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International Staffing- Strategic Considerations for Different World Regions

Research · June 2016

DOI: 10.13140/RG.2.1.1589.4640

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 Abstract

This paper introduces the different international staffing strategies–

ethnocentric, geocentric, polycentric, and regiocentric– that international

human resource professionals can use to hire staff for their foreign

subsidiaries. The process of choosing a suitable strategy for each region

depends on the region’s characteristics related to culture, wage rates and

literacy level. Based on these characteristics managers of multinational

corporations (MNCs) would do well by using a geocentric strategy in North

America, an ethnocentric or regiocentric strategy in Asia, an ethnocentric

strategy in Europe, a polycentric or regiocentric strategy in Latin America, a

polycentric strategy in the Middle East, and, begin with a regiocentric

strategy and slowly change to a polycentric strategy in Africa.

 Table of Contents

Introduction ..................................................................................................... 1

International Staffing Strategies: A Literature review .................................. 1

Regional Staffing Strategic Considerations: Factors that Affect

Staffing Variations across Different Regions ................................................. 6

Culture and Beliefs ..................................................................................... 6

Wages .......................................................................................................... 7

Literacy ..................................................................................................... 10

Discussion: Regional staffing strategies ....................................................... 12

Limitations of the study ............................................................................ 16

Conclusion .................................................................................................... 17

References ..................................................................................................... 18
 Introduction
International human resource professionals play a key role in the

implementation of a multinational corporation’s (MNC’s) strategy in the

global stage. Global staffing remains a broad and difficult topic even to

experienced and savvy professionals and must be tackled with prudence as

human resources has become a key strategic function in the organization.

International Staffing Strategies: A Literature Review

Grimsley & Heinichen (2015) and Caligiuri & Colakoglu (2007)

group employees working on an international stage into three categories, the

first type, an expatriate, being someone who is a citizen of a company’s

home country working in a foreign country ( Noe, Hollenbeck, & Gerhart,

2006, p. 641). A good example is an American citizen who works for Ford

Motors in china. Caligiuri & Colakoglu (2007) reiterate the importance of

expatriation stating that it must be lined up with the company’s strategy. The

second type, a host-country national, is an employee who is hired by a

foreign company but works in their own country. A Chinese citizen working

Ford Motors in China is an example. And the third type is a third-country

national who is a citizen of one country working in another country for a

company that is headquartered in a third country. For instance, a French

citizen working for Ford Motors in China. The staffing strategies identified

1
in Caligiuri & Colakoglu ( 2007) for staffing international companies and

aligned with their corresponding strategic dimensions can be summarized

into three (Table 1) as follows:

Ethnocentric staffing. With a centralized strategic dimension this

strategy involves staffing the most important positions in foreign

subsidiaries with expatriates. Hiring expatriates has the strategic advantage

that expatriates oftentimes would best represent the interests of the home

office and ensure that the foreign operations are aligned with headquarters.

Most expatriates are selected from current employees in the home offices

and simply transferred to the foreign subsidiaries, saving the time and effort

required in hiring new employees. However, staffing exclusively with

expatriates will also entail several disadvantages. First, expatriates tend to be

a lot more expensive to manage than local staff due to relocation costs,

relocation allowances and other related costs. Those who work

internationally instinctively expect to get higher salaries than locals. Second,

expatriates may not have good knowledge of the local perspectives and

insights in the local atmosphere available to local employees (Grimsley &

Heinichen, 2015).

Polycentric staffing. With a local strategic dimension this strategy

necessitates that a company hire host-country nationals for all positions at its

2
foreign subsidiary–from clerks up to executives. This strategy has the

advantages that local employees may not be as expensive as foreign

employees and locals will be more familiar with the customs, values and

culture of their national society. As expected, this strategy has the

disadvantage that it can only be used in the countries with high availability

of educated people to fill the key positions. Additionally, there may exist

language and cultural hurdles between the host country employees and

headquarters, and locals may put the local interest first (Grimsley &

Heinichen, 2015).

Geocentric staffing. This staffing strategy, with a truly global

strategic dimension, involves hiring the best employees for key positions

globally regardless of their country/region of origin (Tiwari, 2013). The

advantage with this strategy is that there is a high chance of getting highly

qualified staff for the company. Nevertheless, this will involve dealing with

a multitude of different people with different cultural backgrounds and

beliefs. Also, the host-country’s immigration policies may limit the

implementation of this strategy or make it more costly to implement than

would be for other strategies (Tiwari, 2013)

Regiocentric staffing. Last, but must important for this paper, and

similar to polycentric staffing, this strategy involves hiring staff within the

3
region in which the company subsidiary is located. MNCs pursuing this

strategy group company offices into regions and employees can be

transferred within the region but not outside of the region. In this case each

region will have its own human resource practices and policies, with some

degree of autonomy from headquarters (Grimsley & Heinichen, 2015).

