Factors that determine the choice of a staffing approach
Staffing approaches of MNCs
Why MNCs are concerned about Expatriate Failure
Elements of a Good Mentoring System for International Assignees
Characteristics of MNCs that Give Unions Cause for Concern
Managing In the Global Workforce
Factors That Determine the Choice of a Staffing Approach
Human resource management differs with international human resource activities of organizations. Staffing is one of the core functions of human resource management. The principles that govern staffing are similar however, differences comes with the application of these activities to human resource management and international human resource management. International human resource management has resulted from the growth and expansion in the activities of firms which carry out their production activities in several countries (Tansky and Heneman, 2006).
Staffing is an important aspect of managing workers in an organization therefore the choice of a strategy to be used for staffing approach to be used by a company is a critical role. The approach used in staffing goes a long way to influence time allocation, the flexibility in controlling the workers and addressing the challenges that are likely to face the employees. Staffing as a function entails the acquisition of the labour force, training them and allocating them in different sections of the organization where they will be discharging their duties. It also involves the allocation of resources to the staffs which will enable them to work (Tansky and Heneman, 2006).
There exist several approaches to staffing for organizations. These approaches are determined by a number of factors. Among these factor is the size of the organization under question. The staffing approach used by large firms is slightly different from that approach that will be used by big firms. Generally, for small firms – firms which operate within a country, there are five key considerations that have to be given attention before choosing the model of staffing. This does not mean that these considerations don’t apply to bigger firms. These factors include the speed of growth which is anticipated by the company, the mental model and the culture of the firm that is conducting the staffing exercise and the need for flexibility in the management of staff. Others are the level of control that is desired by the management of the firm and the time that is available for attending to human resource issues (Dowling, Festing and Engle, 2008).
Staffing bases on the fact the new employees that are being selected to join the organization will befit the culture of the organization that hires them. Organizations which operate within a country often seek to hire and maintain employees who have a high potential of delivering on the objectives of the firms. Organizations aspire to have quick growth thus they do expect to get staffs who will be assets in accelerating the speed of growth. This shapes the human resources as it concerns staffing. They do put in place measures of ensuring that they get staffs that will pace up the rate of growth (Dowling, Festing and Engle, 2008).
Firms that operate across national boundaries have many factors influencing them both at the national and international level. Many of the factors that influence the choice of staffing by non-multinational also influence the choice of staffing models at the international level. The major difference is that multinationals operate in different environments governed by different human resource policies. In real sense all the local considerations will have to be paid attention to by the firm in the international destination or location. However, more considerations have to be respected by the multinational in in order to make the firm adapt to the business conditions that prevail in the foreign country.
While the considerations by small firms will be on human resource management, multinational have to factor in both the aspects of Human resource management. These govern the local operation of the company. Aspects of international human resource management must also be considered by the company as this determines the existence and adaptability of the firm in the international labour market for its firms (Dowling, Festing and Engle, 2008).
Unlike the smaller firms which are only restricted by the human resource policies of a single country, multinational enterprise have to meet different conditions as they operate in different countries. Multinational companies do come across varying environments in the social, political, cultural and economic realms as they manage their subsidiary firms that are located in different parts of the world. Controlling and organizing human resource activities including staffing of foreign subsidiaries require the extensive knowledge of the challenges which subsidiary firms are likely to face. This hardens the task of human resource management in these firms just as it is complicated to choose a single approach of human resource management for these multinationals (Long, 2009).
One important aspect of managing subsidiary firms is the choice of the managers to lead the subsidiary firms. This role is the chief determining factor for the success of these firms. The lead staffs of subsidiary firms have a more complex role. Factors that will be considered in staffing of subsidiary firms are the level of knowledge of the subsidiary company and the comprehension of the corporate culture of the firm. The other factor is the technical qualification and international experience (Long, 2009).
There are different approaches to staffing which can be used by multinational firms to enhance their performance in the foreign country. Each approach of staffing has its pros and cons. The choice of any of these approaches of staffing by multinationals depends with the chief strategy of the company which originates from hoe their mother companies are operated or managed. The major challenge in staffing of subsidiaries is the choice of the managers. Many theses support different kinds of managers. Some human resource analysts argue for the use of expatriate managers and cite their supporting arguments while others support the hiring of local managers and also support their stand. This is a problem that is not experienced in the staffing of small firms and therefore adds to the factors of staffing for multinational companies (Björkman and Stahl, 2006).
