International Human Resource Strategies - Essay Example

International Human Resource Strategies HR Selection Strategies Selection and recruitment of human resource to execute functions in overseas subsidiaries is the most critical function of IHRM practice; developing effective talent is crucial for the success of overseas operations in the globalization era (Ananthram & Chan, 2013). International companies adopt a host of key strategies in their selection and recruitment of human resources to manage their foreign subsidiaries; MNCs utilize three main strategies in the transfer of human resources to their overseas subsidiaries. These include the ethnocentric strategy, the polycentric strategy and the geocentric strategy (Tiwari 2013); the ethnocentric strategy entails applying the parent company’s HR practices in the host countries while the polycentric strategy involves recruiting local staff and adopting the host nation’s HR practices (Reiche 2006). Contrariwise, the geocentric strategy entails simply paying attention on the skills of the employees and adopting the best HR practices that serve the MNCs purposes, regardless of their nationality. Given that all these HR selection and recruitment strategies have their unique pros and cons, MNCs often make a choice, on which one to use based on numerous considerations (Banai & Sama 2000); these include the nature of businesses they engage in, their organizational strategy, and leadership structure, in addition to their previous experiences. The company that applies the polycentric strategy in the selection and promotion of its international human resources usually goes by the assumption that every country is unique from all the others and its foreign subsidiaries must adapt practices that are locally appropriate to every market through the direction and supervision of local managers. The Atlanta-based soft drink giant Coca Cola has managed to build both a global organization and a multi-local enterprise whose internationalization strategy entails adapting to local needs, laws and cultures through polycentric policies. The company has a global presence in more than 200 countries and in all its global subsidiaries, the company strives to employ as many local nationals as possible because it considers the HCNs to be more suitable to the home markets (Anfuso 1994). Traditionally, the polycentric approach to the selection and promotion of employees in the management of international subsidiaries entails low costs of recruitment and training (Tiwari 2013). Similarly, the polycentric approach is mired with lesser adjustment and communication challenges, primarily because all the employees are from the host country. The polycentric approach also allows the continuity of management within the host country and eliminates the possibility of conflicts and hostilities at the workplace, due to tensions between management the local staff. Furthermore, the polycentric approach promotes the morale and career advancement of the local staff since subsidiaries focus on building capacity for higher performance management and higher-level skill training. Disadvantages of the polycentric approach to employee recruitment and promotion include the communication challenges between host country nationalities (HCN) at the subsidiary level and parent country nationalities (PCN) at the corporate headquarters. Furthermore, when the MNC becomes a confederation of independent national units that are loosely integrated at the corporate headquarters, multiple challenges in exercising control arise. It also becomes very difficult for MNCs to coordinate activities between headquarters and the subsidiaries, if they have adopted polycentric policies across their chains (Jackson 2000). Since both HCN and PCN have very limited opportunities of gaining experience abroad, it is more likely that career advancement opportunities beyond their own countries are very limited as well; in the highly dynamic and increasingly competitive global climate, the lack of employees with international experience is a great liability for MNCs. On the other hand, the ethnocentric approach, which involves sending expatriates from the parent country to manage international subsidiaries, is best suited for MNC with an international strategic orientation. MNCs that apply the ethnocentric strategy often assume that the host countries may not be able to provide sufficient skilled labor to carry out their subsidiary operations. In most cases, such companies may recruit local staff for the low skilled job positions but will always retain the skilled job-positions and managerial positions for expatriates from the parent country. Toyota has been cited on many occasions as one of the leading MNCs that is successfully applying the ethnocentric strategy since its international subsidiaries are basically viewed as extensions of the Toyota city-based parent company. Like most Asian MNCs, Toyota tends to pursue certain deeply inculcated cultural practices across its international subsidiaries and hardly attempts to seek diverse points of view. Advantages of the ethnocentric approach include the cultural similarity between the parent company and the subsidiary, and a closer control and coordination by the parent company. Similarly, an ethnocentric approach gives the employees of the company a global orientation through their experience of working at the parent company before they are transferred to the foreign subsidiaries, thereby establishing a pool of employees with international experience. The disadvantage of applying the ethnocentric approach to human resource selection and promotion in foreign subsidiaries is that MNCs are more likely to impose cultural norms that may not necessarily be appropriate for their international markets. Ethnocentric policies often create problems of adaptability to foreign environments and cultures while increasing the foreignness of the subsidiaries (Colakoglu & Caligiuri, 2008). Naturally, transfer of expatriates to international subsidiaries often involve high transfer and salary costs that are not justifiable, and contributes to high failure rate of multinational subsidiaries. Furthermore, companies