Staffing for Global Markets

Cross Border alliances are cooperative agreements between two or more

firms from different national backgrounds, which are intended to benefit all
partners. As seen in next slide these comprise equity and non-equity
arrangements.
• A non-equity cross border alliance ‘is an investment vehicle in which profits
and other responsibilities are assigned to each party according to a
contract. Each party cooperates as a separate legal entity and bears its own
liabilities’. Exs; outsourcing is an example, international IT alliances, R&D
alliances
• Equity modes involve a ‘foreign direct investor’s purchase of shares of an
enterprise in a country other than its own’. These can be either a greenfield
investment or acquisitions, joint ventures or mergers. JVs and mergers
involve long term collaborative strategies, which require the support of
appropriate HR practices.
Equity and non-equity modes of foreign operation
1. Cross Border mergers and acquisitions
• A merger is the result of an agreement between two companies to
join their operations together. Partners are often equals. Merger
usually results in the formation of a new company.
• An acquisition occurs when one company buys another company with
the interest of controlling the activities of the combined operations.
Acquisition involves the acquiring firm keeping its legal identity and
integrating a new company into its own activities.
Typical Cross Border Problems

• A large number of M&As fail or do not produce the intended results

• Within the first year of a merger, up to 20% of executives may be lost
• The percentage lost gets worse over more than one year after a
merger
• Personnel issues are often neglected
Strategic HRM in M&As

Firms should rely on three conceptual tools:

1. Resources
money, people, brands, relationships
2. Processes
activities used to convert resources into goods & services
3. Values
the way employees think about what they do & why they do it
Comparing HRM in M&As in different countries

• Performance-related pay is more popular in US than in Japan or Germany

• Recruitment in US is more short-term than in Germany, France, & UK
• Japan still has longest-term focus
• US training & career planning is the most extensive
• French still favor French managers
• Germans are the most anxious to adopt international practices for their M&As
2. International Equity Joint Ventures

• Shenkar and Zeira define an IJV as:

‘ a separate legal entity representing the partial holdings of two or
more parent firms, in which the headquarters of atleast one is located
outside the country of operation of the joint venture. This entity is
subject to the joint control of its parent firms, each of which is
economically and legally independent of the other’.
• An IJV can have two or more parent companies.
• But problems may get even more complex with more than two
partners.
Formation of an international equity joint venture
IJV Challenges

• HR must manage relations at the interfaces between IJV & parent companies.
Different partners follow different set of rules and this can lead to critical
dualities within the HR function

• HR must develop appropriate HRM practices & strategies for the IJV entity itself.
HR must recruit, develop, motivate and retain human resources at the IJV level
The Main Reasons for an IJV

• To gain knowledge & transfer that knowledge

• The host government insists
• Increased economies of scale
• To gain local knowledge
• To obtain vital raw materials
• To share risks (e.g., financial)
• To improve global competitive advantage
• Provide an efficient & cost effective response required by market globalization
Approaches to Staffing
There are four primary approaches that multinational companies use in staffing decisions, including
ethnocentric, polycentric, geocentric, and regiocentric approaches.
The ethnocentric staffing approach heavily focuses on the norms and practices of the parent company where
upper management positions are typically held by corporate personnel from the home country. These
managers are considered parent company nationals, or PCNs. Firms at the early stages of internationalisation
this approach can reduce the risk of new environments. Japanese and Korean firms follow this approach quite
often.
The polycentric staffing approach heavily focuses on the norms and practices of the host company where
upper management positions are typically held by corporate personnel from the local country. These
managers are considered host country nationals, or HCNs. European firms often follow this approach.
The geocentric staffing approach does not focus on one nationality over the other. Instead, upper
level management positions are held by the most qualified employees selected form a global pool of
candidates. These managers are considered third country nationals, or TCNs The most qualified candidates
are selected, but no single nationality is stressed.
The regiocentric staffing approach, a more recently identified approach, is where upper level management
positions are held by employees from a particular region (North American region, European Region, Asian
region, etc.). This approach is similar to the polycentric approach, but it reflects a specific region rather than a
specific country. For instance, a U.S. company in Mexico may consider hiring an employee from Canada to fill a
management role.
The advantages of using PCNs
The advantages of using HCNs
The advantages of using TCNs
Source: Reiche & Harzing
Regiocentric
This approach reflects the geographic strategy and structure of the MNE. This
approach uses a wider pool of managers but in a limited way. Staff may move out
of their home countries but within the particular geographical region.
The advantages :-
• It facilitates interaction between managers transferred to regional HQ from
subsidiaries and PCNs posted to the regional HQ.
• It reflects some sensitivity to local conditions, since local subsidiaries are usually
staffed almost totally by HCNs.
The Disadvantages :-
• It can produce federalism at a regional rather than a country basis and constrain
the MNE from developing a more global perspective.
• While this approach does improve career prospects at the national level, it only
moves the barrier to the regional level. Talented managers may advance to jobs
in regional HQ but less frequently to positions at the MNE HQ.
Determinants of Staffing Choices
Reasons for International Assignments
There are three key organizational reasons for international assignments:-
• Position Filling -
The transfer of technical and managerial knowledge. This motive is quite important for developing countries,
where qualified local nationals might not be available, but specific knowledge transfer might be necessary to
subsidiaries in developed countries as well. Expatriates can be seen as the key bearers of tacit knowledge.

• Management Development –
The transfer gives the manager international experience and develops him/her for future important tasks in
subsidiaries abroad or with the parent company. This perceived link between international experience and
career development can be a motivator for staff to agree to such transfers. This kind of transfer would be
carried out even if qualified host-country nationals were available.

