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Introduction To International Human Resource Management Essay

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Published: Mon, 5 Dec 2016

Human Resource Management (HRM) involves all management decisions and practices that directly affect the people who work for the organization. Hence HRM is the strategic and coherent approach to the management of an organization’s most valued assets – the people working there who individually and collectively contribute to the achievement of the objectives of the business. In simple words, HRM means employing people, developing their capacities, utilizing, maintaining and compensating their services in tune with the job and organizational requirement.

1.2 International Human Resource Management

INTERNATIONAL HUMAN RESOURCE MANAGEMENT (IHRM) is a process of procuring, allocating, and effectively utilizing human resources in a multinational corporation, while balancing the integration and differentiation of Human Resource activities in foreign locations.

Hence it can be defined as “Procurement, allocation, utilization and motivation of Human Resources in International business.


To reduce the risk of international human resource.

It has helped a lot in reducing the risk in the business by using a proper standard recruitment and selection process.

To avoid cultural risks.

International HRM has helped a lot in overcoming the inter-continental culture by making people from different parts of world work under the same roof.

To manage diversifies human capital.

Due to IHRM human capital is diversified and hence the risk involved has lessen down to a great extent.

1.4 P. Morgan’s Model of IHRM

P. Morgan: Two groups of variables that affects basic HR process

1st – Types of employees.

2nd – Political, economic, legal environment, labor laws and practices prevailing in different countries.

1.5 Human resource activities



Utilization of human resources.

1.6 Nations categories where firms expand and operate

Host country

A country in which the MNE seeks to locate or has already located a facility.

Parent country

The country in which a company’s corporate headquarters is located.

Third country

The countries other than the one in which the MNC is headquartered or the one in which it is assigned to work by the MNC.

1.6Categories of employees in an MNE

Parent Country Nations (PCNs)

PCNs are managers who are citizens of the Country where the MNC is headquartered. The reasons for using PCNs include

– The desire to provide the company’s more promising managers with

International experience.

– The need to maintain and facilitate organizational coordination and control.

– The unavailability of managerial talent in the host country.

– The company’s view of the foreign operation as short lived.

– The host country’s multi-racial population.

– The belief that a parent country manager is the best person for the job.

.Host Country Nationals (HCNs)

HCNs are local managers hired by MNCs. The reasons for using HCNs

– Familiar with the culture, language.

– Less expensive, know the way things done, rules of local market.

– Hiring them is good public relation.

Third Country Nationals (TCNs)

TCNs are managers who are citizens of countries other than the one in which

the MNC is headquartered or the one in which it is assigned to work by the

MNCs. The reason for using TCNs:

– These people have the necessary expertise.

– They were judged to be the best ones for the job..


Difference between IHRM and Domestic HRM


· Responsible for a greater number of functions and activities

· Broader knowledge of foreign county employment law

· Closely involved with employees lives

· Cope with more external influences

· Exposure to problems and liabilities

· Management of differential compensation

· Diversity management

· More coordination and travel

· More risk management

2.2 Difference between Domestic and International Managers

· Global mindset

· Communication skills

· Conflict management skills

· Oriented towards a process of continual change

· International experience

· Political, economic and social sensitivity and knowledge of many countries.

· Knowledge of culture shock and how to minimize it.

· Leadership and team building skills.

2.3 Variables that moderate difference between Domestic HRM and IHRM:

Main Challenges in IHRM:

Talent identification and development – identify capable people who are able to function effectively

Language (e.g. spoken, written, body)

Different labor laws

Different political climate

Different stage(s) of technological advancement

Educational level attained.


Forces of change and global work environment

Globalization, technological changes, knowledge management and cross boundaries collaboration are four factors that are major forces creating change in organizations today.

These changes affect decision-making as organizations are forced to recognize that they need leaders who are innovative, creative visionaries who understand the various environments that their organizations are operating in, and are able to differentiate between these different environments.

These environments include: the external or operating environment; the competitive environment (that part of the external environment in which firms that are competing for the same market exist) and the macro environment in which influences such as the economy, government regulations, societal values, demographics and technology come to bear upon an organization.

Faced with such complexities leaders need to be equipped with appropriate skill-sets such as flexibility, good communication, and critical thinking and negotiation abilities. They must also be supported with the necessary resources in order to make good decisions that will benefit their organizations.


A convergence of international activities such as the increase in overseas production of goods and services; increasing consumer demands in emerging markets worldwide; declining barriers to international trade aided by rapidly changing technology, have created a globalized economy in which inter-dependency among countries has emerged as the norm today. Therefore the hiring practices of companies who are seeking the best talent have changed because the best talent might no longer be resident in the home country.

Companies have had to calibrate their hiring, training and management practices to meet this challenge. In a world where “Americans too often come across as intrusive, manipulative, and garrulous” (David, 2007, p.291), US organizations have to be respectful of the culture, customs, political, and legal differences of the countries that they are operating in.

