Business newer-days are recognized to be international and there is a universal belief that this will prolong in the future. This is why organisations now have the need for international managers, as the organisation spread worldwide, so must the employees. Human resource management (HRM) has grown to be one of the most accepted topics in international management. The employee that is send abroad is known as an expatriate. “Expatriates are employees/managers who move from the home country to an overseas location.” (Tanner 2009, 360) A successful expatriate usually entail a vast amount of time and money, however, a botched expatriate can be even more expensive for an organisation. “International business is all the business transactions involving private companies or governments of two or more countries.” (Daniels 2009, 864) International human resource management is an imperative aspect of MNE’s international strategies and the difficulty of managing international operations. The determination of this study is to gain a better understanding of how multinational enterprises (MNE) select their expatriate managers. It is important to note that the selection process is a discrete process and need to function successfully in the organisations.
1. Multinational Enterprise.
The multinational enterprise (MNE) can be measured as the most powerful organisation in the world today. Globalization is the development that has a significant impact on how the world operates today and is mostly driven by the expansion of MNE’s. Internationalisation has lined the technique for the eradication of boundaries between countries and now multinational enterprises (MNE’s) can be distributed across the world in exploration of new markets, opportunities and wherewithal.
“A multinational enterprise (MNE) takes a worldwide view of markets and production.” (Daniels 2009, 63) In simple terms, a Multinational enterprise (MNE) will produce and market their products anywhere in the world. Operations can also take place in multiple countries, for example, in the wholesale trade Nestle is an excellent example of an MNE. Nestle has marketing and production facilities in almost every country, in the world; Nestle Switzerland operational plants must be managed to use the same set of management styles as their international counterpart Nestle SA.
A multinational enterprise (MNE) is an organisation that holds a hefty equity share; usually fifty percent or more of another organisation, functioning in an overseas country. The multinational enterprise (MNE) can be formed when an organisation in one country makes an impartiality investment in an organisation, in another country. Foreign direct investment (FDI) is an investment in an overseas organisation where the overseas financier holds at least ten percent of the average shares, accepted with the objective of proven a ‘lasting interest’ overseas, a durable bond and momentous influence on the management of the organisation. International markets and foreign direct investment (FDI) have amplified penetratingly in the precedent decades. Escalating internationalization has had a remarkable influence on the competitive spot of numerous countries.
Role of (MNE) in staffing approaches.
Operating internationally, a Multinational Enterprise (MNE) has many vital decisions to make, how to, best structure the organisation in order to manage business effectively. “According to (Schuler et al.1992,419-459), The most influential factor that determines the success of the organisation, is the way in which the Multinational Enterprise differentiates its operating units internationally and, at the same time, assimilates, control and coordinate its activities.” Important factor is to balance the need for diversity, to coordinate and manage to produce an organisation that is internationally, flexible and competitive. Diversity branch as the need to operate in a rejoinder manner in an array of environments occurs internationally arise. Multinational enterprise’s (MNE’s) can supply resources to host countries that other organisations cannot. The host country can persuade them to transmit their compensations in suitable forms. The compensation that a host country can acquire from foreign direct investment (FDI) is as follow: 1) Capital, 2) Technology, 3) Skills and Management and 4) Access to markets.
Foreign direct investment (FDI) brings to hand financial resources in the form of capital for countries who can not afford the required capital. The capital inflows received from the FDI are more constant, and it is much easier to service than trade debt or portfolio investment. In dissimilarity to other suppliers of capital, MNEs mostly invest in long-standing assignments compelling risks and repatriating of profits only when the assignment yield returns.
Embryonic countries tend to insulate in the use of technology, even the technology in developed countries can be outdated. The MNEs can bring modern technologies and increase the effectiveness with which technologies can be used. They modify technologies to local environments, depiction on their knowledge in other embryonic countries. The MNE can improve technologies as modernization materialize and spending patterns change, they can also rouse technical competencies in local organisations both suppliers and competitors, by giving support, acting as role models and increasing competition.
