Expatriates in multinational enterprises (MNEs)

Table of contents

1. Introduction

2. Recruiting of Expatriates
Staffing policy
Ethnocentric staffing approach
Polycentric staffing approach
Geocentric staffing approach
Success Factors
Selection Criteria
Technical Abilities
Relational Skills
Family Situation
Motivational State
Selection process

3. Training
Pre-departure Training
On-the-job Training

4. Compensation Package

5. Support during Assignment
After Arrival Support
Ongoing Support
Support for the Family

6. Repatriation

7. Conclusion

8. Bibliography

1. Introduction

Globalization of business entails a lot of challenges for a company, including the decision, whether to go international or not. The main reasons for going abroad include opening up of new markets, cutting costs and increasing profit, ensuring of raw materials supply, and acquisition of new technologies. However, the decision to expand business internationally requires developing of new strategies on all managerial levels including the international human resource management (IHRM).

The subject area of international human resource management is “the study and application of all human resource management activities as they impact the process of managing human resources in enterprises in the global environment.”^[1] The tasks of IHRM include the staffing decision in the multinational enterprises (MNEs), managing the global workforce and expatriates management.^[2]

The role of international human resource management in global business is significant. Selecting an appropriate person for a position contributes to the success of a company, whereas recruiting the wrong person can cause failure and unplanned costs. The success of expatriate in their assignments abroad is even more important, because they are among the most expensive employees. Money, resources, and time are misspent if the selection and training process is insufficient.^[3]

Who are the expatriates? According to Mendenhall et al., an expatriate is “living or working in a country of which he or she is not a citizen and who can be classified as possessing skills critical the success of the performance of foreign subsidiaries.”^[4] The term expatriate is typically applied to an employee who is on a long-term assignment outside their home country.^[5] An expatriate assignment concerns not only the employee and their job responsibilities, but also relocation of their family, their adaptation to a different environment, climate, culture, and language.^[6]

The international human resource department of a company is responsible for selection of candidates, preparation, training, drawing up a compensation package, continuous support during assignment, and arranging of repatriation.

The aim of this paper is to research, what activities are necessary to carry out in each of the above-mentioned phase of the assignment circle to ensure a successful assignment of expatriate. The adopted research methodology is a literature review.

2. Recruiting of Expatriates

Staffing policy

The MNEs are confronted with setting down the staffing policy. There are three main approaches to staffing and managing a subsidiary abroad: ethnocentric, polycentric and geocentric staffing approach. Staffing of expatriates plays an essential role by ethnocentric policy. However, the polycentric and geocentric approach can also include the expatriate assignments. Deresky and Dowling et al. describe the advantages and disadvantages of each approach:^[7]

Ethnocentric staffing approach

The company at the early internationalization stage of strategic expansion requires close control over the new ventures to reduce the perceived high risk. In view of this fact, the ethnocentric staffing approach is recommended to fill the top management position in the foreign subsidiary. It also helps to overcome a lack of qualified and competent host-country nationals (HCNs).

The greatest advantage of this approach is that the managers from parent-country (PCNs) are familiar with the parent company strategy, corporate culture, goals, products, procedures, rules, regulations, employees and relationships in headquarters (HQ). This know-how and managerial experience facilitate the communication and coordination between headquarter and subsidiary.

A company adopting an ethnocentric staffing approach, however, must take in consideration that the adaptation of expatriate managers to host country, new culture, and unusual conditions often requires a long period of time. This can lead to mistakes and poor decisions. This staffing strategy also restricts the promotion opportunities of host-country employees, which can have a negative impact of their motivation.

Polycentric staffing approach

A polycentric staffing policy is characterized by a decision-making autonomy of the foreign subsidiary that is usually managed by local managers (HCNs).

The company can profit from their knowledge of local culture, political situation, language, contacts, needs of local market, and ways of doing business. Their sensitivity to local culture can also influent the decision making process in a positive way. To hire the host-country nationals is usually less expensive for a company than to transfer one from headquarters, frequently with a family and often at a higher rate of pay.

One disadvantage of a polycentric staffing policy is the difficulty of coordinating activities and goals between the subsidiaries and the parent company, and the potential conflicts between expatriates and local managers.

Geocentric staffing approach

In a geocentric staffing approach, the recruiting of subsidiary executives takes place regardless of their nationality. It facilitates the multinational enterprises to establish an international managerial team. Furthermore, this approach supports cooperation, knowledge transfer and resource sharing within the corporation.

Success Factors

Expatriates are said to be successful when they do not quit their assignments prematurely, complete their tasks, and develop and maintain interpersonal ties with employees in the host country.^[8] In the opposite case, the assignment is considered as failed. However, there are also other characteristics of its breakdown. Briscoe et al. list the international assignment failures:^[9]

- Early return home or termination
- Poor quality of performance in foreign assignment
- Employee not fully utilized during assignment
- Personal dissatisfaction with experience (by expatriate or family)
- Lack of adjustment to local conditions
- No acceptance by local nationals

[...]

^[1] Briscoe et al. (2012)

^[2] Stahl et al. (2012) p. 1

^[3] Adekola/Sergi (2007) p. 239-240

^[4] Mendenhall et al. (1995)

^[5] Mayerhofer et al. (2004)

^[6] Adekola/Sergi (2007) p. 239

^[7] Deresky (2011), Dowling et al. (2008) p. 80-83

^[8] Deresky (2011)

^[9] Briscoe et al. (2012)