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International Human Resource Management
Welcome friends. So, I welcome you to the last session of International Business. So,today we will be discussing on the most, one of the most important aspects ofinternational business, I had deliberately kept it for the last. This is the you know theInternational Human Resource Management.As you know for any organization the most important asset will be the human resource;because it is the human resource or the human beings that can think and take decisionsand based on these decisions, the organization grows in the future, right. So, I will startthis case with the small you know case of the Indian IT sector.So, If I tell you the few names like for example, when I say Vishal Sikka or SatyaNadella you know and Sundar Pichai, Dinesh Paliwal. So, when I say these names youknow, these are the people who have a reason in the you know stature and today areworking as the CEOs of some of the world’s top companies, right.So, today many Indians have been doing well abroad and they have been doing youknow having an excellent carrier right as the leaders of the world economy. So, similarlythe Indian IT sector has gone through a tremendous transition in the you know nearby inthe recent past.So, what happened to the Indian IT sector; if you see in one of the articles I was reading,it said that the human resource value of the Indian IT sector can be considered to bearound 170 billion. That is the kind of you know experts we are sending outside when toan offshore market and all; so it is around 170 billion and more, it is growing.(Refer Slide Time: 02:24)So, India has been one of those markets which has done exceedingly well in the term ofthe IT and the ITES sector, right. So, what has, why does the Indian IT sector, how didthe Indian IT sector boom so well? Because one good reason was to use the knowledgeand the you know human resource in a way that helped in its you know growth.Generally the expats, as it says expats are basically the expatriates or the people who stayin some other country and do the work over there.So, the expats are generally hired for two main reasons as it says. So, expatriates you canunderstand; somebody suppose is working for a company, but he is working in maybeanother country right, would be termed as an expatriate. So, there had for two mainreasons; first in the initial stage of operations for the knowledge, right. So, for theknowledge, the technical skill, the expertise, the people are hired right and even they aresent to overseas for to do an assignment, to complete a project, inside project orsomething, right.And second reason is for connections to the relevant people or stakeholders in thebusiness. So, these are the two reasons why you know expats are generally hired or youknow leaders in the top oppositions are hired by companies.Second, it is for the specialized knowledge of a given domain or technology; sometimesfor a particular technology there might be an expert who is you know, somebody who isan expert in a particular technology. So, as at one point of time I remember the IBMmainframe was there and some people who were experts, they used to get were hired at avery high good position and were good salaries.So, both cases are needed for operations to start and work successfully. The expatsmostly come in senior positions and are paid well. So, they might be either in the verytop leadership position as are the examples I gave you or they might be in the frontlinemanagers also.So, for example, if Infosys gets a project of XYZ company; so to maintain the project, itsends a lot of you know some of its expert, trained people as a part of their assignment tosome other offshore sites and there they do the job and stay for years at the you knowproject and then maybe they come back at the end.So, some of the expats consider India as a low cost. So, people who have are comingrepresenting their country and company and country and they are let us say working inIndia; so it has been seen that, they sometimes consider India used to, used to happen.Now this is changing as a low cost, low value and low capability country. Thissometimes insults the sensibilities in the, of the local lights or the local people. Low costmay be true; yes India is a low cost place in comparison that is why it is an advantagethat they outsource from us.But the low value and low capability perceptions are maybe wrong or that needscorrection. And another thing is the leadership issue. Many a times if you still, as I gaveyou an example not only in the IT; but if you look at the service industry for example,the Taj and you know that the group of hotels the ITC and all, they have largely taken thesupport or helped from the leaders from outside, for that means from they have hiredpeople from some other countries, where the hotel industry or service industry is reallydoing well.So, that knowledge would come in and they would it would help them to grow out here.And even when they required to expand their operations in maybe other countries, thatknowledge of these leaders helps them, right ok. So, what is we are talking about isbasically the human resource management today right; and but in a perspective of notdomestic, but international, right.(Refer Slide Time: 06:06)So, international human resource management or are is now, I will be writing it as IHRMis defined as performing human resource management and its related activities andarranging for related and necessary cultural and immigration facilities for prospectiveand current employees by organizations operating in domestic or foreign countries.So, what it says? It is the human resource related activities; like for example, bringingthem and adjusting them to the local conditions and you know making their, creatingfacilities for them all these things are a part of the IHRM. It deals with all the functionsof the human resource management which happens domestically also, and in addition toperforming other functions exclusively for the expatriates.Now, who are the expatriates if you want a definition, it says? They are defined aspeople who live and work away from their home country in some foreign land. Supposetomorrow you go for a job, let us say you are an Indian and you go for a job and work letus say in London in some company; so then you are an expatriate, right.So, you are working you are, you know you live in India basically; but you are todayworking away from India and in some foreign land. Morgan defines IHRM as theinterplay among human resource activities; that is procure, allocate and utilize. Types ofemployees host country national, parent country nationals and third country nationals;we will discuss all of these, and countries like host country, home country and others.So, basically international human resource management is deals with all those peoplearound who are working in some other country or you know anywhere or others who arecoming to our country and helping us in the growth of our you know economy.