # 1. International Recruitment:
In general, the basic objective of recruitment is to ensure that the organization is appropriately staffed. However, in order to achieve this objective in the context of an international operation, issues involved may be different from domestic HRM. A global firm operates in different countries which may have different business environment affecting HR practices, more particularly socio-cultural and legal factors.
Therefore, a global firm’s recruitment practices are likely to be affected by host country requirements to a great extent. A global firm has a mix of three types of employees based on their place of origin- parent country nationals (PCNs), host country nationals (HCNs), and third country nationals (TCNs).
What would be the proportion of these three types of employees in total workforce depends on the type of approach adopted by a global firm in the context of international recruitment. For international recruitment, there are four approaches with each approach having its own pros and cons. These approaches are- ethnocentric, polycentric, regiocentric, and geocentric.
i. Ethnocentric Approach:
Under this approach, all key positions, in headquarters as well as subsidiaries, are staffed by parent country nationals (PCNs). A PCN is an employee who is a citizen of the country where the headquarters of the organization are located. A PCN posted abroad is known as expatriate. This approach is adopted by multinational firms in the early stages of internationalization.
Other reasons for adopting this approach are lack of qualified personnel in the host country to fill key organizational positions, desire to maintain a unified corporate culture and tight control across subsidiaries throughout the world, and desire to transfer quickly the parent firm’s core competencies to the subsidiaries.
While these reasons are favourable, this approach has the following disadvantages:
i. The PCNs may take lot of time in understanding the culture of host countries. Because of this reason, faulty decisions may emerge.
ii. Employing PCNs may be a costly affair particularly if host countries are economically lesser developed as compared to the home country,
iii. Since expatriates are generally paid higher remuneration and in the currency of home country, host country nationals may feel discriminated and, thus, frustrated. Such a feeling may affect their productivity.
iv. HCNs may also develop the feeling about lack of promotional opportunities to higher positions as such positions are staffed by PCNs. This may result in higher employee turnover.
ii. Polycentric Approach:
Under this approach, key positions in overseas subsidiaries are staffed by host country nationals and those in headquarters are staffed by parent country nationals. This approach is adopted to give adequate representation to local employees who can handle the issues arising from local political and legal system. This approach is more suitable if the host country socio-cultural and legal system is quite different from that of home country.
However, this approach has the following disadvantages:
i. There is likelihood of cultural conflict between parent company and subsidiary if the culture of parent company is not adequately imbibed by the HCNs. Such a conflict leads to ineffective decisions or even no decisions at all on many issues.
ii. If parent country nationals do not get adequate exposure of global business by working on overseas assignments, their development remains inadequate. They may not be able to have right perspective to make decisions on issues related to global business.
iii. Regiocentric Approach:
Under this approach, for recruitment purpose, global business of the parent country is grouped into broad geographical regions — continent (America, Europe, etc.), two or more adjoining continents (Asia-Pacific), or different areas of a continent (East Asia, West Asia, etc.). Key positions in subsidiaries located in a particular region are staffed by people belonging to that region.
People are also transferred from one subsidiary to another subsidiary of the same region. Thus, the host country is replaced by the region. This approach is adopted when a parent company has a number of subsidiaries in different regions of the world. As compared to polycentric approach, this approach offers a better option to get qualified employees from the region.
However, this approach has the following disadvantages:
i. This approach works well only when there is sufficient similarity in the countries belonging to a particular region. In many cases, this similarity is not available.
ii. The career of many outstanding employees may remain limited to serving regional subsidiaries. They may not get opportunity to reach the top level of the parent company. Such employees may not have that much affection to the region which they may have for their own country. This phenomenon may result in turnover of highly talented employees.
iv. Geocentric Approach:
Under this approach, key positions in headquarters as well as subsidiaries abroad are staffed by people based on merit irrespective of their nationality. This approach is adopted to acquire best available talent worldwide and using this talent pool most effectively by transferring the people where they can be best fitted. Further, it enables the parent company to have uniform work practices throughout the world.
