Staffing International

Operations

Staffing the Global

Organization

Staffing the global organization is

very important in IHRM.
The process involves identifying
and selecting the people who will
fill the positions abroad, and then
placing them in those positions.

Staffing the Global

Organization

International staffing: home or local?

It depends largely on the
international orientation of a MNC:
1. ethnocentric
2. polycentric
3. geocentric
4. regiocentric
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Ethnocentric Staffing
Policy/Approach

MNCs following an ethnocentric

staffing policy would appoint mostly
parent-country nationals (PCNs) to
top positions at their subsidiaries.
An ethnocentric company believes
that home-country management
style, knowledge, and practices are
better than those in the host country.
4

Ethnocentric Staffing
Policy/Approach

For example, Royal Dutch Shell fills

most of its financial officers
worldwide with Dutch nationals.
The reasons include unified
corporate culture and tighter
control.

Ethnocentric Staffing
Policy/Approach

Reasons or advantages for pursuing an

ethnocentric staffing policy:
1. Use of qualified PCNS. There is a perceived
lack of qualified host-country nationals (HCNs).
2. The need or able to maintain good
communication, coordination, and control links
with corporate HQs.
3. An ethnocentric approach can reduce the
perceived high risk for firms at the early stages
of internationalization. To ensure that the new
subsidiary complies with corporate objectives
and policies.
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Ethnocentric Staffing
Policy/Approach

Disadvantages include:
1. It limits the promotion opportunities
of HCNs, which may lead to reduced
productivity and increased turnover
among HCNs.
2. The adaptation of expatriate
managers to host countries often takes
a long time, during which PCNs often
make mistakes and poor decisions.
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Ethnocentric Staffing
Policy/Approach

Disadvantages:
3. When PCN and HCN compensation packages are
compared, the often-considerable income gap in
favor of PCNs is often viewed by HCNs as
unjustified.
4. For many expatriates a key overseas position
means new status, authority, and an increase in
standard of living. These changes may affect
expatriates sensitivity to the needs and
expectations of their host country subordinates.
5. Time-consuming and expensive documentation
(due to host-country government requirements)
may be needed to bring in PCNs into the hostcountry.
8

Polycentric Staffing
Policy/Approach

MNCs following a polycentric staffing

policy would prefer to appoint hostcountry nationals (HCNs).
A polycentric company believes that
only host-country managers can really
understand the culture and behavior of
their markets.
Overseas operations should be
managed by local managers.
9

Polycentric Staffing
Policy/Approach

Advantages:
1. Employing HCNs eliminates language
barrier, avoids the adjustment problems
of expatriate managers and their families,
and removes the need for expensive
cultural awareness training programs.
2. Employment of HCNs allows a MNC to
take a lower profile in sensitive political
situations.
10

Polycentric Staffing
Policy/Approach

Advantages:
3. Employment of HCNs is less
expensive, even if a premium is paid to
attract high-quality applicants.
4. It gives continuity to the
management of foreign subsidiaries.
This approach avoids the turnover of key
managers that results from an
ethnocentric approach.
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Polycentric Staffing
Policy/Approach

Disadvantages:
1. The gap between HCN subsidiary
managers and PCN managers at corporate
HQ.
Language barriers, conflicting national
loyalties, and a range of cultural differences
may isolate the corporate HQs staff from
the various foreign subsidiaries.
The result may be that a MNC could become
a federation of independent national units
with little links to corporate HQ.
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Polycentric Staffing
Policy/Approach

Disadvantages:
2. Limited career paths of HCN managers.
HCN managers have limited opportunities
to gain experience outside their own
country and cannot progress beyond the
senior positions in their own subsidiary.
3. Limited career paths of PCN managers.
PCN managers also have limited
opportunities to gain overseas experience,
which may be needed for their career
advancement.
13

Geocentric Staffing
Policy/Approach

MNCs following a geocentric staffing

policy would simply appoint the best
person, regardless of his/her
nationality and that could include
third-country nationals (TCNs).
TCNs are nationals of a country
other than the MNCs home country
and the country of the subsidiary.
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Geocentric Staffing
Policy/Approach

A geocentric company believes

that it must be managed on a
global basis.
The best manager for a particular
position can be from any country
where the company operates.