(Refer Slide Time: 07:57)Boxall defined international human resource management as concerned with the humanresource problem of multinational firms in foreign subsidiaries, such as the expatriatemanagement or more broadly, with the unfolding HRM issues that are associated withthe various stages of internationalization process. So, it talks about basically, it isconcerned with the human resource problems of MNCs basically, right.Mendenhall stated that, IHRM includes comparative HRM studies; comparative meanscomparison between two nations, right. Differences in how companies in Japan,Thailand, Austria and Switzerland plan for upgrading of employee skills and so on, right.So, basically we understand that, international human resource management is the samehuman resource management; but it has a different perspective, just because you aregetting into a new country and you have to adjust and learn to acclimatize or you knowaccustomed to that place, right. And then there is a small complexity that comes in withit.(Refer Slide Time: 09:02)Why is it important? Why you know international human resource management isimportant? First of all the whole world has expanded drastically; today the whole globehas become one single market. So, increased globalization has led to the moment offirms and employees all over the world, right.And then as if you know, after outsourcing became a phenomenon or a buzzword induring the last 20, 25 years, 30 years; Indian sector for example, for India at least I haveseen that, a lot of IT sectors you know grew and they were in demand.People were hired from India at a very less cost and that helped the foreign companies tonot only achieve economic benefits, but also special skills were achievable. Then firmshave major, faced major issues but; you know due to human resource managementmistakes.So, there are cases where companies had, have merged you know and after that what hashappened is, the because of the cross the cultural differences between the two companiesyou know or the companies; there was conflict between the human resource right ofthese two different companies who have merged, and then that has led to the failure ordifficulties for the companies, right.Developing managerial talent in a global business environment, this is also arequirement. Today most of the business schools, good business schools they havecourses like international business; because they want to bring in people from differentwith experience from different backgrounds, so that they can come and you know as givetheir opinion and suggestions and then there is a global kind of a learning, right. So, thathas become a very important task, and these managers tomorrow can get into you knowany company and then they can become good leaders.Managing multicultural workforce; so as I said when two or when a merger or you knowjoint venture happens right or JV happens or strategy aligns happens, so in that conditionyou have to work with people, from different backgrounds different culturalbackgrounds. So, how do you handle this? So, for that, it also international humanresource management helps you, sensitizes you to learn that.Today advances in technology has become also a very to, played a very important role inthe IHRM; because advances in technology has forced us to bring people or help in themovement of people who are there, who are the experts in that field to go from one placeto other and you know share their knowledge. So, that has also become one key reasonfor IHRM.(Refer Slide Time: 11:44)How are they different? So, we can understand it, but let us still talk about it. Variousnationalities and culture; the first thing is there are several different kinds of nationalitiesand cultures involved when you talk about the you know international HRM versus thedomestic HRM. Now the family complexity, now this is something that might look verysimple, but it is a very complex matter.So, suppose tomorrow I am posted outside some place and I cannot leave my family,because I am I may go for 2 years, 3 years, 4 years; I do not know what is the timeperiod. So, when I am going for a long time period; so my family might, I may be able toadjust, but my family might not be able to adjust. So, what do you do then? So, youcannot leave your family right, your children and your family members.So, at that point of time, this becomes an important issue; how do the companies managethe family issues of these people who are or these employees. Influence of internationalenvironment technology, political ideologies right; so the political ideologies are alsodifferent.Suppose let us say, people are working from here and they are positioned in let us say inUS or Canada or Australia; so there might be political differences, the ideologies whichare different, there might be cultural differences and the whole environment might be,the legal challenges might be there, understanding of the legal climate, so many thingscould be there.The functions, for example logistical arrangement, immigration details, selection andrecruitment process; this is an important thing when it comes to the international HRM.Otherwise in a domestic HRM case, it is not very complicated; but when it comes tointernational HRM, you have to make all these logistical arrangements like theimmigration details, the selection and recruitment process is also not easy and then youneed to understand the compensation right and the taxation right, issues which can comein the future.So, of all these issues makes an international human resource management slightlycomplicated, right.