International human resource managers do begin with the hiring of the right staffs. The people selected must have the right skills just as it is for the staffs in the companies which operate locally. The other thing is that they must have the ability to cope with the culture of the organization in the foreign environment. This is the reason why multinational opt to hire the local staff. The assumption for this is that the local employees will be more familiar with the local business environment. They are more adaptable thence this will make then to easily conduct business with the local people. They understand the cultural issues that affect business in their country (Björkman and Stahl, 2006).
Staffing Approaches of MNCs
Corporate policies and behaviour should be considered before staffing of subsidiary firms. These policies and behaviours are dictated by the different approaches of staffing at the international level. These types of staffing are ethnocentric, geocentric and polycentric staffing. As mentioned earlier, each of these approaches has its merits and demerits depending on the supplementary policies.
In ethnocentric staffing, the multinational companies opt to use the national from the parent country in managing the affairs of the subsidiary firms. The key positions in the subsidiary firms are held by the staffs who are expatriated from the mother country of operation. This is common with firms from Europe, United States, South Korea and Japan. Only the low-rank staffs are recruited from the foreign country in which the firm is operating. A number of reasons are given for choosing to use this approach in managing the global organizations. The absence of qualified staff from the host country to manage the affairs of the company is one of the reasons. The other reason is that the general management of these firms usually have a desire of maintaining a unified corporate culture and tightening the control of the organization. Also, the parent companies usually have the desire of transferring the central competencies of the company to foreign subsidiaries in an expeditious manner. This staffing policy has made gains. Its major problem is linked to the failure of the expatriate staff because of the challenges of adaptability that are often encountered in the foreign country (Harzing and Ruysseveldt, 2004).
The second staffing policy that can be used by subsidiaries is polycentric staffing. This approach allows for the hiring of the staffs from the host country to manage the subsidiaries in the foreign country. Nationals from the parent country only occupy central positions at the corporate headquarters of the company. In some instances, the staffs from the mother country might occupy the topmost positions of management, this only happens in rare circumstances. For example, most of the multinationals belonging to US, opt top use expatriate staff to start the operation of subsidiary companies. These managers are used until the time when the operations of the firms have fully picked up. Once this happens, the management is handed to the local staff. An example of such a multinational is the Hindustan Lever Limited which is a subsidiary of the Unilever Company. It is located in India. The chiefs of this company are Indians. The major benefit of this policy is that most of the cultural factors which are a major hindrance factor in the management of subsidiaries are eliminated. It also reduces the expenses of catering for the affairs of staffs as is with the ethnocentric policy. The major disadvantage this approach of staffing is that the administrative lapses. Because of lack of wholesome familiarity with the activities of the organization, local managers may be constrained when it comes to bridging the gap between mother companies and the subsidiaries (Harzing and Ruysseveldt, 2004).
The last approach to staffing for multinational is the geocentric staffing policy. This policy seeks for the qualified people to take up positions in the organization. It does not emphasize on nationalities of staffs. It bases on the assumption that qualified staffs are not, only present at the company headquarters but can also be outsource from the subsidiary firms. Colgate-Palmolive is an example of a company that uses this approach in staffing. The major merit of this policy is that it can be used in making the best utilization of human resources. There is a high feeling of the sense of belonging among the staffs which motivates them. It builds a bunch of international executives for the company. The major disadvantage is the high training as well as high costs of relocating the staff. Generally, multinationals have to consider many factors before settling on a given system of staffing (Harzing and Ruysseveldt, 2004).
Expatriation can be defined as the act of firms which operate in several countries to regularly send workers on extended overseas tasks with the aim of enriching the prospective of their firms in the foreign countries. The international assignments are mostly very challenging and need sound strategies. Firms do expect to strengthen their business base in the foreign countries therefore they often choose staffs that have a high performance potential for the international assignments. There are three basic categories of workers who are sent by companies in the foreign countries. These are the employees with the highest motivation and potential in performance, the employees interested in performing the international assignments and the technical staff who will oversee the technical aspects of the company in the foreign location. With all these three kinds of staff, one can easily conclude that these employees find themselves in the foreign locations because of different reasons or motivations. Therefore to sustain them in these locations, the company has to go an extra mile in ensuring that their motivations are aligned and propelled towards the well being of the organization (Mariano, Mohamed and Mohiuddin, 2011).