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Geocentric Staffing
Policy/Approach

Advantages:
1. It enables a MNC to develop an
international executive team which
assists in developing a global
perspective, and an internal pool of labor
for deployment throughout the global
firm.
2. It overcomes the federation
drawback of the polycentric approach.
3. It supports cooperation and resource
sharing across units.
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Geocentric Staffing
Policy/Approach

Disadvantages:
1. Host government requirements.
Host governments want a high number
of their citizens employed and may
utilize immigration control to force HCN
employment, if enough people and
adequate skills are available; or require
training of HCN over a specified time
period to replace a foreign national.
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Geocentric Staffing
Policy/Approach

Disadvantages:
2. Time-consuming and expensive paperwork.
Many Western countries requires companies to
provide extensive documentation if they wish to
hire a foreign national instead of a local.
Providing this documentation can be timeconsuming and expensive.
Also, it could be very difficult to obtain a work
permit for the accompanying spouse or partner.
3. A geocentric policy can be expensive to
implement because of increased training and
relocation costs.
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Geocentric Staffing
Policy/Approach

Disadvantages:
4. To support a geocentric policy, large
numbers of PCNs, TCNs, and HCNs need to
be sent abroad to build and maintain the
international team.
This requires a longer lead time and a more
centralized control of the staffing process.
This reduces independence of subsidiary
management in the staffing issues, and this
loss of autonomy may be resisted by the
subsidiary.
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Regiocentric Staffing
Policy/Approach

In this approach, managers are

transferred on a regional basis,
such as Europe, North America,
and Asia.
It often forms a midway station
between a pure ethnocentric or
polycentric approach and a truly
geocentric approach.
20

Regiocentric Staffing
Policy/Approach

Staff may move outside their

countries but only within the
particular geographical region.
Regional managers may not be
promoted to HQ positions but
enjoy a degree of regional
autonomy in decision making.
21

Regiocentric Staffing
Policy/Approach

For example,
A US-based firm could create 3 regions:
Europe, the Americas, and Asia-Pacific.
European staff would be transferred
throughout the European region, say a
Briton to Germany, a French to Belgium,
and a German to Spain.
Staff transfer from Europe to Asia-Pacific
region would be rare, as would transfers
from the regions to HQ in the US.
22

Regiocentric Staffing
Policy/Approach

Advantages:
1. It allows interaction between
executives transferred to regional HQs
from subsidiaries in the region and PCNs
posted to the regional HQs.
2. It reflects some sensitivity to local
conditions, since local subsidiaries are
staffed almost totally by HCNs.
3. It can be a way for MNC to gradually
move from a purely ethnocentric or
polycentric to a geocentric approach.
23

Regiocentric Staffing
Policy/Approach

Disadvantages:
1. It can produce federalism at a regional
rather than a country basis and constrain
the organization from taking a global
stance.
2. While this approach does improve career
prospects at the national level, it only
moves the barrier to the regional level.
Staff may advance to regional HQs but
seldom to positions at the parent HQs.
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International Staffing
PCNS, TCNs, or HCNs?

Note that these staffing policies apply to

key positions in MNC subsidiaries only.
Although some PCNs and TCNs might still
be found at middle management, MNCs
normally appoint host country managers
at this and lower levels.
There are advantages and disadvantages
in employing PCNs, TCNs, and HCNs.
See Dowling et al. (2013), p. 114,
Chapter 5, Table 5.1.
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26

27

28

International Staffing:
Home or Local

In sum, reasons to employ local managers

(HCNs):
1. The cost of using expatriates is much higher
than the cost of employing local managers.
A recent study by PriceWaterhouseCoopers
shows that the average expatriate assignment
cost is US$311,000 per annum with a range of
between US$103,000 and US$396,000.
The average expatriate management cost
amount to US$22,378 as compared to the
management of an average employee of
US$3,000.
29

International Staffing:
Home or Local

2. In some countries, the government

may insist that local people be
employed unless there are no locals
with the required qualification.
3. There is a fear that expatriates,
knowing they are posted to the foreign
branch for only a few years, may only
emphasize short-term projects and not
long-term commitments.
30

