VI Selected International Business Functions
International Human Resource Management
Human resources are among the most critical success factors of International Management. Human Resource Management (HRM) for MNCs involves challenges that go far beyond those of purely domestic operations. For example, MNCs are faced with intercultural issues and needs to manage expatriate assignments. This Chapter explains the basic activities, models and particularities of international HRM.
Human Resource Management (HRM) refers to those activities undertaken by a company to effectively acquire and utilise its personnel to achieve a firm's objectives. More specifically, it encompasses the process of recruiting, selecting, training, appraising and compensating employees (Dowling/Festing/Engle 2013, p. 2).
While in principle the tasks of international HRM (IHRM) are the same as in purely domestic companies, managing human resources in MNCs is much more complex. For instance, different cultural environments influence the effectiveness of management techniques in different countries. Furthermore, employees from one country, e.g. the MNC's home country, might be allocated to operations in another country, or vice versa. To analyse the complexity of IHRM, the model illustrated in Figure 22.1 considers three dimensions (Morgan 1986; Zentes/Swoboda/Morschett 2004, p. 857):
■ The first dimension considers the different activities of IHRM (e.g. recruitment and selection).
■ The second dimension considers the regional aspect, i.e., for which country the HRM is carried out. The usual distinction is between the home country, the host country and other countries, where the host country is the location of the specific foreign subsidiary that is focused on in a specific analysis (e.g. Spain when discussing the recruitment of employees for a Spanish subsidiary).
■ The third dimension considers different employee groups. Here, the usual categorisation distinguishes employees from the home country (often called parent-country nationals), employees from the host country and employees from other countries (third-country nationals).
Source: Adapted from Morgan 1986, p. 44.
Increased Complexity of IHRM
The main difference between HRM for purely domestic companies and IHRM stems from the enhanced complexity (Dowling 1999, pp. 30-35; Zentes/Swoboda/Morschett 2004, p. 854):
■ The extent of the activities of IHRM is broader. For instance, relocating employees to a foreign country has to be prepared and organised. Questions of international taxation have to be considered for compensation issues. MNCs have to provide certain administrative services to their employees abroad. Given the geographical dispersion of activities in an MNC, deployment, i.e., getting employees with the right qualifications to the geographic location where the company needs them, is a key challenge.
■ IHRM focuses on different and heterogeneous groups of employees with a different cultural background. Different national cultures affect employees' expectations and values and the effectiveness of different leadership styles.
■ Norms and laws strongly influence HRM in different countries. Regulations concerning labour rights, wages, participation of employees in company decisions, or terminating a labour contract, are strongly heterogeneous between different countries. Other external factors exert a strong influence as well.
■ Central HRM decisions have an impact on employees from different nations. Perceived fairness and equal treatment of employees in different locations require an international perspective of HRM.
■ IHRM is more strongly involved in employees' private sphere. For example, the families of employees are an important factor in the case of international assignments. They have to be considered in the selection process as well as in the administrative work in the host country.
■ Risks and costs of IHRM are usually higher than for purely domestic operations. If candidates for international assignments are not optimally chosen, the financial and personal consequences are often more severe than in a purely domestic setting.