Table of Contents
Globalization has led to an increase in the multinational enterprises as well as resource mobility all across the world. In order to compete at the global pace, it is essential for an organization to employ, train and develop human resources that are competent enough to hand business operations at the international level. This report includes a critical analysis of staffing approaches implemented by multinational organizations to employ suitable candidates at the managerial position.
Three major staffing approaches have been so far implemented by the international organizations to gain a competitive advantage in the global market, the geocentric approach, polycentric approach and the ethnocentric approach. With these staffing approaches, the multinational organizations in the emerging markets are able to run business operations in the parent country as well as in the host countries. Besides numerous advantages there are a number of issues that multinational organizations face while staffing a suitable candidate at the managerial position such as cultural issues, communication and coordination challenges, adjustment to the working environment, and such. A critical analysis of the staffing framework provides an in-depth analysis of the advantages and disadvantages of such an approach as well.
In the fast growing business, one of the most significant as well as dominant themes is the rapid development of world economy. As a result of increase in globalization, people are moving to international locations to take new overseas job assignments (Collings, et al., 2010). Over the past few decades, there has been a rise in the interest of numerous researchers to understand how emerging market multinational enterprises (EM-MNEs) compete in the international market. Recent researches have reflected that effective management as well as standardization of HR practices in staffing have resulted in higher levels of managerial performance. There are a number of staffing frameworks that are adopted by the multinational enterprises, such as ethnocentric staffing, polycentric staffing, and geocentric staffing (Colakoglu, Tarique and Caligiuri, 2009).
Generally, organizations that adopt ethnocentric approach are home-country orientated and a majority of the human resources of such organizations are recruited from the home country only (Clapp-Smith and Lester, 2014). Whereas, foreign national are only appointed in case there is a lack of qualified home country nationals. On the other hand, for those organizations that adopt geocentric staffing approach, skill of the candidate is more important than the nationality. In other words, the organizations hire managers that belong to the same nationality as the parent company. MNEs that pursue such staffing approach are more likely to have executives, managers as well as leaders with global mindset (Clapp-Smith and Lester, 2014). Under polycentric staffing framework, the inhabitants of the host country are recruited at the managerial positions so as to conduct business operations of the subsidiary organization. In other words, MNEs from emerging market treat each of its subsidiary companies as a separate entity with few individual decision-making authority. The managers are hired from the host-country where the subsidiaries operate.
Staffing Framework of Multinational Organizations
Selection of Managers to Work on Global Scale
In the highly competitive business environment, the multinational enterprises recognize that human resources play a crucial role to gain a competitive advantage in the market (Dowling, 2008). Though each aspect of human resource management is vital, however, staffing frameworks adopted by the organizations, continue to be an essential activity that enables an organization to establish coordination and control over its units, franchisees, subsidiaries, and associates, worldwide. According to the viewpoint of Chalofsky (2014), effective managing and controlling of human resources facilitates creation of specific knowledge as well as social relations within a MNE. Collings (2014) emphasizes that the most important component of talent management is global staffing, which is substantially concerned with the matter that the overseas subsidiaries of an emerging markets MNEs’ is either staffed with and managed by the natives of the parent country, or host country nationals or third country nationals. Collings and Mellahi (2009) are of the view that the first step with regard to the international talent management process is the recognition of individual talent. Individual skills and expertise are the most significant factors that matter the most when running an MNE in the emerging market. The other areas of concern are staffing, and managing and controlling the expatriate as well as the repatriation process.
Ghatak, Mulhern and Watson (2008) are of the view that a rise in regional or local trade agreements, as well as an increase in regional integration at the economic union level has also led to an increase in the inter-regional mobility of potential candidates. Crawley, Swailes and Walsh (2013) have emphasized that the key factors that influence the human resource management of an MNE to employ either a parent, host or third country national for their international operations are organizational culture, as well as supervision and need for control. On the other hand, Tarique, Briscoe and Schuler (2015) have added that in reality, besides the above factors, the staffing framework of an MNE in the emerging market is also affected by the regulatory environment of the nations in which both the parent company as well as the subsidiaries operate.
In the era of globalization, in order to meet the national level requirements, the multinational enterprises need to select individuals who have the skills and ability to manage business operations of the subsidiary companies, as well as expertise in identifying such talents that are able to facilitate the transfer of knowledge beyond the geographical boundaries. Selection of such staff not only requires consideration with regard to expertise and knowledge but also requires evaluation of factors beyond individual skills and talent. Tiwari (2013) in her work has emphasized that in order to increase the chance of attaining the expected outcomes from a manager, a multinational organization invests in providing appropriate training, guiding as well as proper support to the selected staff. This is not only a crucial task but also a challenging one which may make the staffing approach more complex. Other issues that are taken into account by the multinational organizations are nationality, family consideration, remuneration as well as motivation of the selected staff. The scholar is also of the view that the experience of the selected candidate is also a crucial factor that enables them to compete in the international market. In support of the above view, Vance and Paik (2015) have emphasized that the selected candidate must be provided with the training relevant to the task of the subsidiary companies. Generally, the experience and expertise of individuals in different field of business operations matters the most when competing with the global firms worldwide. This may create an external pressure on the multinational organization to select such talents so as to gain a competitive advantage in the international market.
