INTERNATIONAL HUMAN RESOURCE MANAGEMENT

UNIT 2
STAFFING PRACTICES IN INTERNATIONAL HUMAN RESOURCE MANAGEMENT

International Staffing-Staffing (or finding, choosing and placing) good employees is difficult even at home.
However, it becomes more difficult in other countries. For example, until recently in Russia, very few Russians had
resumes available to give to prospective employers with vacant positions. Consequently, recruiting is often done
only by word of mouth. Only recently have more sophisticated methods—such as structured interviews, testing or
work samples—been used on a limited basis. More systematic selection is becoming necessary in Russia and many
of the former Soviet-bloc countries as younger, more highly educated candidates are being needed by
international firms.

Deciding on the mix of local employees, employees from the home country, and even people from third countries
that will best meet organizational goals is a challenge. In staffing an overseas operation, cost is a major factor to be
considered. The cost of establishing a manager or professional in another country can run as high as $1 million for
a three-year job assignment. The actual costs for placing a key manager outside the United States often are twice
the manager’s annual salary.
For instance, if the manager is going to Japan, the costs may be even higher when housing costs, schooling
subsidies, and tax equalization payment are calculated. Further, if a manager or professional executive quits an
international assignment prematurely or insists on a transfer home, associated costs can equal or exceed the
annual salary. “Failure” rates for managers sent to other countries run as high as 45%.Factors that are most likely
to be causes of concern for an employee sent overseas are shown in Figure. The figure shows that only roughly
two-thirds to three-fourths of employees sent to another country are satisfied with the way the top five support
needs are being met. To meet these needs, organizations are outsourcing various functions, citing gains in cost
effectiveness, expertise, and efficiency. Several respondents to a survey on the subject suggested that outsourcing
certain HR functions to international experts may be a long-term trend.

TYPES OF INTERNATIONAL EMPLOYEES-International employees can be placed in

three different classifications.
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 An expatriate is an employee working in a unit or plant who is not a citizen of the country in
which the unit or plant is located but is a citizen of the country in which the organization is headquartered.
 A host-country national is an employee working in a unit or plant who is a citizen of the country
in which the unit or plant is located, but where the unit or plant is operated by an organization
headquartered in another country.
 A third-country national is a citizen of one country, working in a second country, and employed
by an organization headquartered in a third country. Each of these individuals presents some unique HR
management challenges. Because in a given situation each is a citizen of a different country, different tax
laws and other factors apply. HR professionals have to be knowledgeable about the laws and customs of
each country. They must establish appropriate payroll and record-keeping procedures, among other
activities, to ensure compliance with varying regulations and requirements.
EXPATRIATES
(An expatriate (in abbreviated form, expat) is a person temporarily or permanently residing in a country and
culture other than that of the person's upbringing.) (A person who leave one's native country to live elsewhere)
Many MNEs use expatriates to ensure that foreign operations are linked effectively with the parent corporations.
Generally, expatriates also are used to develop international capabilities within an organization. Experienced
expatriates can provide a pool of talent that can be tapped as the organization expands its operations more
broadly into even more countries. Japanese-owned firms with operations in the United States have rotated
Japanese managers through U.S. operations in order to expand the knowledge of U.S. business practices in the
Japanese firms.
Several types of expatriates may be differentiated by job assignment, because not all individuals who decide to
work as expatriates are similar in the assignments undertaken.
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 Volunteer expatriates: These are persons who want to work abroad for a period of time because
of career or self-development interests. Often, these expatriates volunteer for shorter-term assignments of
less than a year so that they can experience other cultures and travel to desired parts of the world.
 Traditional expatriates: These are professionals and managers assigned to work in foreign
operations for one to three years. They then rotate back to the parent corporation in the home country.
 Career development expatriates: These individuals are placed in foreign jobs to develop the
international management capabilities of the firm. They may serve one to three “tours” in different
countries, so that they can develop a broader understanding of international operations.
 Global expatriates: The broadcast category comprises those individuals who move from one
country to another. Often, they prefer to work internationally rather than in the home country.

