Why do many MNCs continue to recruit internally from the home country instead of the local labour market when seeking to hire managerial staff for overseas subsidiaries? What are the limitations of this approach and how should management respond? Abstract A selection of perceived and valid reasons encourage Multi National companies (MNCs) to recruit Parent country nationals (PCNs) for managerial positions at overseas subsidiaries rather than employing Host or Third Country Nationals (HCN/TCNs). The reasons range from a good ‘fit’, of the person to their environment (Tarique, 2006) and, the employees actual capabilities of doing the job.
However, limitations exist when adopting this approach in various aspects of the process. These limitations are associated with the failure of the international assignments and are addressed in this paper in order to deduce comprehensive suggestions for management that will minimise or at least reduce the risk of failure, that the hiring of PCNs at overseas subsidiaries pose. The choice of hiring a PCN instead of a HCN for an assignment in a foreign country can be defined as the ethnocentric approach to recruitment. It uses PCNs, the majority of the time when filling key positions.
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This occurs when a high degree of control and co-ordination is required by the MNC. (Tarique, Schuler & Gong, 2006). All internal factors focus on what the firms’ current resources are and how best to apply them. The external factors usually limit the employment of PCNs in the host country and promote HCN/TCN employment. The exception in this case is technology, because in-house systems from home country may need to be transferred and implemented to the subsidiary. Working knowledge of the systems and technical expertise will need to be transferred to HCN/TCN colleagues. Expatriates are primarily selected on the bias of their technical competence alone” Balifa and Baker, 1985; Harvey 1985; Mendenhall et al. , 1987; Miller 1972 . This reason is further strengthened by Millers 1972 view, that the selection of employees for international business is a risky operation. Both statements explain why so much importance is placed on technical competence and managerial qualifications (Harris & Brewster 1999). This geocentric approach to hiring takes into account the best people for the job rather than where they come from.
Because nationality is a secondary factor competency based jobs this type of hiring is likely to occur in technical or the I. T sectors. Firms hire from their existing resource pool because they believe they have access to high calibre candidates that are available, although this may be the case the selection that is made may not be right, in terms of future success. When employees are selected from the parent company, in most instances they are receptive to working abroad and gaining international experi The future response of management is discussed on the basis of selection, adjustment and repatriation.
Academic recommendations of formal and professional approach should be implemented, because thorough selection techniques can quantify the candidate’s capabilities and experiences in order to avoid failure in the future. During selection processes it has been reported in research that little attention was paid to determining the soft skills of the candidate for examples cultural empathy, emotional stability and maturity and family situation. These aspects must be addressed by management as leaving risks unidentified increases the likelihood of assignment failure (Shen & Edwards, 2004).
Language fluency is assessed however according to Shaffer et al. , 1999 it may not benefit the results of the international assignment and may result in more conflict. This is because fluency means that the expatriate is aware of the contradictory demands from the host country causing a conflict of adjustment, therefore an MNC must not disregard a candidate on the basis that they can not speak the secondary langue of the Host country. Tenure or length of time with the parent company is an influencing factor here too, as higher tenure may provide an overall view and collective benefits.
Tenure increases commitment to Parent company goals (Gregersen & Black, 1992)and should be considered in selection process. Organisational support from the firm, avoids the “information gap” (Chorafas, 1967) where communication is overlooked with colleagues abroad. It causes misinterpretation of information or lack of it throughout the course of the assignment. Support will reduce this hazard and increase commitment from to the parent company. The ability to adjust can be assisted by defining the goals and objectives of the firm; clarity of the job design also helps this process.
Therefore the capability of adjustment by expatriate and spouse/family must be considered at the selection stage of the international assignment. Shaffer et al. , (1999) research show that more emphasis on designing global positions should exist where jobs are clearly defined and the employee has greater decision-making authority. Job design refers to the role clarity, its discretion and novelty, which in turn relates to the success of the international assignment. A supportive organisational culture both home and abroad will enhance expatriates ability to adjust thus increasing their effectiveness on the job.
This should include repatriation support by the provision of a buddy or assignment of a “special employee” to help expatriate navigate the cultural and business terrain as used in the Amos Tuck School’s joint M. B. A (Black & Gergersen,1992). Repatriates play an irreplaceable role in organisational learning (Bonache and Brewster, 2001; Downes and Thomas, 1999, 2000) as they encourage the expansion of the companies operations over international boarders. As well as enhancing the group intellectual capital of the MNC (Downes & Thomas 1999, 2000).
So, repatriation should be considered on a strategic level. However even though assignments should be considered strategically they must all be considered individually also taking into account its functions and operations. MNCs need to integrate selection, performance management and repatriation systems into one strategic process, at the beginning or as early in the process as possible; terms and conditions should be agreed in order to avoid misinterpretation, assignment failure and consequently repatriation turnover.
These steps will reduce risk of failure. Retention of repatriates is the major challenge. Gomes-Mukia and Balkin, 1987; Harvey, 1982, 1989 suggest that “turnover is primarily a result of poor management of the repatriation process on behalf of the MCN. ” Harvey also suggests that turnover will occur less often if repatriation problems are considered in advance by the MNC i. e. Provide repatriation assistance and performance management. Performance management is another feature which will determine lack of commitment to the parent company and be positively related to performance appraisals systems by home standards. ” This occurs due to an intervention and an evaluation conducted by the home standards which will control behaviours and ensure that international managers work towards the Parents Company’s goals. The final response by managers should be to value their staff. Global leaders are in high demand and have high internal career motivation; therefore it is a challenge to keep them motivated and content at a single firm.
This challenge should not only be met with providing these staff recognition, encouragement, praise, and opportunities for professional growth, higher pay and competitive benefits (Grossman, 1998) but with • Career development • Training programs • Promotions • Better corporate communication • Stock options (Comeau-Kirchner, 1999;Fryer 1998) Expatriation is the initial stage of an international assignment and repatriation is the final stage of it, they are not two separate processes (Lazarvo & Caligiuri, 2004).
To ensure high retention, post the international assignment, the MNC should consider the process and procedures discussed. These must take place during the assignment to ensure commitment and contentment within the role and on return to the home country. Management should conduct a more thorough and formal selection process, including family interviews and training, where performance management during the assignment is consistent and a strategic approach to both repatriation and the whole process is embraced. Bibliography Black, J.
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