NMIMS

INTERNATIONAL HR PRACTICES
APPLICABLE FOR JUNE 2022

1. Acme engineering in Mumbai, is India based heavy engineering company specializing in

transformer manufacturing and setup projects. It's now planning to setup a project
management office in Warsaw, Poland. For this, there will be a team of 15 project experts
moving from India and 2 from France to Poland, including a senior manager coming from
France. What are the pre departure and post arrival trainings you will plan for the team?
What are the top 3 challenges you as HR Manager foresee after the movement is
completed to Poland?

Answer:

Today, the scope of IHRM is increasing at the fast pace. Increasing globalisation, rising of
information and communication technologies and budding presence of multinational
companies have increased the IHRM scope manifolds. With several emerging markets in
China, India, South East Asia and Eastern Europe; organisations are facing stiff competition
in the global market. This brought the need to develop an understanding of how to manage
international human resource practices globally to gain competitive advantage. Various
scholars had studied the emerging challenges in the IHRM practices and developed few
effective theories and models to deal with the challenges of internationalisation. These
models describe the various aspects of international HRM from different points of view and
focus on evaluating whether various IHRM practices could be transferred to different
business systems; considering the diverse cultural, social and political environment.

Pre-Departure Training

Identification of training needs:

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One of the main components of pre-departure training program is training needs
identification. If you feel there is a need of training, then only you can proceed further to
perform it. Here, the main objectives of the training programmes are set so that company
get the desired result post training programs. The objectives of a training programme can be
identified by performing a training need analysis. This analysis helps in finding the areas
where training can benefit both employees and an organisation in meeting their objectives.

Selection of expatriate on the basis of assignments:

Now when the training needs have been identified, company will shortlist the candidates
who will be going to the foreign location to establish the branch and handle everything.
There must be different kind of assignments in any organization and all candidates cannot
handle all kind of assignments so company chooses some candidates who are suitable for
the job. All assignments may not require equal attention and rigour. Differentiating
assignments on the basis of attention and coverage is an essential part of this stage.

Cultural assessment and related training:

When any organization expands itself and enter in international markets, it has to take care
of the culture of those countries else decision may backfire and you may not get the
expected results. Cultural assessment is mandatory in international expansion. At this stage,
specific cultural needs for different assignments across different host countries are
determined. Different countries require expatriates to be trained in different fields which
need to be ascertained well.

Design the training program:

Training program should be drafted wisely by the HR department so that it can achieve the
desired goals and objectives. Proper planned procedure should be followed in this regard.
All the shortlisted candidates should get the training on all the required fields so that they
can perform accordingly.

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Evaluating the effectiveness of a training programme:

At this stage, the effectiveness of a training programme has to be assessed once training is
imparted. The success of pre-departure training is evaluated by taking feedback from
expatriates. It can also be gauged by observing expatriates’ actual performance on the job
on the international assignment. Training evaluation
helps in fine-tuning the pre-departure training programmes to suit the requirements of
expatriates.

Post-arrival training

Career development opportunities:

An expatriate gets opportunities for enhancing his/her career while working on foreign
assignments. This is because an expatriate develops a diverse set of skills in the course of
carrying out his/her job duties. For example, while working in a foreign country, an expat
has to be mindful of cultural diversities present in that country broadening his/her scope of
knowledge.

Work challenges:

An expatriate might face work challenges with respect to a different work environment and
culture present in a company as well as different work timings. Moreover, commutation
distance between the locations of a company premises and the place where the expatriate
is boarding might prove to be a work-related challenge.

Promotion opportunities:

An expatriate is given promotion opportunities if he/she performs well on his/her

international assignments the failure rate among expatriates is quite high since they are

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unable to settle down in a foreign country. The failure rate is high because of factors related
to the inability of the family to settle down.

Job security: Expatriates travel from their country to any other country for the job purposes
so, when they are sacrificing this much for the job, they should be provided some assurance
that their jobs would be secured.

