Differences Between International and Domestic Staffing
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Published: Wed, 14 Mar 2018
Recruitment and Selection in Multinational Firm – Why International Staffing is different from Domestic Staffing?
“One of the main issues facing the development of the global companies has always been to find the right balance between the local autonomy between subsidiaries and the control of the corporate headquarters.” – Maral Muratbekova-Touron (2008)
Internationalization of the firm
Today the impact that multinational companies’ foreign direct investment has on the growth of the world economy is even more important than that of international trade (Harzing, 2004a). Therefore the managers handling international operations must function well across the cultural borders (Dowling and Welch, 2004). Because of this managing the human resources of a company effectively has become essential in order to gain competitive advantage for the global company (Phatak, Bhagat and Kashlak, 2005).
For most MNCs finding suitable candidates for international projects is a major challenge for the human resource department (Black et al., 1999). An International connection brings out various risks and much of it comes from the threat of expatriate failure (Phatak et al., 2005). The failure of an international project has wide spread consequences on effecting operations in host country (Harris and Brewster, 1999). Therefore the expatriate manager deals with enormous pressure to succeed in mission (Wilson and Dalton. 1998). The ‘right person’ for an international assignment is found only after a thorough job analysis, market and personality traits of the prospective candidate (Tung, 1981), and finding the right person decreases the risk of expatriate failure (Dowling and Welch, 2004).
Staffing failure is more often connected to problems with cross-cultural adjustment and lack of technical skills (Harris and Brewster, 1999). According to Scullion and Collings (2006) the reasons as to why MNC still rely mostly on technical competency as international assignments are concerned with the filling of the roles or positions. It is also to be noted that interpersonal and cross-cultural skills are difficult to recognize and determine. The global staffing decision can, according to Dowling and Welch (2004), be understood by reviewing actual selection process. Research has showed that MNCs generally recruit parent country nationals (Harzing, 2004) while the main reason for expatriate failure is connected with cross cultural adjustments (Black et al., 1999).
In view of the above, the main purpose of this study is to gain an understanding of the differences in domestic and international staffing and this shall be addressed by following research questions:
Why and how international staffing is different from domestic staffing?
What is the reason for growth in importance of International Staffing?
How recruitment and selection strategies can be advantageous in the right acquisition of Human resources?
Existing research and theories on the dissertation topic will be reviewed in this section below.
As the primary focus of this dissertation topic is Global Staffing in terms of recruitment and selection so it is important to consider the evolution of IHRM in this regard. Companies operating in the international business environment are faced with a great variety of cultural and institutional variations which make managing in a multinational context particularly complex (Doz and Prahalad, 1986). Significantly, managers of multinational corporations (MNCs) are increasingly realising the importance of HR practices in ensuring the profitability and viability of their business operations. While research suggests that many firms continue to underestimate the complexities of managing human resources across borders which often results in poor performance in international operations (Dowling and Welch, 2004).
Differentiation between HRM and IHRM and emergence of HRM:
Despite some similarities between operating in the domestic and international business environment, there is growing recognition that IHRM is distinctive from HRM (Dowling and Welch, 2004), and there is growing support for the argument of Evans et al. (2002: 14) that ‘in the global era the most relevant insights into management processes will come from studying human resource management in an international context’.
The main major factors which differentiate domestic HRM from International HRM are at the outset complexities of operations in different countries (different cultures), and the employment of different national categories of workers. On the one hand where domestic HRM is involved with employees within only one national boundary, IHRM, on the other hand, deals with three national or country categories: the parent country where the firm is usually headquartered; the host country where a subsidiary may be located; and other countries which may be the source of labour, finance or research and development. In addition, there are three types of employees of an international firm: parent country nationals (PCNs), host country nationals (HCNs) and third country nationals (TCNs). (For example, Citibank, headquartered in the USA, might recruit some Australian managers to work for them in Japan.) There is no consensus about the definition of IHRM although most studies in the area have traditionally focused on the area of expatriation (Brewster and Harris, 1999).
Importance of Recruitment and Selection:
It is important to examine expatriate failure and adjustment as the high cost of failure in both economic and human terms highlights the importance of recruitment and selection.
Global staffing is thus one of the critical issues faced by multinational corporations with regard to the employment of home, host and third country nationals to fill key positions in their headquarter and subsidiary operations. Thus our conceptualization not only concerns the transfer of PCNs to subsidiary operations, as is implied in traditional definitions of expatriation, but also includes staff flows in other directions. Hence it is imperative to know and find out how recruiting and selecting staff for international assignments play an important role in enabling MNCs to participate efficiently in international business.
