Approaches to Staffing in IHRM + Case Study

APPROACHES TO STAFFING

STAFFING POLICY▪A firm’s staffing policy is concerned with the selection of employees who have the skills required to perform a particular job.

▪A staffing policy can be a tool for developing and promoting the firm’s corporate culture (the organization’s norms and value systems).

▪A strong corporate culture can help the firm implement its strategy.

APPROACHES TO STAFFING

▪There are four approaches to international staffing are:Ethnocentric ApproachPolycentric ApproachGeocentric ApproachRegiocentric Approach

ETHNOCENTRIC APPROACH▪ Few foreign subsidiaries have an autonomy and strategic decisions are made at HQs.

▪ Key positions in domestic and foreign operations are held by HQ’s personnel.

▪ Subsidiaries are managed by the staff from the home country (PCNs).

▪ Most appropriate during the early stages of set-up of a foreign subsidiary when the need for control is the greatest.

▪ There are often sound business reasons for pursuing an ethnocentric staffing policy: A perceived lack of qualified host country nationals. The need to maintain good communication, coordination and control links with corporate HQs.

▪ An ethnocentric policy, however, has a number of disadvantages: It limits the promotion opportunities of HCNs, which may lead to reduced productivity and increased

turnover among that group. The adaption of expatriate managers to host countries often takes a long time, during which PCNs often

make mistakes and poor decisions. When PCN and HCN compensation packages are compared, often – considerable income gap in favour of

PCNs is viewed by HCNs as unjustified. For many expatriates, a key overseas position means new status, authority and an increase in standard

of living. These changes may affect expatriates’ sensitivity to the needs and expectations of their host-country subordinates.

Expatriates are also very expensive to maintain in overseas location.

POLYCENTRIC APPROACH▪ Primarily host-country oriented.

▪ Subsidiaries are usually managed by local nationals (HCNs), who are seldom promoted to positions at HQs, and PCNs are rarely transferred to foreign subsidiary operations.

▪ The main advantages of a polycentric approach are: Employing HCNs eliminates language barriers, avoids the adjustment problems of expatriate

managers and their families and removes the need for expensive cultural awareness training programs.

Employment of HCNs allows a MNC to take a lower profile in sensitive political situations. Employment of HCNs is less expensive, even if a premium is paid to attract high-quality

applicants. Gives continuity to management of foreign subsidiaries. This approach avoids the turnover of

key managers.

▪ A polycentric policy, however has its own disadvantages: Bridging the gap between HCN subsidiary managers and PCN managers at corporate HQs.

Language barriers, conflicting national loyalties and a range of cultural differences may isolate the corporate HQs staff from the various foreign subsidiaries.

Career paths of HCN and PCN managers. As HQs positions are held only by the PCNs, the senior corporate management group will have limited exposure to international operations and over time, this will constrain strategic decision-making and resource allocation.

GEOCENTRIC APPROACH▪ Geocentricism involves filling positions at both HQ and subsidiary level with the ‘best person for the job’

regardless of nationality.

▪ Nationality and superiority are not related concepts. ‘The skill of the person is more important than the passport’.

▪ Geocentric organisations represent the most complex form of organisational structure, thus, requiring high levels of communication and integration across borders. The aim of the structure is to de-emphasise national culture and to emphasise an integrating corporate culture.

▪ There are three main advantages to this approach: It enables a multinational firm to develop an international executive team which assists in developing a global

perspective and an internal pool of labour for deployment throughout the global organization. It overcomes the ‘federation’ drawback of the polycentric approach. It supports the cooperation and resource sharing across units.

▪ Disadvantages associated with geocentric approach are: Host governments want a higher no. of their citizens employed and may utilize immigration controls in order to force

HCN employment if enough people and adequate skills are unavailable. Many countries require companies to provide extensive documentation if they wish to hire a foreign national instead

of a local national which can be time consuming, expensive and futile. Expensive to implement because of increased training and relocation costs. The need to have a compensation

structure with standardized international base pay, which may be higher than national levels in many countries. Large no. of PCNs, TCNs and HCNs need to be sent abroad in order to build and maintain the international team

required to support the geocentric staffing policy which requires a longer lead time and more centralized control of the staffing process which reduces the independence of the subsidiary management which may be resisted by it.