• Organization Development –
This motive consists of two elements:
 socialization of both expatriate and local managers into the corporate culture and;
 the creation of a verbal information network that provides links between subsidiaries and HQ.
Here the more strategic objectives of the operation come into play : the need for control; the transfer of
knowledge, competence, procedure and practices into various locations. As a result, organizational capabilities
enabling a firm to compete in global markets might be developed.
Types of International Assignments

Employees are transferred internationally for varying lengths of time

depending on the purpose of the transfer and the nature of the task to be
performed. MNEs tend to classify types according to the length or duration
of the assignment:
• Short term: upto 3 months. These are usually for trouble shooting, project
supervision, or a stopgap measure until a more permanent arrangement
can be found.
• Extended: up to one year. These may involve similar activities as that for
short term assignments
• Long term: varies from one to five years. Involving a clearly defined role in
the receiving operation ( senior management role in the subsidiary). This
also has been referred to as a ‘traditional expatriate assignment’.
Role of an Expatriate

Agent of
direct
control

Language Agent of
Node Socializing

Expatriates
roles in the
interplay of HQ
and local unit

Boundary Network
Spanner Builder

Transfer of
competence
&
Knowledge
Expatriate Failure

This has been defined as the premature return of an expatriate.

• This can be associated with a selection error, often compounded by ineffective
expatriate management policies.
• The expatriate may be ineffective and poorly adjusted and yet if not recalled, will
not be considered a failure. Because of an inability to effectively handle the new
responsibilities or to adjust to the country of assignment, performance levels may
be diminished.
 International
assignments:
factors
moderating
performance

- Leading to Expat Failure of Success

 International assignments: factors moderating performance
• Inability to adjust to foreign culture. Reasons for Early Return :-
1. Family concerns
2. Accepted new position in the company
3. Completed assignment early
4. Cultural adjustment challenges
5. Security concerns
6. Career concerns
• The process of adjustment (Next slide). This is a U curve. Not everyone experiences this U curve. Reactions
may differ. Phase 1 commences prior to the assignment – the expatriate to be experiences positive and
negative emotions such excitement, anxiety, fear and a sense of adventure. Once they reach the new place,
spirits will be high and they will be very motivated. Phase 2 – homesickness and negative appraisals of the
situation and location. Phase 3 is a critical time. How the individual copes with the psychological adjustment
plays an important role in his success or failure. ‘Failure as an early recall’ may be triggered at this stage. Once
past this, he would have come to terms with the new environment. Phase 4 is the healthy recovery time after
he has adjusted to the new situation.
• Length of Assignment. A longer assignment allows the expatriate more time to adjust to the foreign situation.
• Willingness to move. A reluctant expat will interpret all events and situations encountered in the new
environment , negatively.
• Work environment – related factors. Job autonomy is a powerful factor influencing expatriate turnover,
perceived level of support from home and host country, less demanding job may give him free time to think
negatively.
• Psychological Contract – employees consider everything unfair
Ability to adjust to a foreign culture
Expatriate Success and Failure

The Brookefield study reports that :-

• spouse/ partner dissatisfaction ( 65%)
• Inability to adapt ( 47%)
• Other family concerns ( 40%)
• Poor candidate selection ( 39%)

Costs of Failure
• Direct Costs – airfare and associated relocation expenses
• Indirect Costs – harder to quantify but can be more expensive for firms.
ROI indicators for
calculating
international
assignments
Selection Criteria of the Expatriate
• Technical Ability. The persons ability to perform the required task is an important consideration.
Technical and managerial skills are an essential criterion.
• Cross cultural suitability. Expatriates require cross cultural abilities to enable the person to
operate in a new environment.
 Soft skills
 Intercultural competence
 Ability to adjust to a foreign culture
• Family Requirements. The spouse is a major factor, his/ her job, house, school, support networks
• Country/ Cultural requirements. Work permit for the spouse, some regions are considered hard
ship postings. The HR staff should keep up to date with legislative changes in the country of the
MNE.
• MNE requirements. The mode of operation involved ( interference from the local partner), the
duration and type of the assignment ( short assignment family are generally not accompanied),
the amount of knowledge transfer ( if training local staff is the job then the expat should possess
training skills as well)
• Language. Local language is always preferred.
Selection Criteria of the Expatriate
4 dimensions for successful expatriate selection

1.Self-oriented
Expresses adaptive concern for self-preservation, self-enjoyment, mental
hygiene.
2.Perceptual
Accurately understands why host nationals behave the way they do.
3.Others-oriented
Cares about host national co-workers and affiliates with them.
4.Cultural-toughness
Able to handle the degree to which the culture of the host country is incongruent
with that of the home country.
Dual Career Couples

With working spouses, their job concern is an emerging constraint thus affecting
the recruitment and selection process. People are becoming immobile due to this
constraint. They refuse good offers stating “family concerns”.

Some solutions to this challenge are these family friendly policies :-

• Inter-firm networking – a reciprocal arrangement with other firms
• Job-Hunting assistance – help them look for a job
• Intra-firm employment – same company employment for both spouses
• On-assignment career support – organizing for some courses/ trainings for
resume building. May even bare expenses.
Some international assignments…..

• Commuter assignments
• Rotational assignments
• Contractual assignments
• Virtual assignments
• Self-initiated assignments
Read
• https://www.linkedin.com/pulse/5-main-reasons-why-international-assignments-fail-
h%C3%A5kan-rantakeisu

• https://hbr.org/1999/03/the-right-way-to-manage-expats
References
• http://kelleyflores.weebly.com/approaches.html
• http://panmore.com/staffing-policy-hrm-issues-in-international-business
• www.emaze.com
• https://www.slideshare.net/dipesh_kabra/ihrm-chapter4