Staffing Management in MNCs
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Published: Fri, 16 Mar 2018
Based on literature review, this research paper is to investigate staffing management in multinational companies (MNCs) is not only a complex issue but also a crucial one to the international human resource management (IHRM). The structure of this research paper consists of three parts. First of all, the introduction of concept, challenges, culture difference, and new alternatives in international assignments will be summarized. Then to discuss for the answer to subsidiaries’ staff retention in the human resource management (HRM) of MNCs. Lastly, to support my observations, the qualitative research method will be utilized and one-to-one interview to figure out the dilemma about staffing management in MNCs and the conclusion is drawn.
HCNs Local/host-country nationals
HRM Human resource management
IHRM International human resource management
MNCs Multinational companies
PCNs expatriates/parent-country nationals
TCNs Third-country nationals
The title of the paper is “the importance of staffing management in MNCs and by using qualitative method to find out the implications”. In this paper, what will be the research plan to collect useful information and how? What steps to use for organizing the research and make analysis reliable? The questions will be answered in the following sections.
The objective of this paper is to investigate the importance of staffing management in MNCs. In the last decades, an extensive amount of articles of this topic have been published, obviously, staffing management is a critical issue in the HRM for MNCs:
1. How to balance the expatriates/parent-country nationals (PCNs), local/ host-country nationals (HCNs), and third-country nationals (TCNs)?
2. How to reconcile the individual career plan to the corporation scope?
3. How to manage the multicultural team?
These topics have been explored in conceptual theory and empirical analyses. In the meantime, with global economic and political development, some new trends and patterns have appeared in international business, for example, global virtual team, the e-business, etc. These new challenges bring new patterns for staffing management of IHRM. Thus I will focus on new changes and patterns to bring out solutions, such as alternatives for the conventional expatriate assignments and the retaining of the local staff retention.
V. Literature Review
In order to get the general knowledge about staffing management in MNCs, a few books have been chosen as the literature related to the topic. In those books, the authors claimed that people are the foundation in MNCs; most of the attention of HRM in MNCs is concerned with staffing management, while staffing management is the most difficult task for them. How to effectively manage people in various countries and cultures is a big issue in staffing management of MNCs. Meanwhile, in order to get the recent research topic, some articles which were published in the academic journals have been chosen as well.
V.1. Conceptual Introduction
Before proceeding to a definition of international HRM, it is better to know what the general field of HRM is all about. Typically HRM refers to the activities undertaken to effectively utilize its human resources within an organization. These activities would include as follows: a) Human resource planning; b) Staffing; c) Performance management; d) Training and development; e) Compensation and benefits; & f) Employee relations. We can now explore further of which activities change when HRM goes international. According to the article of Morgan & Bottrall (1988) on the development of international HRM, it is helpful in considering this question. They presented a model of international HRM (Figure 1) that consists of three dimensions:
V.1.1. The three broad human resource activities of procurement, allocation, and utilization. (These three broad activities can be easily expanded into the six HR activities listed above).
V.1.2. The three national or country categories involved in international HRM activities: (i) the host-country where a subsidiary may be located, (ii) the home-country where the firm is headquartered, and (iii) “other” countries that may be the source of labor or finance.
V.1.3. The three types of employees of an international firm: (i) host-country nationals (HCNs), (ii) parent-country nationals (PCNs), and (iii) third-country nationals (TCNs). Thus for example, IBM employs Hong Kong citizens (HCNs) in its Hong Kong operations, often sends U.S. citizens (PCNs) to Asia-Pacific countries on assignment, and may send some of its Australian employees on an assignment to its Singaporean operations (as TCNs).
Morgan & Bottrall defined IHRM as the interplay among these three dimensions – human resource activities, types of employees, and countries of operation. We can see that in broad terms IHRM involves the same activities as domestic HRM, for example, procurement refers to HR planning and staffing. However, domestic HRM is involved with employees within only one national boundary.
Whilst staffing management deals with a comprehensive term for all operative functions namely recruiting, placing, appraisal, rewarding, assessing, developing performed in HRM (http://en.wikipedia.org/wiki/Human_resources, 2009). Face to those options and wide resource, the managers in global enterprises have particular concern about the employees’ ability to disseminate knowledge and innovation throughout their global operations. The use of expatriates has seemed to be a logical choice for staffing, while the use of parent-country nations seems to be the most appropriate in some specific situation. Some other global enterprises also prefer to integrate expatriates and local human resource. Nevertheless, each procedure has both advantage and disadvantage.
