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Resource Management
Staffing Policy
Staffing policy is concerned with the
selection of employees who have the
skills required to perform a particular job
can be a tool for developing an promoting the
firms corporate culture
the organizations norms and value system
a strong corporate culture can help the firm
implement its strategy
Staffing Policy
Three main approaches to staffing policy
1. The ethnocentric approach - fill key
management positions with parent-country
nationals
2. The polycentric approach recruit host country
nationals to manage subsidiaries in their own
country, and parent country nationals for
positions at headquarters
3. The geocentric approach seek the best people,
regardless of nationality for key jobs
Ethnocentric Staffing
Policy
Firms that pursue an ethnocentric policy believe that
there is a lack of qualified individuals in the host
country to fill senior management positions
it is the best way to maintain a unified corporate
culture
value can be created by transferring core
competencies to a foreign operation via parent
country nationals
it makes sense with an international strategy
But
it limits advancement opportunities for host country
nationals
it can lead to "cultural myopia"
Polycentric
Staffing Policy
The polycentric approach
makes sense for firms pursuing a localization strategy
can minimize cultural myopia
may be less expensive to implement than an
ethnocentric policy
But
host country nationals have limited opportunities to
gain experience outside their own country and so
cannot progress beyond senior positions in their own
subsidiaries
a gap can form between host country managers and
parent country managers
Geocentric
Staffing
The geocentric approach
is consistent with building a strong unifying culture
and informal management network
makes sense for firms pursuing a global or
transnational strategy
enables the firm to make the best use of its human
resources
builds a cadre of international executives who feel at
home working in a number of different cultures
But
can be limited by immigration laws
is costly to implement
Approaches to Staffing
Factors affecting approaches to staffing
General staffing policy on key positions at
headquarters and subsidiaries
Constraints placed by host government
Staff availability
Ethnocentric
Polycentric
Geocentric
Regiocentric
I
Ethnocentric
Strategic decisions are made at
headquarters;
Limited subsidiary autonomy;
Key positions in domestic and foreign
operations are held by headquarters
personnel;
PCNs manage subsidiaries.
Polycentric
Each subsidiary is a distinct national
entity with some decision-making
autonomy;
HCNs manage subsidiaries who are
seldom promoted to HQ positions;
PCNs rarely transferred to subsidiary
positions.
I
Geocentric
A global approach - worldwide integration;
View that each part of the organization
makes a unique contribution;
Nationality is ignored in favor of ability:
Best person for the job;
Color of passport does not matter when it
comes to rewards, promotion and
development.
Regiocentric
Reflects a regional strategy and structure;
Regional autonomy in decision making;
Staff move within the designated region,
rather than globally;
Staff transfers between regions are rare.
Ethnocentric Approach
Advantages:
Disadvantages:
Polycentric Approach
Advantages:
Employment of HCNs eliminates language
barriers, avoids adaptation of PCNs, reduces
the need for cultural awareness training
programs
Employment of HCNs allows a multinational
company to take a lower profile in sensitive
political situations
Employment of HCNs is less expensive
Employment of HCNs gives continuity to the
management of foreign subsidiaries (lower
turnover of key managers)
Polycentric Approach
Disadvantages:
Difficult to bridge the gap between HCN
subsidiary managers and PCN managers at
headquarters ( language barriers, conflicting
national loyalties, cultural differences)
HCN managers have limited opportunities to
gain experience outside their own country
PCN managers have limited opportunities to
gain international experience
Resource allocation and strategic decision
making will be constrained when headquarter
is filled only by PCNs who have limited
exposure to international assignment
Geocentric Approach
Advantages:
Ability of the firm to
develop an
international executive
team
Overcomes the
federation drawback of
the polycentric
approach
Support cooperation
and resource sharing
across units
Disadvantage:
Host government may use
immigration controls in
order to increase HCNs
employment
Expensive to implement
due to increased training
and relocation costs
Large numbers of PCNs,
HCNs, and TCNs need to
be sent across borders
Reduced independence of
subsidiary management
Regiocentric Approach
Advantages:
Allow interaction between
executives transferred to
regional headquarters from
subsidiaries in the region
and PCNs posted to the
regional headquarters
Provide some sensitivity to
local conditions
Help the firm to move from
a purely ethnocentric or
polycentric approach to a
geocentric approach
Disadvantages:
Produce federalism at a
regional rather than a
country basis and
constrain the firm from
taking a global stance
Staffs career
advancement still limited
to regional
headquarters, not the
parent country
headquarters
Parent-Country Nationals
Advantages
Advantages
Organizational
Organizationalcontrol
controland
and
coordination
coordinationisismaintained.
maintained.
