The change in focus from a domestic to a global business perspective has a profound impact on the corporate human resources management activities (Dowling et al., 1999). The effective management of an organization’s human resources is vital for the successful implementation of international strategies in multinational companies (Keating, M. & Thompson, K., 2004). Therefore it’s important to understand the determinants of international staff recruitment and selection strategy. This essay aims to evaluate the different strategies and its effects on the firm. It also considers the nature of industry, internationalization and culture within an organization.
Staffing in the international setting is about who is going to run the diverse geographically detached companies (Sparrow et al., 1994). Recruiting overseas business is imperative because several MNEs have difficulty in collecting international management team mixing information of local market circumstances with local and organizational ability. Different alternatives for global assignees exist, including parent-country nationals (PCNs), host-country nationals (HCNs), third-country nationals (TCNs), mixed and ad hoc. (Shen, J., 2006). IHRM is responsible by an organization’s wide approach equally to international growth / strategy and to strategic HRM. One of the most helpful typologies that enlighten the main alternatives existing in international management is based on Perlmutter’s (1969) early work on ethnocentric, polycentric, geocentric and regiocentric managerial perspectives and behaviors (Doherty, L., Klenert, A, & Manfredi, S, 2007).
The first approach is the ethnocentric approach. This approach is characterized by a centralised organisation, where all practices and decisions are established in headquarters and no localisation of practices is allowed (Vidal, Ma E.S., Valle, R.S., Aragon, MA I. B., 2007). It is founded on the profession of a key position by employees from headquarters (i.e. expatriates or parent country nationals PCN). It is contemplated that subsidiaries can be administered more inventively by expatriates. This is because expatriates are more educated of the company’s goals and objectives, strategies and “know how” in contrast to local managers. This method is used when increasing internationally and when there is need of good communication, cooperation and control of activities. Subsequently, PCN’s are allocated to top management positions who execute strategic decisions from headquarters. Hence, the choice of expatriates will depend on the technical knowledge required or the sort of international expansion a company is preparing.
This approach offers the parent company with more control which is crucial when expanding to a new country. Therefore, expatriates are seen as more capable than host country nationals. At the recruitment process the MNC must decide whether it is going to be external or internal, the implication of technical credentials is vital in regards to other selection aspects. It is noted that MNCs rely on internal recruitment for abroad management posts and these jobs are apt to senior management task. (Scullion, H., 1994). Research has shown that MNCs depend upon technological skills and a good career at home when deciding job offers (Anderson, 2005).
Unfortunately, this approach has its down side. For example, HCN are restricted in career pathway as they will seldom attain senior management jobs. In addition, they have thin control over actions which may root discontent and dissatisfaction leading to employee’s turnover and decline in output. The pay inequality is another drawback, since PCN’ accrue higher salaries than HCN’s.
Expatriates who perform badly in their overseas assignments cost MNE’s billions of dollars, harm company standing, disrupt relationships with local nationals and habitually exact a cost on expatriates’ psychological welfare. Furthermore, IHRM should be able to evaluate cross-cultural proficiency and the general efficiency of organizational constituents participating in abroad ventures (Fisher, G. B., & Hartel, C. E. J., 2003).
The second approach is known as polycentric. It relies on HCN’s for being employed to administer subsidiaries in their own country, while positions at headquarters are sustained by PCN’s. In this circumstance, each subsidiary is supposed as separate national unit with a level of independence in decision-making and is mainly used when applying a multinational approach. This approach frequently results from immense exterior pressures such as laws in diverse countries requiring local management contribution. Work pattern may have to be determined locally. The host country may be a key client and so manipulate the way of doing business (Harris., P .R., & Moran, R. T., 1996).., & Moran, R.T., (1996)
Polycentric approach has certain positive outcomes. By hiring HCN’s, language obstacles are conquered, there is ideal information of the industry, legal and political configuration and culture. Also there is no setback in the alteration process, when dispensed to new posts in contrast to expatriates. By using HCN’s labour turnover reduces and productivity enhances. Additionally, HCN managers get lower remuneration and benefit packages which have substantial result in reduction of administration costs.
But, this approach has some disadvantages. This can be explained as latent crisis in communication and control between the headquarters and the subsidiary. This is accredited to difference in language, clashes of interest and cultural differences. As a result, there is an inconsistency in the strategic management process and the quest for general objectives as every subsidiary will operate as a separate business unit. Another drawback is the conflicting career selections that PCN’s and HCN’s face (Deresky, H., 2000). Though, expatriates occupy prominent positions at the headquarters but they are constrained from an international career which would give them added knowledge on how things work abroad. Similarly, HCN’s cannot occupy positions at headquarters or anywhere abroad, thus, restricting their career development.
