By

Dr. Atri Roy Sengupta

The process of critical issues faced by the MNCs with regard to the employment of Parent, Host & Third Country Nationals to fill key positions in their Headquarter & their subsidiary operations.

It not only includes the transfer of PCNs to subsidiary operations, as is implied in traditional definitions of expatriation, but also includes staff flows in other directions.

Reasons of Relevance: There has been a considerable increase in the mobility of human

resources due to the more rapid growth of internationalisation and global competition since the mid-1990s (Black et al., 2000).

The effective management of human resources at the international level is increasingly being recognised as a key source of competitive advantage in international business (Dowling and Welch, 2004).

There is growing recognition that the success of global business depends most critically on recruiting the desired quality of senior management in the MNC (Schuler, 2000).

Staffing issues are different and more complex in the international environment (Torbiörn, 1997), as in addition to the complexities of operating in different countries, the MNC employs different national categories of workers.

9The performance of expatriates continues to be problematic and the evidence suggests that the costs of poor staffing decisions in international business are often costly in human and financial terms (Dowling and Welch, 2004).

Reasons of Relevance: Many MNCs continue to underestimate the complexities of

global staffing and lack of knowledge of labour markets in a variety of countries and how to recruit in these markets is a major challenge for MNCs (Briscoe and Schuler, 2004).

Shortages of international managers are a growing problem for international firms and the implementation of global strategies are increasingly constrained by shortages of international management talent (Scullion, 1994).

The rapid growth of the emerging markets such as China and India (cf. UNCTAD, 2003, 2004) implies an increasing need for managers with distinctive competencies and a desire to manage in these culturally and economically distant countries (Garten, 1997). Also, there is greater competition between MNCs and local organisations in the emerging markets for managers with context specific knowledge of how to do business in such countries (Harvey et al., 1999).

Reasons of Relevance: Global staffing issues are becoming increasingly important in a

far wider range of organisations partly due to the rapid growth of small and medium enterprise (SME) internationalisation (Anderson and Boocock, 2002). Research has highlighted the importance of staffing and the top management team’s international experience to the performance of international SMEs (Monks and Scullion, 2001).

Recent research highlights the importance of staffing strategies to the successful implementation of the rapidly increasing number of strategic alliances and cross-border mergers and acquisitions (Schuler et al., 2004), particularly as the context of strategic alliances and global business is increasingly shifting from formal, developed and mature markets to informal, emerging and culturally distant markets (Harvey et al., 1999).

Reasons of Relevance: The move towards network multinational organisation and the

shift away from traditional hierarchical organisation structure means a more flexible role for staffing in the global network organisation. The development of networks of personal relationships and horizontal communication channels requires a more significant role for global staffing in the network organisation (Boxall and Purcell, 2003; Marschan et al., 1997).

Research has shown the growing importance of emerging staffing strategies such as inpatriation which reflect the growing need for MNCs to develop a multicultural international workforce (Harvey et al., 1999).

Developed Countries: Aging Populations & Labour Shortage Reduced birth rates Aging population Talent gap or labour shortage in developed countries Resultant activities – increasing their hiring of foreign immigrants and their

recruitment of foreign employees, moving jobs “offshore” outsourcing work subcontracting to retirees hiring workers “in place” in other countries and using the

internet and telecommunications for management and control greater use of robots and computers to perform work, etc.

Developed Countries: Aging Populations & Labour Shortage

Developed Countries: Aging Populations & Labour Shortage

Developing Countries: Labour Conditions the populations are very young labor surpluses and high unemployment levels people with limited education and job skills Some highly populated countries have more educated &

underemployed people Low cost of living Labour mobility emigration & immigration brain-drain export the work and jobs of the firms of the developed countries

to the foreign employee in his or her home country

Categories of international employeesExpatriate refers to someone who has been on a

foreign assignment for more than one yearWhen they return home, they are referred to as

repatriatesEmployees of foreign subsidiaries when are relocated

to the headquarters of the parent firm, they are generally referred to as inpatriates

Third country nationalsThe process of moving work from one’s domestic

location to one’s international location is referred to as “offshoring”

Purpose of assignmentsCEO – director or general manager of a foreign subsidiary.Structure reproducer – sent abroad to duplicate (start up)

the domestic operation in a foreign locale.Troubleshooter – sent abroad to solve business or

personnel problems.Operative – sent abroad to perform functional tasks, such

as accounting, sales, or manufacturing, usually as a supervisor.

Domestic internationalists whose jobs entail frequent interaction with people in other countries (via telephone, e-mail, fax, or even snail mail) but who never leave home.

International commuters are people who typically live (and do most of their work) in their home countries but who regularly commute to specific foreign locales to perform some aspect of their work for short-period of time.

Purpose of assignmentsAssignees on short-term foreign postings for less than one

year Assignees on intermediate-term (twelve to thirty-six months)

foreign postingsAssignees on long-term (greater than thirty-six months, e.g.,

up to five years) foreign postingsPermanent transfereesPermanent cadre – some organisations, such as, Royal Dutch

Shell, Nestlé, Unilever employ international employees who spend their whole careers in overseas assignments. They move from one foreign assignment to another.