4
 Table 1: Global Staffing Strategies and Strategic Dimensions

Staffing strategy Ethnocentric Polycentric Geocentric Regiocentric

Strategic dimension Centralized Local Global Regional

5

Geographic focus Home country Host country Global Regional

Sources: Adapted from Caligiuri & Colakoglu (2007), Tiwari (2013)

 Regional Staffing Strategic Considerations: Factors that Affect
Staffing Variations across Different Regions
Prior to deciding which staffing strategy to employ for which

geographic region or country it is imperative to consider a number of factors.

Culture and Beliefs

Different regions, different countries and different ethnic groups

would have different cultural backgrounds and thus different beliefs which

are key factors to consider when planning an international strategy. Geert

Hofstede (1980) defines a culture as “the collective mental programming of

the people in an environment”. Though it is arguable that a culture does not

apply to all members within a region, it is arguably true that certain cultural

facets are common among individuals within close geographic locations.

Hofstede admits that it is difficult to define what the culture of a country is,

and thus affixing a culture to a nation doesn’t indicate that “all individuals

belonging to the country have all the features given to the culture”. As a

result, only common elements are stated when talking about national

cultures. He opines that nationals from the same country share “national

character” that is obviously discernable to foreigners (Hofstede, 1980) .

From Hofstede’s studies a country can be classified into one or more of the

following “cultural dimension”; “Power distance, Uncertainty avoidance,

individualism-Collectivism, and Masculinity”

6
 If Hofstede’s conclusions were correct within nations then it can be

inferred that with regional integration of national boundaries through free

trade agreements these ideas will also hold true within regions. Additionally,

different regions will have variations in their regional cultures and beliefs

leading to variations in regional staffing strategies. Within Arab nations, for

example, women may not be allow (or if allow they will not feel

comfortable) to work alongside men in the same offices (Mill, 2008)

Wages
Wage rates have wide variations within different regions resulting to

variations in effective staffing strategies for different regions. The

international Labour Organization, ILO (2015) defines a wage as “the total

gross remuneration including regular bonuses received by employees during

a specified period of time for time worked as well as time not worked…such

as paid annual leave and paid sick leave”. ILO (2015) reports that global

wages have been increasing rapidly since 2007, though with significant

regional differences. Real wage increases in 2013 stood at the following

percentages in different regions: Asia-6%, Europe-0.2%, Latin America-1%,

middle east-4%, Africa-1%, and North America-1%, with nearly half of

wage rise globally coming from China alone. Due to the large population

and the rapid growth taking place in China (and therefore Asia), China has

7
been contributing near 50% of wage growth globally (ILO, Global wage

report 2012/13: Wages and equitable growth, 2013)

Figure 1 shows the percentage of average wage increases for the

different geographic regions. As can be easily seen in the figure, Europe and

North America have been having the lowest average wage increases in

recent years implying that wage rates in these regions are fairly stable year

on year. It is not surprising, for these economies are in their advance stage of

development with minimal interest rates (Indexmundi.com, 2016)

(Investmentfrontier.com, 2015) and equally minimal inflation rates

(Tradingeconomics.com, 2016a) (Tradingeconomics.com, 2016b).

Following Europe and North America with low annual increase in wages is

the Middle East, then Africa, Latin America and Asia having the highest

growth rate in annual wages–probably largely contributed by China. For the

sake of clarity separate charts for the same values in figure 1 are presented in

appendix A in order that the reader may see noticeably the absolute

percentage increase in wages.

8
 8
2013
2012
6
2011
2010
4
2009
9

2008
2
2007
2006
0
Asia Latin America Middle East Africa Europe &
N. America
-2

-4
2006 2007 2008 2009 2010 2011 2012 2013

-6

Figure 1: Average regional wage growth, 2006-2013 (%)

Source: Authors computation from ILO (2015) and ILO (2013)
 Interested in the actual dollar values of wages? Table 2 presents the

average minimum wages by region in PPP$ values for the most recent year

as of December 2010. Notice the wages in Europe and North America are

more than triple the next highest region (Latin America), and, Asia, though

with rapidly rising wage rates remains one of the regions with the lowest

salaries.