With regard to the staffing approaches of international enterprise, Perlmutter (1969) identified three ways in how global corporations are staffed. The fourth staffing approach was added a few years later, they are: ethnocentric approach, polycentric approach, regiocentric approach, and geocentric approach.
These four approaches, in summary, are useful for MNCs, and they can choose one of four approaches to manage the international staffing policy, however, there are no restricting rules for staffing management. Some important questions which MNCs still have to face are: recruitment and selection of HCNs and TCNs in global labor market, equal employment opportunity, legal issues, predictors of expatriate success, and expatriate failure rate, etc..
V.2. Challenges of MNCs
The rapid expansion of global trade, business consolidation and geographical diversification are driving companies for changes in their management structure and style. The nature of international business is undergoing a dramatic change. MNCs need to consider regional market current conditions and develop strategies to cater for each of the regional markets.
Another factor driving the need for change is the global mergers and acquisitions, joint venture, and strategic alliance. Companies acquired other companies’ abroad need to change their HR policies and management as it is not applicable on the acquired company. Behind these scenes, MNCs face more or less the following challenges in global talent acquisition:
V.2.1. Blockage of Career
Most employees will be excited to have opportunity to work abroad. As a matter of fact, for the parent-country managers have limits, they will feel frustrated when they come back home to see their fellow colleagues are promoted to more senior level and their career have been side-tracked. For the host-country manager who as well have limited opportunities to gain experience outside their own country and cannot progress beyond senior positions in their own subsidiary.
V.2.2. Family Problems
The overseas employees always think of their family, sometimes such emotion will effect the concentrations in their work, thus family problems for PNC manager is another challenge. MNCs should assist expatriates’ family to adapt into their new environment which this kind of difficulty is usually under-estimated by most MNCs.
V.2.3. Culture Shock
Diversity brings different thinking ways and working styles, and it needs time to adjust, this is another big challenge to most MNCs. In most cases the expatriate managers prefer to stress on their home office or home country values to the host country’s employees instead of accepting and learning within the new culture.
V.2.4. Lack Of Cross Cultural Training
The better understanding for culture block can help managers to improve effectiveness of staffing management. For example, Bell Canada’s managers were asked for training about Muslim laws of drinking and the treating attitude of women there before they assigned projects in Saudi Arabia. For another instance, in the US, computer-based demonstration is popular and case studies are appropriate in product launching seminars and roadshows, whereas in India instructor-led learning is incorporated and role-play holds the interest of customers. In fact most MNCs ignore training program during staffing management.
V.2.5 New Trends And Developments
IHRM places emphasis on several functions such as relocation, orientation and services translation to help employees adapt to a different environment outside of their own country, thus it is important for HR professionals to weigh the followings in order to ensure success:
Employees’ selection requires careful evaluation of personal characteristics of the candidate as well as the spouse.
Training and development extends beyond information and orientation training to include sensitivity training and field experiences so as to enable the managers to understand cultural differences better. On the other hand, managers need to be safeguarded from career blockage, family problem, repatriation, and culture shock.
To balance the pros and cons of home country and host country evaluations, performance evaluation should combine with two sources of appraisal information.
Compensation systems should support the strategic roadmap of the organization but also should be customized for local conditions.
In many European countries it is more likely for employees and managers to be unionized, such as Germany, law establishes representation. Organizations typically negotiate the agreement with the unions at a national level.
V.3. Managing Multicultural Team
When organizations become cross-border entities, cross-cultural factors start affecting every aspect of the business. Whether in multi-cultural teams or in business interactions, the variants of cultural nuances eventually end up affecting the business. Diversity workforces of MNCs come from different countries with different culture, economic, religions and habits. The difference brings different thinking way and working style, thus it is another challenge for HRM in MNCs to manage multicultural team.
In the article of “Managing multicultural team”, Breet et al. (2006) stated that “Communication in western cultures is typically direct and explicit. In many other cultures, meaning is embedded in the way the message is presented. The differences can cause serious damage to team relationships” (Breet et al., 2006). At the same time, the accent and the lack of fluent communication will affect the understanding and the integration between team numbers. The direct effect of misunderstanding can also be the barrier to constrain the team achieving the project common goal. Therefore, the scholars indicated four strategies to manage the multicultural team (Breet et al., 2006):
V.3.1 Adaptation: acknowledging cultural gaps openly and working around team
V.3.2 Structural intervention: changing the shape of the team
V.3.3 Managerial intervention: setting norms early or bringing in a higher-level manager
V.3.4 Exit: removing a team member when other options have failed
Although these four strategies can be used to deal with some challenges in the multicultural team, the first step to manage the multicultural team for team manager is to identify what kind of challenge the team would face. Sometimes, we can advocate the post-modern thinking as a popular but unofficial thinking which can be used among the team numbers. We try to understand and think about questions from the other side without prejudice. However, the official team management needs some norms and rules to keep the right orientation. In my opinion, when facing the team troubles, we should see the troubles from the culture angle, through the social thinking ways instead of from the personality.