While most of the upcoming multinationals are sending their management and technical staff in the foreign countries with the reason of expanding into the new markets, a lot of caution has to be taken by these firms. The selection and training of these personnel is an issue that must be given a lot of attention. These workers must be adequately prepared for the new assignments. Unfortunately, this is rarely the case. The maintenance of an effective expatriate programme is tantamount to the strategic development of the senior managers and making them to gain the multinational and international perspective of management at the global level. This will help the expatriate managers in formulating effective strategies of managing the staff in the multinational context (Oddou, 1991).
Towards the end of the 20th century, many multinational corporations opted for repatriation as a way of increasing efficiency and effectiveness of human resource management. However, in the recent past, there has been there has been an increasing concern by many multinational corporations about expatriate failure. This is because of the high rate of failure that is associated with the expatriate activities. This has even attracted the attention of human resource management scholars who continue to conduct research on the reasons why expatriate activities of multinational corporations often fail. Multinational companies have continued to record a high rate of failure of the expatriates send by the companies to conduct business in foreign countries. Expatriate failure is a cost to these firms as it not only results in the financial coast but also other costs but also negatively affects the society. By the year 2007, the rate of expatriate failure was estimated to be at 50 per cent (Peng, 2011).
Why MNCs are concerned about Expatriate Failure
For the last twenty years, the increase of the cases of expatriate failure has been more visible. This has been even termed to be one of the major international crises that have been facing multinational companies over the past three decades. It includes failed assignments by expatriates resulting to premature return. Also, there has been a poor rate of retention of the expatriates who return home on the basis of failed assignments in foreign countries. As it is now with the multinationals, this necessitates a lot of concern and in fact calls for action to reverse this trend (Chew, 2004).
There are many reasons as to why multinational enterprises should be concerned about the increasing rate of failure of expatriates. Expatriate failure has both direct and indirect effect on companies. Therefore, multinational corporations are being forced to move with speed in raising their capacity of managing expatriates before, during or and even after being assigned duties in foreign countries. The failure of firms to manage their expatriate activities has been associated with their inability to do effective selection and management of the expatriates. Effective selection and management of the expatriates can aid in adding value to the expatriates. Firms that have recorded such failures are reported to lack effective strategies of integrated human resource management. These firms focus more attention on substantive elements of business like product quality, product innovation and coast outsourcing rather than human resource issues that affect the employees (Chew, 2004).
The management of international business assignments by the multinational corporations by way of using expatriate managers is a risk itself to the MNC. The risk is attributed to the high levels of premium compensation involved. The cost of sending an expatriate manager to a foreign country are very high, they are estimated to be approximately three times higher as compared to domestic appointments. Furthermore, failure of this medium of management is bound to aggravate the situation by resulting in other indirect costs. These costs may include the damaging of the relationship of the customers with the company at the international level. The other indirect cost that comes with expatriate failure is the loss in the market share (Perkins and Daste, 2007).
A research conducted towards the end of the 20th century indicated that multinational companies will always require expatriate staff. This is because new countries are increasingly becoming part of a global market for the United States owned multinational companies. These companies opt to export their personnel to foreign countries. This takes a lot of preparations as the staffs have to be prepared for settling in the foreign country and adapt to the new business climate. The survey indicated that most companies operating in foreign countries expect to make more income from their firms in the countries. Therefore these companies further expect to expand their activities and operations internationally. The effective administration of the international personnel of multinational companies includes proper selection, preparation, support and reintegration of these staffs (Oddou, 1991).
The challenges that are faced by expatriated employees can negatively affect the employees resulting in the loss of confidence in the foreign duties assigned to them. It can also result in the loss of motivation and morale further compounding the possibility or the rate of failure of the expatriated staffs. The failure of expatriate is an elusive phrase; it does not only imply the premature return of the expatriates but also the failure to achieve in the international duty. Generally, it represents the general failure of the organization in managing human resources at the global level. More often than not these failures are associated with the difficulties in cultural adjustment by the expatriates (Petison and Johri, 2008).