However, this approach has certain limitations too:
i. Different countries of the world have their own specific requirements. Because of these differing requirements, a multinational firm cannot transfer its employees as freely as it wishes.
ii. In some cases, there may be cultural mismatch even in the case of the highly qualified employees. To that extent, free transferability of employees is hampered.
The above discussion shows that not a single approach of international recruitment is suitable in all situations. The determining factors for suitability of a particular approach are the nature of parent company’s business and its HR strategy and the nature of host countries in terms of level of human resource development, employee cost, legal requirements, and approach towards multinationals.
Thus, many companies may prefer ethnocentric approach (Indian IT companies operating overseas prefer this approach) while many may prefer polycentric approach (many Indian companies which have acquired overseas businesses adopt this approach).
Many European and American multinationals adopt geocentric approach with the result Hindustan Unilever (a subsidiary of Unilever) has become a good source of supplying competent managers to its parent as well as its subsidiaries in different countries; many Indians are CEOs of multinational firms which have opted this approach.
Activity # 2. International Selection:
Various international recruitment approaches, except polycentric approach, involve extensive employment of expatriate employees. An expatriate is a person who is sent on a long-term assignment to the host country operations. When the period of assignment is over, he comes back to his country. Though in the category of expatriates, generally PCNs are included but TCNs experience the same kind of problems.
Therefore, we can include both these categories of employees. Since expatriates face different kind of problems as compared to home country nationals working in headquarters, issues related to selecting former category of employees differ from those of latter. Let us go through these issues. These issues are identification of problems likely to be faced by expatriates, factors in expatriate selection, and expatriate selection methods.
Expatriates face some problems which HCNs are not expected to face. For identifying the stage at which expatriates face problems, an expatriate assignment life cycle is prepared.
Expatriate assignment life cycle involves determining need for expatriates (done on the basis of organization’s global business strategy and its international HR strategy), process of selecting expatriates (criteria and methods of selection), pre- assignment training, departure for taking foreign assignment, post-arrival orientation and training, crisis and its resolution and adjustment, crisis leading to failure, finally reassignment abroad or repatriation back to home and adjustment.
It is not necessary that every expatriate may face crisis of the same magnitude but it depends on the ability of expatriates to adjust with the situations.
A major problem connected with expatriates is their premature return to home country. Known as expatriate failure, this feature has created lot of problems before multinationals and lead to considerable losses.
ii. Factors in Expatriate Selection:
The reasons for failure of expatriates suggest that they cannot be selected purely on the basis of their technical competence but those factors should also be taken into account which are important for determining their success in foreign assignments.
Activity # 3. International Training and Development:
In international HRM, training is provided to expatriates as well as to host country nationals (HCNs). However, the contents of training for both these categories of employees differ significantly. Therefore, it is desirable to discuss these separately, that is, expatriate training and HCN training.
Multinational firms provide pre-departure training to expatriates. However, in many cases, such a training is superficial without really addressing the issues uppermost in the minds of expatriates and their families.
In multinational firms, training objectives should be as follows:
i. Bridging the cultural gaps between parent and host organizations.
ii. Recognizing the fact that orientation challenges are different for parent and host units.
iii. Building a unified culture across subsidiaries throughout the world.
Fieldman suggests that expatriates need four level training:
Level 1- Training focusing on cultural differences and on raising trainees’ awareness of such differences and their impact on business outcomes. This is known as cross cultural training.
Level 2- Training focusing on attitudes and aiming at getting trainees to understand how attitudes (both positive and negative) are formed and how they influence behaviour.
Level 3- Providing factual knowledge about host country.
Level 4- Skill building in areas like language, adjustment, and adaptation.
Training in all these areas is necessary for the success of the expatriates because in different cultures, different meanings are assigned to a particular gesture; different criteria are used for defining a qualitative outcome, say success; and so on. Looking at the importance of expatriate training in the present business scenario, many firms are offering consultancy services in this area.
