Updated May 31, 2023
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We adore the image of a man wearing an expensive suit, walking along the hallway of a glitzy office, and projecting an aura of significance. He always answers people at the rear and is too busy to lift his head.
This is not a romanticized description of the ideal hero. This is the conjuration of images in our mind about efficient HRM (Human Resource Management) managers who work 24X7 and earn a great salary which is beyond our belief.
Though a little over the top, the above perception does hold some validity. The truth is that Employee Relations and Personnel Management in HRM is much more than the popular term used in the press to describe industry experts.
The art and science of HRM are complex. One needs to understand the subject in depth to understand the popular practices in the HRM industry.
Before we go into much detail, let us briefly describe HRM or Human Resource Management.
Human Resource Management is managing the people of an organization or company (in both the private and the public sector) in a structured and thorough manner to achieve the set goals and targets as decided by the company’s management.
HRM includes hiring and retaining people in the company, negotiating their salary and perks, and managing performance. They also change management by taking care of the employees’ exits to round off the complete activities in the company. This is the traditional role and definition of HRM.
Modern times have seen HR Managers designated as People Managers, as Human Resource Management is nothing but the work of handling people in an organization.
Today’s HR manager is responsible for managing employee expectations vis-à-vis the management objectives and reconciling both to ensure employee fulfillment and realization of management objectives.
Domestic HRM vs International HRM Infographics
Objectives: HRM
HRM’s primary objective is to ensure the right people’s available for the right jobs. This could only be possible by utilizing the employees’ talent and ensuring that they remain competent and motivated players in the company. This helps to achieve the organizational goals effectively.
The HRM is responsible for providing job satisfaction and self-actualization and maintaining cordial relations between the management and the employees.
HRM is required to maintain the standard of work-life and help practice ethical behavior and policies in the organization.
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Today industries and industrial groups are no more limited to one geographical region or country. A company spans almost three to four continents. Thus, with such a large workforce spanning the boundaries of other nations, companies require a management concept covering each employee.
Thus keeping the global perspective in mind, HRM has now also been modified into IHRM (International Human Resource Management) to cover the ever-changing work scenario in the world.
IHRM, or International Human Resource Management, is the process of employing competent people across all the nations in which the company spans and effectively utilizing these human resources’ talent to achieve the company’s mission statement.
HR Managers or People Managers in a multinational company ensure that the HR policies are integrated and practiced across all the branches of the companies in different nations bearing in mind the significant differences in the HR policies in different countries while continuing to work together as a whole to achieve the company’s targets and goals.
International HRM manages the company’s workforce and output internationally. They ensure that the company receives a competitive advantage locally and globally.
Objectives: IHRM
The IHRM objective involves the management of the diverse human capital employed. Simply, the HR Manager has to ensure that the employees in the company are competent and supremely talented in taking the company forward despite the difference in the countries.
The regional disparity should not crop among the employees hampering the growth and success rate of the company. IRHM should avoid cultural differences and reduce risks at all costs.
The IHRM follows extensive rules and regulations and stringent international taxation policies at the international location of work, employment protocols, language requirements, and special work permits.
Difference between Global IHRM and HRM
There is some common intersection between HRM and IHRM concerning recruitment and selection, appraisal and development, HR planning, and staffing and rewards. HRM is the management of employees only in one country.
IHRM manages employees in the three-nation categories, i.e., the parent country where the company originated and its headquarters; the host country where the branch of the parent country is located; and other countries from where the organization may source the labor, finance, or research and development.
This distinction is broadly based on the types of employees in an international organization Parent Country Nationals (PCN), Host Country Nationals (HCN), and Third Country Nationals (TCN).
Parent-Country Nationals (PCN): A parent-country national is an employee working in a country that is not the country where his origin is based. He is an expatriate. The risk of being termed as “de facto” in the host country is those employees who work for long periods (perhaps 4 –5 years or more) in the parent country. And subsequently, the host country’s labor laws apply to them.
