Sample Human Resource Management Paper on the Global Context: Indian IT services and consulting company

Introduction

Human resources are considered as one of the most valuable assets of an organisation. However, a company may not be able to reap full benefits without a comprehensive human resource management policy in place. It is particularly important in case of multinational companies, which function in a global environment with a diverse workforce drawn from different countries. (Pdfs.semanticscholar.org, 2019)

The ongoing globalization is increasing and intensifying competition among creating pressure on multinational companies for extending footprint. They are investing on quality human resourcesto have an edge in the highly competitive business environment and evolving suitable human resource management policies to address the concerns raised due to cultural and intuitionaldifferences in the home country and host countries.It is a slow process of transition from human resource management to international human resource management.

Global human resource management, also referred to as international HRM, is a broad term that includes all such aspects of a company’s human resources, payroll, and talent management processes operating on a global level.. In other words, Global HRM is the process that involves procurement, allocation and effective utilization of human resources in a multinational corporation.

HRM is all about understanding, analysing, applying and revising all the internal and external factors as they impact the process of management of human resources in enterprises globally to improve the experience of the related stakeholders, including customers, investors, employees, environment, and society.

Ongoing technological innovations have made it easier for organizations to perform better across the world, expanding globally has become a necessity for survival. Similarly, it is also essential for these multinational companies to have appropriate HRM software that is capable of catering to the employees working around the globe.

Multinational companies have to align their HRM policies with the cultural, institutional and other contextual factors that come into play in a global operating environment. Studies have revealed that international HRM policies often do not work to the advantage of companies as different countries have their own HRM practices rooted in their own peculiar political, cultural and social settings. There is significant local influence in HRM practices, which have to be taken care of to make optimum use of the human resources. It is imperative that to for companies to have suitable HRM policies that help attract, retain and manage human resources effectively to gain a sustained competitive edge.

 

INFOSYS: An Overview

For this case study, Infosys, India’s second largest IT (Information Technology) company with footprint across the globe has been selected. It ranked 3rd in 2019 Forbes ‘World’s Best Regarded Companies’ List

Headquartered in Bangaluru, formerly Bangalore, the company has a global footprint with 13 subsidiaries and 191 offices spread across 46 countries. The maximum 45 offices were in North America and 6 in South America. Infosys has highest presence in the US with 18 offices, two more than home country India, and 6 offices in China.

With a workforce 229000 and a revenue of $12.1 billion, it is a global leader in next generation digital services and consulting.

India’s second largest software exporter Infosys was incorporated in the year 1981  byMr.N.R.Narayana Murthy at Bangaluru in India. The company was started by seven people with a paltry investment of USD 250. The company became a public limited company in the year 1992 and it was the first Indian company to be listed on the NASDAQ in the year 1999. Infosys also forms a part of the NASDAQ-100 index.

Infosys won the National Award for Excellence in Corporate Governance, conferred by the Government of India,.Continuously in the year 2001, 2002 and 2003. (Limited, 2019)

The study will focus on the impact on HRM policies of the company in countries, with vastly different cultural, political and institutional settings, like the United States and China.

Like most big multinational companies,the workforce of the Infosys comprisesparent-country, host-country, or third-country nationals.Before looking into various aspects of GHRMpolicies, it is essential get familiar with the terms used to refer to various category of employees.

Categories of Employees

They   include local candidates, expatriates, in-patriates, home-country nationals, and third country nationals. It is important to understand the difference between various categories of employees and the terms describing them in human resource management terminology.

Local nationals. The employees hired for jobs in their own country, they are also known as host-country nationals. For example, a British national working in a subsidiary of Thomas Pink in United Kingdom is a local national.

Expatriates. A citizen of a company’s home country working at one of the company’s foreign subsidiaries abroad is an expatriate. American companies define defined expatriates as employees, who are sent away for a period to work outside their home countries, eventually to return to their home countries. An expatriate is also be referred to as a parent-country national.

 Host Country National: An employee who is a citizen of the country where a foreign subsidiary of a companyis located, but the company itself is headquartered in another country.

In-patriates. Foreign national employees of a multinational organisation, who are deputedto work in their home country on a temporary or permanent basis, are referred to as in-patriates.

Third-Country Nationals (TCNs). These employees are from neither the home country, nor the host country. Theyare citizens of one country, working in another country for a company headquartered in a third country. (MBA Skool-Study.Learn.Share., 2019)

Approaches to GHRM:

There are four main approaches the multinational companies adopt to synchronise their human resource management practices with the local laws and policies of the host cotnry.