Table 2: Average regional minimum wages in 2010 PPP$

Source: Author’s computation from ILO (2011)
Average 2010
Region
minimum wage(PPP$)
Europe &
1236
N. America

Latin America 381

Middle East 303

Asia 196

Africa 123

Literacy
The proportion of literate people in a region would also determine

which staffing strategy would work better for the region. In a region

dominated with mostly illiterates it would be hard to find and successfully

10
train staffs for key positions in the company, leading to either of polycentric

and regiocentric staffing being ineffective strategies in the region. UNESCO

(2013) provides estimates of the proportions of literate youths and adults in

various world regions–exclusive of North America. According to the

estimates global literacy rates for adults stood at 76% in 1990, 82% in

2000s, and 84% in 2011. Table 3 presents the regional rate of literacy in

youths and adults showing how it has developed since 1990

Table 3: Regional rate of literacy (1990–2011) in adults and youths

Source: UNESCO (2013)
Literacy rate in adults
1990 2000 2011
Africa 53% 57% 59%
Asia 47% 59% 63%
Middle East 55% 68% 77%
Latin America 86% 90% 92%
Europe 96% 97% 99%

Literacy rate in youths

1990 2000 2011
Africa 66% 68% 70%
Asia 60% 74% 81%
Middle East 74% 83% 90%
Latin America 93% 96% 97%
Europe 98% 99% 99%

11
 Discussion: Regional Staffing Strategies
With an analysis of each regions’ culture, beliefs, literacy and wage

rate, attention shifts to deciding which staffing strategy would effectively

work for which region.

The wage rate in Africa is low and the diversity in cultures is huge.

African cultures are and beliefs are totally unfamiliar to people from all

other regions. Training managers based on other regions’ theories with the

aim of posting them to successfully work in these unfamiliar cultures of

Africa is of no use and may even lead to more harm than good for the

company (Hofstede, 1980)–thus rolling out ethnocentric strategy in this

region. This leaves either polycentric or regiocentric strategy being the best

for foreign MNCs operating in African countries. On the other hand, the

literacy rate for this region is very low making it hard to hire and train local

employees for key management positions. Therefore foreign MNCs, at the

start of operations in this region, may do better by staffing with a regional

focus (Table 4) and then slowly switching to a polycentric strategy as time

goes by.

Asian countries, though the salary rate is low, are in a period of fast

pay growth, resulting to absolute uncertainty in the future staffing approach.

There also exists diverse cultures in Asia, but the key cultures are being

12
vastly studied in western literature. Therefore proper training of managers

based on host-country theories would not be a bad approach. This leads to a

regiocentric or ethnocentric staffing strategy being good for Asia.

European culture has been widely studied in all regions for centuries

and the studies are ongoing. The literacy rate in Europe is very high making

it easy to hire talented staff within the region. Nevertheless, European salary

rates are exorbitantly high compared to other regions’ which make a

polycentric strategy not financially worthwhile for the region. Equally,

Europeans seem not to show any xenophobic character toward foreign

employees. This leads to ethnocentric strategy being the best for foreign

companies operating in Europe.

Latin America possesses high literacy rate among youths and adults.

The average wage rate in this region is not very high and the region

possesses a multitude of cultures which, if not familiar to any other region’s

people, may not be easily learned. Therefore, a regiocentric or polycentric

strategy would be more suitable for foreign company subsidiaries in Latin

America.

The Middle East consists of country cultures with stringent religious

beliefs. Salaries in this region are average (and growing slowly), and the

literacy rate is average. Host country nationals may exhibit xenophobia

13
towards expatriates and policies on gender inequality may not be familiar to

foreigners. Thus, a polycentric strategy would be most suitable for Middle

Eastern countries.

North America is in possession of a culture that is widely known and

studied in all other regions. American theories are the most studied in

management literature not only in America but in every other part of the

world (Hofstede, 1980). Thus competent managers from any part of the

world can do equally well in North American countries. The region has the

highest wage rate of all other regions– leading to local hiring being a

disadvantage. This leaves Geocentric staffing strategy as the best choice for

subsidiaries of foreign companies operating in North America.

Table 4 is an extension of Table 1 with additional rows summarizing

the various staffing strategies for different regions.