Another key consideration that affects the functioning of the multinational organization is the management of expatriate through a repatriation program after the completion of a particular assigned task. Through a successful repatriation program of expatriates the multinational enterprise can apply the knowledge that the expatriates gain during their assignment, as well as exploit their skills and expertise so as to mentor other expats. In addition to this, the multinational enterprises are also able to access the networks built by the individuals during their interactions with government organization, local suppliers and buyers. This also helps in building managing knowledge transfer across the national boundaries. Thus, in order to compete in the global market, multinational organizations adopt diverse staffing approaches to select individuals who are efficient to manage, coordinate as well as support the business operations of subsidiaries and headquarters in the national as well as international countries.
Staffing Frameworks Adopted by MNE’s
Geocentric Staffing Approach
The geocentric approach is a system of staffing where the multinational companies select and recruit the most suitable candidate for the business operation or any relevant task irrespective of their country of birth or nationality. According to the viewpoints of Colakoglu, Tarique and Caligiuri (2009), one of the most significant rationale behind this approach is that the world is filled with talented people with substantial skills and eligibility and thus, in order to utilize the pool of talents, it becomes essential for a multinational organization to appoint such a candidate at the managerial position who is not only able to manage the business operations but also the workforce at the international level.
Appointing candidates irrespective of their nationality also enable the multinational organizations to recruit candidates from different cultural backgrounds with the expertise and knowledge of legal and economic necessities of different nations. According to the viewpoint of Li (2008), the geocentric approach is followed by those enterprises that conduct its business operations on the global scale as well as follow integrated international business strategy.
Colakoglu, Tarique and Caligiuri (2009) have emphasized that with the geocentric staffing approach the organizations integrate their overall business strategy all across the world. The scholars state that the geocentric approach facilitates the creation of a strong unified culture as well as an informal management network, which is appropriate in both transnational and global strategies.
Polycentric Staffing Approach
In the Polycentric staffing framework, the natives of the host country are employed as managers to carry out the business operations of the subsidiaries. Colakoglu, Tarique and Caligiuri (2009) contend that the rationale behind adopting polycentric framework is that the locals of the host country are well aware of their culture, which will enable them to run the business competently compared to any foreign national. On the other hand Hill (2011) has emphasized that handing over the managerial position to the local residents of the host country ensures that the organization is in a better position to understand the political scenario, the local market conditions, as well as the legal and cultural requirements. According to Hill (2011), through this staffing approach, the multinational organizations tend to limit the recruitments to the locally available candidates of the host country.
Multinational enterprises that adopt the polycentric method to recruit staff also have a localized HR department to manage the workforce in the host country. For an example, a Canadian parent company uses inhabitants of America at the managerial position so as to manage business operations at the American subsidiary.
Ethnocentric Staffing Approach
The ethnocentric staffing approach is a system, where the managers of the parent company are also recruited as the managers of the subsidiaries. Colakoglu, Tarique and Caligiuri (2009) have stated that the managerial decisions such as vision, mission as well as the business objectives, targets goals all are formulated by the parent company, which is required to be followed by the subsidiaries as well. According to the research of Hill (2011), the rationale behind this approach is that workforce of the parent company are in a better position to represent the interests of the headquarters to the subsidiaries in the host country.
By adopting the ethnocentric staffing model, multinational enterprises place the citizens of the home country in key positions at both headquarter and the host country. For an example, a European parent company places inhabitants from Europe in key positions in both Europe as well as its subsidy company in Australia, Canada and Mexico.
Staffing Approach at Huawei Technologies and Tata Group
Li (2008) emphasizes that the end objective of the staff selection process is to recruit the most competent candidate suitable for the job. Damp (2006) has added that the criterion for selection of the appropriate candidate in the MNEs include evaluation of candidates on the basis of five principal areas such as skills, attitude, behaviour personality as well as motivation. Mondy (2008) is of the view that selection of candidates for the managerial position to compete in the international market includes strong communication skills, interpersonal skills, cultural adaptability, professional or technical competence as well as technical expertise, country-specific experience, global experience and family flexibility.
The well-renowned multinational organization assesses its employees and select managers on merit basis as well as on their performance results. In addition to this, the candidates are also examined in terms of handling their responsibilities. The organization recruits staff from all over the world in order to boost workforce localization as well as to compete in the international market. The company believes in hiring local employees so as to better understand the culture of each nation of its host country as well as to create a favorable workplace with global human resources. Thus, it can be said that the company follows polycentric approach of staffing. This approach enables the company to promote local employment together with higher economic growth and development.