Challenges to the HR manager

Training for cultural and language differences:

It is a challenge for an organisation to provide cross-cultural training to expatriates to

familiarise them with the culture of the country where they are being sent for the
international assignments. Re-location often requires the expatriates and his/her family to
understand the cultural and language differences with which they have to adjust. These are
important components of pre-departure training of the expat and his family. Often it is a
challenge to convince the family of the expat to be a part of the pre-departure training.

Adjustment of the expatriate’s family:

This is perhaps the major reason why expatriates fail in their international assignments.
Often the family members of the employee are unable to adjust to the host country which
makes the expatriate to leave the international assignment midway. This may further lead
to huge costs and work breakdown for the company.

Responding to variations in external environment:

It is very challenging for an organisation dealing at different locations to develop and alter
their HR policies and practices as per the local environment of the host country. In addition,
they also need to maintain some uniformity across its various locations, which may also turn
as a challenging task for the organisations.

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2. Super solutions is an organic dye manufacturing company, headquartered in Faridabad,
India. Their environment and skin friendly dyes are in high demand with Indian and global
fashion houses, especially in Mumbai and US. They are a small firm of around 100
employees, mostly in chemical research, sales, quality and customer relationship roles.
Manufacturing is almost completely outsourced to small scale enterprises in villages in
Haryana and Rajasthan. They have got into a 20 year contract to fulfil requirements of a
new fashion house in Milan (Italy). As per the terms of contract, they need to have 2
researchers, 3 quality experts, 2 logistics managers and 1 customer relationship manager
based exclusively at customer HQ in Milan. Super solutions have decided to go for local
candidates as it will be cost effective and also in line with government guidelines to
promote local talent. Before you start planning, what all the information you need to
acquire? How will you decide on the recruitment strategy and approach? Please detail the
step wise plan to fulfil these needs?

Answer:

International human resource management

The management of Human Resources (HR) in an international setup is even more complex
than the management of human resources in a domestic set up. The reason for this
complexity lies in the numerous differences that are present between headquarters and
subsidiaries. Managing human resources in an international context is more complex than in
a domestic set up because of the many differences between headquarters and the
subsidiaries. In international management, where people are from different cultures, you
have to develop and apply your knowledge about cultures and not use a standard process
for everyone. This is called cross cultural management. In a global market even if you do not
have a diverse workgroup you may have to deal with clients abroad or vendors or service
providers of different countries. So; knowledge about different cultures is a must. The
success of any multinational company depends on the techniques and cultures. Corporate
culture is an organisational culture, related to the management of businesses with respect

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to organisational structure, strategy, and control. It states all the elements around which a
company describes and relates to its stakeholders.

International HR planning

International Human Resource Planning (IHRP) is defined as the process of identifying the
future workforce requirement of the organisation. It is the process of forecasting the
demand for the right kind and number of employees required at various levels and locations
of a multinational. It involves determining the gap between the demand and supply position
of the workforce at a future point in time depending on the future business plans of the
organisation. Depending on whether the MNC experiences a future surplus or future deficit
of the required workforce, it can choose either to hire or to downsize, respectively. IHRP is
derived from strategic plans of the MNC. The company frames its objectives on the basis of
its strategic plans and then builds its operations to achieve those plans.

Information to be needed

HR planning is all about plan the future HR requirements of the organization. In the given
case, company has planned its expansion to Milan, Italy. First task the company needs
before it starts its operations is undertaking international HR planning, so, the strategic
plans of the organization are clear i.e. expansion and for this, it needs to plan about the
human resources requirements. While setting strategic plans, it is always advisable to have
the in-depth understanding of the organizational perspective so that required results can be
achieved. The success of multinational enterprises depends on the human talent is has
acquired and maintained in the long run. Thus, acquiring employees involves crucial steps
like recruitment and selection. The same practice is followed in the parent country as well as
in its overseas entities. This will relate to the managing of the international mobile
workforce who could be hired in one locale and relocated to the other locations if required.
MNCs that look at the overseas expansion strategy could be able to find the right talent
when it is able to decide employment needs. This could be operated from the available
resource buffer.