14
 Table 4: Regional staffing strategies

Staffing strategy Ethnocentric Polycentric Geocentric Regiocentric

Strategic dimension Centralized Local Global Regional

15

Geographic focus Home country Host country Global Regional

Africa (begining),
Asia, Africa (later),
Regions Asia,
Europe, Latin America, North America
most suitable Latin America,
Middle East,
Limitations of the Study
Premise Limitation. This study, like any other study, and the

conclusions drawn was not without limitations. The discussion above is

based on the author’s understanding of international company operations and

how companies can match their strategies with staffing. I may have assumed

that all companies would want to keep their expenses as low as possible but

this may not always be the case. Therefore the proposed strategies may not

be applicable to all companies. Some companies operating in, say, Asia, may

find it better to implement a geocentric strategy. Some other limitations

follow.

Data limitation. The available data for minimum wages could not be

found for some countries. The average minimum wage for the Middle East

was calculated from three countries only excluding Saudi Arabia which

should have considerably higher wage rates compared to other Middle

Eastern countries, whereas other regions’ averages were taken from at least

seventeen countries. This might have resulted in an underestimation of the

minimum wage in the Middle East. For Europe, Germany was not

considered and this would also have had some effects in the regional average

estimate. For all the regions, extremely low wage countries were not

included in the average minimum wage calculation. Africa and Asia

16
contained some countries with extremely high and others with extremely

low minimum wages resulting to averages that were not quite reflective of

the actual average in the region.

Limitation in bias. The nature of the study may be viewed by some

researchers as biased. Arguably a region with low wages would also have

low education, and therefore few qualified staff to fill key positions. This,

however, does not alter significantly my analysis above.

Conclusion
The procurement of staff for international companies is a key strategic

function for human resource professionals. In order to completely

understand which strategies are suitable for employing staff for any

geographic region, it is of necessity to consider that certain factors, such as

wage, culture and literacy would influence the effectiveness of the strategy.

Drawing from the results of these analyses, an appropriate staffing strategy

can be implemented for the region and different regions can employ

different strategies with the same company. The results presented in this

paper are limited to the three factors analyzed. Future studies or Human

resource professionals may include other elements in their analysis for

practical use.

17
 References
Noe, R., Hollenbeck, J., & Gerhart, B. (2006). Human resource management:

Gaining a competitive advantage, 5th ed,. McGraw-Hill.

Caligiuri, P. M., & Colakoglu, S. (2007). A strategic contingency approach

to expatriate assignment management. Human Resource Management

Journal, 393-410. Retrieved from

http://www.culturalagility.com/sites/default/files/A%20strategic%20c

ontingency%20approach%20to%20expatriate%20assignment%20man

agement.pdf

Grimsley, S., & Heinichen, I. (2015). Global staffing approaches

ethnocentric, regiocentric, polycentric, and geocentric video & lesson.

Study.com. Retrieved from

https://www.youtube.com/watch?v=BjSX3FVAkgw

Hofstede, G. (1980). Motivation, leadership,, and organization: Do

American theories apply abroad? Organizational Dynamics, 42-63.

ILO. (2011). Global wage report 2010/11: Wage policies in times of crisis.

Geneva: International Labour Organization. Retrieved from

http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@pu

bl/documents/publication/wcms_145265.pdf

18
ILO. (2013). Global wage report 2012/13: Wages and equitable growth.

Geneva: International Labour Organization. Retrieved from

http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@pu

bl/documents/publication/wcms_194843.pdf

ILO. (2015). Global wage report 2014/15: Wages and income inequality.

Geneva: International Labour Organization. Retrieved from

http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/@pu

bl/documents/publication/wcms_324678.pdf

Indexmundi.com. (2016). Lending interest rate (%) - North America.

Retrieved May 25, 2016, from Indexmundi.com:

http://www.indexmundi.com/facts/indicators/FR.INR.LEND/map/nort

h-america

Investmentfrontier.com. (2015). Where are the highest interest rates in the

world? Retrieved May 25, 2016, from Investment Frontier:

http://www.investmentfrontier.com/2015/04/13/where-are-the-

highest-interest-rates-in-the-world/

Mill, L. (Director). (2008). Inside the Saudi kingdom: BBC documentary

[Motion Picture]. Retrieved from

http://www.dailymotion.com/video/xznshf_inside-the-saudi-kingdom-

bbc-documentary_travel

19
Tiwari, N. (2013). Managing human resources in international organizations.

Global Journal of Management and Business Studies, III, 355-360.

