DMR 3503 INTERNATIONAL

HUMAN RESOURCE
MANAGEMENT

CHAPTER THREE
STAFFING FOR INTERNATIONAL
OPERATIONS
PROF DR HASLINDA ABDULLAH
drhaslinda@gmail.com hba@upnm.edu.my
019-3273122
 LEARNING OUTCOMES
■ understand the various staffing approaches and the issues
related to staffing foreign operations
■ discuss the types and reasons for using international
assignments
■ understand the role of expatriates and the importance of their
return on investments
■ examine the role of corporate HR function in MNEs
INTRODUCTION
■ Staffing the multinational enterprise (MNEs) is the heart of IHRM
■ The process involves identifying and selecting the people who fill positions abroad and
then planning them in those positions
■ Managing and staffing multinationals is not an easy responsibility because it involves
– Selecting and transferring employees across borders
– strategize and select the right staffing approaches
– consider the issues related to selecting the types or categories of employees for
subsidiaries business operation’s success
– decision to select parent-country nationals or host-country nationals is crucial
– understanding the strategic perspective on international transfers
– Understanding the underlying motives that multinationals have to send out
expatriates to their international subsidiaries
1. APPROACHES TO STAFFING
INTERNATIONAL OPERATIONS
■ Ethnocentric – Subsidiaries employ mainly parent-country
nationals (PCNs) from country of origin
■ Polycentric – Subsidiaries employ mainly host-country
nationals (HCNs) who are locals
■ Geocentric – Employ the best person with the capabilities,
from any part of the world, regardless of nationality
■ Regiocentric – managed by managers who are selected from
different countries within the regional geographic area of the
business. Managers are selected within the region that closely
resembles the host country
2. ADVANTAGES AND
DISADVANTAGES OF
INTERNATIONAL
STAFFING
ADVANTAGES AND
DISADVANTAGES OF
ETHNOCENTRIC
Advantages APPROACH
Disadvantages
■ Can reduce the perceived high ■ It limits the promotion
risk in the early stages of opportunities of HCNs
internationalization
■ The adaptation of expatriate
■ Staffing subsidiaries with PCNs managers to host countries often
can ensure that the new takes a long time
subsidiary complies with overall
corporate objectives and policies ■ PCNs compensation packages are
■ Having “your own people” in
normally much higher than HCNs
whom the firm has trust “to do ■ Expatriates holding key overseas
the right thing” positions often feel that they have
the status, power and authority
ADVANTAGES AND
DISADVANTAGES OF POLYCENTRIC
APPROACH
DISADVANTAGES
ADVANTAGES • There is a gap between HCN subsidiary managers and PCN
Employing HCNs managers at corporate headquarters

■eliminates language barriers, • Differences in languages, culture, attitudes to business and