Besides expatriates, host country nationals also need training. However, this training differs substantially from that of expatriates. The emphasis of HCN training is to make them suitable to occupy the positions that they are expected to occupy in the subsidiary.
Thus, HCNs need training in the following areas:
i. Training for developing technical and managerial competence in HCNs; the extent of such a training depends on level of education prevailing in the host country.
ii. Acquiring knowledge about the parent organization- its objectives, strategies, and the role that it is expected to play.
iii. Gaining knowledge about the culture of the parent organization and imbibing that culture.
Activity # 4. International Performance Management:
Performance management, that is, assessment of employee performance, discussing its results with employees, and suggesting and working out way for improvement of performance is a critical issue in managing a subsidiary located abroad. In fact, the work is performed in a context. It implies that work outcome depends, to a very great extent, on contextual variables.
In the case of a subsidiary, there might be so many host country variables on which the expatriates may not have that much of control which HCNs may have. Further, an HCN as a head of subsidiary may use criteria for performance appraisal which may not work for the expatriates. For example, Americans tend to appraise performance based on management by objectives (MBO).
This essentially involves open discussion. In countries where people are highly oriented towards authority (a cultural factor), any discussion of performance outcome by a subordinate is treated insubordination. In order to overcome these problems and to improve performance management of expatriates, Oddou and Mendenhall have suggested the following measures-
1. Stipulate the difficulty level involved in assignments at the expatriate’s workplace. For example, working as expatriate in China is generally considered more difficult than working in England.
2. Give more weight in evaluation towards the on-sight manager’s appraisal than towards the home-sight manager’s appraisal which is based mainly on distant perceptions of the employee performance.
3. In case the home-sight manager appraises the expatriate, background advice from a former expatriate from the same overseas location should be taken to ensure that unique local issues are considered in appraisal.
4. The performance criteria used for a particular job should be modified to fit the overseas position and characteristics of that particular location. For example, maintaining and improving labour relations might be more important in India than in the United States.
5. Appraise the expatriate not only in terms of quantitative criteria like profit or market share but also qualitative criteria like insights of the expatriate into the functioning of the overseas operations.
Activity # 5. International Compensation Management:
International compensation management involves fixing remuneration of expatriates and administering it. Expatriate’s remuneration includes base salary, benefits, allowances, and incentives.
The intricate question in fixing international remuneration is how to fix it so that following objectives are achieved:
1. Attracting employees who are qualified and interested in international assignments.
2. Facilitating the movement of expatriates from one subsidiary to another, from the home country to subsidiaries, and from subsidiaries back to the home country.
3. Providing a consistent and reasonable relationship between the pay levels of employees at the headquarters, domestic affiliates, and foreign subsidiaries.
4. Being cost-effective by reducing unnecessary expenses.
In designing international compensation to meet the above objectives, generally, the following problems crop up:
1. Discrepancy in remuneration between parent country, home country, and third country nationals.
2. Need to vary expatriate compensation depending on the life cycle stage of the expatriate’s family (for example, children’s age and their schooling).
3. Remuneration issues related to re-entry into the parent organization.
4. Remuneration issues to deal adequately with new waves of changes in the international business environment.
While fixing international remuneration, various factors are taken into account. Wil- Harzing and Ruysseveldt have classified these factors into two categories- MNC internal environment and MNC external environment. MNC internal environment includes goal orientation, capacity to pay, competitive strategy, organizational culture, internal workforce composition, labour relations, and subsidiary role.
MNC external environment includes parent nationality, labour market characteristics, local culture, home and host country rules, industry type, and competitors’ strategies. After considering these factors, one of two approaches of determining international remuneration can be adopted- going-rate approach and balance- sheet approach.
