Domestic HRM vs International HRM | eduCBA (2022)

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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.

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

The art and science of HRM are 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 into much detail, let us briefly describe what HRM or Human Resource Management means.

Human Resource Management is managing the people of an organization or company (in both the private and the public sector) in a structured and thorough manner 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 managementand 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.

(Video) Domestic HRM vs IHRM/8 Differences between domestic HRM and IHRM

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.

Domestic HRMvs International HRMInfographics

Domestic HRM vsInternational HRM | eduCBA (2)

Objectives: HRM

The primary objective of HRM is to ensure the availability of the right people for the 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.

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The HRM is responsible for 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.

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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. Thus, with such a large workforce spanning boundaries of other nations, companies require a management concept that would cover each employee.

(Video) Difference between Domestic HRM and International HRM | MBA | M.Com | B.Com | BBA | KUK University

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 these human resources’ talent 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 locally and globally.

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.

(Video) HRM vs IHRM

However, IHRM seems to suffer a setback in its international ventures more than often 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 the IHRM department are thus faced with the responsibility of looking after employees belonging to more than one nationality and consequently have to handle the task of setting up a domestic HRM department for each country from where employees are working.

Despite a local HRM department, the IHRM has to continue to closely monitor all the employees since they are 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 employees’ personal lives than the local HRM department.

It is the responsibility of an HR manager in the 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 a 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 the 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 handling 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 for 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, the 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 affect the working conditions.

(Video) Domestic HRM vs International HRM|Difference between domestic hrm and international hrm

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 unfavourable.

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 “super organisational culture” using the best of all the cultures, which is universally accepted amongst all the HR policies and practices.

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

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

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 creates organisational strategies to achieve sustainable competitive advantage.

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FAQs

What is the difference between international HRM and domestic HRM? ›

International HRM is involved with the management of employees in the three nation categories i.e. home country, host country and third country. Domestic HRM is involved with the management of employees in only one or single country.

Does international HRM influence the business agenda more than domestic HRM? ›

International HRM has to deal with more external factors than domestic HRM. For example, government regulations about staffing practices in foreign locations, local codes of conduct, influence of local religious groups, etc.

How does IHRM differ from domestic HRM and give relevant example? ›

Unlike domestic HRM that is mainly concerned with local/national compliance, IHRM largely focuses on monitoring international taxation laws, employment protocols, language proficiencies, work visas & permits, etc., for a global workforce. This is one of the crucial differences between global vs. local HRM.

Which HRM model is best? ›

The Harvard HRM model is considered one of the most influential 'soft HRM' approaches due to its focus on people rather than outcomes. The Harvard HRM model seeks to provide an optimal context for people to do their best work.

Why is Ihrm more complex than domestic HRM? ›

Domestic HRM is less complicated due to less influence from the external environment. IHRM is very complicated as it is affected by external factors such as cultural distance and institutional factors.

What are the similarities between domestic and international HRM? ›

Both domestic and international HRM have same major functions and activities in HR planning, recruitment, performance management, training and development, compensation, and industrial relations. Another similarity is related to the environmental forces that influence the function of HRM.

What is the importance of international human resource management? ›

International Human Resource Management is all about the regular HRM activities but at the international level. IHRM helps an organization manage its objectives without sacrificing its competitive advantage in an international scenario. The idea behind global human resource management is much similar to regular HRM.

What activity in international human resource would not be required in a domestic environment? ›

To operate in an international environment, a human resources department must engage in a number of activities that would not be necessary in a domestic environment: international taxation; international relocation and orientation; administrative services for expatriates; host-government relations; and language ...

What are the two main approaches to HRM? ›

Approaches that organisations can take in managing employees

There are two main perspectives to Human resource management, viz. hard and soft HRM.

What are the models of international HRM? ›

The four HRM models are: (i) The Fombrun, (ii) The Harvard, (iii) The Guest, and (iv) The Warwick.

How many types of HRM are there? ›

Description of three types of HRM, relational, transactional and transformational.

What are the basic domestic issues in international HRM for the firm in its home country? ›

What are the basic domestic issues in international HRM for the firm in its home country? The basic domestic issues include local recruiting and selection issues, local training issues, and local compensation issues.

Are citizens of countries other than the home or host country they typically work in management and are usually hired because of their special knowledge or skills? ›

+ Third – country national (TCNs).