Geocentric: Here the policies are framed to meet the goals of the worldwide network of home country locations and the foreign subsidiaries.

Regiocentric: In this approach, the policies are in coordination with the region as much as possible.

Polycentric: The HR policies are modified according to the conditions in each foreign country. The subsidiaries are free from the headquarters.

Ethnocentric: The MNC regulates the HR practices from home contrary to Subsidiaries in foreign countries.

Global human resource management can work using any of these approaches to utilize the human resource efficiently internationally by regulating activities like staffing, compensation, management,labour relations, performance evaluation etc.

Human resource management at domestic and international levels essentially involves similar functions like recruitment of staff, training and development, monitoring performance and career development and other mattersrelatedemployees. However, management of human resources in domestic settings within the boundaries of one country is relatively easy and uncomplicatedthe composition of staff is homogeneous as they come from the same cultural background.

However, handling human resources at international is a challenging task as the staff present a heterogeneous mix, drawn from different countries with varied cultural backgrounds. The managers require a broader perspective to effectively marshal human resources and they need to take cultural backgrounds of employees into consideration.

In the domestic settings, the human resource department (HRD)   needs to select candidates for various positions in a country locally,   whereas international human resource management professionals have to make recruitments in a global environment, which is much more complex and challenging.  As operations of international organisations are spread globally, theyhave employees mostly from different countries.Recruitment for Multinationals have to consider many aspects while hiring international managers to handle management positions in different countries from amongst candidates from varied cultural backgrounds. Some companies do maintain the three categories of employees in fixed ratios.

Each category of employees has its own plus and minus points, which are taken into consideration by the human resource department while carrying out recruitment and postings. For instance, the host country national are citizens of the country where they live and work they are familiar with the culture and know the language and as such may perform better than the home-country nationals may.

There multiple advantages of host country nationals, they cost the companies much less than home-country personnel and they have no issues related to culture and language.They stay longer with the companies and require no work permits. Host-country governments also want companies to have maximum host-country nationals on their rolls and hiring them helps to maintain good public relations

There are some disadvantages too. Excessive local hiring may weaken the control of the headquarters over company’s operations and it could end up as a group of disintegrated national unit rather that a cohesive unified international unit. It also limits opportunities for other employees to gain overseas work experience, which is not good for career progression.

Similarly, the expatriate employees also benefits the companies as global mobility of its work force helps them to gain competitive advantage.The companies give various monetary benefits to expatriate employees. (Infosysbpm.com, 2019)

 

Global Human Resource Management Policies and practices:

For an international business to succeed HRM policies, which are globally accepted and are congruent with the firm’s strategy are required. Following are the GHRM policies;

  1. Staffing Policy

Staffing policy involves selection of employees who have the required skills to perform a particular job. Even though difference in culture influences the selection procedure to a certain extent, organizations generally follow similar criteria and process worldwide. The reason is that the end objective of any organization is to select the most capable persons for the job. The criteria for selection for any multinational organization usually relates to the five core areas of skills, attitudes, behaviour, motivation and personality. To be more precise, the focus of selection for international jobs involves strong communication skills, cultural adaptability, technical competence, expertise in the particular field, experience that is accepted globally, country-specific experience language skills, interpersonal skills, and flexibility. Managementstudyguide.com, 2019)

Employers around the world typically rank personal interviews, work experience and technical competency in similar type of jobs as important criteria for selection.  International firms, while selecting employees for any overseas operations, generally prefer people with good language and communication skills, adaptability towards other culture, colour, habits, values etc. , high level of technical skills, people who are highly motivated, who can work independently and resist stress and have a goal oriented behaviour.

Expatriates Selection Process in Infosys

Infosys has established a very formal selection procedure to recruit staff for its overseas positions. (Cbsmohali.org, 2019)

Selection Criteria: Rather than selecting candidates who are simply excited about overseas assignment and have the technical skills required, the company takes a closer look at the personality characteristics of the candidates to ascertain if they possess necessary traits such as empathy, adaptability, their capacity to interact with others and the family support essential to succeed in overseas assignments.

Selection Methods

-To select candidates for international assignments, Infosys interviews candidates about the positions, the country’s culture, and its marketplace.

-In case there is doubt regarding the candidate’sability to adjust, they hire a consulting firm to assess his suitability for the job.