personal values can isolate the corporate headquarter’s staff
■is less expensive from the various foreign subsidiaries
■avoids the adjustment problems of • The MNE could become independent national units with
expatriate managers and their families, minimal links to corporate headquarters
■removes the need for expensive cultural • Host-country managers have limited opportunities to gain
awareness training programs experience outside their own country
■allows a multinational company to take • Host-country managers cannot progress beyond the senior
a lower profile in sensitive political positions in their own subsidiary
situations • Parent-country managers also have limited opportunities to
gain overseas experiences as PCNs usually holds headquarter’s
■give continuity to the management of positions
foreign subsidiaries
• Senior corporate management group will have limited exposure
■avoids the turnover of key managers to international operations and over time will constrain
resulting from an ethnocentric approach strategic decision making and resource allocation
ADVANTAGES AND
DISADVANTAGES OF GEOCENTRIC
APPROACH
Advantages
Disadvantages
■ Host governments want more local nationals
■ It enables a MNE to develop employed
an international executive ■ Host governments want HCN to trained over
a specified time period to replace expatriates
team with global ■ Many Western countries require companies to
perspectives provide extensive documentation
■ It overcomes the issue of ■ Extensive hiring documentation can be time-
consuming, expensive and at times
distance and isolation in the unsuccessful.
polycentric approach ■ A geocentric policy can be expensive to
implement because of increased training and
■ It supports cooperation and relocation costs.
resource sharing across units ■ Large numbers of PCNs, TCNs and HCNs
need to be sent abroad
ADVANTAGES AND
DISADVANTAGES OF
REGIOCENTRIC
Advantages APPROACH
Disadvantages
■ It allows interaction between ■ produce federalism at a regional
executives transferred to regional rather than a country basis
HQ from subsidiaries in the region ■ Regiocentric approach does support
and PCNs posted to the regional
HQ. career progression prospects
■ Sensitivity to local conditions is
seen and present in regiocentric
approach,
■ purely ethnocentric or polycentric
approach to a geocentric approach.
 3. ADVANTAGES AND
DISADVANTAGES
OF USING
PARENT-COUNTRY NASIONAL
(PCN), HOST-COUNTRY NASIONAL
(HCN) AND THIRD COUNTRY
NASIONAL (TCN)
ADVANTAGES AND
DISADVANTAGES OF PARENT-
COUNTRY
Advantages NASIONAL (PCN)
Disadvantages
■ Organizational control and ■ Job promotion opportunities for the
coordination is maintained and HCNs are limited
facilitated ■ Adapting to host country may take a
■ Promising managers are given long time
international experience ■ PCNs may impose an inappropriate
■ PCNs may be the best people for HQ style of working
the job ■ Compensation for PCNs and HCNs
■ There is assurance that subsidiary may differ
will comply with company
objectives, policies, etc.
ADVANTAGES AND
DISADVANTAGES OF HOST-
COUNTRY
Advantages NASIONAL (HCN)
Disadvantages
■ Language and other barriers are ■ Control and coordination of HQ may
eliminated be obstructed
■ Hiring costs are reduced and no ■ HCNs have limited career opportunity
work permit is required outside the subsidiary
■ Continuity of management ■ Hiring HCNs limits opportunities for
improves, PCNs to gain foreign experience
■ Government policy may dictate ■ Hiring HCNs could encourage a
hiring of HCNs federation of national rather than
global units
■ Morale among HCNs may improve
as they see career potential
ADVANTAGES AND
DISADVANTAGES OF THIRD-
COUNTRY
Advantages NASIONAL (TCN)
Disadvantages
■ Salary and benefit ■ Transfers must consider possible
requirements may be lower national animosities and political
than PCNs conflicts
■ TCNs may be better informed ■ The host government may resent
than PCNs about the host- hiring TCNs
country environment ■ TCNs may not want to return to
their own countries after
assignment
4. FACTORS THAT AFFECT THE
CHOICE OF STAFFING
Context specificities Company Specificities
 Cultural context  MNE structure & strategy
 Institutional context  International experience
 Staff availability  Corporate governance
 Type of industry  Organizational culture

