There are different levels of international employees around the world. An expatriate is an employee who is sent by a company in one country to manage the same company’s operations in another country. There are three types of expatriates: parent country nationals (PCNs), host country nationals (HCNs), and third country nationals (TCNs).
PCNs are employees who are born and live in the parent country. These employees tend to be responsible for starting up operations at locations in another country. A hiring manager is responsible for staffing the operations with employees who can adapt to the new environment and be self-motivated. Some of the desired characteristics of a candidate include work experience with other cultures, knowledge of multiple foreign languages, and extensive travel overseas. However, some multinationals are concerned about hiring too many PCNs, given the additional expenses that are incurred by the company. For example, the multinational corporation (MNC) will have to consider costs such as relocation expenses, cultural training, housing assistance, taxation allowances, incentives and rewards, and family issues. HCNs are employees who were born and raised in the host country. MNCs have found that hiring managers from the host country is an opportunity to build good public relations with the citizens of that country. This approach shows an economic commitment on the part of the MNC by providing local citizens with the opportunity to gain employment and fueling the local economy. Another incentive is that hiring an HCN is not as costly as hiring a PCN. TCNs are employees who were not born or raised in either the host or parent country but work in the host country. These candidates tend to be pursued when there are jobs that require a certain level of expertise and skills to perform certain jobs.
Different countries will utilize different combinations of these employees to staff their international operations. Four of the major approaches include the following:
- Ethnocentric staffing approach: The staffing plan is dictated by the MNC’s values, attitudes, practices, and priorities. The corporate office is responsible for establishing human resource policies and practices as well as selecting candidates who will be equipped to provide leadership to the subsidiaries in other countries.
- Polycentric staffing approach: Although the corporate office may make all of the hiring decisions, there is consideration for the needs of the local subsidiaries. In addition, the policies and practices are developed at the local level to meet the needs of the local citizens filling the jobs. Although the locals are selected for managerial positions, it is rare for these individuals to be promoted to the corporate office. These employees tend to be promoted to positions at the local level only.
- Regiocentric staffing approach: Human resource policies and practices are dictated by the needs of the region. The approach utilized is similar to what occurs in the polycentric staffing approach. However, there is a broader territory—it is regional versus local. Therefore, there are opportunities to hire and promote workers to regional levels.
- Geocentric or global staffing approach: The multinational’s focus is to look at the “big picture” and develop a plan that provides optimal utilization of all resources, not just human resources. Local and regional concerns are not given priority; rather, they are given equal weight as some other factors in the decision-making process. Staffing practices are developed at the corporate level and the selection process is based on a global pool without regard to a person’s country of origin or cultural background.
When considering these approaches, the organization must consider issues such as the following:
- National concerns: MNCs are expected to work within the legal parameters of the host country. Therefore, it is essential to be aware of the local employment law policies and practices.
- Economic concerns: The MNC has to consider cost of living expenses (i.e., housing, food, incentives, and rewards).
- Technological concerns: Given the increased use of technology in business operations, MNCs will need to determine if the host country’s workforce has a skilled pool of potential candidates.
- Organizational concerns: The MNC’s level of internationalization as well as the product life cycle are two important factors evaluated when determining staffing needs.
- Cultural concerns: It is imperative that the corporate office considers the differences between the corporate and subsidiary cultures when making staffing decisions and policies.
Organizations will have to decide if it is best to establish the international business function internally or externally. It is important for organizations to assess their current workforce to determine if they will need to rely on expatriates to establish a presence in the host company or whether it is more feasible to hire employees from the host country to minimize cultural and language barriers.
If the organization elects to start internally, it may assign a team to set the budget, ship products, and develop the international marketing plan. However, this can become expensive, so the organization may evaluate two other options. One option is to hire employees from the host countries. Many organizations elect this option to minimize cultural and language barriers and secure labor that is cheaper than its current workforce. If the organization elects to hire employees from the host country, it is important that it assimilates these new hires into its corporate cultural so that they will have an understanding of what the organization values and how it operates.
- Thomas P. Bechet, Strategic Staffing: A Comprehensive System for Effective Workforce Planning (AMACOM, 2008);
- Donald L. Caruth, Gail D. Caruth, and Stephanie S. Pane, Staffing the Contemporary Organization: A Guide to Planning, Recruiting, and Selecting for Human Resource Professionals (Praeger Paperback, 2008);
- Collings et al., “Composing the Top Management Team in the International Subsidiary: Qualitative Evidence on International Staffing in U.S. MNCs in the Republic of Ireland,” Journal of World Business (v.43/2, 2008);
- Herbert Heneman III and Timothy Judge, Staffing Organizations (McGraw-Hill Irwin, 2008);
- Morrison, “International Recruiting a Helpful Staffing Tool,” Hotel & Motel Management (v.223/4, 2008);
- Bonache Pérez and J. Pla-Barber, “When Are International Managers a Cost Effective Solution? The Rationale of Transaction Cost Economics Applied to Staffing Decisions in MNCs,” Journal of Business Research (v.58/10, 2005);
- Reiche, “The Effect of International Staffing Practices on Subsidiary Staff Retention in Multinational Corporations,” International Journal of Human Resource Management (v.18/4, 2007);
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- Peggy Tallier, Nurse Staffing Ratios and Patient Outcomes: A Critical Look at Nurse Staffing Ratios and the Impact on Patient Outcomes (VDM Verlag, 2008).
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