V.4. New Alternatives In International Assignments
According to Edstorm & Galbraith (1977), there are three motives why MNCs use expatriates.
As position fillers when suitably qualified host country nationals (HCNs) were not available.
As a means of management development, aimed at developing the competence of the individual manager.
As a means of organizational development, aimed at increasing knowledge transfer within the MNC and modifying and sustaining organizational structure and decision processes.
However, the high cost and the family problems are the evident shortcomings of the conventional expatriate assignments. Recently, more and more research begins to question the utility and viability of the conventional expatriate assignments. According to the article “Changing patterns of global staffing in the multinational enterprise: challenges to the conventional expatriate assignment and emerging alternatives” (Collings et al., 2007), there are five aspects related to the debates: a) supply side issues, b) demand side issues, c) expatriate performance and expatriate “failure”, d) performance evaluation, e) cost and finally career dynamics. By reviewing the reasons of those challenges, the following alternative forms in international assignments could be explored:
V.4.1. Short-term international assignments
V.4.2. Frequent flyer assignments
V.4.3. Commuter and rotational assignments
V.4.4. Global virtual team
V.4.5. The HR implications of managing alternative forms of international assignments
Although those new patterns appeared in international staging assignments, each alternative has both positive and negative influences. For example, as scholars mentioned that the short-term assignments are the most popular form of non-standard assignment. At the same time, they also identify the following situations in which short-term assignments are used in MNCs: a) Problem solving or skills transfer; b) for control purposes and; c) for managerial development reasons. And the disadvantages: i) taxation issues¸ particularly for assignments over six months duration, ii) the potential for side-effects such as alcoholism and marital problems, iii) failure to build effective relationships with local colleagues and customers and, iv) work visas and permits (Tahvanainen et al., 2005). Eventually, the challenge for HR practitioners is to ensure that each international assignment has clearly defined goals and in this context to continue the advancement of techniques aimed at measuring the return of investment on international assignments.
V.5. Retaining subsidiary staff’s retention
It can be argued that the retention of staffing in MNCs’ subsidiary conducts huge influence. The transfers between the PCNs, HCNs and TCNs are the big issues in the staffing management strategy. The scholars identified that the HCNs and TCNs who are sent to the corporate headquarters (HQ) called inpatriates (Harvey et al., 1999).
As mentioned before, ethnocentric approach, polycentric approach, regiocentric approach, and geocentric approach are four major nationality staffing policies in the international staffing, by analyzing the complex and new situation appear in the relationships between the HQ and subsidiary, Reiche (2007) explored the international stiffing-related retention strategies.
Firstly, he claimed that a pluralistic and consensus-driven approach to international staffing enhances the retention capacity of international staffing practices through increased responsiveness to and involvement of the respective local unit. He stated that the knowledge and skill from the local staff can help multinationals to reduce the risk and culture-bound in the local market. He also believed that this approach can improve the loyalty of local staffs, and the local staff can achieve individual career plan to cohere the institutional development plan. At the same time, he stated that the PCNs still act as the vital role for informal controlling and coordination in the multinational companies. Secondly, he indicated that expatriation of local staff can help to retain the MNCs’s retention. In this approach, he stated that the “inpatriates can share their social and contextual knowledge of the subsidiary environment with managers at the HQ. And also inpatriates tend to be accepted by HCNs more willingly than foreign personnel.”
According to the literature review, we can see that the staffing management is and important and critical issue in IHRM. Although some models and some rules can be used in the staffing management in MNCs, there is no magic formula which we can follow, and there is no silver bullet that gives the kill. Simultaneously, I also discovered some challenges and new patterns of the staffing management in MNCs, in order to get the better understanding about the staffing management strategy, and to prove some confused questions in our minds, like why are there so few women on international assignments? The designed qualitative research which addresses the staffing management in MNCs will be presented as follows.
It would be helpful to have a clear understanding about qualitative research before the start. Qualitative research is a field of inquiry that crosscuts disciplines and subject matters. It involves an in-depth understanding of human behavior and the reasons that govern human behavior. Unlike quantitative research, qualitative research relies on reasons behind various aspects of behavior. (http://en.wikipedia.org/wiki/Qualitative_research, 2009)
A successful qualitative research should have a clear introduction about the research methods, the detailed and scientific research, and the justice and related data analysis. In this part, how to develop and execute this qualitative research will be described:
VI.1. Research Methods
Research methods are the tools to be used in this qualitative research. It is the basic elements to do the research, and the better and clear understanding is helpful and necessary for the success of the research. In the following part, I will introduce some research methods which will be used in this qualitative research.