Staffing Choices
 Ethnocentric
 Polycentric
 Regiocentric
 Geocentric

Local unit context IHRM practices

 Establishment method  Selection
 Strategic role and importance  Training and development
 Need for control  Compensation
 Locus of decision  Career management
CONTEXT SPECIFICITIES
■ cultural and institutional factors, staff availability and type of
industry may influence the choice in staffing.
■ Cultural values may differ to a high extent between the
headquarters and the host-country context.
■ The institutional environment includes the legal environment or
the education system.
■ The availability of staff determine the choice of staffing
■ The type of industry determine the type of people to be employed
COMPANY SPECIFICITIES
■ The decision to staffing choices may be dependent on the
company specificities which include
– MNE structure and strategy
– experience in international operations
– corporate governance structure of the organization
– organizational culture or headquarters international
orientation
LOCAL UNIT SPECIFICITIES
■ Staffing choices may also be dependent on the local unit
specificities such as
– the establishment method of the subsidiary, (i.e. whether the
unit is a merger, an acquisition or a shared partnership),
– the strategic role of a subsidiary and its strategic importance
for the MNE,
– the need for control
– the locus of decision making.
■ These local unit specificities may play important roles in staffing
choices.
INTERNATIONAL HRM
PRACTICES
■ International HRM practices such as
– selection, training and development,
– compensation
– career management including expatriation as well as
repatriation
■ These practices play an important role in the development
of effective policies required to sustain a preferred
staffing choice.
 5. TYPES OF INTERNATIONAL
■
ASSIGNMENTS
Short-term assignments are usually up to three months. These assignments are usually for
troubleshooting, project supervision, and temporary arrangement until a more permanent arrangement
can be found.
■ Extended assignments are usually up to one year. These may involve similar activities as that for short
assignments.
■ Long term assignments vary from one year to five years. These may involve clearly defined role such
as managing director of a subsidiary. This assignment has also been referred to as a traditional
expatriate assignment.
■ Non-standard Assignments
– Commuter assignment
– Rotational assignments
– Contractual assignments
– Virtual assignments
 NON-STANDARD ASSIGNMENTS
■ Commuter assignments: Special arrangements where the assignee commutes from
the home country on a weekly or bi-weekly basis to the place of work in another
country. For example, the assignee lives in Kuala Lumpur but works in Jakarta.
■ Rotational assignments: Employees commute from the home country to a place of
work in another country for a short period of time followed by a break in the home
country. For example, Malaysian employee works on oil rig in Vietnam offshore for 3
months and return home for 1 month break.
■ Contractual assignments: Employees with specific skills are assigned to an
international project for a limited duration of six to 12 months. Research and
development (R&D) is one area that is using multinational project teams and this is
usually on a contractual basis.
■ Virtual assignments: This assignment is where the employee does not relocate to a
host location but works from home-base using communication technologies such as
telephone, email or video conferencing.
ROLES OF AN EXPATRIATE
Agent of
direct control

Language Agent of
node socializing
Expatriate roles
in the interplay of
headquarters
and local unit

Boundary Network
spanner builder

Transfer of
competence &
knowledge
ROLES OF AN EXPATRIATE
4. Expatriates as boundary spanners: Expatriates are expected to gather
information that bridge internal and external organizational context.
5. Expatriates as language nodes: For example, Ahmad learns Japanese for his
assignment in Japan. Upon repatriation back to the Malaysia, Japanese
counterparts will only speak to Ahmad on their queries, gather information and
also check information sent to them in English. Hence, Ahmad became the
language nodes.
6. Transfer of competence and knowledge: Expatriates on international
assignments are expected to transfer competencies and knowledge to host-
country employees.
RETURN ON INVESTMENTS OF
INTERNATIONAL ASSIGNMENTS
■ Expatriates return on investments (ROI) is defined as a calculation in which the financial and
non-financial benefits to the multinational corporation are compared to the financial and non-
financial costs of the international assignment (McNulty and Tharenou, 2004).
■ In order to calculate ROI, all international HRM support activities including assignment
planning, expatriate selection, administering the relocation program, expatriate
compensation, training and development, family support practices, performance
management, repatriation and retention and any other activities related to purpose of the
assignment has to be analyzed.
■ Four steps in determining expatriate ROI are:
– Identify financial and non-financial costs and benefits.
– Link the costs and benefits to the purpose of the long-term assignment.
– Isolate the appropriate antecedents from a system’s perspective
– Conduct the calculation at an appropriate time within the context of the assignment’s
purpose.
 Summary
■ The four approaches to staffing MNE are ethnocentric, polycentric, geocentric and
regiocentric
■ Decisions on staffing approaches are determined by the context, local unit specificities
and company specificities.
■ Various types of international assignments can be distinguished: short term, extended
and long term (traditional); and non-standard forms such as commuter, rotational,
contractual and virtual assignments.
■ Primary reasons for using international assignments include position filling,
management development, organization development and for control mechanism.
■ Roles of the expatriates are complex.
■ In line with the increasing need of companies to control costs and develop metrics, ROI
is an important measure
■ Finally, the various roles of the corporate HR function in centralized, decentralized and
transition HR companies.