In both these approaches, additional expenses such as relocation, housing, extra taxes, etc. are paid in the form of allowance. However, the basis of fixing compensation differs in both approaches.
i. Going-Rate Approach:
In going-rate approach, pay of an expatriate is tied to host country norms. This approach aims at equity between people working in the same location. However, this can have devastating effects in a financially unattractive location. For example, an employee of a developed country will be at loss when he is placed in a developing country where the compensation level tends to be much lower.
Similarly, when an employee from a developing country is posted in a developed country, his compensation level may be too high to be borne by the organization.
ii. Balance-Sheet Approach:
In balance-sheet approach, pay of an expatriate is tied to home country norms. This approach is more practical in recognizing that an employee’s current home pay and emoluments need to be protected and augmented to compensate for hardship and additional expenses. The objective is to keep the employee financially ‘whole’ with no loss from present emoluments.
However, in this approach, an employee is likely to suffer when he is placed in a location which is cost disadvantageous than his home location. In order to overcome this problem, a modified balance-sheet approach is adopted which has many variations “encompassing common salary structures, fixed percentage tax withholding, or the blending of certain local elements such as housing or spendable income, with home country benefits or taxes.”
International Human Resource Management — IHRM Practices Compared with Domestic HR Practices
A multinational corporation’s HR practices vary from firm to firm and the nature of business it does in the context of the international scenario. It also depends on whether the manager is located in a global corporation’s headquarters or onsite in a foreign subsidiary.
This problem of balancing integration (control and coordination from HQ) and differentiation (flexibility in policies and practices at the local subsidiary level) have long been acknowledged as common dilemmas facing HR and other functional managers in global corporations. Although some argue that IHRM is not unlike HRM in a domestic setting, others point out that there are significant differences.
Specifically compared with domestic HRM, IHRM has the following features, namely:
1. IHRM encompasses more HR functions (like more involvement in employee’s personal lives, focus on diversity training, cross cultural assimilation etc.)
2. IHRM involves more heterogeneous functions
3. It involves constantly changing perspectives
4. It requires more involvement in employees’ personal lives
5. IHRM is influenced by more external sources
6. It involves a greater level of risk than typical domestic HRM.
7. Emphasis put on HR activities changed when workforce mix varies
Wider Spectrum of HR Functions:
When compared with domestic human resource management, IHRM requires a much wider spectrum on even the most common HR activities. This is particularly so for HR managers operating from a MNC’s headquarters.
The number and variety of IHRM activities are daunting. International HR managers must deal with issues as varied as international taxation; international relocation and orientation; various other administrative services for expatriates; selecting, training and appraising local and international employees; and managing relations with host governments in a number of countries around the world.
Other relevant issues might involve those of-
(a) International taxation and legal obligations,
(b) International relocation and orientation,
(c) Providing special or additional administrative services for the expatriates,
(d) Managing host government relations and
(e) Statutory/legal compliance management etc.
A final aspect of the broader scope of IHRM is that the organization needs to deal with people with different cultural backgrounds. The HR manager must coordinate policies and procedures to manage expatriates from the firm’s home country parent country nationals, (PCNs), host-country nationals (HCNs), as well as third country nationals (TCNs, e.g., a French manager working for an American MNC in the firm’s Nigerian subsidiary) in subsidiaries around the world.
The HR manager must develop HR systems that are not only acceptable to the host country but also compatible with company-wide systems being developed by the HQ-based officer. These policies and practices must effectively balance the needs and desires of local employees, PCNs and TCNs.
International Human Resource Management — MNCs and International Organisation
MNCs and international organizations opening subsidiaries in foreign countries need to find substantial differences in labour relations practices among the world’s countries and regions.
