Comparison between Domestic and International HRM

Domestic HRM and International HRM compared :  Several factors differentiate International HRM (IHRM) from Domestic HRM. The main differentiators are:

  • More HR activities
  • Need for a broader perspective
  • More involvement in employee’s personal lives
  • Changes in emphasis as the workforce mix of expatriates and locals vary
  • Risk exposure
  • More external influences

More Human Resource activities: The scope of IHRM is much broader than managing domestic HR activities. There are issues connected with international taxation, international orientation and relocation and administrative services for expatriates, host-government regulations, and language translation services.

Each function of HR has new dimensions in IHRM as shown below:

  1. Human Resource Planning :
  • Difficulty in implementing HR procedure in host countries.
  • Difficulty in aligning strategic business planning to HRP and vice-versa.
  • Providing developmental opportunities for international managers.
  1. Employee Hiring :
  • Ability to mix with organization’s culture.
  • Ethnocentric, polycentric or geocentric approach to staffing.
  • Selection of expatriates.
  • Coping with expatriate failure.
  • Managing repatriation process.
  1. Training and Development :
  • Emphasis on cultural training.
  • Language training.
  • Training in manners and mannerisms.
  1. Compensation:
  • Devising an appropriate strategy to compensate expatriates.
  • Minimizing discrepancies in pay between parent, host and third country nationals.
  • Issues relating to the re-entry of expatriates into the home country.
  1. Performance management :
  • Constraints while operating in host countries need to be considered.
  • Physical distance, time differences and cost of reporting system add to the complexity.
  • Identification of raters to evaluate subsidiary performance.
  1. Industrial Relations :
  • Who should handle industrial relations problem in a subsidiary ?
  • What should be the attitude of parent company towards unions in a subsidiary.
  • What should be union tactics in subsidiaries ?

Thus the list goes on. Be it employee selection, training or compensation, IHRM adds to new dimensions which are not being felt or being observed inn DHRM.

Need for broader perspective :  When compared to domestic HRM, IHRM requires a much broader perspective on even the most common HR activities. For example, while dealing with pay issues, the corporate HR manager must co-ordinate pay systems in different countries with different currencies that may change in relative value to one another over time. While handling fringe benefits too, complications tend to arise. It is a common practice in most countries to provide health insurance to employees and their families. The family in some countries is understood to include the employee’s spouse and children. In other countries, the term family may encompass a more extended group of relatives-multiple spouses, aunts, uncles, grandparents, nephews, and nieces. It is a difficult task for an international business to deal with the different definitions of family.

Any activity of IHRM  needs a broader perspective because HR managers working in the global environment face the problem of designing and administering programs for more than one country.

More involvement in Employee’s personal lives : A greater degree of involvement in the employee’s personal lives is necessary for the selection, training and effective management of both parent-country and third-country nationals. The HR department needs to ensure that the expatriate employee understands housing arrangements, health care, and all aspects of remuneration packages provided for the foreign assignment. Many international businesses maintain an “international Human Resource Service” section that co-ordinates administration of the above programs and provides service for the parent-country and third country nationals such as handling their banking, investments, home rental while on assignment, coordinating home visits, and final repatriation.

Involvement of the Hr department in the personal lives of the employees is limited in domestic HRM.  The firm may, for example provide employee insurance program, or when a transfer is involved, the HR department may provide some assistance in relocating the employee and his or her family. But in the international setting the HR department must involve itself more and understand the personal lives of employees to provide the servicer and support needed by them. For example, some governments task to submit a marriage certificate before granting visa to an accompanying spouse. Thus, marital status could become an important consideration in the selection process. In such a situation the HR department should advise all candidates being considered for the positions of the host-country’s visa requirement with regard to marital status and allow each candidate to decide whether he or she wishes to remain in the selection process. Apart from providing suitable housing and schooling in the assignment location, the HR department may also need a assist children left behind at boarding schools in the home country. These issues do not figure in domestic HR management.

Changes in emphasis : As an international; business matures, the emphasis placed on various HR activities change. For example, as the need for parent-company and third-country nationals declines and more trained locals become available, resources previously allocated to areas such as expatriate taxation, relocation and orientation transferred to activities such as staff selection, training, and management development. The latter activity may require establishment of a program to bring high- potential local staff to corporate headquarters for development assignments. The need to enhance emphasis in HR activities, as a design subsidiary matures, is clearly a factor that broadens the responsibilities of local HR activities.

Risk Exposure : Risk exposure is high in domestic HRM. unfair hiring practices may result in a firm being charged with the violation of the constitutional provisions and be liable for penalties. Failure to maintain relations with unions may result in strikes and other forms of labor unrest, in addition to these risks, there are other hazards that are unique and more threatening. Depending on the countries where the MNC operates, the headquarters and subsidiary Hr managers may have to worry about the physical safety of the employees.

External influence : The HRM activities are influenced by a greater number of external factors than are domestic HRM functions. Because of the visibility that the international businesses tend to have in host countries (particularly in developing countries), the subsidiary HR managers may have to deal with ministers, political figures, and a grater variety of economic and social interest groups than domestic HR managers would normally encounter. A host-country government can dictate hiring procedures as is the case in Malaysia. During the 1970 s, the Malaysian government introduced an injunction according of which foreign firm must comply which an extensive set of affirmative action rules designed to provide additional employment opportunities for the Malaysians.

In develop countries, labor is more expensive and better organized than in less develop countries, governments require compliance with guidelines on issues such as labor relations, taxation, health and safety. These factors shape the activities of the subsidiary manager considerably. The subsidiary HR manager also need to spend time learning and interpreting the local ways of doing business and the general code of conduct regarding activities such as giving gift. It is also likely that the subsidiary HR manager will become more involved in administering benefits such as housing, education, and other facilities that are readily available in the host country.