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Q1 Discuss the model of International HRM (IHRM) in relation to the article.
1.1 The Model of IHRM
1. First Dimension of IHRM � Allocation, Procurement and Utilization
1. Second Dimension of IHRM � Type of Employees (PCNs, HCNs & TCNs)
1.4 Third Dimension of IHRM � Home, Host & Other Countries
Q Which approach to international staffing will you recommend for ERO?
Support your answer.
.1 Recommendation of approach
. Advantages & Disadvantages of Ethnocentric Approach
Q Although it is important for ERO to have first a very good marketing and brand positioning before going global, how can you convince the senior management issues should not be taken lightly?
.1 Importance of IHRM in the globalization context
1.1 THE MODEL OF INTERNATIONAL HRM
International HRM (IHRM) involves the same functions as domestic HRM but is more complicated as a result of the addition of major factors, the countries which are involved in the organization’s operations and the types of employees in the organization.
As can be seen from Figure 1.1, there are broad HR functions which are the same in the domestic and international arenas; procurement, utilization and allocation of staff.
However, an international organization has the opportunities to employ staff who are not just Parent Country Nationals (PCNs) but may also be Host Country Nationals (HCNs) or Third Country Nationals (TCNs).
Figure 1.1 shows the Model of International HRM adapted from P.V Morgan
1. FIRST DIMENSION OF THE MODEL � ALLOCATION, PROCUREMENT & UTILIZATION
· HR Planning & Strategy
Ø It requires that Ero and Blush always has enough trained and experienced people to meet its own needs.
Ø It must be a policy of the ERO and Blush to get and keep people of the right calibre for the effectiveness of its objectives.
Ø Analysing the existing situations to see if the effectiveness of the existing organisation can be improved
Ø Since ERO has many outlets, it is important for the organization to carefully select suitable staff that will help the company to achieve its objectives.
Ø There are 4 approaches to MNE staffing policies � ethnocentric, geocentric, polycentric and regiocentric approaches.
· Performance Management
Ø A process that enables the Multinational to evolve and continuously improve individual, subsidiary unit and corporate performance, against clearly defined, preset goals and targets.
Figure 1. shows the links between the multinational’s internationalization.
· Compensation & Benefits
Ø ERO and Blush has to ensure that the international compensation consistent with the overall strategy, structure and business needs of the multinational.
Ø Secondly, the policy must attract and retain staff in the areas where the multinational has the greatest needs and opportunities.
Ø Thirdly, the policy should facilitate the transfer of international employees in the most cost effective manner for the firm.
· Training & Development
Ø Since ERO is in service-oriented industry training & development plays an important role in developing the staff. Training aims to improve current work skills and behaviour whereas development aims to increase abilities in relations to some future position or job �usually managerial position.
Ø The essential components of predeparture training programs that contribute to a smooth transition to a foreign post include cultural awareness training, preliminary visits, language instructions and assistance with practical day-to-day matters.
· Labour Relations
Ø It is important to realize that it is difficult to compare industrial relation system and behaviour across national boundaries. A labour relations concept may change considerably when translated from one industrial relation context to another.
1. SECOND DIMENSION OF IHRM � TYPE OF EMPLOYEES - HCNs / PCNs / TCNs
· Parent Country Nationals (PCNs)
Ø PCNs are employees who are sent from the country in which the organization is headquartered. These people are usually referred as expatriates . In ERO’s case, Singaporean who are sent to Taiwan, China and Malaysia is an expatriate or PCNs.
· Host Country Nationals (HCNs)
Ø HCNs are employees from the local populations. Sometimes they are referred as local nationals. In ERO’s case, for example, the local workers whom are employed from Taiwan is termed as HCNs.
· Third Country Nationals (TCNs)
Ø TCNs are employees from a country other than where the parent organization’s headquarters or operations are located.
Ø In ERO’s case, Singapore as a home country employing Taiwanese at its facilities in Malaysia, he or she would be considered as a TCNs.
1. THIRD DIMENSION OF IHRM � COUNTRY � HOME / HOST / OTHERS
IHRM must also taken into consideration the different countries involved in the HRM activities. There is the host country where an international subsidiary may be operating. As for ERO’s host country are Taiwan, China and Malaysia. A home country (Singapore as home country for ERO) where and international has its head office and other countries which may be a source of labour or finance.