HOST-COUNTRY NATIONALS
 Using host-country nationals is important for several reasons. It is important if the organization wants to
establish clearly that it is making a commitment to the host country and not just setting up a foreign
operation. Host-country nationals often know the culture, politics, laws, and business customs better than
an outsider would. Also, tapping into the informal “power” network may be important. In one Southeast
Asian country, foreign companies have learned that a firm’s problems are resolved more quickly if a family
member of that country’s president is a consultant to the firm or a member of its management. But U.S.
firms must take care that the individuals used actually perform work for the company; the “salary” must
not be a disguised bribe paid in order to obtain contracts. Otherwise, the firms could be in violation of the
FCPA addressing foreign corrupt practices. Another reason to use host-country nationals is to provide
employment in the country. In many lesser-developed countries, compensation levels are significantly
lower than in the United States, so U.S. firms can gain cost advantages by using host-country nationals to
staff many jobs.
 Recruiting the first group of local employees can be a challenge. The initial group helps create a culture for
that organization—for better or worse. Yet, the opportunity for serious errors is great. For example, many
 countries have very different employment laws, which may make it difficult to dismiss an employee. In
countries where there is a shortage of qualified candidates, good potential employees may be lost if not
approached correctly. To accomplish successful hiring of host-country nationals, many firms form
partnerships with local companies to help with hiring.
THIRD-COUNTRY NATIONALS
Using third-country nationals emphasizes that a truly glob global approach is being taken. Often, these individuals
are used to handle responsibilities throughout a continent or region. For instance, a major U.S.- based electronics
company has its European headquarters in Brussels, Belgium.
While most employees on the clerical staff are Belgians, only about 20% of the professionals and managers are
from Belgium. Most of the rest, except for five U.S. expatriates, are from other Western European countries.
It is unusual to find third-country nationals in a new multinational enterprise (MNE). These are usually staffed with
qualified nationals and expatriates. Third country nationals are often first hired when a company has several
foreign operations and decides to open another. The choice is often between transferring another expatriate from
headquarters or transferring an employee from another overseas operation. Third-country nationals are more
common in MNCs with headquarters in North America than in other regions.
TRANSNATIONAL PROJECT TEAMS
There has been a dramatic increase in the number and variety of multicultural or “transnational” teams. These
teams may be temporary or somewhat permanent and are formed to solve a specific problem or to handle
ongoing activities. They often include headquarters representatives, host-country nationals, and third-country
nationals. They are useful not only as potentially valuable business units but also as development vehicles for
leaders. Eastman Kodak formed a transnational team based in London to launch its photo CD at the same time in
several European countries. The team dealt with complex strategic issues across geographic and cultural barriers.

OBJECTIVES OF INTERNATIONAL STAFFING

 To select and appoint the right person to the right job.

 To develop a strategy for effective utilization of human resources.
 To introduce training, seminars, workshops and other efficiency development programs of employees.
 To maintain coordination among staff members and integrate their performance.
 To maintain high morale and better human relation inside the organization.
 To ensure equal opportunities to employees on the basis of their skill and experience.
 To develop an environment of mutual cooperation and a sense of belonging among the staff.

SOURCES OF GLOBAL STAFFING

1. Host country National

2. Parent Country National
3. Third Country National

GLOBAL STAFFING PRACTICES/APPROACH

1. ETHNOCENTRIC APPROACH

 The ethnocentric approach of staffing gives much importance to the culture and policies of the
organization.
 The multi-national organizations that follow this approach appoint personnel from the home
country to the upper management positions in all its operating units in different countries and
are all called parent company nationals.
 The main advantages of this approach are as follows:
 a. The process of communication would be smooth with the head office.

 Familiarity with the practices and policies of the organization. The culture of the organization
can be maintained easily.
 The main disadvantages of this approach are as follows:

a. Adapting to a foreign language would be a major problem.

b. It takes time to get used to the new political, cultural and legal environments.