-If candidates clear the interview, the company further conducts a360-degree feedback survey duringwhich their managers and peers are asked about their strengths and weaknessesto assess their skills.

– If the assessment is positive, the short-listed candidates undergo a second round of interview by the local managers of the country for which the candidates are being considered.

-If the local managers consider a candidate suitable for the job, he or she can accept or reject the offerafter consulting thefamily.

 

 

Typology of Expatriates Selection Processes

FORMAL                                                                                 INFORMAL

-Well- defined criteria

OPEN

.

-Clearly defined measures.

-Training for selectors.

-Open advertising of positions (Internal/external)

-Panel discussions.

-Less defined criteria.

-Briefly defined measures.

-Limited training for selectors.

-No panel discussions.

-Open advertising of positions.

-Recommendations.

CLOSEDD

-Clearly defined criteria.

-Clearly defined measures.

-Training for selectors.

-Panel discussions.

-Nominations only (networking/reputation)

-Selectors’ individual preferences determine criteria and measures.

-No panel discussions.

-Nominations only (networking/reputation)

 

 

When the selection system is closed and informal, there are some disadvantages.Limited interpersonal and intercultural skills are considered when selecting international managers.

Employee Training and Development

Training: The process of training begins where selection ends and it focuses on preparing the employee for a specific job.

Development: It is the continuous process of improving the skills abilities for future positions and roles.

            ExpatriateTraining:  For a manager to be truly global there is a set of specific abilities, such as knowledge about the industry, and some other essential characteristics, such as sensitivity and adaptability towards culture, ability to handle responsibility, ability to lead subordinates and to demonstrate. These traits and skills are considered as essential international competencies and can be instilled through effective international training and management development. E. Khilji, 2019)

           International Training: It is the training given for international assignments.

            International trainings in MNCs like Infosys are of three types ;

Preparatory Training for Expatriates: When a person is appointed for an international job, there is a pre-departure training to ensure the candidate has satisfactory skills and knowledge required for working abroad effectively.

Post-Arrival Training for Expatriates: After an expatriate goes overseas, an on-site training is oftenimpartedto familiarize the expatriate with the environment and procedures of that country.

            –Host-Country Nationals & Third-Country Nationals Training: Training is provided to               HCNs and TCNs to help them understand corporate culture, corporate strategy, and socialization.

             Cross-Cultural Training: Cross-cultural training is related to feeling of well-being and      build confidence in another country, development of suitable behaviour as per the foreign culture and improving the interpersonal skills and relationships with host country’s workers

 

 

International Management Development

Infosys develops human development-related strategies and  approaches that are innovative enough to attract, retain and develop international talents into leaders. The company is a forward-thinking organisation that tends to employ suitable human development-related HRM strategies and come out with better results. It can be difficult to locally hiremanagers who have the requisite talent to take up major roles in the company. There is a centralised personnel roster for tracking managerial talents throughout the world. The company takes individual development security seriously by designing a well-developed organized repatriation system and career and succession planning, while relating international experience to management development as well. (Infosys.com, 2019)

For effective international management it is important to have a scheme that includes an evaluation of the present international management pool, the need for international managers in future, and a system for developing and nurturing a truly global management team. HCNs and TCNs should be included in international management development schemes.

Learning and development teams are formed within the human resource department of organisations and they have been the standard motivation for training and development of personnel.

Compensation of International Employees

The aims of an effective compensation system are to attract highly skilled competent candidates for global positions andretain the high performing staffand keep them motivated to improve standard of performance. There are four components in a total pay package, which are the basic salary, benefits, taxes, and allowances. Thee different types of allowances are meant to compensate troubles related to the relocation. Finally, taxes have to be fixed.

Different companies have different salary structure and as a result, the annual compensation differs widely as apart from base salary employees are entitled to various other financial benefits.

The compensation for different categories of employees varies in various countries, depending on cost of living, and the level of skills.  Some countries have specified minimum wage structure for skilled employees, which is mandatory to follow, though the companies can pay hire compensation to attract talent and retain talent. The companies follow different salary structures in various countries complying with the local laws.

Methods to Determine Salary

There are three methods to determine the base salary.The standard methods are always adopted by Infosys to determine the base salary of their employees are the balance sheet approach, the local market approach and the international approach.

Balance Sheet Approach:  It entails designing a compensation package that makes the purchasing power of the expatriate at par with that of employees in parallel positions in the host country and provides incentives to cope up with the inconveniences of the relocation.