The Tata Group has significantly incorporated the culture of diversity and inclusion within the organization. The MNE operates in more than six continents and over hundred nations as a global leader in several sectors. The group has employed overall thousands of employees from all over the world without any discrimination in caste creed, gender, and such, in headquarter as well as in the host countries (Tata Group, 2018). The managerial decisions are all formulated by the parent company so as to exert control over other group companies. As per the data, Tata Sons has created a division named as Excellence Group that assists all the companies under the Tata group in its business excellence initiatives. The efforts of the parent company involve transmitting the same methods of production and management of business as those developed in the parent country. Therefore, it can be said that the group has adopted the ethnocentric approach of staffing.
Advantages and Disadvantages of Global Staffing Approaches of MNEs
Expanding business operations in the international markets demands effective management of staff. According to the viewpoint of Hill (2011), it is an evident fact that management and staff of internal organization encounter numerous problems such as communication and coordination, adjustment issues, or maintaining relationship between headquarters and subsidiaries.
Table 1: Advantages and Disadvantages of MNE’s Staffing Approach
One of the major advantages of geocentric staffing framework is that the organizations are able to develop a pool of international managers. The expatriates appointed in the organizations do not face any identity issue, because geocentric approach reduces the requirement of any nationality proof of home country or host countries, thereby creating immense opportunities for the local as well as foreign nationalists to get employed in the MNEs. As there is no nationality issues, the managers are easily able to share resources of the unit in home country with the unit in the host country. Companies such as Colgate Palmolive have adopted geocentric approach. Over 50% of the expatriates of Colgate Palmolive are from nations other than the United States. In addition to this, Coca- cola also is another example of geocentric organization (Aswathappa, 2008). However, the organizations, following this approach, also face difficulties in providing training and development to the managers, as they belong to diverse cultural backgrounds. Moreover, parent country nationals are not always sensitive towards the requirements and expectations of the subsidiary units (Ashwathapa, 2008). Hence this creates a gap between the organization in the parent as well as in the host country.
The basic advantage of adopting the polycentric staffing framework is that it eliminates language barriers, as the management team in the subsidiary companies are appointed from the host country itself, thereby reducing the chances of language barriers. In addition to this, according to the viewpoint of Hill (2011), there are nations, where the government only supports hiring staff either from parent country or from host country and resent hiring staff from any third country. Other companies such as McDonald’s have a policy of employing local people to each of its restaurant chain in different countries (McDonald’s, 2014). However, an organization following the polycentric approach gets the managerial position filled by appointing the candidates from host country, thereby getting full support from the government to ensure continuity of management within host country. The major issue with such staffing framework is that as the managers are appointed from within the host country, there is a lack of international expertise. Moreover, there is always coordination issues between the headquarters and the host companies (Hill, 2011).
Organization that adopts ethnocentric approach recruits majority of its staff from the home country (Hill, 2011). Therefore, the managers belonging to same nationality can effectively communicate and coordinate with each other with minimum chances of conflicts of interest. Moreover, the parent company can exercise direct control over its overseas business operations and its subsidiaries. The managers of the parent and the subsidiary company belong to the same nation and political background, thereby having efficient economic and political understanding among them. Organization such as Shell, General Motors, and Standard Oil also tend to transfer the same methods of handing business operations management of resources as developed in the parent country (Sitkin and Bowen, 2013). However, the major disadvantage of such approach is that the expatriates that belong to a foreign nation may face difficulties to adjust in the environment. In addition to this, there exist regulatory and legal issues for the managers hired from a different nation (if any), which may make it difficult for the managers of the parent company to constantly monitor the staff of company in the host country. Moreover, this approach may also lead to cultural myopia (Hill, 2011).
Staffing approach of multinational enterprises from non-dominant and emerging economies is a significant task, which involves complex issues such as management development. There exists a number of differences between the parent country and the host country such as cultural differences, economic systems and legal system, compensation issues and many more. These differences influence the staff selection procedure of the MNEs. Despite such differences and hurdles, global organizations tend to adopt similar criteria and approach internationally.To gain competitive advantage in diverse emerging market, multinational organizations need to appoint managers, who are able to play the role of both as a manager and a leader. The capabilities of the staff are what matter the most when conducting business at a global scale. In order to run business at multinational levels, organizations need to adopt the most suitable staffing approach that best fits with its business policies as well as the regulatory norms in the country of business operation.
Multinationals such as Huwaei Technologies, Tata Group, McDonald’s have adopted diverse variants of staffing approaches in order to appoint managers, who are capable to compete on a global scale. Thus, other organizations must come forward to follow the paths followed by such organization as examples and then strive to create such a work environment with appropriate talent and skills of managers, who are able take the business at the highest level in the global market.
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