* Skills and Management
The need for training, is regularly not recognised by local organisations, the MNE’s is mostly in possession of advanced skills and can transfer the resources to the host countries. They bring to hand experts, setup training facilities and have some of the best management techniques that offer the host country a gargantuan competitive advantage. Where association can be integrated into MNE’s networks, they can cultivate capabilities to service the regional or international system in tasks, products or markets.
* Market Access
The MNEs can provide access to export markets, both for existing activities and new activities. In order to attract MNEs, a host country must make sure that its policies and regulations are beneficial, while at the same time protecting the state from opportunistic entities. The process of internationalization and multinational corporations influence the political area of a host country, a host country that intends to attract more MNEs and investors need to generate an image of stability and reliability. This can be done by implementing policies and regulations that the international community endorse and that make MNE entry more advantageous for both parties. The main channel for the transfer of human resource management (HRM) across international boundaries and various cultures is the MNE. Not only are MNEs main cast lists in international business, but they are also crucial cast lists in the practice of human resource management (HRM) internationally. The procedure of human resource management (HRM) in other countries is often culturally specific, and human resource (HR) professionals need to take this into consideration.
The main focus of an organisation’s human resources programme right through all of its progression and actions should be the optimum support and reinforcement of the organisation’s strategy, in attempts and actions involving both strategy formulation and implementation. The staffing approach has a significant impact on strategic management, including selection of key MNE managers who have a significant influence in formulating the MNE’s strategy, and the selection of managers throughout the MNE.
Staffing should shape and strengthen the direction and main concern of the MNE, such as being steady with its ethnocentric, polycentric, region-centric, and geocentric staffing approaches in operating international organisations. An organisation’s approach to international endowment (staffing) must support the way of doing business. Discussion on the orientations toward staffing in MNE can be traced to the work of Howard Perlmutter, and his work represents the seminal theoretical contribution to the field. He introduced a classification of multinationals which differentiated between firms based on their attitude toward geographic sourcing of their management teams. “According to Perlmutter, 1969. There are three primary ways in which international organisations can be staffed; a fourth staffing approach was added later.” The connotations for the staffing functions, mainly for superior levels of management, held by region-centric, geocentric, ethnocentric and polycentric strategic approaches can be discussed.
International Staffing Approaches
Organisations involved in international business can be divided into four types international strategies, 1) Global, 2) Multi-domestic, 3) Transnational and 4) International strategy. When a MNE has identified their strategy they look to international markets for potential growth strategies. Management beliefs are a serious matter, because it decides how an organisation views itself in relation to it wants and needs to manage human resources in different countries. Employees who mix with the organisation’s culture and have the ability to engage in the working environment, is extremely useful, for an international human resource manager in the selection process. Nestle, for example, is hiring employees who have the necessary skills required to perform actual tasks and whose style, beliefs, and value system needs to be the same as the organisation. Factors such as local values and international trade theories need to be taken into consideration when managers create a strategy for international markets. Ethnocentric, polycentric, geocentric and region-centric is perspectives that managers themselves present and characterise into question.
2.1 International strategies.
2.1.1 Global Strategy.
“This strategy describes the most mature international strategy, with highly coordinated activities dispersed geographically around the world.” (Johnson 2008, 306) This strategy offers a standardised product across a number of national markets, with little or no adjustment to local needs or expectations. An example of a company that make use of this strategy can be Sony, as they compete in every country, in the world, and they regulate their products for all markets in different countries.
2.1.2 Multi- Domestic Strategy.
“This strategy is similarly loosely coordinated internationally, but involves dispersion overseas of various activities, including manufacturing and sometimes product development.” (Johnson 2008, 305) This strategy also aims at adapting a product for use in national markets responding to changes in the local market environment. Local adaption can make the overall organisational portfolio increasingly diversified. This strategy is most desirable in professional services, where local relationships are extremely valuable.
2.1.3 Transnational Strategy.
“Transnational companies operate in many countries and delegate many decisions to local managers.” (Boddy 2005, 106)This strategy strives to optimise the trade-offs associated with productivity, local adaptation and learning.
2.1.4 International Strategy.
This strategy can be based on the dissemination and adaptation of a company’s knowledge and expertise to foreign markets.