Second-generation expatriates are naturalized citizens (immigrants) who are sent on foreign assignments, but to other than their countries of origin.

Ad hoc, or contract, expatriates based on needs arise.

Purpose of assignments

Perlmutter’s study (1969)Multinationality of International Firm -- no

single criterion of multinationality was enough.He introduced a classification of multinationals

which differentiated between firms based on their attitude toward the geographic sourcing of their management teams.

Initially he identified three approaches to the staffing of MNCs, namely ethnocentric, polycentric and geocentric (Perlmutter, 1969) while in later work he classified a fourth approach, the regiocentric approach (Heenan and Perlmutter, 1979).

Perlmutter’s study (1969)Ethnocentric approach Primarily home-country orientated Key positions in the headquarters (HQ) and

subsidiaries are filled by parent country nationals or citizens of the country where the HQ is located

Home based policy, practice and even employees are viewed as superior and foreigners can be viewed as, and feel like second class citizens

Subsidiaries are controlled directly through PCNs in key positions

There are rarely opportunities for host employees to be promoted beyond their subsidiary operation or even to be promoted to key positions in the subsidiary operation

Perlmutter’s study (1969)Ethnocentric approach – Relevance Most appropriate during the early stages of set-up of a

foreign subsidiary when the need for control is greatest

There is a perceived lack of qualified host country nationals

After international acquisitions in ensuring the acquired firm complies with corporate policy (Dowling and Welch, 2004

This is most consistent with the global companies characterised by integration of production, standardisation of the products, & the promotion of organisational policy.

E.g., Philips, Procter & Gamble

Perlmutter’s study (1969)Polycentric approach Primarily host-country oriented Foreign subsidiaries are primarily staffed by host

country nationals or managers from the subsidiary location

Subsidiaries are allowed to develop with minimal interference from HQ and generally controlled through good financial monitoring and procedures

These organisations provide ample opportunity for promotion within foreign subsidiaries, but the opportunity for advancement beyond the subsidiary is also limited

Perlmutter’s study (1969)Polycentric approach -- Relevance where organisations serve heterogeneous product

markets and where products and services must be adapted and marketed to suit specific national tastes

where organisations have low levels of production integration between foreign operations and thus subsidiaries may be relatively autonomous and have little impact on production in other subsidiaries or operations

Useful for the multidomestic companies characterised by a decentralisation of decision making and manufacturing driven by a desire for local responsiveness

Perlmutter’s study (1969)Geocentric approach filling positions at both HQ and subsidiary level with

the ‘best person for the job’ regardless of nationality aims to produce a truly global approach to the

management of MNCs geocentric organisations represent the most complex

form of organisational structure, thus requiring high levels of communication and integration across borders

Perlmutter’s study (1969)Geocentric approach -- Relevance Consistent with the transnational companies

characterised by flexible organisational strategy which can respond to emerging developments in the business environment

Where production is integrated to a large extent across subsidiaries

Organisations which have a large percentage of their operations outside the home country or where a large percentage of sales are outside the home country

Perlmutter’s study (1969)Regiocentric approach conceptualised on a regional basis and managers are

generally selected on the basis of ‘the best in the region’ with international transfers generally being restricted to regions

Under this structure subsidiaries within a region may have a relatively large degree of autonomy

Corporate policies and communication are generally mediated through the regional HQ

promotes localisation of policy as key positions in subsidiaries are generally filled by HCNs or TCNs with reasonable knowledge of the host context

career opportunities for key personnel will be limited to regional structure

Selection criteria Job suitabilityCultural adaptabilityDesire for foreign assignment (candidate and family)Profiles of a successful international assignee.

Because of the nature of most overseas assignments, selections for international transfer are most successful when based on factors such as the following:

The maturity of the candidate (i.e., being a self-starter, able to make independent decisions, having emotional stability, sensitive to others who are different, and having a well-rounded knowledge of on- and off-the-job subjects to facilitate discussion with foreign colleagues and contacts who are often quite knowledgeable and interested in such topics)

Ability to handle foreign language(s) Possession of a favorable outlook on the international

assignment by the expatriate and his or her family (i.e., s/he wants to go overseas)

Possessing appropriate personal characteristics (excellent health, desire for the assignment, this is an appropriate time in the individual’s career and family, individual resourcefulness, adaptability)

Successful expatriate experience

The twenty-first-century expatriate manager profile

Process of SelectionInterviews (IA and spouse/partner)Formal assessmentCommittee decisionCareer planningSelf-selectionInternal job postingRecommendationsAssessment centers

Definition of expatriate failure

Reasons for expatriate failure

LanguageGenderFamilyLifestyleLocalization or “going native”Career developmentCosts of international assignmentsDeveloping a pool of IA candidatesImmigration law