In-depth interview: are typically used in survey development. One-to-one interviews are conducted (with people meeting the criteria for completing a particular survey) when individuals complete the instrument. This method helps investigators understand how people perceive and interpret language and their own experiences as they refine the survey instruments.
Five persons (individual profiles as described in the following table) will be interviewed to talk about this project. The questions sheet was designed for the interview. The purpose of the interviews is to figure out the strategic staffing management in MNCs, especially the challenges in MNCs are the major issues in the interview.
16 years accountant
Master Engineer &MPM
9 years engineer
6 years marketing manager
4 years HR
1 year management consultant
VI.2. Research Procedure
In this research, the five persons who have background with working in MNCs or have the ideas about HRM will be involved in the research. This research have two parts, the first part will discuss about the important position for staffing management in MNCs. The second part is about the challenges, and tries to find out answers for those challenges.
VI.3. Data Collection And Analyzing
In this stage, enough and useful data is necessary for qualitative research. Collecting data is the key step to achieve the research goal after in-depth interview and case study.
Based on the challenges about IHRM in MNCs, through the in-depth interview with five persons and the case studies, the result about this research is to find the way how to solve those challenges.
VI.4. Research Schedule
The research development will follow the deliverables on the following timelines.
Proposal: Deadline is December 23, 2009
Interview protocol: Deadline is January 4, 2010
Interview: Deadline is January 18, 2010
Research report: Deadline is January 30, 2010
VI.5.1 Interview Plan
Traditionally, the detailed plan is the first step for a successful interview. For me, the major thing should be described is about the interview tools. The in-depth interviews are typically used in the interview. One-to-one interviews are conducted as the individuals complete the instrument being tested. This method helps investigators understand how people perceive and interpret language and their own experiences as they refine the survey instruments. At the same time, based on the topic which is staffing management in MNCs, I will choose the telephone interview too.
Five persons will be interviewed to talk about this topic. The purpose of the interviews is to figure out the strategies about the staffing management in the MNCs, especially the challenges in MNCs are the major issues in the interview. Four persons are chosen from my ex-colleagues and/or my present colleague who had or have working experience in MNCs, the fifth person is my brother who works in a MNC in Sydney of Australia whom I need to take a telephone interview.
VI.5.2 Level of Language
The medium language of interview is performed in English, though four of five interviewees’ mother tongue is not English. The effective communication is the critical issues for the success of the interview and the real reflection of interviewees’ thoughts and ideas to be put in the research report.
VI.5.3 Interview Questions
1. Do you think the staffing management is a critical issue for MNCs?
2. Do you think staffing issues are different and complex in MNCs?
3. Should there different strategies between the employees in local/ host-country nationals (HCNS), expatriates/parent-country nationals (PCNS), and third-country nationals (TCNS)?
4. How to motivate the expatriate employees?
5. How to make the justice between local and expatriate employees?
6. How to implement the performance management for the host-country nationals?
7. How to manage the diversity in the workplace?
8. Why are there so few women on international assignments?
9. What kind of trainings are necessary for the international assignees?
10. What are the challenges about staffing management in the MNCs?
VI.5.4 Analyses about the interview questions
As I mentioned before, five persons were be interviewed to talk about this topic. Four persons are chosen from my working relationships who had or have the working experience in MNCs, one person who works in Sydney, I already called him to do the telephone interview. The entire interviewees have the common thought of staffing management is crucial to the growth and development of MNCs and diversity in multinationals is most important. The detailed analysis about the interview questions as follows.
1. Do you think the staffing management is a critical issue for MNCs?
The same answers from five interviewees. All of them given “yes” to this question. Analysis: People are one of the most important parts in MNCs. The staffs are from different countries, they have diversified cultures, religions, and working styles. Therefore, working environment in MNCs can be very complex. Finding skilled and talented personnel and motivating them then become more and more important. How to resolve problems and conflicts, and integrate the diverse human resource and management is going to be a critical issue.
2. Do you think staffing issues are different and complex in MNCs?
All of five interviewees answered “yes” in this question. Analysis: Compared to national company, MNC’s target market may be for a numerous countries or the whole-wide world. According to this situation, the employees of MNCs have different culture, religion and life habit. The employees’ diversely formed culture background can help MNCs understand the local market environment; however, it increases the cost of staffing management. MNCs should pay more attention on the HR management. The enormous human resource data and complex work environment is a trouble for MNCs. At the same time, communication problem is also critical when people speak different languages.