Example: Let us understand the ethnocentric approach with an example. Consider a company ABC, a
Smartphone manufacturing company that has its headquarters in China. The company wants to expand
its operations in India. But at the same time, it wants to retain the culture and practices of the
organization. So, it appointed the top management positions with the parent company nationals. They
will report to the head office at regular intervals. The company took the help of a local consulting firm in
India to appoint the personnel for other senior level and entry-level positions.

2. Polycentric Approach

 The polycentric staffing approach gives much importance to the legal norms and practices of
the country where it is operating and appoints all the upper management positions from the
local country.
 The main advantages of this approach are as follows:

a. The managers will be familiar with the legal, political and cultural environments. They
can give suggestions to the head office during decision making which may prevent legal
implications.
b. Increases the motivation of employees and they can put forward their suggestions
without any hesitation.
c. This will help the head office to know the requirements of employees and take steps
accordingly to retain the talent.

 The main disadvantages of this approach are as follows:

a. The organization may lose control over its operating unit.

b. Difficulties and delays in the communication process.

Example: The polycentric approach can be better understood with the following example. Consider an E-
commerce company QPR, which has its headquarters in the USA. It wants to expand its operations in
India and Australia. The staffing department worked on the idea and appointed two personnel Rakesh
and Watson. Rakesh is of Indian origin and had worked on his own startup earlier. Watson belongs to
Australia and worked with many organizations in senior roles. Rakesh and Watson will lead the company
in India and Australia respectively.

3. Geocentric approach

 The geocentric staffing approach does not focus on the nationality of top-level management.
  The multi-national companies that follow this approach appoint the most qualified employees
selected from a global pool of candidates to top-level management positions and are called
third-country nationals.
 The main advantages of this approach are as follows:

a. This will help the organization to grow locally and globally.

b. There will be a collective decision making.

 The main disadvantages of this approach are as follows:

a. There may be a conflict among managers while making a decision as all of them belong
to different nationalities.
b. Politics for promotions may start as the managers are of the same designations but
different nationalities.

Example: To understand the geo-centric approach, let us take the tech-giant, Google as an example. The
founders of Google appointed Sundar Pichai as its chief executive officer (CEO). Google is an American
based tech company that has its operations in many countries. It appointed Sundar Pichai of Indian
origin as its CEO. It clearly shows that the company gives no importance to the nationality of an
individual while appointing for top-level management positions. The organizations which follow this
approach, select a person based on their skill set and previous achievements in the organization.

4. Regio-centric approach

 The regio-centric staffing approach is similar to the polycentric approach, but it takes a specific
region into consideration rather than a specific country.
 In this approach, top-level management positions are held by employees from a particular
region where the unit is performing its operations.

Example: Let us take the PQRS Company as an example to understand the region-centric approach.
PQRS Company is a Japanese company that works on kitchen accessories. It wants to expand its
operations in India. The company decided to establish two manufacturing units, one unit in north India
and the other in south India. The company wants to match the local needs of the people. It appointed
Piyush and Mohan, who belong to north and southern regions to lead the units in the north and south
India respectively.

Importance of staffing

 It helps the organization in listing out the efficient workforce and offering them better salaries
and incentives. These individuals can be trained on other skills or can be absorbed into
management. This will motivate the employees to up skill themselves.
 Staffing helps the organization to improve its performance by appointing the right person for
the right job.
 It forecasts the requirement of the workforce by taking the historical data and the current
undergoing projects that the company is dealing with and plans the hiring process accordingly.
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The staffing department is responsible for succession planning. It develops the employees to
take up managerial positions of the organization. This will stop the external hiring for senior
roles and help the organization grow without any conflicts.
It works on the training needs of the organization according to the changing technological
needs. This will help the organization to take up new projects.
The staffing department takes labor laws into consideration while planning the recruitment
process to prevent legal implications.

Summary:

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Staffing is placing the right person at the right job and helping the organization.
The staffing department takes the legal, cultural and political aspects of a country or region
into consideration while planning the recruitment process.
The staffing department is responsible for succession planning and this will motivate the
employees to up skill themselves.

PROCESS OF GLOBAL STAFFING