GEOCENTRIC STAFFING REQUIREMENTS

Search for global operators

Geocentric Staff transfers staffing

policy International Team

Top management commitment

Globalization Momentum

Momentum maintained

• Staff availability• Time and cost constraints• Host government requirements• HRM policies

REGIOCENTRIC APPROACH

▪ Reflects the geographic strategy and structure of the multinational. It utilizes a wider pool of managers but in a limited way.

▪ Staff may move outside their countries but only within the particular geographic region.

▪ Regional managers may not ne promoted to the HQs position but enjoy a degree of regional autonomy in decision making.

▪ The advantages of using a regiocentric approach are: It allows interaction between executives transferred to regional HQs from subsidiaries in the

region and PCNs posted in the regional HQs. It reflects some sensitivity to local conditions, since local subsidiaries are staffed almost totally

by HCNs. It can be a way for a multinational to move gradually from a purely ethnocentric or polycentric

approach to a geocentric approach.

▪ There are some disadvantages in a regiocentric policy: It can produce federalism at a regional rather than a country basis and constrain the

organization from taking a global stance. While this approach does improve career prospects at the national level, it only moves the

barrier to the regional level/ Staff may advance to regional HQs but seldom to positions at the parent HQs.

The advantages and disadvantages of using PCNs

The advantages and disadvantages of using TCNs

The advantages and disadvantages of using HCNs

DETERMINANTS OF STAFFING CHOICES

STAFFING A NEW INTERNATIONAL VENTURE(CASE STUDY YARRA RIVR WINES)

▪ Listen to the case study very carefully!!!

▪ Situation: The HR Director will present an assessment of the current situation in your new acquisition and describe the institutional environment in France.

▪ You are top management team members of Yarra Wines that has to decide about the staffing of the French acquisition, on whether to use Australians (either from inside or outside the company), to retain the current French management team or use a mixture of French and Australians.

▪ The key positions to be considered are: Managing Director, Marketing Director, Wine Technologist (a new position), Production Manager, Finance Manager and HR Manager.

SOLUTION (ACCORDING TO ME)

▪ The Managing Director can be an Australian and possibly from the company itself. It would be advantageous to have someone with the greater knowledge about the company and the expectations of the company from the new venture. Therefore an experienced candidate from the Australian company would be a great choice.

▪ The priority choice for a Marketing Manager should be a French person since the position requires a great deal of knowledge about the local marketing policies, law and current local market trend. These qualities can be expected from a French candidate since the new market covers French with few EU countries surrounding France.

▪ Wine Technologist can preferably be a local French candidate since the “Trend of Taste” varies from different part of the world. Even if a top notch Australian expert is chosen for the position there is no guarantee that he/she can satisfy the taste needs of the local consumers of the new French acquisition.

▪ Production Manager is no simple position either. There are loads of responsibilities to be managed and accomplished by the suitable candidate. An Australian can be a wise choice for this position since he/she can drive the production capacity based on the business standard put forth by the mother company in Australia. Whereas an equivalent French candidate might have difficulty in understanding and executing the same conditions without much questions.

▪ Finance Manager plays a vital role in creating a budget for a given fiscal year and also make sure the business is driven based on the target requested by the Yarra Valley Company in Australia. Moreover the Finance Manager should be extremely good in handling the business based on local laws, political policies & economy of the local market. Therefore a French candidate would be a positive option for the post.

▪ Finally, for the position of a Human Resource manager, a candidate from the mother company from Australia can be chosen but it is better to choose a candidate who is up-to-date in the local HR policies, political policies & laws. Also he/she should be able to implement the knowledge on hiring new recruits, public relations & other HR activities in great depth. Therefore an experienced French local person can be suitable for the position since an equivalent Australian choice needs more training regarding the same which in turn saves time and money for the company.