Ever since the globalization era began, companies have become more aware of the competitive environments they operate in. It is obvious that a competitive advantage such as technology, resources and quality can be imitated. It is the personnel that a company employs that makes the difference. Making the right selection and most efficient use of it will surely provide the advantage needed.
This difficult task is left in the hands of International Human Resource Management. The term IHRM refers to the development and deployment of human resource capabilities within an international framework. Companies have several techniques at their disposal when faced with staffing decisions.
The first approach is called ethnocentric. It is based on the occupation of a key position by employees from headquarters (i.e. expatriates or parent country nationals PCN). It is assumed that subsidiaries can be managed more efficiently by expatriates. This is because expatriates are more informed of the company's goals and objectives, strategies and "know how" compared to local managers. This method is used when expanding globally and there is need of good communication, cooperation and control of activities. Consequently, PCN's are assigned to top management positions who implement strategic decisions coming from headquarters. Hence, the selection of expatriates will depend on the technical knowledge required or the type of international expansion a company is planning.
The ethnocentric approach provides the parent company with more control which is vital when expanding to a new country. Therefore, expatriates are seen as more able than host country nationals.
Unfortunately, this approach has its side-effects. For instance, host country nationals (HCN) are very restricted in their career progression since they will never occupy top management positions. In addition, the have limited autonomy and control over activities which may cause frustration and disappointment leading to labour turnover and a fall in productivity. The wage differential is another disadvantage in this model since PCN's receive higher salaries than HCN's.
There are some cases were expatriates had difficulties in adjusting to the new environment and as a result have made poor decisions. As an example we can take Procter & Gamble's unsuccessful attempts in assigning expatriates subsidiaries in Japan.
The second approach is called polycentric. It relies on HCN's being recruited to manage subsidiaries in their own country, while positions at headquarters are maintained by PCN's. Under this scenario each subsidiary is perceived as separate national entity with a degree of autonomy in decision-making and is mostly used when implementing a multinational approach.
Polycentric staffing can have certain advantages. By hiring HCN's language barriers are overcome, there is perfect knowledge of the market, legal and political structure and culture. Also there is no delay in the adjustment process when assigned to new posts compared to expatriates. By using local staff labour turnover can be decreased and productivity rises. In addition, HCN managers receive lower wages and benefit packages which have considerable effects in the reduction of costs.
However, the polycentric approach has some disadvantages. This can be described as lack in communication and control between the headquarters and the subsidiary. This is attributed to differences of language, culture and conflicts of interest. As a result, there is a gap in the strategic planning process and the pursuit of common objectives since each subsidiary will as an independent unit.
Another limitation is the conflicting career options that PCN's and HCN's face. On the one hand, expatriates occupy key position at the headquarters but are limited from an international career which would give them extra feedback on how things work abroad. Likewise, HCN's cannot occupy positions at headquarters or anywhere abroad,...
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