3. Should there have different strategies between the employees in local/ host-country nationals (HCNS), expatriates/parent-country nationals (PCNS), and third-country nationals (TCNS)?
The answer is “yes”. Analysis: Based on the countries’ different conditions like economic, living standards, socio-cultural aspect, etc. The local, expatriates and third-country nationals’ employees are in the different positions. The HCNS are familiar with the culture, environment, and the communication habits. Therefore, the management strategy can be very simple and easy. However, for the PCNS and TCNS, they are unacquainted with the country, and it is harder to accommodate themselves with the new living and working environment. So the communication process will be more complex. Consequently, the companies should use different strategies between the different nationals’ employees.
4. How to motivate the expatriate employees?
In this question, building up own corporate culture which is not only local culture but also expatriates recognize and respect different culture and habits has been mentioned in all five interviewees.
As interviewees C stated that familiarize new employees to company’s culture, business values, people, organization and processes in an efficient manner. Then, helping new employees to fit into their new environment, lowering isolation feeling and anxieties, and increases feelings of comfort, security and belonging. Also, created a favorable impression and attitude. At the same time, interviewee D thought that special compensation and benefits and holidays are necessary and important rules to motivate the expatriate employees.
How to make the justice between local and expatriate employees?
The answers about this question related to the understanding about culture and habits and the performance evaluation. Firstly, a series of regulations and rules should be created, Then, try to avoid bias, think objectively, and stand by different positions to see the view.
At the same time, the performance evaluation should have the same standard.
How to implement the performance management for the host-country nationals?
The performance management should be made based on the appraisals which provide legal and formal organizational justification for employment decisions. Also, the appraisals are used as criteria in test validation and provide feedback to employees. Meanwhile, the appraisals can help establish objectives for training programs and determine organizational problems
How to manage the diversity in the workplace?
In this question, there are many answers: interviewee A: Management should create chance for employees to know each other; interviewee B: Equal opportunity is just one part of diversity, detailed policies and procedures should be user-friendly; interviewee C: To establish a heterogeneous workforce performing to its potential in a fair work environment where no member has an advantage or disadvantage for any reason other than merit; interviewee D: To establish training system to reduce failure and conflicts. To establish effective communication to exchange information in time.
Why are there so few women on international assignments?
In this question, there have the different answers between male and female interviewees; two male interviewees stated that this situation based on history, culture, like working capability of women cannot be accepted by everyone. One male interviewee claims that he did not find this situation because one of the groups in his department is all women who are in charge of both local and international assignments. The two female interviewees said that women have more family commitments, emotional burden, and women always lack of career progress to break the “glass ceiling”.
What kind of trainings are necessary for the international assignees?
In this question, most interviewees mentioned that the international assignees should be trained of the knowledge of culture, religion, value and working style. Interviewee D talked further about the training should be connected with sexual harassment, legal issues and global corporate finance.
10. What are the challenges about staffing management in MNCs?
A How to integrate different thinking approach and culture
B How to improve expatriate-local relations
C How to respect the diverse values, and establish the same corporation values is most challenging
D Conflicts between cultures, communication problems, performance standard.
E Unions want to cooperate but compete with each other for jobs
VII. Finding and Results
The interviews proved my observation that staffing management is critical and complex to MNCs. Therefore to successfully achieve its goal, MNCs not only insist its successful experience and culture but also should adjust the strategy due to the diversity and complexity of HRM which includes staffing management strategy.
In my research, I focus on two aspects: First is about the importance of staffing management in MNCs, which even should be considered as the most crucial part in multinationals life. My interview has proven my standpoint, all interviewees agree on the importance of staffing management. A mistake MNCs may make is they believe the successful experience in the home country will work well in other parts of the world. But the fact usually says no. Therefore, MNCs need to learn how to face the “difference” in different thinking ways, policy, culture and people’s desires.
Thus, the second aspect is how to make and implement the proper staffing management due to de complexity and difference of country situation. Based on this understanding, I listed my questions like “How to motivate the expatriate employees”, “How to manage the diversity in the workplace?” and “What kind of trainings are necessary for the international assignees”. Most of these questions related to the people. Undoubtedly, people are the most important factor in all aspects. No matter how correct a decision or strategy has been made, it depends on how people implement it. My interviewees answered the questions through different aspects which based on their experience. Clearly, all of the answers based on one common point is that staffing strategy has to meet peoples’ basic demands, cu
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