There are three specific areas of country differentiation that international HR managers must be aware of:
The type of labour legislation – which varies from country to country in terms of scope , whether it conveys an employer or employee bias, and in particular areas of deficiency in the behavior of individuals, organizations and institutions. The scope of labour legislation and associated collective agreements and custom or practices varies markedly. For example, some constitutions convey rights in relation to appointment.
The type of labour market – There are marked differences in countries in terms of labour market. Germany, Japan, France and Switzerland generally noted for internal labour markets and recruitment here is focused on specialized entry points at low levels followed by promotions based on internal assessment. Although Internal labour markets are considered to have the benefits like improved morale, commitment and security amongst employees, competencies and accrued knowledge, more specialized HR skills around dedicated HR points (such as graduate recruitment), the downturn is that there can be high levels of political behavior, informal ‘glass ceilings’, complacency and structural shocks when market and technological changes force whole vocational system for a significant overhaul of HR system.
The advantages of external labour markets in this context is that it gives an opportunity to bring new blood as part of culture-change processes, insights into competitor capabilities and the ability to respond in the equal opportunities issues more visibly. Examples are Britain, USA, Denmark, The Netherlands and HongKong etc
The recruitment methods – Recruitment occurs through both formal and informal methods. Informal methods rely on the contacts of existing employees or on people just applying. International differences in the use of informal recruitment are substantial but it is widespread throughout the world, especially in developing countries.
The selection Process for International Managers in Foreign Markets:
The state of mind of an organization, as described by Perlmutter (1969) motive for international transfer, affects an organization’s selection for prospective and potential candidates. Tung (1981) argue that it is of utmost importance that a contingency approach to be applied in the selection process as strategies that only focus on one particular criterion, (not taking environment and task in consideration), has proven to reach little success.
According to Tung (1981) the first step in selection process is to identify projects that company will require to handle. After that it is to be decided as to who would be most suitable for the job, a parent country national – host country national, or third country national. If PCN r or TCN is to be hired, the search should be conducted among those who are already present in the operations in the international or foreign market and are within the competing industries.
After this the, according to Tung (1981), the selectors need to determine the degree of interaction with the host market the new manager has or will require to do, this is done to establish the importance of relational abilities. Another important factor is that the recruiter or selector must assess the willingness of the managers for going abroad. If there are great differences between the culture of the parent company and host country then the selection decision should rely to a great extent on relational abilities, if not then factors relating to actual assignment will be of more importance.
Harris & Brewster’s Typology of international manager-selection system:
Harris and Brewster (1999) identified four different variations of the selection system for international managers based on various variations. The first two variations relate to nature of selection procedures. The expatriate management literature identifies yje use of both ‘open’ and ‘closed’ selection procedures. An ‘open ‘ system is one in which all vacancies are advertised and any one with appropriate qualifications and experience may apply and applicants are interviewed with greater or lesser degrees of formalized testing. Selection decisions are taken by consensus of all selectors. In contrast, a ‘closed’ system is one in which selectors at corporate headquarters choose, or nominate to line managers, suitable candidates. In this situation, only one manager may be involved in the selection process at head office. The candidate is informed only when agreement about acceptability has been reached between head-office personnel and line manager.
The second two variations of the selection process relate to the existence of formal and informal systems operating at organizational level. Substantial evidence exists of the mediating effects on the formal organizations systems of informal mechanisms, leading to unintended outcomes, In this way four distinct categories are derived depicted below:
Clearly defined criteria
Clearly defined measures
Training for selectors
Open advertising of vacancy (internal/external)
Less defined criteria
Less defined measures
Limited training for selectors
No panel discussions
Open advertising of the vacancy
Clearly defined criteria
Clearly defined measures
Training for selectors
Nominations only (networking/reputation)
Selector’s individual preferences determine criteria and measures
No panel discussions
Nominations only (networking/ reputation)
Figure 1 Typology of international manager-selection systems (Brewster and Harris)
Robson (2002) distinguished three purposes of conducting a research-
Explorative – considered as looking around, to find out what is happening, asking questions or studying a topic from a new angel.
Descriptive – research aims at accurately depicting people, events and situations.
Explanative – study which gains an explanation of a situation, usually in the form of causal relationships (Robson, 2002).
The main purpose of this study is to gain an understanding into the staffing policies of real operating Indian MNC in foreign market which will be done by investigating factors affecting staffing strategy and motives influencing the company to dispatch from home or hire locally. The purpose of this study is Descriptive.