International Staffing:
Home or Local

Reasons for using expatriateseither PCNs or

TCNs:
1. Technical competencemany firms cannot
find local candidates with the required technical
qualifications.
2. Career developmentsome MNCs view
overseas experience as a requirement in
developing top managers.
3. controlthe assumption is that home office
managers understand the firms policies and
practices and are more likely to implement
instructions from HQs.
31

Factors Influencing
International Staffing
Choices
Some points to note:

1. A MNC can pursue one of the several approaches

to international staffing based on top management
attitudes or their international orientation.
2. A MNC may even proceed on an ad hoc basis,
rather than systematically selecting one of the 4
approaches just discussed.
3. The nature of international business often forces
adaptation upon implementation of a certain
approach to staffing. A firm may adopt an
ethnocentric approach. But a host government may
require the appointment of its own people, hence, a
polycentric approach is mandatory for that country.

32

Factors Influencing
International Staffing
Choices
The external and internal factors facing

a particular MNC would influence its

staffing approach.
These factors can be categorized into:
1. Context Specificities (external)
2. Company Specificities (internal)
3. Local Unit Specificities (internal)
4. IHRM Practices (internal)
See Dowling et al. (2013), p. 115,
Chapter 5, Figure 5.1.

33

Determinants of Staffing
Choices

These include the following:

1. Context specificitiescultural context,
legal environment, education system,
industrial relations, labor availability, type of
industry, competition, and other local
conditions.
2. Company specific variablesMNC
structure and strategy, international
experience, corporate governance, and
organizational culture.
34

Determinants of Staffing
Choices

3. Local unit specificities

establishment method (whether it is
a green field investment, a merger,
an acquisition, or a shared
partnership), the strategic role of the
subsidiary, its strategic importance
for the MNC as a whole, the need of
control, and the locus of decision.
35

Determinants of Staffing
Choices

4. HRM practices
Selection, training and development,
compensation, and career
management including expatriation
as well as repatriation play an
important role in the development of
effective policies required to support
a preferred staffing choice.
36

37

Determinants of Staffing
Choices

Note that there are

interdependencies between the
determining variables mentioned in
the Figure 4-1.
The various contextual,
organizational and HR-related
issues are interrelated in
determining staffing choices.
38

Determinants of Staffing
Choices

Examples:
1. An ethnocentric approach to a new
established subsidiary (local unit specificity)
could be perfectly valid for a very experienced
MNC (company specificity).
2. A MNC developing into a networked
organization (company specificity) will require
IHRM approaches and activities (IHRM practices)
that will assist its ability to build a flexible global
organization that is centrally integrated and
coordinated yet locally responsivea geocentric
approach.
39

Determinants of Staffing
Choices

Examples:
3. A geocentric staffing philosophy requires that
the MNC has sufficient numbers of high-skilled
labor staff (PCNs, TCNs, and HCNs) constantly
available for transfer anywhere, but it is not
easy to find or nurture the required numbers of
high-quality staff (firm and context
specificities), nor assign them to certain
operations due to host-country requirements
(context specificities). Hence, other staffing
approach such as polycentric may be more
appropriate.
40

Global Workforce Planning

and Forecasting

As with HR planning in a purely

domestic firm, the objective of
global workforce planning is to
estimate employment needs
globally, and to develop plans for
meeting those needs from the
available global labor force.
41

Global Workforce Planning

and Forecasting

The term workforce refers to any

firms employees.
The term labor force applies to
the pool of potential employees,
the labor market, from which a firm
hires its workforce.

42

Global Workforce Planning

and Forecasting

In planning and forecasting a global workforce, IHRM

managers must understand the many factors define
the dynamics of global labor markets or the size of
the labor force:
1. the quantity and quality of employment in a
country.
2. the levels of employment and unemployment
within a country.
3. the labor force participation rates of various
segments of a countrys population. For example,
the participation rates of men and women in various
locations.
4. the occupational and industrial structures of
employment in a country.
43

Global Workforce Planning

and Forecasting

5. the quality and extent of education for

various components of a countrys
population.
6. Whether the education or skills required
for a particular job would require a firm to
seek job candidates from all over the
world.
7. Whether mainly local people would be
expected to apply for a particular job due
to individual employment preferences or
host government requirements.

End

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