Staffing for global operations is quite a complex affair. It involves activities on a global basis, including candidate selection, assignment terms and documentation, relocation processing and vendor management, immigration processing, cultural and language orientation and training, compensation administration and payroll processing, tax administration, career planning and development, and handling of spouse and dependent matters. In global staffing, companies need to choose from various types of global staff members and need to have specific approaches and strategies to global staffing. Global staff members are selected from among three different types: expatriates, host-country people and third-country nationals. Expatriate is a person who belongs to the country in which the organization is headquartered and not a citizen of the country in which the company operates. A host-country national is a citizen of the country in which the subsidiary company is located. A third-country national is a citizen of a country, but works in another country and employed by an organization headquartered in a third country.
Expatriates still represent a minority of multinationals managers. Yet there are also reasons for using expatriates-either home-country or third country nationals- for staffing subsidiaries. The major reason is usually technical competence. Multinational also view a successful stint abroad as a required step in developing top managers.
An international human resource manager must proceed with the job of hiring the right number of people of the right type. The international human resource manager must not only select people with skills, but also employees who can cope with the organization’s culture. MNCs tries to staff its operations with local persons under the assumption that local people are better equipped to do business at their home locations. However, expatriates are needed in the system for a specific set of skills that might not exist at a particular location.
Values and International Staffing Policy
Experts sometimes classify top executives values as ethnocentric, polycentric, or geocentric, and these values translate into corresponding corporate behaviors and policies. These values translate into three broad international staffing policies. The vital factors that affect Multinational enterprises (MNEs) staffing include strategy, organizational structure, and subsidiary – specific factors such as its duration of operations, technology, production and marketing technologies, and host country characteristics such as level of economic and technology development, political stability, regulations and culture. Thus the philosophies of staffing abroad are ethnocentric, polycentric, regiocentric and geocentric.
- Ethnocentric Staffing: In ethnocentric staffing, Parent Country Nationals (PCNs) are selected for key position regardless of location. Japanese, European, U.S and Korean firms utilise ethnocentric staffing. With an ethnocentric staffing policy, the firm fills key management jobs with parent country nationals. Reasons given for ethnocentric staffing policies include lack of qualified host-country senior-management talent, a desire to maintain a unified corporate culture and tighter control, and the desire to transfer the parent firm’s core competencies to a foreign subsidiary more expeditiously.
- Polycentric Staffing: The polycentric staffing policy requires host-country nationals to be hired to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters. Although home-country personnel fill top management positions, this is not always the case. For example, many US MNCs use home-country managers to get the operations started, and then hand it over to the host-country managers. Hindustan Lever Ltd, (HLL), the Indian subsidiary of Unilever, has local as its chiefs. Preference for home-country citizens for key positions does not fit into a pattern, unless government interventions dictate selection processes. In Brazil, for example, two-thirds of the employees in any foreign subsidiary traditionally had to be Brazilians. In additions, many countries exert real and subtle pressures to staff the upper management ranks with nationals. The polycentric approach to staffing has both merits as well as demerits. Hiring host country nationals eliminates language barriers, expensive training periods and cross-cultural adjustment problems of managers and their families. The disadvantages of the polycentric approach are equally strong. Local managers may have difficulty bridging the gap between the subsidiary and the parent company, because the experience and exposure they posses may not have prepared them to work as part of global enterprises. Language barriers, national loyalties, and a range of cultural differences may isolate the corporate headquarters staff from the various foreign subsidiaries. Finally, consideration of only home and host-country nationals may result in the exclusion of competent executives.
- Regiocentric Staffing: With regiocentric approach, a firm’s recruitment for its international operation is done on a regional basis and the managers are selected on the basis of ‘the best in the region’ with international transfers that are restricted to regions. Regiocentric approach takes a somewhat larger operational view than that of polycentric approach as it covers a trade region like European Union and allowing managers to move between business units in various countries of the same region. In this staffing approach, a mix of Parent-country nationals, host-country nationals and third-country nationals can be used depending on the specific needs of the company. The regiocentric approach has recently become more popular as many multinational companies are choosing to organize in regional basis. One of the main advantages of this approach is that it reduces the need for costly duplication of support services. Most multinational companies regiocentric rather than truly international and majority of their sales and operations are concentrated on the region. When it comes to the corporate level, the regiocentric approach is may be limiting as ethnocentric approach as multinational companies are failing to understand the features of the regions outside of their home-region. The regional structure may also lead to the mergence of silo-mentalities as regional managers will be trying to hold and protect their top talent within the region rather than allowing them to develop outside their region.
- Geocentric Staffing: This staffing philosophy seeks the best people for key jobs throughout the organization regardless of nationality. Seeking the best person for the job, irrespective of nationally is most consistent with the underline philosophy of a global corporation. Colgate-Palmolive is an example of a company that follows the geocentric approach. A geocentric policy is based on assumptions that, highly competent employees are available not only at headquarters, but also in the subsidiaries; international experience is a condition for success in top position; managers with high potential and ambition for promotion are always ready to be transferred from one country to another; competent and mobile managers have an open disposition and high adaptability to different conditions in their various assignments; and those not blessed initially with an open disposition and high adaptability can acquire these qualities as their experience abroad accumulates. The geocentric approach has merits and demerits. Among its advantages is the possibility of making the best use of its human resources and it enables the firm to build a cadre of international executives who feel at home working in a number of cultures. In addition, the multinational composition of the management team that results from geocentric staffing tends to reduce cultural myopia and to enhance local responsiveness. Thus, other things being equal, a geocentric policy seems to be the most attractive. Among the disadvantages, the restrictions imposed on staffing by host governments that a high number of their citizens are to be employed in subsidiaries, the increased training and relocation costs and a remuneration structure with standardized international base pay are the prominent.
The four global staffing approaches having been described, it may be stated that based on top management attitude, an international business can pursue one of the three philosophies. Each staffing modes present different and unique HR management challenges as well as opportunities. More specifically, when an organization uses citizens of different countries for its staffing, different tax laws and other significant HR-related factors may apply and therefore it highly recommended that HR professionals need to be knowledgeable about the laws and customs of each country that its workforce belong to.