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Domestic HRM vs International HRM

 

diaspora of talent

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We love the idea of a man wearing a swanky suit, sashaying down the corridors of a glitzy office with an air of importance about him.  He always answers people at the back of a call and is too busy to lift his head.

This is not a romanticized description of the ideal hero but the actual conjuration of images in our mind about efficient HRM (Human Resource Management) managers who work 24X7 and earn an awesome salary which is beyond our belief.

The above perception though a little over the top does hold some validity, but the truth is that Employee Relations and Personnel Management in HRM is much more than the popular term used in the press to describe the industry experts.

The art and science of HRM is complex and one needs to understand the subject in depth to derive an understanding of the popular practices in the HRM industry.

Before we go in much detail let us have a brief description about what actually HRM or Human Resource Management means.

Human Resource Management is the process of managing people of an organization or company (in both the private and the public sector) in a structured and thorough manner in order to achieve the set goals and targets as decided by the company’s management.

The Human Resource Management includes the area of hiring people, retaining them in the company, negotiating their pay package and perks setting, performance management, change management and taking care of the exits of the employees from the company to round off the complete activities in the company. This is the traditional role and definition of HRM.

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The modern times have seen the HR Managers to be designated as People Managers as Human Resource Management is nothing but the work of handling people in an organization.

The HR manager today is responsible for managing employee expectations vis-à-vis the management objectives and reconciling both to ensure employee fulfillment and realization of management objectives.

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Domestic HRM vs International HRM Infographics

HRM-VS-IHRM

Objectives: HRM

The primary objective of HRM is to ensure the availability of right people for right jobs so the organizational goals are achieved effectively. This could only be possible by utilizing the employees’ talent and ensuring that they remain competent and motivated players in the company.

The HRM is responsible of providing job satisfaction and self-actualization as well as maintaining cordial relations between the management and the employees.

HRM is required to maintain the standard of the work life and helping in the practice of ethical behavior and policies in the organization.

International HRM

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Today industries and industrial groups are no more limited to one geographical region or country. A company almost spans three to four continents and thus with such a large work force spanning boundaries of other nations, companies require a management concept which would cover each and every 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 the talent of these human resources in the organization to achieve the company’s mission statement.

HR Managers or People Managers in a multinational company have to 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 is concerned with the management of the company’s dispersed work force and their output despite being geographically divided by boundaries to ensure that the company receives a competitive advantage both locally as well as globally.

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Objectives: IHRM

The objectives of IHRM involve the management of the diverse human capital employed. To simply put the HR Manager has to ensure that despite the difference in the countries, the people employed in the company are competent and supremely talented in taking the company forward.

The petty regional disparity should not crop amongst the employees hampering the growth and success rate of the company. Cultural differences and risks need to be avoided at all cost and the risk of international human resource has to be reduced to the bare minimum.

The IHRM is required to follow extensive rules and regulations as well as stringent international policies related to taxation at the international location of work, employment protocols, language requirements and special work permits.

Difference between Global IHRM and HRM

There are some common mode of intersection between HRM and IHRM with respect to recruitment and selection , appraisal and development, HR planning and staffing and rewards while the main difference lies and as the name itself pronounces that HRM is involved with the management of the employees only in one country .

While IHRM is into the management of employees in the three nation categories i.e. the parent country where the company is actually originated and has its base headquartered; 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 based broadly on the idea that there are three 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 which is not the country where his origin is based. He is also known as an expatriate. When these employees work for long periods  (perhaps 4 –5 years or more) in the parent country they run the risk of being termed as “de facto” employee in the host country and subsequently the labor laws of the host country apply.

Host Country Nationals (HCN): These employees of an organization are the citizens of the country in which the foreign subsidiary is located.

Third Country Nationals (TCN): These are the citizens of a country other than the country where the organization is headquartered or the country that is hosting the subsidiary.

Globalization has brought in a new level of complexity and challenges to the fore in the concept of the Human Resource Management especially in the managing of newer forms of network organizations.

Thus with the new developments taking a precedent, companies have evolved the role of HRM as well as IHRM to meet new requirements. IHRM plays a key role in the achievement of a balance between the need for control and coordination of foreign subsidiaries and the need to adapt to local environments.

However, more than often IHRM seems to suffer a setback in its international ventures due to the lack of understanding and adjustment in the differences of managing employees in the domestic and foreign front.

The modifications required in making the successful home policies work in the 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 with it a broader range of perspective than the domestic department of HRM.

IHRM includes activities such as international taxation, coordinating foreign currencies and exchange rates, international relocation, international orientation for the employee posted abroad, etc.

The HR managers in IHRM department are thus faced with the responsibility of looking after the issues of employees belonging to more than one nationality and consequently have to handle the task of setting up domestic HRM department for each of the country from where employees are working.

Despite a local HRM department the IHRM have to continue to closely monitor all the employees since they are the ones heading the other departments in different countries.

IHRM has a host of duties to mete out in case of an executive posted to a foreign country because they are more directly involved in the personal lives of the employees than the local HRM department.

It is the responsibility of a HR manager in IHRM department to ensure that an executive posted in a foreign country understands all the aspects of the compensation package such as cost of living, taxes and so on.

He needs to understand and take into account the wishes of the family of the executive to relocate to a new country entirely, as well as helping them in adjusting to new culture of the host country.

Children often seem to be the worst hit by the relocation, leaving behind school, friends and adjusting to the alien environment that is thrusted upon them.

IHRM is therefore is given the task of getting the children comfortable and admitted to school to ensure their studies are not hampered. On the other hand the HRM department in the local country is only responsible for providing insurance programmes and transport facility in case of a domestic transfer.

International assignments bring a lot of risk factors especially terrorism in today’s time. IHRM is therefore loaded with the additional responsibility of the health and safety of the employee.

Moreover cost plays a very important role in the handling of 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 upon 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 the setting of a branch of a country. Government regulations about staffing practices in foreign locations, local codes of conduct, influence of local religious groups have to be worked out to ensure a smooth running of the subsidiary as well as the safety of its employees.

Diplomatic relations plays a very crucial role in the successful run of a subsidiary of a parent company. Diplomatic ties between the country of origin and the host country affects 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 multi-cultural differences in order to successfully set up and run a local subsidiary of the parent country. Since globalism sees an interaction of the different cultures, spoken and written languages often act as a barrier to progress.

Thus in such a scenario IHRM can be reduced to a state of helplessness, however, IHRM accepts the different cultures and to bring them together creates a “superorganisational culture” using the best of all the cultures which is  universally acceptable amongst all the HR policies and practices.

Whatever be the differences and striking similarities between HRM and IHRM, what is to be observed is that in the globalized world of today more and more firms are going international to include a diaspora of talent to achieve greater success.

In such a dynamic and competitive market it becomes prominent for any organization to establish an IHRM department to venture on the international grounds.

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 the processes of managing human resources in organizations throughout the global environment has and only then IHRM will be able to successfully allow the multinational companies to achieve success globally.

In short IHRM links the HRM of local subsidiaries and creates organizational strategies in order to achieve sustainable competitive advantage.

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