2.2 Staffing approaches.
Once the organisation has chosen their international strategy, they can now choose and apply one of four staffing approaches in order to manage their staff in an efficient manner in the organisation.
2.2.1 Ethnocentric approach.
“An ethnocentric attitude is the parochialistic belief that the best work approaches and practices are those of the home country.” (Stephen 2007, 92) An organisation with a parent country strategy succeeds with this approach. The headquarter from the parent country makes the key decisions, most employees from the parent country have significant work, and the contributory support the parent country, resource management procedures.
The organisation procedure and culture values of the parent country are predominant when MNE follow the ethnocentric approach. A managing and staffing approach can be developed by headquarters and is steadily applied throughout the world. Organisations following this approach assume that the parent country management system is better, and that staff members from other counterparts of the world should follow these styles.
126.96.36.199 Advantages of using Ethnocentric approach.
188.8.131.52.1 Transmitting core competencies.
Employees that can be transferred to engage in an international strategy are more likely to be au fait with and protect the organisation’s core competencies. Organisations intend to continue with the success of the organisation, when expanding and operating in international markets. They perpetuate the success by controlling and regulating the use of the organisation’s core competencies.
184.108.40.206.2 Countering cognitive dissonance.
Organisations make use of the ethnocentric staffing approach, to minimise the level of cognitive dissonance, as there are various challenges operating in foreign markets; to help them overcome these challenges, the organisation makes use of reliable and competent employees to engage in proven working methods, in the foreign market, . An ethnocentric staffing approach is from time almost impossible. The development and employing of local workers can be alerted by the hosting government, the preferences of foreign contributory to hire locals. The MNE is often pushed through immigration laws and workplace set of laws to do so.
220.127.116.11 Disadvantage of using ethnocentric approach.
18.104.22.168.1 De-motivate staff.
The ethnocentric staffing approach can de-motivate local managers and employees. All “smart” and competent employees live near headquarters, this sends out a message, to lower-level employees that the organisation do not appreciate them which lead to less motivated staff.
22.214.171.124.2 Narrow interpretation of foreign operations.
Expatriate managers may struggle to oblige styles which are acceptable in the organisation’s headquarters, but which may be considered inappropriate in the host country.
2.2.2 Polycentric approach.
“A polycentric staffing policy uses host-country nationals to manage local subsidiaries.” (Daniels 2009, 823) A local employee heads a contributory because headquarters’ managers are not measured to have sufficient local knowledge. Contributory continually cultivates human resource management procedures locally. A polycentric staffing approach analyse the effectiveness of the organisations procedures of the host country operations as equivalent to those of the parent country.
126.96.36.199 Advantages of using Polycentric approach.
188.8.131.52.1 Maintain motivation and organisational image.
Making use of the host country managers, to engage in a multi-domestic strategy, they can assist and encourage local initiative and commitment, and to perk up the organisations local image.
184.108.40.206.2 Continuity of management improves.
It abolishes language barriers, elude adjustment problems of expatriate managers and their families, and eliminate the need for costly cultural consciousness training courses. Bestow potential for profit proliferation through elasticity because local managers can respond immediately to market needs in the vicinity of pricing, production, product life cycle, and political bustle; deficiency of problems linked with expatriate managers together with cultural short-sightedness.
220.127.116.11 Disadvantages of using Polycentric approach.
18.104.22.168.1 Gap between local and global operations.
With a polycentric approach, it is more trouble to bridge the gap (policies, communication, coordination, control and culture etc.) between the host country component and the organisation’s parent headquarters.
22.214.171.124.2 Lead to corporate lethargy.
The organisation confines understanding of host nationals to their own country. Organisations headquarters may become isolated from national component and lead to lack of incorporation, this, in turn, may lead to corporate lethargy.
2.2.3 Geocentric approach.
A geocentric approach can be defined as “A world-oriented view that focuses on using the best approaches and people around the globe.” (Stephen 2007, 93) When organisations engage in a geocentric approach they seek the ideal candidate for prime positions throughout the organisation, despite their origin. Managers that make use of this staffing approach believe that it is extremely valuable to have an international perspective, both at the organisations headquarters in the parent country as well as in the foreign host country.