Host-based Approach: This approach calculates the base salary considering the host-country standards. Particular allowances will also be added to create a fair compensation package. This method decreases the inequality between expatriates from different countries and working in the same location, and the inequity between expatriates and local employees. This system is effective only if the country of destination pays relatively high wages, as it is easier to encourage individuals to work at higher pay scales than what they would have otherwise.

.International Approach: This approach tries to create an equitable pay system among all overseas employees. This method revolves around the pay and benefits for expatriates who receive equal regardless of the country of destination. This is easily applicable in the case where international employees switch from one foreign job to another. This approach is costlier and is used by companies needing a small number of global managers.

Tax equalization is important as all countries have different taxation systems. It is difficult to provide benefits to the employees working abroad like transportability of the pension plans or heath care coverage is challenging (Jaimovich, 2011). India has a plethora of laws that govern bonus, contributory provident fund, gratuity, retirement other benefits of employees. However, employment in the IT sector is mostly on the contract basis.

In China, where people are concerned about financial security, employees believe in the paternalistic nature of employment relations and a majority of companies and employees value annual pay increase more than performance-based increase. In the United States where the uncertainty avoidance is low, employees look for performance-based rewards and salary increase.

Policy governing role change and promotion also varies as home and host country have different patterns of hierarchy (Edwards, Schnyder and Fortwengel, 2019). The promotions are effected on the basis of experience and performance. There as different parameters for different categories of employees some of whom are assigned delivery targets. The annual salary hike is also based on experience and performance. (Icmrindia.org, 2019)

Labour Relations 

Every country has its own labour laws and the companies have no option but to comply with laws. There is little flexibility as major issues like working hours, leaves structure and retirement benefits, maternity leave, notice period exit are different in various countries. In some aspects of the human resource management policies are virtually dictated by the labour laws of the host country.

The IT companies in India, including Infosys, have to work nine-and-a-half hours every day   whereas those in the US put in just 8 hours a day. However, in India the IT industry, the employees have the benefit of flexi-working hours, they do not have to report for at a fixed time but they have to ensure the minimum specified hours every month. China’s labour law lay down that employees should not work more than 8 hours a day, or 44 hours a week, and that they were entitled for overtime if made to work beyond the specified hours.,

Similarly, in India the mandatory notice period for an employee exiting the country is three months ,whereas in the US there is no statutory requirement for management granting notice in case of dismissal of employee or an employee serving a notice before leaving the company. Some companies do have a specified period in the contract.

A company has to pay a huge amount as severance compensation in the US, whereas in India it is nominal, equal to the salary for the notice period, unless otherwise specified in the employment contract.

China also has labour laws that mandate that every employee must sign an employment contract, either open ended or fixed term, to secure certain rights.. It ensures that the any employee, locals or expats, cannot be sacked unilaterally. Some kind of review will have to be carried out to complete the termination process. This is entirely different from the ‘at will’ employment policy in the US, where an employee can be terminated at any time and for any reason. In China the company and the employee can terminate the job contract by serving a 30-day notice in case of termination without a cause (Siekańska and Wojtowicz, 2017).

Talent Development

New Age Technologies: The companies are willing to pay more to the engineers trained in new technologies, particularly in the IT sector, where new technologies keep evolving all the time. The compensation for employees working in new technologies is much higher as there is shortage of engineer skilled in new technologies.As there is no dearth of engineers skilled in prevalent technologies, the employees working in such technologies are in comparison paid much less (Berzsenyi, 2019).

Companies invest in talent only if it helps to boost the business prospects. A company will hire new talent if the skill is in demand. Infosys pays higher compensation to staff hired in the USA as the projects it handles require new technologies. Investing in talent is rewarding. In contrast, in India it is mostly executing government projects, which do not require new age technologies. It can make do with prevalent technologies for which it does not have to scout for new talent. There is no dearth of engineer skilled I prevalent technologies and company has to pay much less compensation. (The WritePass Journal, 2019)

 

Trade Relations:The trade relations between home and host countries also influence the hiring policy of companies. Infosys has been hiring locally in the US and has plans to add another 10,000 engineers to its workforce solely because the two countries have good trade ties and there are no constraints. The company sees much   scope for expanding business in the country. The same cannot be said about China where expanding business is not easy and the company is not keen to invest. India and China do not have best of trade ties and the environment there is not conducive for growth of business. It is evident from the fact that Infosys has very small offices in China and a small workforce. (Harzing.com, 2019)

Leave Structure

The companies in different countries have different leave structure and holidays. In some companies, employees are entitled to casual leave and earned leave besides weekend offs. Many companies only allow a fixed number of earned or privilege leave to employees and no casual leave. The Infosys is one such company where employees are entitled only to earned leave.

