International Human Resource Management (IHRM) and Labor RelationsJayadeva de Silva.M.Sc,, FIPM, FITD

Strategic Significance of IHRMThe international HRM process involves understanding the strategic context of HRM within the firm’s overall strategy, recruiting and selecting appropriate managerial personnel, providing necessary training and development, assessing performance, providing compensation, and evaluating managerial retention and turnover.

What are the complications for IHRM compared to HRM?International HR managers face a more complex task than their domestic counterparts because o differing cultures,o levels of economic development, and o legal systems among countries

These may require companies to adapt their hiring, firing, training, and compensation programs to each country.

o Firms must decide whether managers will be selected from the home country, from the host country or from third countries.

o Training and development in an international firm may be more complex than in a domestic firm.

o Compensation systems must be adapted to meet the needs of each country’s labor market.

IHRM Employee IssuesThere are two broad categories of Employee facing international human resource managers:

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(1) recruiting, training, and retaining managerial and executive employees; and (2) recruiting, training, and retaining non managerial employees such as blue-collar production workers and white-collar office staff.

PA & Compensation for non executiveso For non managerial employees, international firms

normally adapt their compensation and performance appraisal systems to local laws, customs, and cultures. for example,

o U.S. workers appreciate feedback from an appraisal system,

o German workers are resentful of feedback.

Type of Decision Makingo Firms that centralize decision making at headquarters

typically favor home-country managers while firms that decentralize decision making to the subsidiary level often employ host country nationals.

o Since most companies do not fall at one extreme or the other, most companies have a combination of both home and host country managers.

PCNso Managers can be hired from three groups: parent

country nationals; host country nationals; and third country nationals.

o Parent country nationals (PCNs) are residents of the international business’s home country who are transferred to one of its foreign operations.

Why PCNSo Communications and coordination with corporate

headquarters is typically facilitated when PCNs are employed because they normally share a common

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culture and education background with headquarters’ staff.

Issues with PCNso PCNs may however, lack knowledge of local laws,

culture, economic conditions, social structure, and political processes.

o Moreover, they may be expensive to relocate and maintain the host country.

o In addition, because a host country may impose restrictions on the number of employees that can be transferred, a company may not have the freedom to hire whom it wants.

HCNso Host country nationals (HCNs) are residents of the

host country, and are the most common choice for mid-level and lower-level jobs.

o Employing HCNs is popular because they are already familiar with local laws, culture, and economic conditions.

Why HCNso Also, HCNs may be cheaper than PCNs because a firm

can avoid the costs such as relocation expenses that are associated with PCNs.

o However, an HCN may not be familiar with the firm’s corporate culture nor its business practices.

TCNso Third country nationals (TCNs) are citizens of

neither the firm’s home country nor of the host country.

o TCNs are most likely to employed in upper-level or technical positions. TCNs and PCNs are collectively

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known as expatriates (people working and residing in countries other than their native country).

Ethnocentric Modelo An ethnocentric staffing model may be used to help

a firm choose among HCNs, PCNs, and TCNs for various positions.

o The model indicates that PCNs staff most higher-level positions.

Poly Centric & Geocentric Modelso Other firms may follow a polycentric staffing model

where, based upon the belief that HCNs know the local market best, the use of HCNs is high.

o Finally, firms that want to hire the most qualified person for the job, regardless of the individual’s nationality, follow the geocentric staffing model.

Skills & Abilities Required by IHR ManagersThe skills and abilities needed by international managers fall into two general categories:

o those needed to do the job ando those needed to work in a foreign location.

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Issue of Talents

o Today, as businesses globalize, the market for executive talent is also globalizing.

o Top management teams are increasingly diverse in their members.

o While most MNCs do not hire new college graduates to take foreign positions immediately, many hire graduates with the intention of sending them abroad in the future.

Expatriate Failure

o The selection process in international firms is particularly important because of the high cost of expatriate failure.

o Expatriate failure is the early return of an expatriate manager to his or her country because of an inability to perform in the overseas assignment.

o The cost of expatriate failure ranges between $40,000-$250,000.

o Expatriate failure rates may be as high as 20-50 percent in many U.S. companies, higher than for either European or Japanese companies.

What is “Culture Shock”?

o Managers sent on foreign assignments may experience culture shock, a psychological phenomenon that may lead to feelings of fear, helplessness, irritability, and disorientation.

o Acculturation typically proceeds through four phases.

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What should be done ?

Because an expatriate suffering from culture shock may be less effective and productive, companies typically take measures to limit its effects such as providing pre-departure language and cultural training.