They are citizens of countries other than the home or host country. They typically work in management and are usually hired because of their special knowledge or skills. International human resource management is usually more complex than domestic human resource management.

What is the concept of international HRM? ›

International human resource management (IHRM) is defined as “the set of distinct activities, functions, and processes that are directed at attracting, developing, and maintaining multinational enterprises' human resources” (Taylor, Beechler, & Napier, 1996, p. 960).

What are the challenges of international human resource management? ›

Top challenges with a global workforce
  • Effective Communication. It is a challenge to work closely within the team when your teams are across the globe. ...
  • Managing Talent Diversity. ...
  • Abiding by Local Laws. ...
  • Talent Gaps. ...
  • Conflicts of Interest. ...
  • Challenges for HR Managers. ...
  • Mentor Programs. ...
  • Strategic Deployment of Talent.
22 Dec 2020

What are the dimensions of international HRM? ›

Morgan, IHRM is the interplay amongst 3 dimensions. Dimensions of IHRM are: HR Activities for recruitment, selection, training, development, compensation, performance management, employee relations etc. Types of employees.

What is the difference between strategic human resources and human resource strategies? ›

Differences Between HRM and SHRM

A managerial function which implies framing of HR strategies in such a way to direct employees efforts towards the goals of an organisation is known as SHRM. The process of HRM is reactive in nature. On the other hand, SHRM is a proactive management function.

What are the similarities between domestic and international HRM? ›

Both domestic and international HRM have same major functions and activities in HR planning, recruitment, performance management, training and development, compensation, and industrial relations. Another similarity is related to the environmental forces that influence the function of HRM.

What do you mean by international human resource management? ›

International Human Resource Management (IHRM) can be defined as a set of activities targeting human resource management at the international level. It strives to meet organizational objectives and achieve competitive advantage over competitors at national and international level.

Why International HRM is important? ›

IHRM helps an organization manage its objectives without sacrificing its competitive advantage in an international scenario. The idea behind global human resource management is much similar to regular HRM.

What is difference between HRM and HRD? ›

The main focus of HRM is on enhancing skills and increasing efficiency of people in the organization whereas HRD is based on the concept of building up the right organizational climate that could discover, nurture and utilize human capabilities in an optimum manner.

What activity in international human resource would not be required in a domestic environment? ›

To operate in an international environment, a human resources department must engage in a number of activities that would not be necessary in a domestic environment: international taxation; international relocation and orientation; administrative services for expatriates; host-government relations; and language ...

What are the challenges of international human resource management? ›

Top challenges with a global workforce
  • Effective Communication. It is a challenge to work closely within the team when your teams are across the globe. ...
  • Managing Talent Diversity. ...
  • Abiding by Local Laws. ...
  • Talent Gaps. ...
  • Conflicts of Interest. ...
  • Challenges for HR Managers. ...
  • Mentor Programs. ...
  • Strategic Deployment of Talent.
22 Dec 2020

What are the basic domestic issues in international HRM for the firm in its home country? ›

What are the basic domestic issues in international HRM for the firm in its home country? The basic domestic issues include local recruiting and selection issues, local training issues, and local compensation issues.

What is the difference between human resource development and human development? ›

Historically, people have used “human resources” to relate to what individuals can contribute to an organization, but the trend is towards the use of “human development” to refer to all human resources activities.

What is scope of human resource management? ›

The scope of HRM is very wide: Personnel aspect-This is concerned with manpower planning, recruitment, selection, placement, transfer, promotion, training and development, layoff and retrenchment, remuneration, incentives, productivity etc.

Videos

1. Difference between HRM and IHRM
(Prof . M.THANGA DARWIN)
2. What is the difference between Domestic HRM and International HRM? | challenges of international HRM
(Education Point)
3. MGMT5609 - International Human Resources Management
(bheobhe)
4. INTERNATIONAL HRM vs DOMESTIC HRM|HRM|UGCNET |MBA|BBA|BCOM|MCOM
(Prof. shalini Khatwani)
5. Lecture 3 Unit 1 variables that moderate difference between domestic and international HRM
(Study with Dr Angurala)
6. DIFFERENCES BETWEEN IHRM & HRM
(Fernanda Ciandra)

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