Since one of the problems facing expatriates is difficulties to adjust to the culture of the foreign country, focus on cultural awareness by the multinationals can help in remedying the situation. This can be done through cultural training and the adjusting of their policies so that they can put into consideration the aspects of culture for the staffs that are send to perform the international assignments. The policies of multinationals governing their foreign operations need to include issues of cultural orientation as this will help to pull down the risk of such failures. It is also important to note that adjusting to culture is not a simple exercise as it may seem to appear. Adjusting to a foreign culture more so in the context of ding business is quite hard. Culture is so diverse thence a very hard phenomena. Each person will mostly have his or her own way in which he or she views the culture (Perkins and Daste, 2007).
Different countries have different conditions that govern business in the country. While global business has increased due to globalization, many multinational firms still find a lot of challenges in operating in foreign countries due to the nature of the business environment in the country. This has been mostly reported with the multinational that are operating in China. With the rapid growth of the China economy kin the recent years, foreign firms still report difficulties in operating in the country more so with the expatriate staffs. These problems emanate from the nature of human resource functions in the country, cultural disparities, and the social environment among other factors. It is quite hard to manage staff in China and many foreign staffs who are exported to the country by the multinationals that carry out activities in the country find it hard to cope with the business climate. This compounds the rate at which expatriates are failing (Chew, 2004).
Human resources management is becoming a very big issue in the management of firms at the international level. The operation of human resource management activities had been standardized by most companies but due to the nature of diversity that comes with the operation of the companies in foreign country, the norms cannot be adhered to. Adjusting the human resource management functions is very difficult for the staff of the foreign company (Chew, 2004).
There exists a big cultural gap between China and other countries in the world. The cultural differences, employment market and systems between China and many other countries do create a big obstacle for the foreign multinationals. Expatriate managers face a difficult task in attracting and maintaining qualified staff in the country. Human resource management is a fairly recent phenomenon in the Chinese labour market. Even when the expatriates have the experience and the know-how in the field adapting to these cultural differences is extremely difficult (Harzing, 1995).
Tung is one of the researchers who have done a lot of empirical research in this field. In one of his researches on expatriate administration, he sampled different firms from different regions of the world. In his sample, there were 80 American Multinationals, 35 Japanese multinationals, 29 west European firms. All these firms had subsidiaries in almost the entire regions of the world including Asia, North and South America, Western and Eastern Europe, Canada and Africa. He focused on assessing the staffing and other human resource issues. He found out that the failure of repatriates was a problem that was affecting all the firms though at different rates. American Owned firms were the most affected as they had the highest percentage of expatriate failure. Most of the failure of expatriates is caused by differences in culture and human resource policies and strategies (Harzing, 1995).
Elements of a Good Mentoring System for International Assignees
As Multinational corporations continue to opt for using expatriates in managing the subsidiary companies, they have to be prepared to meet the cost that comes with exporting staffs to foreign countries. The relocation of staffs from the mother countries to work in foreign countries has a lot of implication on the family and work life of these employees. While working within the new cultural environment, the assignees can be stressed up within their career planning. For them to fully fit in the new culture there is need for a lot of mentoring for these employees. Mentoring will help top put these employees in a good mental or psychological and professional state of managing the international assignments. A mentoring system for the staffs that are bestowed with moving to the foreign countries and discharge duties for the company has to fulfil a number of elements. This is what will ensure that it is effective and meets all the objectives as laid down in the activities of the company. Mentoring helps the foreign staffs to internalize the challenges that faces them in the external environment thus bosting the coping mechanisms (Klein, 2009).
A mentoring programme must contain a number of elements which will make it concrete. The mentoring program must tackle all aspects that affect management across cultures. The elements highlighted in this paper are derived from the study of the multinationals operating in Australia (Klein, 2009).
The first element is market specific knowledge. The mentor must be aware of the local conditions that prevail in the local market of the country in question. These include the political, economic, social and cultural factors that affect the performance of employees in the country in which the subsidiary firm is located. The expatriates must be well briefed on these factors and if possible learn the local language of the country hosting the subsidiary of the multinational firm. When the staffs are well aware of these factors, they will be more relaxed and handle business transactions with confidence and ease (Dowling and Welch, 2008).