Some of these customs affect protocol such as the exchange of gifts, the observance of holidays, and labor laws. Even accounting standards vary internationally. Therefore organizations must be sensitive to these differences when formulating operational and human resource (HR) policies for implementation abroad for, in this global environment, it is hardly likely that companies can apply the domestic policies that work at home, abroad.

Technological Change:

Technology is like a two-edged sword that can make our lives easier or worse. The Internet has revolutionized the way in which information is exchanged, communication facilitated and commerce conducted. Technology is rapidly changing and effective management demands more knowledge in these areas in order for companies to manage their resources and develop, maintain or keep their competitive edge.

While technology has enabled firms to save time and money by conducting business such as negotiations, trade, and commerce in real time, it can also facilitate the dissemination of sensitive information about a company’s practices, trade secrets and new product development in a matter of seconds.

Hackers can breach a company’s security via the internet and put companies at risk. Organizations have responded by having whole new types of departments such as Information Technology (IT) departments, headed by managers with titles such as Chief Information Officer (CIO), to manage both the opportunities and the risks associated with technological changes.

Additionally, technology has ushered in an array of high-tech devices that aid and facilitates companies in gathering and managing information, maintaining contact with their employees globally, making and communicating decisions instantaneously. This can be both a boon and a source of stress for managers and leaders who must learn to manage their choice and use of these devices. In a global economy technology can aid in knowledge management

Knowledge Management

Driving forces such as shifts in buyer demographics and preferences; technology, product and market innovation; changes in society, consumer attitudes and lifestyle all demand new ideas. This has created a need for knowledge workers.

Knowledge workers comprise a company’s intellectual capital and are made up of creative people with novel ideas and problem-solving skills. Managing its knowledge assets can give a company a competitive edge as it effectively utilizes the expertise, skills, intellect, and relationships of members of the organization.

For example, a company’s strategic management efforts can be greatly enhanced when knowledge that is resident in its international talent pool is tapped at its source, since a manager who is “closer to the ground” and part of the local culture might be better able to sense environmental changes than one who is not.

Keeping knowledge workers motivated and incentivized by both intrinsic and extrinsic means will cause organizations to re-think and change their benefits and compensation methods and, perhaps, even redefine the traditional view of the employer-employee relationship into something new, such as a company-contractor model, for example.

Cross-boundaries Collaboration

An important part of knowledge management is effectively managing organization-wide collaboration. Use of appropriate technology and applications such as a virtual private networks; VoIP, e-mail, social networking websites such as Face Book, and even company-sponsored blogs can facilitate communication between an organization and its stakeholders, and help in different types of internal and external collaborative processes. An example of a tool that can be used in cross-boundaries collaboration might be an easily accessible online database that provides a central source of information to employees, customers, or suppliers.

Managing in the 21st Century

In the 21st Century change is the norm rather than the exception and leaders must be able to embrace it. They need to be able to develop:

A vision, and be able to communicate it to their organizations

An orientation to serving

An entrepreneurial mind-set

A commitment to continuous innovation

A global mindset

Ease and confidence with technology

Know-how in systems thinking (a broad view of the inter-relationship of an organization’s parts, rather than a narrow view that is focused on one part or event.)

A sense of ethics and appreciation of spirituality in the workplace

A commitment to continuous learning, personal and professional development

In order to respond effectively to the four major forces creating change in today’s global economy leaders must be willing to embrace change; they must be curious and appreciative of the richness and diversity of other cultures. The must be trust-worthy and flexible; and they must have very strong time management, communication, conflict-management, problem-solving and people-skills in order to effectively manage these drivers of change.

Human Resource Management: Futuristic Vision

On the basis of the various issues and challenges the following suggestions will be of much help to the philosophy of HRM with regard to its futuristic vision:

1. There should be a properly defined recruitment policy in the organization that should give its focus on professional aspect and merit based selection.

2. In every decision-making process there should be given proper weightage to the aspect that employees are involved wherever possible. It will ultimately lead to sense of team spirit, team-work and inter-team collaboration.

3. Opportunity and comprehensive framework should be provided for full expression of employees’ talents and manifest potentialities.

4. Networking skills of the organizations should be developed internally and externally as well as horizontally and vertically.

5. For performance appraisal of the employee’s emphasis should be given to 360 degree feedback which is based on the review by superiors, peers, subordinates as well as self-review.

6. 360 degree feedback will further lead to increased focus on customer services, creating of highly involved workforce, decreased hierarchies, avoiding discrimination and biases and identifying performance threshold.

7. More emphasis should be given to Total Quality Management. TQM will cover all employees at all levels; it will conform to customer’s needs and expectations; it will ensure effective utilization of resources and will lead towards continuous improvement in all spheres and activities of the organization.


To conclude IHRM should be linked with strategic goals and objectives in order to improve business performance and develop organizational cultures that foster innovation and flexibility. All the above futuristic visions coupled with strategic goals and objectives should be based on 3 H’s of Heart, Head and Hand i.e., we should feel by Heart, think by Head and implement by Hand.

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