126.96.36.199 Advantages of using Geocentric approach.
188.8.131.52.1 Endorse international learning.
A geocentric staffing approach enables firms pursuing a global or transnational strategy to establish the necessary framework of international management, who can support global learning by moving between countries and cultures without forfeiting their success. This approach also allows the organisation to make best use of its human resources and makes employees feel at ease working in any culture.
184.108.40.206 Disadvantages of using Geocentric approach.
220.127.116.11.1 Hard to develop and costly to maintain.
The issues that make the geocentric staffing approach hard to develop and costly to maintain can be issues such as, economic aspects, decision-making and legal contingencies.
2.2.4 Region-centric approach.
Staffing approaches may also occur in the process under an established region-centric strategic approach, where the organisation’s operations or meticulous functions can be controlled by various country regions or fundamental economic regions. This staffing approach can be viewed as the host country has the predominance at a local contributory, however, with an increased activity of superior host country managers to top up operations in various countries of the fiscal region.
In this case, it can be noted that headquarter employees signify at regional headquarters, which provide opportunities for cross-cultural dealings afar from what can be found in the polycentric staffing approach. The previous host country managers and the international assignments also acquire useful albeit less culturally remote international career experience; however, they are still limited to the regional level with a slight chance of upgrading to the top management strategic working party back at their company headquarters.
18.104.22.168 Advantages of using Region-centric approach.
22.214.171.124.1 Build Competencies.
The region-centric staffing approach possibly will play a role, through this prolonged level of international assignments, to edifice competent international competencies, signifying an obliging conversion to an ultimate global strategy introducing a geocentric approach to staffing.
126.96.36.199.2 Encourage communication.
It permits interaction flanked by managers of an organisation’s contributory that transmits to their organisation’s local headquarters, and managers from the organisation’s headquarters positioned in the regional headquarters.
188.8.131.52 Disadvantages of using Region-centric approach.
184.108.40.206.1 Career limited.
When an organisation makes use of the region-centric staffing approach, there is a rare occasion that they can be transferred between regions. This strategy shift employees within designated regions, rather than transferring internationally.
The multinational enterprise can engage in one of numerous approaches to select international staff. It may even continue on an unplanned core, rather than analytically selecting one of the above four staffing approaches. The jeopardy with these approaches can be that the organisation will choose a staffing approach of making use of parent country nationals in international management positions by firm will choose for a policy of using parent-country nationals in foreign management positions by evasion, that is, simply as an routine expansion of domestic staffing approach, rather than consciously looking for best possible exploitation of management abilities. There are both advantages and disadvantages of making use of local nationals and expatriates in foreign contributories. The majority organisations make use of expatriates only for important positions as senior managers. Expatriates veer to be very costly, it makes little sense to hire expatriates for positions that can be proficiently filled by foreign nationals. Numerous countries compel that a evident percentage of the work force need to be local employees, with omissions frequently made for superior management.
3. Criteria for selecting expatriates.
International human resource is a decisive factor of an organisation’s position and is widely recognized as an influencing factor for failure and success of international business environments. International human resource involves developing human resource capabilities to meet the diverse needs multinationals organisations. Human resources and competitive international economy are cannot be easily too duplicated, as factors of production and can, therefore, provide a competitive advantage for the organisation. When looking at international staffing criteria’s, operating and middle management employees can be selected locally. Upper management positions can be filled with parent country nationals (PNC), host country nationals (HCN) and third-country nationals (TCN). The choice of whom to hire is often influenced by the attitudes of top management teams and the overall staffing policies. The organisations strategic positions and vision should take the view on international human resource management and how it can be integrated into the organisation. “According to Dowling and Schuler, (1990) selection is the process of gathering information for the purpose of evaluating and deciding who should be employed in a position.” When high-technical capabilities and when new international organisations recognize that adherence to the organisations is in greater concern as to the commitment to host countries; expatriates are usually sending abroad. (Deresky 2003) Technical expertise can be seen as one of the most critical criteria when selecting employees for international assignments. “Black et al, 1999, stated focusing on technical skills can result in an instant selection process, where potential candidates with cross-cultural skills and similar technical skills can be overlooked when decisions makers are trying to find suitable candidates within the organisation.”