Different countries have holidays on national days and important religious festivals and multinational companies usually grant such holiday’s country wise. Infosys employees in India have a holiday on Diwali and Republic day, while its employees in the US have a holiday on Christmas.

In China, employees who have cumulatively worked for more than one year all employers are entitled to 5 days annual leave for cumulative employment of 1-to10 years, and 10 days annual leave for service of 10-20 years.  (Farndale, 2019)

 

Host Country Politics Impact on Multinational Companies

The politics of the host country, which often affect the government policies, also has implications for the hiring policies of multinational companies. Infosys has been mostly hiring its workforce from its home country India and it enable it to provide IT services abroad at highly competitive rates due to lower cost of human resources (Sommer, 2017). However, the Trump government has imposed restrictions on visas to professionals to force the companies to make maximum recruitment from the host country. Infosys along with other major IT company, TCS, have been affected the most by the decision (Cieślik, 2012). The two companies have been left with no option but to make recruitment from the US .Consequently, the cost of service delivery has increased considerably and their profit margins have come down significantly. (Bartleby.com, 2019)

Many professional who joined the Infosys with the aim to build a career overseas hare now a disappointed lot and they are leaving the company se company after being deniedthe H-1B visa by the United States. As a result, the attrition rate has hit the highest ever 23.4 percent.

The forced change in hiring policy has implications for the home country as companies have scaled down recruitment. The protectionist policy of the US has boosted employment in the country; it has led to loss of employment opportunities in India.

Host Country Employees and Home Country Employees

The Differential salary structure and work culture in the home country and host country has impact on employees of both. In a company like Infosys, where the home country employees outnumber the host country employees, the latter fear discrimination and feel out of place. They face difficulties due to language problem and difference in work culture. The overall reputation and standing of companies make an impression. The Indian companies in the US are known to be conservative in payment of compensation and fall in the lower end of the wage spectrum. The host country employees feel the pinch long for switch over to US companies which are good paymasters. (Petti, 2019)

 

Similarly, the home country employees feel that the host country employees are getting higher compensation for the same work. Also they rue that their annual hike and promotion prospects are being affected due to hiring from host country which is an proposition that is hurting companies’ profits.

However, there are positive aspects too, they feel it is prestigious to be working in accompany with a global footprint. Global presence with employees drawn from different countries also brings stability to the company. This is one of the reason that Infosys is a highly rated company in India with better HRM policies. They also feel that it provides them opportunities for overseas exposure and employment.

Succession Planning

Succession is an important and critical part of the business planning. As businesses go through up and down for various reasons and companies endure the cycle of profit & losses, succession planning becomes a big challenge. The top companies identify one or more successors for key posts or groups of similar key posts to ensure smooth transition, move forward on the planned course with the established norms, and work culture. Lack of proper successor planning often lands companies in trouble.  Even a company like Infosys, which follows high standards of governance and ethical standards, has run into rough weather on this count. The promoters handed over the company to a professional board but conditions became difficult and founder chairperson Narayanmurthy had to come back to steer the ship for a short while. (Treven, 2019)

Apart from the professional competence, the ultimate success of an expatriate assignment depends on the local people with whom he or she has to work. However, a majority of multinational companies are lagging  in international management development and also lack commitment to individual career planning at the corporate level. They do not make a serious effort to identify managers of high potential at an early stage, groom them in their career, and give them opportunities to gain international experience.

The companies in China have this drawback; they have a short-term focus and pay little attention to training and development. The Chinese multinational companies mostly lack formal schemes and they handle international management development on an ad hoc basis. Unlike Infosys, no Chinese multinational maintain proper a centralised record of all international managers or high-potential staff worldwide atits headquarters.

 

Conclusion

Infosys is already a highly rated IT company with offices across the world. The wide gap in compensation paid to host country employees does make an impact on home country employees and it is one of the reason for high attrition rate.

It should try to gradually integrate the relevant cultural and institutional factors of the host countries and evolve astandardise set of GHRM practices to help reduce the differences in HRM policies in different locations. Once the organisation starts providing comparable facilities, services and compensation it will emerge as a truly global unit complying with international HRM practices. This will keep all its employees, irrespective of the location, satisfied and motivated.

 

References

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