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While collecting the necessary information, you need to comply with all the rules and
regulations related to the recruitment and related process. You need to know about the
market conditions related to the industry, average salary structures for the similar jobs,
work culture, workplace environment, labour laws, employment responsibilities etc, regular
training and development programs, usage of technology in human resource development
etc. Hiring local talent to support entry into a new market can give your products and
services a localized feel: Local people are much better positioned — both culturally and
professionally — to represent your brand within a new market. As locals, they recognize
what consumers want and possess an intuitive feel for the nuances of the local market.

Recruitment strategy and approach

Before acquiring international talent, proper planning should be there. The success of
multinational enterprises depends on the human talent is has acquired and maintained in
the long run. Thus, acquiring employees involves crucial steps like recruitment and
selection. The same practice is followed in the parent country as well as in its overseas
entities. This will relate to the managing of the international mobile workforce who could be
hired in one local and relocated to the other locations if required. MNCs that look at the
overseas expansion strategy could be able to find the right talent when it is able to decide
employment needs. This could be operated from the available resource buffer. The HR
manager along with some professional agencies could be the source of information
pertaining to adequacy of the local labour markets. Thus, the same procedure is repeated
before one makes decisions about the locations where the operations will take place. This
could affect the participation in the cross-border acquisition, joint venture or alliance. Also,
there are some crucial business factors like the financial and legal considerations which have
to be explored fully.

In the given case, Super solutions have decided to go for local candidates as it will be cost
effective and also in line with government guidelines to promote local talent. In this case,
polycentric approach would be appropriate. The polycentric approach to recruitment means
that we hire locals to fill our positions in a host country. For example, we could advertise on
local job boards or create a contract with a local recruitment agency. We use the polycentric
approach when we need the skills of locals to conduct our business. For example, if we want

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to expand our clientele to a specific country, we’d hire a local professional who knows the
market and can coordinate our sales operations.

3. Pranam electronics, headquartered in Chennai, is a well-known supplier of

semiconductor chips to automobile companies across Europe, US and Asia- Pacific. They
source these chips from China and Philippines and then sell them after required
programming and packaging. Looking at the product market demand they decided to
setup manufacturing unit in Philippines to cater customers across the globe. Team of 50
members hired to setup the plant, out of which 10 are locally recruited and rest moved in
from Chennai, US & France. You as a Global HR Manager have to decide on the
compensation for all employees working in Philippines. Company believes in promoting
equal compensation for all.

a. What are the components of international compensation you will consider while rolling
out offer to the employees joining Philippines unit?
b. Which international compensation approach will you choose and why? Justify with
reasons.

Answer: a)

Compensation system plays an integral role in retention of employees as a poor

compensation is indeed one of the strong factors of employees leaving the organisation. A
compensation system in an organisation can be linked to employees’ behaviour and
attitude. An ineffective compensation strategy can result in poor job satisfaction and
organisational identification which may further affect employee behaviours towards each
other and the organisation.

There are various aspects that need to be considered while developing an international
compensation programme, discussed as follows:

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Salary bands: It is a combination of salary grades and ranges into broader levels for a large
number of jobs and salary levels. The minimum and maximum pay for each band is
determined and the respective jobs to be attached to those bands are also identified.

Other areas in this category are:

Allowances
(i) Cost of living allowance (COLA)
(ii) Housing allowance
(iii) House leaving allowance
(iv) Educational allowance
(v) Location and relocation allowance

Benefits
(i) Parent or host country benefit
(ii) Medical benefit
(iii) Social security benefit
(iv) Compensation
(v) Reimbursements

Issue of Taxation
(i) Country of taxation (where the income is determined)
(ii) Double taxation

Conducting job evaluations to determine pay rates: Information is collected about all the
jobs across the headquarters and international subsidiaries. The information is collected to
have a clear picture of the tasks, duties and responsibilities that come under each job. At
the same time, information about the knowledge and skill requirement for each job is also
ascertained. The jobs are evaluated on the basis of this information that is collected. Then
money values are attached to each of these factors and the final rates of pay for each job
are determined.