Research approach: Induction and Deduction are two approaches for conducting any research. (Saunders, Lewis and Thorhill, 2007). In an Inductive study, the data is first collected then after analyzing theory is developed. Deductive study is opposite where the hypothesis or theory is first developed followed by a research strategy in order to test the theory (Saunders et al., 2007). Since existing theories are used to create a framework through which the collected data will be analyzed, the approach for this study will be deductive. Analyzing previous research and theories provide better understanding to underlying factors affecting the staffing policies in recruitment and selection process.
Nature of research can be qualitative or quantitative (Byman and Bell, 2005). The difference lies in the fact that in qualitative research the emphasis is often on words than numbers unlikely in quantitative approach. Qualitative approach hence becomes more inductive and interpreting. Denscombe (2000) stated that qualitative approach is favorable while conducting study on human activities and behavioral patterns. The current authors approach hence will be qualitative to analyze the collected data from interviews full of values, beliefs and perceptions which cant be quantifiable.
There are several other different research strategies including experiments, surveys, archival analysis and case studies (Yin 2003). Case studies can be conducted by one or multiple cases. Case studies are also recommended when the research aims at answering ‘how’ and ‘why’ (Yin 2003). Saunders et al., 2007 argues that when applying a multiple case study strategy it is possible to establish whether the findings in one case are related to others. In a case study it is possible to use number of methods to collect data.
The research purpose and approach of this study is in accordance with the Case Study Strategy.
The collection of empirical data for the case studies can be done through six commonly used sources of evidence: documentations, archival records, interviews, direct observations, participant observations and physical artifacts (Yin, 2003). According to Yin (2003), interviews are considered the most important method when it comes to collecting empirical data and it benefits the researcher as it allows to be focused on specific research topic.
There are three types of interviews such as open – ended, focused and survey. The current researcher will use the open ended so that the respondent has more freedom to answer. The questions will be semi structured which means that they will be based on an interview guide which will have pre-prepared list of questions.
As with any research, limitations are to be expected. A major limitation for any phenomenological research is that as human beings, we have limited cognitive information processing capabilities (Curral and Towler, 2003) and therefore certain key issues that are relevant to research might go unnoticed. This issue can be checked by recording all the interviews and wherever possible to transcribe the interviewee’s answers for facilitating a thorough study.
This study will be conducted in only one organization and the participants will only be that of HR team. Other support and administrative staff may not be included. While I acknowledge that other staff and functions would be of great impact in the process of implemented policies in global staffing, I will stick to the recruitment and selection as that is the sole area of the study.
As the research in this area of HR is requires in-depth study and travel to understand and underpin all that is required to prepare best piece of work. The time frame available may not help top achieve all the required data and from all the resources. The researcher can only spend a limited amount of time in the organization to collect all the sought after details and conduct interviews. This may result in hurried data collection process at best and inadequate data at the worst.
Adoption of single method research design and a highly subjective method of analysis, raises concerns of reliability, validity and issues of bias. Small sample size and restriction to management consultants would raise the question of ability to generalize beyond research organization (Yin, 2003). However there will be an attempt to carry out the focus group discussions after the interviews in order to validate the data.
Researchers prior work experience in the organization implies that there will be pre established views and assumptions, which can potentially interfere in the study (Saunders et al., 2007). This can most likely result in an subjective approach but this can be help the researcher gain the confidence of the participants to facilitate the flow of information.
An important limitation may arise upon key issue of the research: culture. Literature review suggests that culture accounts for a large amount of differentials in international staffing. This could have an impact on the respondent’s subjective interpretations of the reality. As many geographical regions would be involved in this study, researcher will try to focus the subject towards international prospect of staffing rather than a particular region so that a unifying experience will downplay the emergence of factors that could cloud the response related to a specific geography.
Furthermore, there is no guarantee that the researcher will be able to interview all the proposed interviewees especially as some of them are senior level staff who may not be available for the interviews. There is also the possibility that they refrain to share or be unwilling to provide some of the required inputs given that the sensitivity of the subject matter can be an issue along with the fact that the researcher is no more an employee of the company.
Last but not the least as the company is currently undergoing various levels of restructuring and there have been potential shifts of positions across the departments and functions of HR. The resulting tension and insecurities may pose a threat to carrying out the interviews. Employees might be uncomfortable to share their inputs. In such scenario, the attempt will be to conduct the interview informally outside the workplace. A personal talk over phone or home visit can be another option for gaining important information.
In spite of the problems likely to be expected, the research believes that the study will be conducted efficiently and effectively. All attempts will be made to reach the objective of the research and complete the process in accordance with the proposed schedule.
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