MNC headquarters involvement in industrial relations is influenced by several factors such as:
1. The degree of inter-subsidiary production integration
2. Nationality of ownership of the subsidiary
3. International HRM approach of the organization
4. MNC prior experience in International IR
5. Nature and characteristics of the subsidiaries
6. Characteristics and features of the home product market
7. Management attitude towards the unions
Impact of Trade Unions in IHRM:
Trade unions may limit the strategic choices of MNCs by three ways, namely:
1. By influencing the wage levels to the extent that cost structures may become uncompetitive
2. By constraining the ability of the MNC to vary employment levels at will in terms of investing or divesting in a particular subsidiary
3. By hindering or preventing global integration of the operations of the MNCs.
Response of Trade Unions to MNCs:
Trade unions have long seen MNCs as a potential threat to the bargaining power of labour because of the considerable wealth, autonomy and power and influence exerted by the MNCs in host country (subsidiary) operations. The following factors or issues can be depicted as the reasons contributing to the growing concerns of the trade unions caused by the MNC operations.
These are:
1. MNCs have formidable financial resources which may even include the ability to manage and withstand losses in a particular subsidiary that might be in dispute or conflict with the local trade unions.
2. MNCs are strong in terms of their alternative sources of supply of manpower and other resources.
3. MNCs are highly capable in terms of shifting their operations facilities to other countries having favourable climate for IR.
4. Most MNCs have remote locus of control and authority that might not be influenced by the industrial disputes occurring in a particular foreign subsidiary unit.
5. MNCs are strong in terms of their operations facilities in many industries and other product lines.
6. MNCs are good at superior knowledge and expertise in industrial relations
7. MNCs have the capacity to stage an “investment strike” in a particular country where IR environment is unfavourable for business.
Considering the above issues posed by the superior strengths and capabilities of most MNCs, the response of trade unions to MNCs can be categorized into a threefold entity, namely-
1. Forming International Trade Secretariats (ITSs) which can function as loose confederations so as to provide worldwide support for trade unions from various countries
2. Lobbying to the national governments in respective subsidiaries for restrictive national legislations
3. Regulation of MNCs by International Organizations like those of the European Trade Union Confederation (ETUC) and the International Confederation of Free Trade Unions (ICFTU) etc.
International Human Resource Management — Difference between Domestic HRM and International HRM
Domestic HRM:
1. There are a little and narrow range of HRM practices
2. HR practices and issues belongs to single nationality
3. There are limited external factors involved
4. A limited involvement of HR managers in the personal life of employees
5. There are limited risk in HRM issues
6. There are specific and general cross-cultural dimensions
International HRM:
1. There are a wide and broad range of HRM practices
2. HR practices belongs to more than one nationality
3. There are several external factors involved
4. A greater involvement of HR managers in the personal life of employees
5. There are greater risk in HRM issues
6. There are several cross-cultural dimensions and challenges
International Human Resource Management — HR Challenges in International Joint Ventures (IJVs)
In these cases the most frequent and obvious HR challenges faced by these organizations can be summarized as follows:
HR Challenges Associated with International Joint Ventures (IJVs):
1. Staffing – Management of the host country partner may perceive providing jobs for their citizens (HCNs) as a more important objective than increasing profits
2. Promotion – Blocked promotion of HCNs in the IJV may result from revising top positions for expatriates (PCNs) deputed in the foreign assignments.
3. Loyalty – Because of the multiplicity of entities involved in the IJV, loyalty and cultural conflicts may occur
4. Delegation – Partner companies limit the delegation of authority and/or disagree on the desired extent of autonomy
5. Decision making – Decision making is a particularly complicated process because of the conflicting expectations of the entities involved
6. Unfamiliarity – Each employee group may experience feelings of strangeness and lack of familiarity with the employees of the other entities. Expatriates (PCNs) may be unfamiliar with the environment and culture of the host country
7. Communication – Communication blockages can result because of the interpersonal problems and cross-cultural differences between geographically dispersed managers and executives
8. Information sharing – Information flow from the host or foreign partner in the IJV may be restricted because of suspicion regarding the intentions of the other partner.
9. Compensation – Dissatisfaction with compensation gaps between HCNs and PCNs can develop. Difficulties in assessing the performance of IJV staff stem from the different procedures and performance standards of the parent companies.