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Increments/promotions: This involves deciding when and how-to move an employee from
the existing level to the next level of salary. A decision needs to be taken regarding the
amount of the increment that is to be given. The type of the increase relates to general
increments, cost of living increments, promotion increases and merit increases.

Linking compensation to performance appraisal: In order to design proper system of

compensation management, the organisation must develop a well-designed system of
performance appraisal. A well-designed performance appraisal system helps to link the
rewards with the merit and performance of the employees.

International compensation aims at providing monetary and non-monetary rewards to the

employees working in international organisations. This includes basic salary, allowances,
foreign assignment inducements, perks, benefits and incentives. International compensation
has the objective to:

 Attract the competent and talented individuals for international assignments.

 Allow flexibility and movement of employees from one subsidiary to another or even
back to the parent country.
 Achieve equity between pay systems across the global offices and the headquarters.
 Retain talent in the organisation across the global subsidiaries.
 Help in furtherance of strategic goals and objectives of the organisation
internationally.
 Sustain the performance of employees by rewarding high performers and by
providing incentives to others to improve their performance.
 Help in minimising the cost involved in compensation administration.

b) Compensation Management is more than just the means to attract and retain talented
employees. In today’s competitive labour market, organizations need to fully leverage their
human capital to sustain a competitive position. This requires integrating employee
processes, information and programs with organizational processes and strategies to
achieve optimal organizational results.

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The reasons behind good compensation strategy are as follows:
 An effective compensation package may result in improved organisational
effectiveness.
 It not only addresses monetary but also the self-actualization and psychological
needs of the workforce.
 It helps an organisation to evolve compensation strategies, techniques or
frameworks to attract and sustain best talent from industry.
 It enables the firm to utilise the capabilities of individual employees in the best way
to leverage business potential for growth and expansion of business.
 It acts as a driving force for individuals to work for organisation.
 It enables an organisation to run the organisation effectively and to accomplish its
objectives.

International compensation approaches

Going rate approach:

As per this approach, an MNC decides to compensate their expatriates according to the
salary structure of the host country. The information with regard to the salary structure of
the host country is gathered by conducting salary surveys. This approach is easy to
administer because the salary structure would be similar to that of the host country. This
will result in uniformity of compensation patterns among the employees in the host country.
The compensation package designed on the basis of this approach helps create equity and
fairness irrespective of the nationalities of the employees working in the international
subsidiary. The major problem with this approach is that the expatriates working in different
locations may experience huge variations in their pay package. This can lead to de-
motivation among the expatriates working in countries with a lower pay structure.
However, to offset the pay differential, the organisations pay additional money as additional
salary to such expatriates. The going rate approach may also create a problem for the
returning expatriates especially for those returning from countries with higher pay
structures. They may encounter reduced salary on returning back to the home country
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leading to dissatisfaction. The same problem can occur if the expatriate is transferred from
one host country to the other, i.e., from a country with high pay structure to a country with
low pay structure.

Balance sheet approach:

In this approach, the organisation tries to equate expatriate’s purchasing power in the host
country with that of the home country. This is the most frequently used approach for
international compensation. The basic premise of this approach is that it aims to sustain the
purchasing power of the expatriate in the host country that he had in the home country. It
also aims at providing financial incentives to opt for the international assignment. The idea
behind this approach is that the employee should not lose out on his existing purchasing
power due to the international assignment. MNCs offer a lot of monetary assistance
to maintain the purchasing power of the expatriate in the host country.

As per my view, balance sheet approach should be adopted as it offers various advantages
as compared with going rate approach. Moreover, it aims to sustain the purchasing power
of the expatriate in the host country that he had in the home country, which is very good.

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