The importance of best International Human Resource Management (IHRM) practices

The international human resource management (IHRM) function is a crucial component of implementing the global strategy of a firm. Managing the IHRM functions for and in emerging markets presents complex challenges at all employee levels include the war for talent for managerial and professional people, and the issues of outsourcing employees in those markets.

Companies need to make careful decisions regarding the appropriate staffing policy for foreign locations in order to achieve success in the firm’s operations, particularly because of the lack of proximity to and control by headquarters executives.

In particular, the ability of expatriates to initiate and maintain cooperative relationships with local people and agencies will determine the long-term success, even the viability, of the operation. In a real sense, a company’s global cadre represents its most valuable resource. Proactive management of that resource by headquarters will result in having the right people in the right place at the right time, appropriately trained, prepared, and supported. MNCs using these IHRM practices can anticipate the effective management of the foreign operation, the fostering of expatriates’ careers, and, ultimately, the enhanced success of the corporation.

Therefore, East European managers must have cash for most of their base pay, compared to U.S. managers. In addition, they still expect the many social benefits provided by the old government. To be competitive, MNCs can focus on providing goods and services that are either not available at all or are extremely expensive in Eastern Europe. Such upscale perks can be used to attract high-skilled workers.

For example in Japan, in response to a decade-long economic slump, companies are revamping their HRM policies to compete in a global economy. The traditional lifetime employment and guaranteed tidy pension are giving way to the more Western practices of competing for jobs, of basing pay on performance rather than seniority, and of making people responsible for their own retirement fund decisions.

Chief executive officers (CEOs) report difficulty forecasting talent availability in the Asia Pacific Region, in particular China and India. A key concern of Western managers in China and India as well as the firms that outsource there are the rapidly rising pay rates in those countries, as well as a shortage of top talent.

This shortage of talent is especially problematic in India. With the considerable growth in emerging markets, foreign firms trying to get on the bandwagon there are finding themselves in a “war for talent.” With that kind of supply-demand ratio for local skilled managers, salaries are being pushed up; that situation then lowers the rationale for hiring local managers instead of sending expatriates.