Page 232 - DMGT545_INTERNATIONAL_BUSINESS

Unit 12: Basics of International HRM

12.1.3 factors affecting iHrm notes

According to Charles W.L. Hill, “The strategic role of HRM is complex enough in a purely
domestic firm, but it is more complex in an international business, where staffing management
development, performance evaluation and compensation activities are complicated by profound
differences in labour markets, culture, legal system, economic systems and the like”.
The following are some of the important factors which make international HRM complex and
challenging.
1. Differences in Labour Market Characteristics: The skill levels, the demand and supply
conditions and the behaviour characteristics of labour vary widely between countries. While
some countries experience human resource shortage in certain sectors, many countries
have abundance. In the past, developing countries were regarded, generally, as pools of
unskilled labour. Today, however, many developing countries have abundance of skilled
and scientific manpower as well as unskilled and semiskilled labour. This changing trend is
causing significant shift of location of business activities. Hard disk drive manufacturers are
reported to be shifting their production from Singapore to cheaper locations like Malaysia,
Thailand and China. While in the past unskilled and semiskilled labour-intensive activities
tended to be located in the developing countries, today sophisticated activities also find
favour with developing countries. The changing quality attributes of human resources
in the developing countries and differentials are causing a locational shift in business
activities, resulting in new trends in global supply chain management. India is emerging
as a global R&D hub. India and several other developing countries are having large sources
of IT personnel. In short, changing labour market characteristics have been causing global
restructuring of business processes and industries. And this poses a great challenge for
strategic HRM.
2. Cultural Differences: Cultural differences cause a great challenge to HRM. The behavioural
attitude of workers, the social environment, values, beliefs, outlooks, etc. are important
factors, which affect industrial relations, loyalty, productivity, etc. There are also significant
differences in aspects related to labour mobility. Cultural factors are very relevant in inter-
personal behaviour. In some countries it is common to address the boss Mr. so and so but in
countries like India addressing the boss by name is not welcomed. In countries like India,
people assign a great value to designations and hierarchical levels. This makes delayering
and organizational restructuring difficult.
3. Differences in Regulatory Environment: A firm operating in different countries is confronted
with different environments with respect to government policies and regulations regarding
labour.
4. Attitude towards Employment: The attitude of employers and employees towards
employment of people show variations among different nations. In some countries, hire
and fire is the common thing whereas in a number of countries the ideal norm has been
lifetime employment. In countries like India, workers generally felt that while they have the
right to change organisations as they preferred, they had a right to lifetime employment in
the organization they were employed with. In such situations, it is very difficult to get rid
of inefficient or surplus manpower. The situation, however, is changing in many countries,
including India.
5. Difference in Conditions of Employment: Besides the tenancy of employment, there are
several conditions of employment the differences of which cause significant challenge to
international HRM. The system of rewards, promotion, incentives and motivation, system
of labour welfare and social security, etc. vary significantly between countries.

Task List various factors affecting IHRM.

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