The world has been rapidly transforming due to the changes in technology, innovations, and the reduction of trade barriers into and out of countries which have permitted globalization. Due to globalization human resource management has been forced to take a more international approach, and has demonstrated that a more effective management of human resources internationally is imperative for the success of companies in international business (Shen). Therefore international organizations need to understand the roll that plays the international human resource management (IHRM) department, and the importance of adopting an effective recruiting, selecting, and training strategies that will enable the company to select the right talent for the right places. IHRM plays a very important and challenging roll in the international setting of organizations because “they must develop practices which will maintain congruence with the overall strategic plan of their respective multinational corporations, while balancing the economic, social, political, and legal constraints of the host countries” (Caligiuri).
Companies understand that the only way to develop strong and successful global leaders, which are keys to competitive advantage, is through an IHRM department that has a well develop competitive strategy in place. Multinational Corporations (MNCs) like Unilever and Huawei Technologies Co., a Chinese networking and telecommunications supplier, have understood the importance of a well develop IHRM department and have implemented strategies that are aligned with a global approach that support the business operation worldwide (Gartsdie). Based on Heenan and Perlmutter model there are four competitive strategies as well as different training alternatives for global assignees that MNCs can use to develop a successful IHRM approach. The recruitment and selection (staffing) policies which MNCs implement for their foreign subsidiaries will vary greatly for every company, and should be determine accordingly with the IHRM approach the organization is pursuing (Ball). MNCs can be divided in four types based on their management approach and corporate philosophy.
The first approach a MNC may consider is the ethnocentric approach which is “characterized by low pressures for cost reduction and low pressures for local responsiveness” (Ball). Ethnocentric MNCs are not willing to give up the control over foreign subsidiaries, and prefer to place expatriates employees belonging to the home country of the firm, in all key management positions abroad. IHRMs departments that adopt this approach believe that expatriates are more capable than employees of the host country, and they expect that their expatriate managers transfer headquarters’ culture and philosophy to the host nationals (Caligiuri). This approach is normally used by MNCs with primarily international strategic orientations in the early stages of globalization. The advantage of an ethnocentric approach is that it expands the experience of expatriates and prepares them for high level management positions who execute strategic decisions from headquarters.
Many expatriates adapt, learn the language, and perform effectively within the host country (Ball). However data suggest that there is a high turnover rate among expatriates because many of them do not have the special set of skills, characteristics, and abilities (e.g. tolerance of ambiguity, adjust quickly, empathy, actively manage social contacts) that are required to be successful in such position (Caligiuri). Because of the previous statement it is imperative that MNCs understand that facilitating proper training and development to the expatriate is a very important part of the IHRM department because it has a major impact on the effectiveness of the expatriate manager and “research has shown that cross-cultural training is an effective intervention to prevent expatriate failures” (Deller). However MNCs today face a big problem because studies show that only fifty percent of all expatriates receive adequate training (Deller). Another very important aspect to the IHRM department needs to consider when selecting the right candidate under this approach is to keep in mind the impact in the family of the expatriate.
The family’s willingness and ability to adjust is of crucial importance for the assignee’s employer and it needs to be address during the staffing process as well. Another disadvantage for this approach is that is more costly for the corporation because it has to offer more incentives to the expatriate (Deller). In the selection process it is the responsibility of the IHRM department to evaluate the efficiency and cross-cultural proficiency of the candidates to ensure the success of this approach. The polycentric staffing policy is a second approach that can be implemented by IHRM departments of MNCs. Under this approach the human resource department will look for host country nationals (HNC) to manage subsidiaries in their own country with some coordination form headquarters (Ball).
With this approach IHRM departments do not need to worry about looking for certain skills or characteristics for an international setting because the candidates are employed at the subsidiary level and they do not have language and culture barriers, labor turnover reduces, productivity increase, there are ideal information of industry, legal and political configuration, and the first cost of employing them is less expensive. Also using this approach makes the subsidiary looks less foreign (Caligiuri). However the problem with hiring HCNs is that they are not familiar with the home country of the international company and with its corporate culture, policies, and practices (Ball). The underlying crisis in communication and control between the headquarters and the subsidiary due to language barriers, conflicting national loyalties and differences in personal values may create an inconsistency in the strategic management process that will result in the subsidiary operating as a separate unit. Home country national’s lack of exposure to international assignments and lack of career mobility among HCNs are also some disadvantages of this approach and ultimately will affect the competitive advantage of the MNC (Padala).
According to the article of Jie Shein, “HCNs are included in management development schemes only at the subsidiary level and HCN managers are rarely promoted to senior management positions” (663). When staffing under this approach IHRM departments can choose from hiring HCNs in the home country or HCNs in the host country. Many MNCs have experienced difficulties in hiring high caliber of HCNs managers because of the lack of long-term IHRM planning and training and ineffective international management development (Shen). When the polycentric staffing approach is not adequate the regiocentric staffing approach might be a better option. The regiocentric staffing approach can be used for companies with a regional strategic approach. In this approach employees are selected for key positions within the region the subsidiary is operating, employing a variety of HCNs and third country nationals, TCNs (Ball).
From this perspective the communication and integration systems must be highly sophisticated for headquarters to maintain control over the regions however the host national are given the opportunity to manage their own subsidiaries. The likelihood of HNCs career advancement is greater within the region, but still limited in headquarters (Caligiuri). The training and development for this approach are the same as with the polycentric staffing approach. One of the biggest advantages of this approach is that it serves as a bridge for MNCs to gradually move to a geocentric staffing approach. The geocentric staffing approach is used in companies with a transnational strategic orientation. This staffing approach seeks the best people for key jobs throughout the organization, regardless of nationality, selecting the best person for the job, irrespective of nationality is most consistent with the underlying philosophy of a global corporation (Padala).
This approach is ideal because the human resource strategy will be the same across all subsidiaries, using the best practices from wherever they might be found across the MNC worldwide networking of operations (Ball). However one of the drawbacks of this approach is that it can be expensive to implement because of increased training, compensations packages, and relocations costs, and it could require longer lead time (Padala). IHRM staffing approaches are very important but training and development also play a very important role in the international setting. International training and development is one of IHRM’s most crucial activities. While it is true that MNCs recognize the significance of international training and development for their employees there is knowledge that this corporation’s training strategies are weak and not effective.
Current researches show that today the majority of companies have ineffective training and management policies that have resulted in frequently employee failure (Shen). In order to succeed in the global arena MNCs need to implement an effective international training and development program for expatriates, HCNs, and TCNs. Globalization has definitely created a very competitive business market in which international human resource management plays a crucial role for the success on multinational corporations. It is imperative that corporation carefully analyze every staffing approach available and implement the one that will help them select the right candidates for the right position, and provide the candidates with the appropriate training and development in order to create a competitive advantage.
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