Approaches to Managing and Staffing Subsidiaries

Ethnocentric
Home country approach

Polycentric
Local approach

Regiocentric
Regional approach

Geocentric/Global
Global approach

16-3

Major Approaches to Managing and Staffing Subsidiaries

Ethnocentric
The company uses the approach developed in the home country, and the values, attitudes, practices, and priorities of headquarters determine the human resources policies and practices

Polycentric
The company considers the needs of the local subsidiary when formulating human resources policies and practices

Regiocentric
The company considers needs of an entire region when developing human resources policies and practices

Global or Geocentric
The companys priority is the optimal use of all resources, including human resources, and local or regional considerations are not considered important for the success of the corporate strategy

Ex. 16-1: Strategic Approach, Organizational Concerns, and IHRM Approach

Aspects of the Enterprise Primary strategic orientation/stage Perpetuation (recruiting, staffing, development) Complexity of organization Authority; decision-making Evaluation and control Ethnocentric International People of home country developed for key positions everywhere in the world Complex in home country, simple in subsidiaries High in headquarters Home standards applied to people and performance Polycentric Multidomestic People of local nationality developed for key positions in their own country Varied and independent Relatively low in headquarters Determined locally

16-4

Rewards

High in headquarters; low in subsidiaries

High volume of orders, commands, advice to subsidiaries Nationality of owner

Wide variation; can be high or low rewards for subsidiary performance

Little to and from headquarters; little among subsidiaries Nationality of host country

Communication; information flow Geographic identification

Aspects of the Enterprise

Primary strategic orientation/stage Perpetuation (recruiting, staffing, development)

Regiocentric
Regional

Global
Transnational

Regional people developed for key positions anywhere in the region Highly interdependent on a regional basis High regional headquarters and/or high collaboration among subsidiaries Determined regionally Rewards for contribution to regional objectives

Best people everywhere in the world developed for key positions everywhere in the world Global Web: complex, independent, worldwide alliances/network Collaboration of headquarters and subsidiaries around the world Globally integrated Rewards to international and local executives for reaching local and worldwide objectives based on global company goals Horizontal; network relations

Complexity of organization

Authority; decision-making

Evaluation and control Rewards

Communication; information flow

Little to and from corporate HQ, but may be high to and from regional HQ and among countries

Geographic identification

Regional company

Truly global co., but glocal

MNEs Approaches and HR Practices

Ethnocentric Recruitment and Selection Polycentric Training and Development Regiocentric Industrial Relations Other HR Functions

Performance Appraisal

Compensation

Geocentric

Which Approach to Adopt ?

Classifying Employees

Parent Country National (PCN)

Host Country National (HCN)

Third Country National (TCN)

PARENT-COUNTRY NATIONALS Advantages Disadvantages Control and co HCNs promotion ordination by HQ is opportunities are limited. maintained. Adaptation to host Promising managers get country may take a long international experience. time. PCNs are the best people PCNs may impose an for the job. inappropriate HQ style. Assurance that the Compensation differences subsidiary will comply between PCNs and HCNs with company may cause problems. objectives, policies, etc.

HOST-COUNTRY NATIONALS Advantages Disadvantages

No problems with language and culture. Reduced hiring costs. No work permits required. Continuity of management improves, since HCNs stay longer in positions. Govt. policy may force hiring of HCNs. Promotional opportunities not limited - so higher morale among HCNs. HQ may have less control over operations. HCNs may still have limited career opportunities outside the subsidiary and their country. Hiring HCNs limits opportunities for PCNs to gain overseas experience. Hiring HCNs may encourage a federation of disintegrated national units rather than one integrated global unit.

THIRD-COUNTRY NATIONALS
Advantages Salary and compensation may be lower than for PCNs. May be more familiar with host country than the PCNs. Disadvantages Transfers must consider national animosities. Host government may resent TCNs as much as PCNs. TCNs may not comply with HQ style of management. TCNs may not want to return after assignment.

Which National ?

Any Queries ?