Host Country Nationals (HCN): These employees are the citizens of the country in which the organization holds the foreign subsidiary.
Third Country Nationals (TCN): TCN is the citizens of a country working in other than the parent country or the country hosting the subsidiary.
Globalization has brought complexity and challenges to the fore in Human Resource Management, especially in managing newer network organizations.
Thus with the new developments taking precedence, companies have evolved the role of HRM and IHRM to meet new requirements. IHRM plays a key role in balancing the need for control and coordination of foreign subsidiaries and the need to adapt to local environments.
However, IHRM seems to suffer a setback in its international ventures more than often due to the lack of understanding and adjustment in managing employees on the domestic and foreign front.
The modifications required to make the successful home policies work in international waters often fail due to the lack of maturity on the part of the HR managers to work out that even minor differences in the host and parent countries lead to major issues resulting in the failure of the entire department.
IHRM is more complex, and this complexity in itself leads to differences between HRM and IHRM. Since IHRM involves international employees, it brings a broader range of perspectives than the domestic department of HRM.
IHRM includes international taxation, coordinating foreign currencies and exchange rates, international relocation, international orientation for the employee posted abroad, etc.
The HR managers in the IHRM department are thus responsible for looking after employees of more than one nationality and consequently have to set up a domestic HRM department for each country from where employees are working.
Despite a local HRM department, the IHRM must closely monitor all the employees since they are heading the other departments in different countries.
IHRM many duties to meet in case of an executive is posted to a foreign country because they are more directly involved in the employees’ personal lives than the local HRM department.
An HR manager in the IHRM department is responsible for ensuring that an executive posted in a foreign country understands all the aspects of the compensation package, such as the cost of living, taxes, and so on.
He needs to understand and consider the wishes of the executive’s family to relocate to a new country entirely, as well as help them adjust to the host country’s new culture.
The relocation worst hit the children. They leave behind school and friends and adjust to the alien environment.
IHRM ensures studies are not affected by making children comfortable and admitted to the school. On the other hand, the HRM department in the local country is only responsible for providing insurance programs and transport facilities in case of a domestic transfer.
International assignments bring a lot of risk factors, especially terrorism in today’s time. IHRM also takes additional responsibility for the health and safety of the employee.
Moreover, cost plays a very important role in handling international projects, with high direct and indirect costs being involved. The cost of running into a financial loss due to human mistakes can be very severe for the IHRM department. Failure of such a project can lead to a loss of reputation for the IHRM department in the company.
Many external factors are involved in setting a branch of a country. Government regulations about staffing practices in foreign locations, local codes of conduct, and the influence of local religious groups have to be worked out to ensure the smooth running of the subsidiary as well as the safety of its employees.
Diplomatic relations play a crucial role in the successful run of a subsidiary of a parent company. Diplomatic ties between the country of origin and the host country affect the working conditions.
The benefits of the Parent Company Nationals (PCN) and Third Country Nationals (TCN) may also be under fire if the currency exchange rates become suddenly unfavorable.
The IHRM department has to overcome multicultural differences in order to successfully set up and run a local subsidiary of the parent country. Since globalism sees an interaction of different cultures, spoken and written languages often hinder progress.
IHRM may become helpless in this scenario. However, IHRM accepts the different cultures and brings them together, creating a “super organisational culture” using the best of all cultures, universally accepted amongst all HR policies and practices.
There are differences and striking similarities between HRM and IHRM. More and more firms are going international to include a diaspora of talent to achieve greater success globally.
It becomes prominent for any organization to establish an IHRM department to venture internationally in such a dynamic and competitive market.
Thus the IHRM department has to take the onus of understanding, researching, applying, and revising all human resource activities in their internal and external contexts to know the impact of the processes of managing human resources in organizations throughout the global environment. Only then will IHRM allow multinational companies to successfully achieve success globally.
In short, IHRM links the HRM of local subsidiaries to create organizational strategies to achieve sustainable competitive advantage.
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