Retrieved from

http://www.ripublication.com/gjmbs_spl/gjmbsv3n4_02.pdf

Tradingeconomics.com. (2016a). Canada inflation rate | 1915-2016 | data |

chart | calendar | forecast. Retrieved May 27, 2016, from

tradingeconomics.com:

http://www.tradingeconomics.com/canada/inflation-cpi

Tradingeconomics.com. (2016b). United States inflation rate | 1914-2016 |

data | chart | calendar. Retrieved May 27, 2016, from

tradingeconomics.com: http://www.tradingeconomics.com/united-

states/inflation-cpi

UNESCO. (2013). Adult and youth literacy. Montrea: UNESCO. Retrieved

from http://www.uis.unesco.org/Education/Documents/literacy-

statistics-trends-1985-2015.pdf

Appendix A
Wage growth by regions
Source: Authors computation from ILO (2015) and ILO (2013)

20
 Africa
8
5.8
6

4 3.1 2.8 3.1

2 1.0 1.2 0.9

0
2006 2007 2008 2009 2010 2011 2012 2013
-2

-4

-6
-5.5

-8

Asia
9

8 7.7
7.3
7 6.5 6.3
5.9 6.0
6 5.4
5.1
5

0
2006 2007 2008 2009 2010 2011 2012 2013

Appendix A cont.

21
 Latin America
4.5
4.0
4

3.5
2.9
3

2.5 2.3

1.5
1.1
1.0 0.9 0.8
1

0.5 0.2
0
2006 2007 2008 2009 2010 2011 2012 2013

Europe & North America

1.2 1.1

1 0.9
0.8
0.8
0.6
0.6

0.4
0.2
0.2 0.1

0
2006 2007 2008 2009 2010 2011 2012 2013
-0.2

-0.4 -0.3

-0.6 -0.5

Appendix A cont.

22
 Middle East
6
5.0
5
3.9
4

2
1.3
1.0 1.0 1.1
1
0.1
0
2006 2007 2008 2009 2010 2011 2012 2013
-1

-2 -1.5

23
 Appendix B
Average minimum wage by country(PPP$)
Source: ILO (2011)
Advanced countries (selected)

Australia 1597
Austria ..
Belgium 1492
Canada 1325
Cyprus 1044
France 1443
Germany ..
Greece 1096
Ireland 1368
Israel 960
Italy ..
Japan 944
Korea (Republic of) 797
Luxembourg 1687
Malta ..
Netherlands 1606
New Zealand 1367
Norway ..
Portugal 618
Singapore ..
Spain 911
Switzerland ..
United Kingdom 1507
United States 12
 Appendix B cont.

Africa Mali 97
Algeria 308 Mauritania 152
Angola 94 Mauritius 173
Benin 106 Morocco 371
Botswana 159 Mozambique ..
Burkina Faso 124 Niger 104
Burundi 6 Nigeria 83
Cameroon 95 Rwanda ..
Central African Republic .. Senegal 117
Chad 87 Sierra Leone ..
Comoros .. South Africa 390
Congo 135 Sudan 84
Congo (Democratic Swaziland ..
Republic of) 219 Tanzania 117
Côte d'Ivoire 112 Togo 98
Egypt 14 Tunisia 315
Ethiopia 67 Uganda 7
Gabon 182 Zambia 77
Gambia 48 Zimbabwe ..
Ghana 123
Guinea ..
Guinea-Bissau ..
Kenya 205
Lesotho 206
Liberia ..
Libyan Arab Jamahiriya 273
Madagascar 76
Malawi 53

25
 Appendix B cont.

Asia Europe
Afghanistan 89 Albania
Bangladesh 58 329
Bhutan 108 Bulgaria 292
China 173 Croatia 613
Fiji 300 Czech Republic 526
India 121 Estonia 426
Indonesia 148 Hungary 498
Iran 541 Latvia421
Lao 85 Lithuania 428
Mongolia 159 Macedonia (Former
Myanmar .. Yugoslav Republic of) ..
Nepal 151 Moldova (Republic of) ..
Pakistan 229 Poland 628
Papua New Guinea 249 Romania 320
Philippines 379 Serbia 376
Solomon Islands 156
Sri Lanka 93
Thailand 295
Vietnam 85

26
 Appendix B cont.

Latin American and the Middle East

Caribbean Iraq ..
Argentina 896 Jordan 261
Bahamas 787 Lebanon ..
Barbados .. Oman 441
Belize 388 Syrian Arab Republic 207
Bolivia 215 Yemen ..
Brazil 286
Chile 400
Colombia 390
Costa Rica 489
Cuba ..
Dominican Republic 221
Ecuador 490
El Salvador 304
Guatemala 344
Guyana 145
Haiti 209
Honduras 432
Jamaica 310
Mexico 170
Nicaragua 198
Panama 451
Paraguay 559
Peru 334
Trinidad and Tobago 285
Uruguay 258
Venezuela 481

27

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