Economics University of Wien

The Pros and Cons of International Staffing Policies

by

Kathrin Mössler

Table of Contents

1. INTRODUCTION 2

2. WHAT IS INTERNATIONAL STAFFING? 2
2.1 THE ETHNOCENTRIC STAFFING POLICY 3
2.2 THE POLYCENTRIC STAFFING POLICY 4
2.3 THE GEOCENTRIC STAFFING POLICY 6
2.4 THE REGIOCENTRIC STAFFING POLICY 7

3. EXPATRIATION 8
3.1 THE ADVATAGES OF EXPATRIATION 8
3.1.1 Expatriates Facilitate the Communication between the Foreign Operation and the Home Country 8
3.1.2 Expatriation as a Means of Knowledge Transfer and Transmitter of Corporate Culture 8
3.1.3 Expatriation overcomes the lack of qualified host country nationals 10
3.2.4 Expatriation as a means of personnel development 11
3.2 Difficulties with Expatriation 11
3.2.1 Culture Shock 12
3.2.2 Costs 14
3.2.3 Failure Rates 17
3.2.4. Repatriation 19

4. CONCLUSION 21

TERMINOLOGY IN CONTEXT 23

BIBLIOGRAPHY 33

1. Introduction

There has been a rapid pace of internationalization and globalization over the last decade. Expanding business operations beyond national boundaries while continuing commitment to local markets requires more complex business structures. One of the most critical determinants of an organization′s success in global ventures is the effective management of its human resources.
The purpose of this paper is to summarize the advantages and disadvantages of the different international staffing approaches with special focus on the positive impacts as well as on the challenges of expatriation.

2. What is International Staffing?

International management encounters many problems above those faced by a domestic organization. Geographic distance and a lack of close, day-to-day relationships with headquarters represent a major challenge to multinationals. "It is essential, therefore, that special attention is given to the staffing practices of overseas units" (Pigors 1973: 690).

According to Pigors (1973: 690) there are three different sources of employees with whom an international company can be staffed. First, the company can send employees from its home country, which are referred to as expatriates, expats or home country nationals. Second, it can recruit host country nationals (natives of the host country), and third, it can hire third country nationals who are natives of a country other than the home country or the host country.
When international expansion of the company is in its infancy, management is heavily relying on local staff, as it is extremely respondent to local customs and concerns.

"As the company′s international presence grows, home-country managers are frequently expatriated to stabilize operational activities (particularly in less developed countries). At later stages of internationalization, different companies use different staffing strategies; however, most employ some combination of host-country, home-country, and third-country nationals in the top management team" (Sherman, Bohlander and Snell 1996: 690).,

The staffing policies of multinational companies can be divided into four categories (Mayrhofer and Brewster: "In Praise of Ethnocentricity": 749), namely:

1. Ethnocentric policy
2. Polycentric policy

1. Geocentric policy
2. Regiocentric policy

2.1 The Ethnocentric Staffing Policy

The ethnocentric staffing policy refers to the strategy of a multinational company to employ managers for key positions from the parent headquarters instead of employing local staff ("Global Human Resource Management").

Many organizations have traditionally relied on parent country nationals (PCNs) for staffing top management positions abroad for a number of reasons ("Global Human Resource Management"):

1. The expatriate′s technical and business expertise.
2. Ability to transfer the headquarters′ culture to the foreign operation (infusing central beliefs throughout the organization).
3. Political understanding of the headquarters′ organization.
4. Effective communication between headquarters and the subsidiary.
5. Lack of qualified host country nationals (HCNs).
6. Greater ability of expatriates to transfer know-how from the parent to the subsidiary.
7. Measure of control over the subsidiary.
8. Career and promotion opportunities for PCNs.
9. Personnel development.
10. No need of well-developed international internal labor market.
11. Rapid substitution of expatriates possible.

However, there are a number of major problems with this approach ("Global Human Resource Management"):

1. Parent country nationals continue to experience difficulties to adjust to international assignments.
2. The adaptation of expatriates is uncertain.
3. Complicated personnel planning procedures.
4. The private life of expatriates is severely affected.
5. Difficulties in constant mentoring during the stay abroad.
6. This approach to staffing limits the promotion and career opportunities of local managers, which may lead to low moral and increased turnover.
7. Parent country nationals are not always sensitive to the needs and expectations of their host country subordinates.
8. Tensions between the expatriate executives and the HCNs (caused by philosophical issues such as the clash of cultures and also by some fairly hard issues such as the often substantial income gap).
9. Expatriates are very expensive in relation to HCNs.
10. Legal regulations of the host country.
11. Government restrictions.
12. Repatriation.
13. High failure rate.

2.2 The Polycentric Staffing Policy

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