Western vs. Non-Western ValuesWestern vs. Non-Western ValuesWestern vs. Non-Western ValuesWestern vs. Non-Western Values

IndividualismAchievementEqualityWinningInternal self-controlPrideRespect for resultsRespect competenceTime is money

Collectivism/ groupModestyHierarchyHarmonyExternal controlSaving faceRespect for statusRespect eldersTime is life

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Work Goals

Work goals Germany Japan USAInteresting work 3 2 1Good pay 1 5 2Good interpersonal relations 4 6 7Good job security 2 4 3A good match between you and your job 5 1 4A lot of autonomy 8 3 8Opportunity to learn 9 7 5A lot variety 6 9 6Convenient work hours 6 8 9Good physical working

Culture

Authority, responsibility & accountability

Urgency

CommitmentAgreements & contracts

Risk-takingConflict

CommunicationThe way and style

information is shared

StructureExtent to which uncertainty

creates discomfort

Individual/groupWhether individual or

group takes precedence

TimeThe view of and way time is used

PowerExtent to which

power is distributed

Critical Cultural Variables

humantalents

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conditions 11 10 11Promotion 10 11 10

Phases in Acculturation

Honeymoon…> Disillusionment…>Adaptation…> Biculturalism

Difficulties in adaptingIn most cases, expatriates fail to complete their foreign assignments because of an inability of the expatriate manager, or his or her spouse and family, to adapt to the new location.

What is Repatriation?o Firms are now beginning to pay more attention to

repatriation--bringing a manager back home after a foreign assignment has been completed.

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o Individuals that successfully adapted to the foreign environment may experience culture shock upon returning to their own country.

Non cultural IssuesRegarding “non-cultural” issues leading to success or failure overseas, managers tend to be more successful in foreign assignments when 5 conditions are met:– 1. they can freely decide whether or not to accept a foreign assignment– 2. they have a realistic understanding of the new job and assignment– 3. they have a realistic expectation of a repatriation assignment– 4. they have a mentor in the parent firm who will look out for their careers– 5. there is a clear link between the foreign assignment and the manager’s long-term career path. Issues of CompensationCompensating expatriate managers can be a complex process because factors such as differences in currency valuation, standards of living, lifestyle norms, and so forth must be taken into consideration.

Allowanceso A cost-of-living allowance may be given to managers

to offset differences in the cost-of-living in the home and host countries.

o A hardship premium (also known as a foreign service premium) may be paid to mangers who accept assignments in relatively unattractive locations.

Special benefitso Special benefits packages that may be provided to

expatriate managers include housing, education, medical treatment, travel to the home country, and club memberships.

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Comparison with locals!o In many cases the total compensation package offered

to an expatriate is much more lucrative than the package offered to his or her local counterpart.

Not to take anything for granted

The simplest and most useful advice for those considering an overseas assignment is to carefully weigh the “flip side” of all the issues just mentioned, from your perspective. And, to not take anything for granted about how conditions will be when you arrive (doing one’s homework pays).

What do you mean by Labor Relations?– Process through which management and workers

identify and determine the job relations that will be in effect at the workplace

– Specific approaches to labor relations varies from one country to another

Labor Relations in Other Countries

U.S. Approach to Labor Relations– Collective bargaining

• Process whereby formal labor agreements are reached by union and management representatives

• Involves negotiation of wages, hours, and conditions of employment and the administration of the labor contract

– Germany• Unions and management have been

cooperative in the past• Labor harmony not adversely affected by

unification of East and West

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• Union power is still quite strong• Rights of workers addressed more carefully

by management– Japan

• Unions and management have cooperative relationships

• Contracts tend to be general and vague• Disputes regarding the labor contract

usually settled amicably• Unions most active during the spring and

end of the year

Factors Affecting Labor Relations

o A country’s laws, culture, social structure, and economic conditions may impact labor relations. for example that the role of unions varies greatly among countries.

o In the U.S. membership in unions has been steadily decreasing, but over half the world’s workforce outside the U.S. belong to unions.

EU & Japano Unions in the European countries tend to be aligned

with political parties, but in Japan are created and run by the firms themselves.

o In fact, labor relations in Japan are so cordial that strikes are rare.

Industrial Democracy & Codeterminationo The premise of industrial democracy--the belief that

workers should have a voice in how businesses are run--is an important influence in labor unions in Europe.

o In fact, in Germany an approach called codetermination provides for cooperation between management and labor in running a business.

Social Charter

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o The EU’s implementation of its social charter (or social policy) whereby employment conditions and practices will be standardized throughout the community is addressing issues such as maternity leave, job training, and pension benefits.

Globalization..o Finally, labor unions have had their bargaining power

reduced by globalization. o However, there is very little coordination between

unions in different countries to counter that reduction in bargaining power.

Demographic Challenges for IHRM

Educational attainment of workerso Higher education levels coupled with high literacy

rateso Implications: productivity, safety

Aging workforceo Growing % of workforce is in higher age categorieso Implications: retirement, job design, re-training,

benefits, work schedules, etc.