that apply the ethnocentric approach to selection may run into difficulties filling up their low-skilled positions since some of their recruitment requirements may not be applicable in the host countries. In terms of employee development and promotion, companies that apply ethnocentric strategy are less likely to offer any management or high-level technical training to their local staff, thereby limiting their advancement into promoted posts. The critical dearth of opportunities for advancement in such companies may cause acute employee dissatisfaction and high turnover, with the nationals of the host countries opting out of their workforces to seek career advancement in rival firms. Consequently, the high turnover of both expatriate and host country nationalities may have a devastating impact on the company’s workforce stability, profits and long-term survival. The geocentric approach under which individuals are recruited based on their levels of skills and expertise regardless of their nationalities is quite applicable in MNCs with a transnational orientation. Transnational corporations have increasingly moved from global and multi-domestic to international and transnational strategies, due to their geocentric orientation in international subsidiaries (Phillips & Fox 2003). Most transnational corporations such as Unilever and Coca Cola strive to hire the best human resources with the necessary skills to perform their operations across their global subsidiaries, regardless of their nationality. The geocentric strategy has two principle advantages namely; it enables MNCs to establish a pool of senior global managers with international experience beyond national frontiers and reduces the tendency of national identification of managers with subsidiaries (Plakhotnik, Landorf & Rocco, 2010). Three key challenges have arisen from implementation of the geocentric strategy to international employee recruitment and promotion; increasingly, it has emerged that many countries are now beginning to use their immigration laws to impose recruitment of HCNs whenever it is feasible. The other disadvantage of this strategy is that it requires a highly centralized control of the staffing process and the reduced control of the subsidiary managers may be disliked. In addition, the geocentric approach to international human resource recruitment and promotion may be difficult to apply because it entails greater training, compensation and transfer costs. Nevertheless, the geocentric approach requires a highly complex personnel-planning system that provides for international matching processes between available positions and individuals with the requisite competence. The ethnocentric, polycentric and geocentric strategies of recruiting workforces in international subsidiaries can be used to facilitate MNC’s entry strategies into international markets. For instance, the ethnocentric human resource recruitment strategy is more likely to fit perfectly well with the market segmentation strategy adopted by most MNCs that heavily rely on huge distribution channels with which they are familiar with. On the other hand, the polycentric and geocentric strategies could facilitate the mass-marketing entry strategy of MNCs because they lead to organizational flexibility in terms of responding to local needs across diverse market segments. For instance, Kellog, the American cereals giant has managed to effectively sense and deliver the need for mass marketing beyond the parent country to its global subsidiaries (Arnold, 2003). Enticed by the huge potential of a huge consumer population, the company diversified its operations into India in the mid-1990s but failed miserably due to its failure to respond to local attitudes and needs, which could be attributable to its ethnocentric approach. However, the company was able to reenter the Indian market more forcefully after a serious reorientation of its marketing to appeal to the local market conditions through the polycentric strategy. In addition, other MNC such as Unilever and Colgate have been able to reap the benefits of mass marketing in emerging economies by rapidly transferring their organizational learning in one market segment to others through ethnocentric strategy. References Phillips, L., & Fox, M. A. 2003. Compensation strategy in transnational corporations. Management Decision, 41(5), 465-476.  Jackson, K. T. 2000. The polycentric character of business ethics decisionmaking in international contexts. Journal of Business Ethics, 23(1), 123-143. Banai, M., & Sama, L. M. 2000. Ethical dilemmas in MNCs international staffing policies a conceptual framework. Journal of Business Ethics, 25(3), 221-235. Ananthram, S., & Chan, C. 2013. Challenges and strategies for global human resource executives: Perspectives from Canada and the United States. European Management Journal Vol.31, (3), p.223–233. doi:10.1016/j.emj.2012.12.002 Tiwari, N. 2013. Managing Human Resources in International Organizations. Global Journal of Management and Business Studies, 3(4), pp. 355-360. Reiche, S. 2006. The Effect Of International Staffing Practices On Subsidiary Staff Retention In Multinational Corporations. International Journal of Human Resource Management. 18(4) p.523- 536 Arnold, D. 2003. Strategies for Entering and Developing International Markets: Marketing Entry Strategies—Learning from Emerging Markets, FT press [online] Available from: http://www.ftpress.com/articles/article.aspx?p=101588&seqNum=3 Colakoglu, S., & Caligiuri, P. 2008. Cultural distance, expatriate staffing and subsidiary performance: The case of US subsidiaries of multinational corporations. The International Journal of Human Resource Management, 19(2), 223–239. Plakhotnik, M.S., Landorf, H., & Rocco, T.S. 2010. Towards a Process of Creating a Geocentric Organizational Culture of Global Corporations: Implications for Adult Education. To be submitted to International Journal of Cross Cultural Management. Anfuso, D. 1994. Coca-Colas Staffing Philosophy Supports Its Global Strategy. [online] Workforce Available from: http://www.workforce.com/articles/coca-cola-s-staffing-philosophy-supports-its-global-strategy Read More