The next recruitment approach is geocentric, in which there is no inequity among PCN’s, HCN’s and third country nationals (TCN). MNE’s following this kind of orientation identify that each component of the organization makes distinctive contribution with its own exceptional competence (Tarique, I., Schuler, R., & Gong, Yaping., 2006).This implies that employment decisions are exclusively made on who is most appropriate for the job. This approach mirrors a more global vision towards international expansion. That is, candidates are selected either within or outside the organization and the selection guidelines are based on their abilities and not nationality. The idea that only PCN’s occupy headquarter positions is not valid in this case since HCN’s and TCN’s can be found in different positions. The position of the parent company is more of organising and coordinating sort of management than strategic decision-making as stated earlier. Examples of such companies are General Motors and Xerox. Even though geocentrism might be measured as perfect in international dealing nowadays one conception that many researchers have is that “there is no such thing as a global manager” (Ivinger, L., & Lindvetter, L, 2005).
An important benefit is that the use of international employees produces a workforce that is multi-diverse and multicultural which is necessary in today’s competitive and diverse environment. Thus, performance between headquarters and subsidiaries are more integrated and consequently more effective and efficient. The employees of the corporation are very proficient, willing and skilled and all of these characteristics can be passed on to future candidates via knowledge management. This is important for the progress of the company’s global activities. To employ TCN’s in managing subsidiaries can be extremely helpful as language and cultural barrier are not a concern. In addition, TCN’s get low remuneration which makes it cost effective for companies to employ them (Hill, C. W. L., 2001).
However, there are limits to this approach. For instance, there is substantial training and transfer costs to be taken into consideration. In addition, there are certain host governments who have executed severe legal and trade regulations to avert the competitive entry of expatriates in support of the country’s home nationals. Another topic that companies do not anticipate is the exploitation of PCN’s, HCN’s and TCN’s in diverse background.
With regards to the regiocentric approach, staffing choices are based on geographic region. Contrasting the geocentric approach, regiocentric recruitment is constrained to selecting or relocating around applicants within a certain region (i.e. for a job in Egypt, staff can be selected from Africa only). Managers are educated within a region for key appointments and prolong to be employed within that region (Barber, N., & Pittaway, L., 2000). Managers have more autonomy in investment and decision-making actions but they can never accomplish progression to a position in headquarters.
This approach supports the promotion of communication of HCN’s and TCN’s with PCN’s which are allotted at the regional headquarter. This is achieved through relocation of staff. Since the majority of staff is HCN’s it benefits them in terms of future careers while keeping local agencies contented.
One frequent problem is that regions can turn into discrete islands and thus become disconnected from the organisation’s business objectives and mission. Further limitations can be the restriction to advance past the national level, in view of the fact that employees are restricted to a regional level thus creating an increased job entry hurdle (Holt, D. H., 1998).
It is evident that organisations can use a range of solutions in their international employee recruitment drive. This attempt relies on numerous issues such as the dimension of the company, how successful it has been in an international context, what strategy it follows or the commitment of its staff. The most comprehensive and effective method to support a global strategy is the geocentric method.
If management policies in MNC expand to assimilation, there is a ‘country of origin effect’- whereby most MNCs start activities in a region and have a single headquarters. When an MNC comes into a new country, it may bring its own unique organisational culture or international HRM policies or adopt local employment laws. Many writers may stress that local or ‘host country’ effect is more compelling than the ‘country of origin’ effect with regards to HRM practices. Management style is a variant of organisational culture and can be subjected to issues if taken from country of origin and applied elsewhere (Judge, T. A and Ferris, G. R., 1992).
The industry market and type of business, organisational culture and structure (centralisation, formalisation, standardisation and specialization with respect to company size) will all have an effect (Lucas et al., 2006).“Both the multinational and international models have the potential to cause problems in current increasingly complex international market developments.” (Bures and Vloeberghs, 2001) Hence it is essential that each company develops objectives that integrate its uniqueness and potential issues that international recruitment can get. The organisation should demonstrate ethical work practices in their code of conduct so that each staff member realises the extent or consequence of their behaviour.
When an organization’s at phase of internationalization a need for control is necessary. High level of control is required when a firm is at the initial internationalization stage; this is achieved by using an ethnocentric approach. As the firm grows, it requires managing international manufacturing and marketing actions, thus shifts IHRM activities to the geocentric approach.
This theory has a restriction in regards to the sort of industry engaged. (Shen, J., 2006)
Logger et al. (1995) argued that a service company is weaker as compared to manufacturing, since it has not undergone through preliminary stage of exporting which permits contact to few of the natural complexity undertaken in offshore company projects. This leads to depend profoundly on expatriates. Conversely, in service sectors, such as the banking and insurance industries, Boyacigiller (1990) argued that HCNs may provide important links to the local business community and thus play a key strategic role in gaining new business for the branch.
In conclusion, recruitment and selection require an HR model that complements the culture and regulatory business setting. It is important to react to the various and growing demands of the international employment market. The demand of every industry has an impact on all sectors of the organisation. Concluding, we can say that companies in the future should consider the HSBC axiom, that is, “act global, think local.”
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