The Pros and Cons of International Staffing Policies

The Pros and Cons of International Staffing

  INTRODUCTION  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  Expatriates Facilitate the Communication between the Foreign Operation and the Home Country  8

3.2  Expatriation as a Means of Knowledge Transfer and Transmitter of Corporate Culture  8

3.3  Expatriation overcomes the lack of qualified host country nationals  10

3.4  Expatriation as a means of personnel development  11

3.2  Difficulties with Expatriation  11

3.1  Culture Shock  12

3.2  Costs  14

3.3  Failure Rates  17

3  Repatriation  19

4  CONCLUSION  21

  TERMINOLOGY IN CONTEXT  23

  BIBLIOGRAPHY  33

The Pros and Cons of International Staffing

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

"As the company's international presence grows, home-country managers are frequently expatriated to stabilize operational activities (particularly in less developed countries). At later

The Pros and Cons of International Staffing

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

7. Measure of control over the subsidiary.

The Pros and Cons of International Staffing

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

The polycentric staffing policy describes a multinational's approach of recruiting host country nationals to manage subsidiaries in their own country. "There is

The Pros and Cons of International Staffing

little or no flow of personnel between the various countries" (Mayrhofer and Brewster: "In Praise of Ethnocentricity": 754).

A number of advantages to this approach have been identified ("Global Human Resource Management"):

1. Language barriers as well as adjustment problems of expatriates and their

families are eliminated (no adaptation problems).

2. Allows continuity of management within the host country. 3. The employment of HCNs is generally less expensive. 4. "No tension between the locals and the "watchdogs" sent from headquarters

occurs" (Mayrhofer and Brewster: "In Praise of Ethnocentricity": 754). 5. Enhances the moral and career opportunities of local staff. 6. Supported by host country governments.

Several disadvantages can be identified as well ("Global Human Resource

1. Difficulty of achieving effective communication between HCN managers at

subsidiary level and PCN managers at corporate headquarters. 2. Difficulties in exercising effective control over the subsidiaries that arise

when a multinational firm becomes a loose federation of independent national units with weak links to corporate headquarters.

3. Difficulty of coordinating the activities between headquarters and

subsidiaries because of a lack of "boundary persons".

4. There is a problem concerning the career paths of HCN and PCN managers

as both have very limited opportunities to gain experience abroad outside of

their own country (reduced opportunities for personnel to widen their horizons and get an international view).

5. This lack of international experience is a liability in an increasingly

competitive environment.

The Pros and Cons of International Staffing

2.3 The Geocentric Staffing Policy

In the geocentric approach the best people are sought for key jobs throughout the organization, regardless of nationality ("Global Human Resource Management").

This approach has two main advantages ("Global Human Resource

1. It enables a multinational firm to develop a pool of senior international

managers (development of a network of persons with international experience and contacts across borders).

2. It reduces the tendency of national identification of managers with

subsidiary units of the organization.

Three main problems have been identified in implementing the geocentric staffing approach ("Global Human Resource Management"):

1. It is increasingly the case that many host countries use their immigration

laws to require the employment of local nationals (HCNs) where possible. 2. This approach can be difficult to implement because of increased training,

compensation and relocation costs.

3. The successful implementation of a geocentric staffing policy requires a

highly centralized control of the staffing process and the reduced autonomy of subsidiary management may be resented.

4. A highly sophisticated personnel planning system is needed that allows

worldwide matching processes between vacant positions and persons with adequate qualification profiles.

5. High costs.

The Pros and Cons of International Staffing

2.4 The Regiocentric Staffing Policy

In the regional approach, employees "are transferred to positions in subsidiaries in other countries, but stay within the same region" (Mayrhofer and Brewster: "In Praise of Ethnocentricity": 755) (e.g. Europe).

The advantages of this approach are:

1. That HCN managers have the opportunity to influence decisions and

compete for jobs at the regional level.

2. The development of a regional approach can help the MNC through the

evolution from an ethnocentric or polycentric approach towards a geocentric

3. The view of the expatriates can be broadened "while reducing the adaptation

problems and the opposition to "strangers" (e.g., an Austrian transferred to Germany should have fewer problems to adapt to the culture than a Japanese sent there)" (Mayrhofer and Brewster: "In Praise of Ethnocentricity": 755).

On the other hand, the disadvantage of the regional approach is that it can lead to identification with regional rather than global objectives and may limit the development of a global approach.