For the human resource practitioner in charge, it can be challenging to determine what selection criteria to use when selecting employees for international assignments. The factors involved in the expatriation selection is, 1) Technical Ability 2) Cross-Cultural Suitability 3) Family Requirements 4) Organisation-Specific Requirements 5) Language and 6) MNE requirements. These factors are all related so they should not be revised separately. Technical Ability, Cross-Cultural Suitability and Family Requirements, are the factors related to the individual, and the Organisation-Specific Requirements, Language and MNE requirements are mostly influenced by the working situation they need to enter.
3.1.1 Technical Ability.
For the selected candidate to perform a task, technical and the needed managerial skills is necessary. The assessment of the potential candidate is usually based on their previous working experience, where statements and evaluation records from the candidates superiors is available. When the candidate needs to solve a problem in a new international business environment, it must be noted that experience is not that serious. Technical abilities are fundamentally the knowledge required to carry out a task; technical abilities is associated to the working of tools. An example of technical abilities can be that financial managers need to make use of business appraisal tools to assess and set up financial statements like the income statement and balance sheet.
3.1.2 Cross-culture suitability.
“According to Dowling and Welch, (2004) important Things to consider when assessing the candidates cross-culture suitability, is language skills, culture empathy, the attitude toward new cultures and the level of personnel and emotional stability.” In practice, it is not easy to evaluate the cross-culture suitability of a candidate as it is hard precisely know what factors should be included. The multinational enterprise (MNE) emphasizes the importance of expatriate’s abilities to create and maintain a natural relationship, but means to measure such abilities is not always accurate enough. Efficient relationships for example, an analysis of the hypothesis that culture with evident male dominance is more belligerent and it can be perplexed, because the mock-up of cultures is not autonomous.
3.1.3 Family Requirements.
The success, of the expatriate abroad can be influenced by spouse/family, MNE’s sometimes focuses too little on the impact that family may have on the expatriate. Families find it difficult to adjust as they can suffer from segregation due to the subjection to integrate into new environments. A higher level of organisational assistance in the primitive phases of expatriation usually links with a higher level of adjustment by the spouse.
3.1.4 Organisation-Specific Requirements.
The human resource practitioner needs to consider the organisations requirements before selecting a candidate, host country governments can stop the transfer of expatriates. The host government, is the ones that issue the working permits and visas to the expatriates, therefore, the parent country need to prove that there is no available host national country. Legislations and changes of the employee must be addressed; assignments abroad means that the expatriate must move to another country with family to remote or war-torn environments, where living conditions can be challenging. Some host countries do not issue work permits to females, this can make it difficult, for the spouse to adapt. An organisation-specific requirement is implemented during the formation of an independent relationship flanked by computer resources, which includes the evaluation of the comparative precedence between default recommendation and alternative recommendation; and using the highest precedence recommendations to set up a link among the computer resources.
3.1.5 Language skills.
Language skill is a significant factor, knowledge of the host country’s language can be considered essential for many top level management positions, along with the aptitude to communicate successfully. Knowledge of the host country’s foreign language helps the expatriates and their families/spouse feel more contented in the new environment. When adopting a corporate language, which is different from what the, expatriate local, language, is a fundamental that language skills need to be viewed as selection criteria.
3.1.6 Multinational enterprise (MNE) requirements.
The MNE’s requirements have an enormous impact on the decisions and which selection criteria to use. Training skills are very important, so that expatriates can train locals and emphasize negotiating skills in new international business environments. The period of the assignment is another factor influencing family/spouse. “According to Harris and Brewster, (1999) they suggested that international managers has many similar characteristics as those managers working in less complex environments, but are in need of additional skills regarding to handle the problems that may arise internationally.”
Technical abilities is an important factor in the case of selecting international staff, it provides the employee with the basic understanding of what is included in their tasks and what they believe they are capable of doing. The multinational enterprise (MNE) view the experience of expatriate as very important, prolong experience is needed to have the appropriate knowledge to develop a successful organisation.