Rising
Risingstars
starsare
aregiven
given
international
internationalexperience.
experience.
PCNs
PCNsmay
maybe
bethe
thebest
best
people
peoplefor
forthe
thespecific
specificjob
job
due
dueto
tospecial
specialskills
skillsand
and
experience.
experience.
An
Anassurance
assurancethat
thatthe
the
subsidiary
subsidiarywill
willcomply
complywith
with
company
companyobjectives
objectives&&
policies.
policies.
Disadvantages
Disadvantages
Promotional
Promotionalopportunities
opportunities
of
ofHCNs
HCNsare
arelimited.
limited.
Time
Timeand
andperformance
performance
costs
costsassociated
associatedwith
with
adaptation
to
the
host
adaptation to the host
country.
country.
PCNs
PCNsmay
mayimpose
imposean
an
inappropriate
inappropriateHQ
HQstyle.
style.
Compensation
Compensationfor
forPCNs
PCNs
and
andHCNs
HCNsmay
maydiffer.
differ.
Host-Country Nationals
Advantages
Advantages
Disadvantages
Disadvantages
Language
Languageand
andother
otherbarrier
barrier
eliminated
eliminated
Reduced
Reducedhiring
hiringcosts
costs
Continuity
Continuityof
ofmanagement
management
Government
Governmentpolicy
policymay
may
require
requirehiring
hiringHCNs
HCNs
Possible
Possibleincreased
increasedmorale
morale
because
becauseof
ofincreased
increased
career
careerpotential
potential
Hiring
Hiringof
ofHCNs
HCNsmay
may
encourage
encourageaafederation
federationof
of
national
nationalrather
ratherthan
thanglobal
global
units
units
HCNs
HCNshave
havelimited
limitedcareer
career
opportunity
opportunityoutside
outsidethe
the
subsidiary
subsidiary
Control
Controland
andcoordination
coordinationof
of
HQ
HQmay
maybe
beimpeded
impeded
Hiring
HiringHCNs
HCNslimits
limits
opportunities
opportunitiesfor
forPCNs
PCNsto
to
gain
gainforeign
foreignexperience
experience
Third-Country Nationals
Advantages
Advantages
Disadvantages
Disadvantages
Salary
Salaryand
andbenefit
benefit
requirements
requirementsmay
maybe
be
lower
lower than
thanfor
for PCNs.
PCNs.
TCNs
TCNsmay
maybe
bebetter
better
informed
informedthan
thanPCNs
PCNs
about
abouthost-country
host-country
environment.
environment.
Transfers
Transfers must
must consider
consider
national
nationalanimosities.
animosities.
Host
Hostgovernment
government may
may
resent
resent hiring
hiringTCNs.
TCNs.
TCNs
TCNsmay
maynot
notwant
wantto
to
return
return to
totheir
theirown
own
countries
countriesafter
after
assignment.
assignment.
Expatriate Failure
Firms using an ethnocentric or geocentric
staffing strategy will have expatriate managers
Expatriate failure is the premature return of an
expatriate manager to the home country
each expatriate failure can cost between $40,000 and
$1 million
between 16 and 40% of all American expatriates in
developed countries fail and almost 70% of
Americans assigned to developing countries fail
Why Do Expatriate
Managers Fail?
The main reasons for U.S. expatriate
failure are
the inability of an expatriate's spouse to adapt
the managers inability to adjust
other family-related reasons
the managers personal or emotional maturity
the managers inability to cope with larger
overseas responsibilities
Why Do Expatriate
Managers Fail?
The reason for European expatriate failure is
the inability of the managers spouse to adjust
Why Is A
Global Mindset
Important?
A global mindset
may be the fundamental
attribute of a global manager
cognitive complexity
cosmopolitan outlook
Why Is Management
Development Important To Firm
Strategy?
How Should
Expatriates Be Evaluated?
Evaluating expatriates can be especially complex
typically, both host nation managers and home office
managers evaluate the performance of expatriate
managers
How Should
Expatriates Be Paid?
Most firms use the balance sheet
approach
equalizes purchasing power across countries
so employees have the same living standard
in their foreign posting as at home
and adds a financial incentive to take the
position
How Should
Expatriates Be Paid?
A compensation package has five components
1. Base salary - normally in the same range as the
base salary for a similar position in the home
country
can be paid either in the home currency or in the
local currency
How Should
Expatriates Be Paid?
3. Various allowances - hardship, housing, costof-living, education
4. Tax differentials - may have to pay income tax
to both the home country and the host-country
governments no reciprocal tax treaty exists
company usually covers extra tax assessments