International Human Resource Management (IHRM) inspects the method in which international organizations manage their human resources across diverse national contexts. The international framework adds extra complexity to the management of people—beyond what is found in a purely national setting.
The organization that administers people in different institutional, legal, and cultural situations has to be conscious not only of what is allowed or not permissible in different nations and regions of the world, but also of what makes for a cost-effective management style.
"International Human Resource Management is the process of procuring, allocating, and effectively utilizing human resources in a multinational corporation. If the MNC is simply exporting its products, with only a few small offices in foreign locations, then the task of the international HR manager is relatively simple."
– Pulapa Subba Rao
Organizations that tackle IHRM, therefore, have to deal not just with diversity in practices but also with a variety of policy and strategy challenges.
IHRM inspects how MNEs (Multinational Enterprises) manage the demands of ensuring international unity and a cost-effective approach to supervising people across countries, while also staying responsive to local differences in what works and how things are communicated.
This includes, in particular, organizing people who have to work globally.
Importance of IHRM
1. Emphasis on Core Competency
Post-liberalization, many organizations have started focusing on their core competence, planning businesses around what they do best. Core competency is a unique strength of an organization that may not be possessed by others.
This could include access to financial resources at lower costs, superior manpower, strong marketing potential, or technological capability.
Organizations managing their business around core competence often gain a competitive edge. Many have rationalized their operations—divesting units that don’t match their core, and acquiring those that do.
Examples include:
- Tata Group divesting several businesses and acquiring Tetley (UK tea company)
- Voltas and Birla Group’s divestments
- Reliance acquiring four yarn/fiber companies
- Gujarat Ambuja acquiring cement companies
This mindset shift places greater value on the human factor in business success.
2. Competition for Human Resources
With the entry of foreign companies into India’s industrial landscape, competition for human talent has surged.
Foreign firms, especially in consultancy, merchant banking, investment banking, and Indian-origin software companies, are fiercely competing to attract top managerial talent. This increases the demand for skilled HR management at both local and international levels.
3. Reorganization
With restructuring has come reorganization.
Many firms are flattening their organizational hierarchies—cutting down layers of management and increasing the span of control. Flat structures are replacing the older tall structures where “seven levels in a pyramid with seven direct subordinates per manager” was common.
Moreover, traditional functional department structures are being replaced by strategic business units (SBUs) that focus more directly on specific products or services.
This restructuring demands new skill sets within the workforce. Instead of constantly hiring new talent, many organizations now prefer to develop existing human resources — making internal HR development even more critical due to increasing talent competition.
4. Need for Workforce Empowerment
Globally, there's a growing push toward empowering the workforce—giving employees authority aligned with their responsibilities. India, too, is feeling this international influence.
To empower employees, there must be both a shift in mindset and skill level. HRM plays a key role in driving both.
With rising accountability on human resources, HRM is now given a higher strategic position within organizations compared to the past.
5. Technological Changes
Technology is like a double-edged sword—it can simplify life or complicate it.
The internet has revolutionized how we transfer information, communicate, and conduct business. To manage people effectively, today’s HR departments need to be technologically aware and proactive.
While technology allows companies to save time and money by handling negotiations, trade, and finances in real-time—it also exposes them to cyber risks.
For example:
- Sensitive company data can be leaked within seconds.
- Hackers can breach security through the internet.
Organizations have responded by creating new departments like Information Technology (IT) led by roles such as Chief Information Officer (CIO) to handle both opportunities and threats.
With fewer restrictions on tech imports and adoption, companies are adopting advanced technologies, which requires employees to develop newer skills. This, in turn, increases the need for ongoing training, making HR departments more dynamic and essential than ever.
The rise of computers and automation has added yet another dimension to the technological transformation shaping today’s HRM landscape.