(Refer Slide Time: 13:37)So, what are the major factors affecting IHRM as we see? The three first, the three mostimportant factors are; the cultural environment or the cultural factors, the political factorsand the economic issues, right. So, somebody when you; I will tell you an example,when the Australian cricket team came to India to play in one of the series.Almost all of the players had a upset stomach; just because they could not cope with theIndian food habits, right. Similarly when in a recent series when Bangladesh came toIndia; they could not play in Delhi just because of the high pollution levels, right. Butwhatever it is; so food, your language, your you know your behavioral habits all theseform part of the cultural environment.So these can affect largely in the entire. For example, when Indians go abroad they findtough, really tough to adjust to the food habits outside. So, they find it very difficult,because almost and if somebody is in obviously; for example a vegetarian, he finds itvery very tough, because he feels as if he is he would be choked. So, when somebody isnot comfortable; how would you work, that is an issue.And similarly the political environment, so the political environment if it is changingrapidly; so it might affect the MNCs wok culture or the companies work culture, so thatwill also have a bearing on the human resource.And finally, the economic issues as we just discussed; what is the compensation to bepaid, what is the you know the taxation policies for them for somebody who is anexpatriate, how do you deal with these issues, how do you bring them, what is thelogistical arrangements, how what is the staying arrangement you will make for them allthese are part of the human resource, right.(Refer Slide Time: 15:31)Now, as we say culture is a system of shared meanings and understanding held bymembers of the organizations that distinguish from others. So, culture is the sharedmeaning. So, we can understand each other we, because we have been born in one placeand we understand each other, our sign language or our you know verbal you know bodylanguage, or speaking, the way we speak the our written language is more or less same.Japanese culture for example, that affect working relationship is based on peace andharmony. Japan ranks high on masculinity, collectivism, uncertainty avoidance andpower distance, right. But Americans are mostly individualistic. Their behavioral aspectinclude; risk taking, bold initiative, outspoken; and this is something many people, inmost of the countries people do not understand the Americans for that, right.On the other hand the Japanese are extremely they are soft spoken right; confronting andthreatening is in general habits found in the American culture. And that is nothingwrong, because that is a part of the culture, they are accept, they accept, they have beenaccepting each other like that forever; therefore, there are wide conflicting situations inmanaging American in Japanese firms and Japanese in American firms here is anexample.(Refer Slide Time: 16:41)Indians are also high on collectivism like the Japanese, in case of family relations andindividualistic at workplace, right. So, family relations and social relations are verystrong in our culture and we also give importance to that; and anybody who does notrespect it, we have a you know kind of a not a very good feeling for them.So, if you have a you know in a team, you have a diverse set of people and somebody isan American, somebody is in Canadian, somebody is in Pakistan, somebody is an Indiansomebody is a German.Then you find these kind of complexities arising and people tend to compare it with theirown culture and try to say somebody’s bad or good, which is wrong; but that is how thehuman mind works. They also high and power distance and masculinity; India, in Indiais very high, the power distance is high. They respect family or authority, right.Family authorities respected, social class and ranks. They are aggressive, hardworking,demonstrative, friendly and hospitable. They meet the challenges and thrive for goals.Businesses based on trust and honesty. Indians are loyal to organization professions. So,this is something about the Indian culture, ok.(Refer Slide Time: 17:54)Now, what is the political and legal effect? So, lack of legal knowledge, what isacceptable and what is not in a market; if you do not have an idea about it, then whathappens is sometimes one may take a you know, Indians fall prey to this thing, thesehabits very I have seen in many places. So, many Indians fall prey to such kind of, andwhy Indians there are other countries also; but I am an Indian, so I can speak of onlyIndia.So understanding the political history also is very important; because unknowing,unknowingly sometimes you may offend an Indian or a American or a German by notknowing their political history and saying speaking something.Current and future trends and political lobby; now for example, look at the Indian marketfor example. So, the Indian political condition is very complex; now you not only havelarge parties, but you have small small regional parties, and these regional parties play anequally important role when it comes to you know decision making.So, how is this lobby made; for example, you see POSCO was a company which came toyou know India to set up a plant in Orissa. Now they had very high opinion, they hadvery, they were very ambitious and they thought they would surely do it.But then after they stayed for a long time and after that, they found that the natives ofthis place and the regional parties they did not support at all and they opposed them andthey you know tried going against them. It so happened that, after a long time POSCOhad to withdraw its policy; they had to you know back out and they left India and againwent back to their home countrySo, the point is what I am trying to say here is; the political legal effect is also very high,when it comes to the success of a firm in the international business. So, internationalhuman resource management also talks about understanding this political climate verywell; because you get a leader if somebody is in the leadership position and if he doessome mistake that becomes very costly.(Refer Slide Time: 20:08)Similarly the economic issues that are like for; the cost of hiring the labor from differentcountries, settling and taking care of the expatriates, right. So, when you bring in a youknow somebody to settle, make them you know comfortable settle them and take care ofthem; it takes a lot of time and money.So, it has to be worth enough. Compensation and taxation issues; now how do you dealwith the taxation issues? Is it like they have to pay taxation in both the countries or theyhave to pay tax in one country? What is their law of both the countries saying, wherethey are the moment and where they belong to?Finally, what is the training and development cost? It is not that you bring in somebodyand just start making, making them start work. So, what is the training and developmentcost? There has to be some training and development costs. So, all these two takentogether when you see; this becomes the economic issues also play a very vital role indeciding how a firm should go for hiring people from other places. This is all for todayand we will wind up here, and we will continue from here in the next lecture, ok.Thank you very much.