Personal skills are also an important factor or element that must be considered in the mentoring program for the expatriates. These include cross-cultural skills, self confidence, tolerance and flexibility among many other skills. Managing the workforce in the foreign destination is an aspect of cross cultural management in business. Personal skills are complimented with inter-cultural knowledge. Interpersonal communicative skills are easy to master. More focus should be on the cross cultural knowledge and competencies of the expatriate workers. Knowledge of the culture is an activity that takes time and is learnt adaptively. This is a core element and once it is fulfilled, it is a lee way of making management in the foreign country easier for the foreign employees (Dowling and Welch, 2008).
Management skills that are related to the job are also a key consideration in the mentorship programme targeting the expatriates. Under this element, we have a number of skills. These skills are project management, communication and problem solving. Problem solving skills must be given maximum attention because challenges are inherent in the management of the workforce in a foreign destination (Dowling and Welch, 2008).
The other element of mentoring the foreign workforce is network knowledge. This entails meeting diverse people most of whom form part of the clientele of the firm for example, suppliers, clients, subsidiary personnel and other expatriates.
Lastly, we have the general capacity to manage at the global level. It contains an enlarged description of the job and the responsibilities and exposing the employees to other parts of the organization. Mentoring is part of enhancing efficiency of the workforce of organizations at the global level. Is all these elements are paid respect to; they are likely to impact positively on expatriate management (Dowling and Welch, 2008).
Characteristics of MNCs that Give Unions Cause for Concern
The strategic choices that are made by multinational can be greatly affected by the activities of unions. However, there are many factors that give Multinationals strongpoints thereby worrying the unions and their operations in regulating labour relations in multinationals. Unions view multinationals as having advantages which act to insulate them against their actions (Dowling and Welch, 2008).The international operations of multinationals do bring about impediments in the management of labour groups in places where they are situated. They do segment their labour groups by the virtue of the countries or national boundaries. They also stratify the labour groups within or between the countries where they have their firms. Generally, the multinational have a higher bargaining power over the unions (Dowling and Welch, 2008).
The first characteristic which acts to insulate multinational corporations is that they have vast financial resources. For a company to choose or reach a position of duplicating its activities across the world, it must have attained or accumulate financial resources. Setting up of firms in foreign countries is costly. The MNCs have the capacity to absorb losses occurring within a particular subsidiary firm which is in conflict with a national union in the country where the subsidiary is located. The multinational can thus use the formidable financial resources that they have to jeopardize the activities of the unions. Unions find it hard to punish the multinationals. This gives multinational the power to acquire a vast of other resources which hence strengthening their base in the location where they are situated (Dowling and Welch, 2008).
The other point that helps to give multinational a strong edge over the unions is that they have alternative sources from which they get their supplies of labour, products and other resources. This can adapt the form of a dual outsource policy which helps in the reduction of the vulnerability of the actions of unions. This is common with the multinationals in the automotive industry where MNCs may choose to temporarily switch operations as a way of defeating the industrial action. This reduces the chances or loopholes where the unions can get to them and penalize them for faulty labour relation activities (Dowling and Welch, 2008).
Multinational have production facilities sprouted across very many destinations globally. Unions are of the opinion that this may put to danger job security more so when multinational opt to produce from a different country. MNCs have what is referred to as national relative advantage which gives them a wide range of choosing where to locate their firms. When their activities in one country are interfered with, MNCs can choose to close down their operations or opt out of the country. This has been the case with many multinationals which have closed down operations in various destinations because f what they considered as hostile policies (Dowling and Welch, 2008).
Multinationals have a remote concentration of authority which supports them. This is concentrated in the corporate or head office of the company. They base on these authorities in making key human resource policies and actions. Breaking this locus of power and authority is strenuous and an expensive affair for the unions (Dowling and Welch, 2008).
The leaders of trade unions have seen the growth of MNCs as being a being a big threat to their bargaining power. They are very powerful hence have big influences in the labour market. While it is true that multinationals are not anti-union and do not practice monolithic bureaucracy, they have a big potential for lobbying power across national boundaries. This causes friction between them and the unions (Dowling and Welch, 2008).
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