.1 RECOMMENDATION OF STAFFING APPROACH
· With regards to executive nationality staffing policies, a multinational company can choose from 4 options (1) Ethnocentric () Geocentric () Regiocentric (4) Polycentric. I would recommend an ethnocentric approach for staffing in ERO.
· An Ethnocentric approach to staffing results in all key positions in a multinational company being filled by parent country nationals (PCNs). This practice is common used in early stage of internationalization whereby ERO is setting up new business, process or product in another country and prior experience is essential.
. ADVANTAGES & DISADVANTAGES OF ETHNOCENTRIC APPROACH
· The reason of adopting this approach is the need to maintain good communications coordination and good control link with Corporate Headquarter
· Another reason for pursuing an ethnocentric staffing policy are a perceived lack of qualified host country nationals (HCNs) and the need to maintain good communication links with corporate headquarters.
· This approach limits the promotion opportunities of HCNs. This may lead to reduced productivity and increased turnover among HCNs.
· The adaption of expatriate managers to host countries often takes a longer time. During this time, PCNs often makes mistakes and poor decisions. Language problems may occur too.
· HCNs viewed compensation packages unjustified compared to PCNs. It found that considerable income gap in favor of PCNs is viewed unjustified.
· Insensitivity of the expatriates to the needs and expectations of their host country subordinates.
· Finally, for many expatriates, a key overseas position mean new status, authority and an increase in standards of living and not conducive to objective self evaluation. The cost of employing expatriates are approximately times the salary cost.
.1 IMPORTANCE OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT
· To support the growing internationalization of a business, the human resource must evolve with the needs of its organization. As business grows in sophistication and outlook, it moves towards an international perspective, seeking sales or resources aboard. Many international companies still maintain the perspective that the home market is the primary one, international operations being little more than subsidiaries. As the importance of international markets and resources grows, some companies evolve into global ones which operate across international borders in search of business worldwide. National distinctions becomes less important, as do the location and nationality of employees. As this occurs, the human resource department must adjust its perspective from domestic to global in support of the company’s strategies.
International preparation and selection
· Planning and staffing organizations overseas is a crucial activity of international human resource management.
· The slow growth of the work forces in all developed nations makes this activity increasingly important and difficult.
· The international selection process requires the HRM department to go beyond its traditional assessment of candidates. The determination of who should fill an opening encompasses more than technical or managerial abilities. The candidate’s ability to adapt to the company and country cultures is important.
· Family consideration play an important role. Employment opportunity for a spouse,education for children, and the family’s ability to adapt to new surroundings influence whether the placement will be successful.
· Once the candidate is selected, he or she needs to be oriented, trained, developed for future responsibilities and evaluated.
· New hires generally given an orientation on the policies,place, procedures and people to be encountered. International positions require an extensive orientation to familiarize the employee with the culture, language and other unique aspects of the assignment. It gives specific insights to local customs and expectation.
· Predeparture training is important and very helpful for prospective expatriates and their families to settle into the new host country environment as easily as quickly as possible, and for the expatriate manager or professional to perform at optimum level.
· International human resource management places a wide variety of new pressures on traditional human resource activities. At the same time, the department’s ability to meet these challenges provides it opportunities for significant contributions to the company.
· For the department to be a source of competitive advantage, it generally must evolve in support of the organization’s transformation from a domestic to an international to a global-oriented company.
· Virtually every human resource department activity is affected directly or indirectly by the internationalization of the firm’s business. The need for international succession planning arises, as do policy decisions about the use of foreign nationals and expatriates in assignment abroad.
· Internal barriers to international assignments need to be identified and reduced, and external sources of needed talent must be located as well. Then, within a wide range of legal constraint, the department must select qualified people who can assimilated into the company and local cultures.
· Orientation, training and development gain considerable complexity and importance. The success of the foreign national’s or expatriate’s performance depends heavily upon effective placement and development. Compensation becomes more complex, too.
· Adjustments, allowances and incentives along with unique benefit packages, add considerably to the firm’s compensation costs and the human resource department’s involvement in customizing individual compensation packages.
· The department must assess the effectiveness of its international effort to improve its processes and to ensure effective employee relations. The department is often called upon to troubleshoot by assisting managers to address employee relations and other human resources issues.
· The internationalization of business amplifies the cultural diversity of the organization and requires the department members to become increasingly aware of cultural differences so that other managers can be properly advised.
· Whether dealing with immigrants or foreign employees, human resource departments will be facing even more diversity in the work force in coming years
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