More part-time and contingent workerso Accounts for about 15% of all employmento Implications: more flexibility for organizations but

raises issues of pay inequity, reduced employee loyalty

Cultural (Values) Challenges for IHRM

Attitudes toward worko Different expectations re: work and leisureo People want more flexibility, holiday time, etc.

Ethnic diversity

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o Immigration from numerous countrieso Potential for conflicts of values, etc. but also

opportunity to learn, expand

Attitudes toward governmento Negative attitudes toward those in power – effects

employment relationships

Legal Challengeso Numerous laws influence organizational (and HR)

activitieso Employment equityo Human rights lawso Charter of rights and freedomso Safety legislation

Managing Diversityo Diversityo The differences among peopleo Protected-Group Concernso Perceived hostile organizational cultureso Stereotyping

Age Issues and Diversity Managemento Job Opportunities for Older Workerso Discrimination against “overqualified” older employees

in hiringo Instances of age discrimination in the workforce

reduction when layoffs impact largely older workerso Older Workers Benefit Protection Act (OWBPA-USA) of

1990 and equal treatment of older workerso Attracting, retaining, and managing older workers

Sex Discrimination in Jobs and Careerso Nepotism -The practice of allowing relatives to work for

the same employer.

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o Job Assignments and “Nontraditional” Jobs -Women are increasingly entering jobs traditionally occupied only by men.

o The “Glass Ceiling” -Discriminatory practices that have prevented women and other protected-class members from advancing to executive-level jobs.

o “Glass Walls” and “Glass Elevator”The tendency for women to advance only in a limited number of functional fields within an organization.

What should be done for Breaking the Glasso Establishing mentoring programso Providing career rotationo Increasing top management and boardroom diversityo Establishing goals for diversityo Allowing for alternative work arrangementso Diversity training-Against stereotyping

Sexual Harassment and Workplace Relationships

o Types of sexual harassmento Quid pro quo means Linking employment outcomes to

the harassed individual’s granting of sexual favors.o Hostile environment means Allowing intimidating or

offensive working conditions to unreasonably affect an individual’s performance or psychological well-being.

o Legal Standards on Sexual Harassment

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o Tangible employment actions (e.g., termination) that result from sexual harassment create a liability for the employer.

o Affirmative defense for employers in dealing with sexual harassment incidents includes:

o Establishing a sexual harassment policyo Communicating the policy regularlyo Training employees to avoid sexual harassmento Investigating and taking actions when complaints arise

International Labour Relations & Trade Unions

Definition of Trade unionOne of the first and earliest definition on trade unions was that of Sidney and Beatrice Webb who described trade unions as: “..A continuous association of wage earners for the purpose of maintaining or improving their working lives.”

Why do Workers Join Trade Unions?Economic needs:o Strengthen bargaining power over wageso Improve working conditionso Job security:o Protect jobs from dismissal/retrenchmentso Protection from unilateral action by management

(change terms and conditions)Social Needs:o Comradeship and sense of community

Social Welfare:o Accident, death and pension benefitso Unions represented on pension fundso Promote the development of communitieso Use investments to benefit memberso Self-fulfilment and Development:o Train and develop memberso Provide literacy skills to members

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Political Reasons:o Put pressure on repressive governmentso Influence labour legislationo Influence government policy on wealth distribution and

poverty alleviation

Objectives of Trade UnionsGoals include:o Equitable wage benefitso Ensure a healthy and safe environmento Promote job security and freedom from arbitrary

dismissalo Provide legal and other support to memberso Provide political influence and lobby government

Methods Used by Trade Unions to Obtain Goals

o Collective Bargaining: An ongoing process with employers, does not end with wages

o Representation: Election of shop steward, who are full time employees, and represent the interests of union members

Collective Action:o Workers go on strikeo Consumer Boycott:o link with community to boycott products of the

company

Political Power:o Influence the vote at electionso Lobby government and other state structureso International support:o Getting the support of international trade unions and

community organisations

Legal action :

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o Using the protection provided by labour legislationo Media channels:o Promote the view of unions

Types of Trade Unions3 Forms or type of trade unions:

Craft Unions:o Earliest forms of trade unionso Promote the skilled status of memberso Recruit within a particular crafto Membership thru apprenticeship systemo Power in skill and ability to control entry into the

profession, i.e. control supply of skill

General Unions:o Organises all workers regardless of skill or industryo Normally politically motivate and anti-capitalo Ideal of one union for the whole countryo More success with unskilled and blue collar workerso Weakness not sectorally based

Industrial Unions:o Presently most common form of uniono Organises all workers in a particular industryo Promotes sectoral based collective bargainingo Strength is in no. of members per sectoro Stronger unions due to 1 industry focus

International Federationso Autonomous international trade unions linking national

unions from different countries:Examples:Educational internationalInternational Metal Workers FederationInternational Transport Workers Federation

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o Focus: Education, development, solidarity, strategic thinking

Other relevant issues in International labour relations

Stress

Work Life Balance-------------------

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