International Staffing Strategy




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International Staffing Strategy

By Arun Kottolli


Staffing for a multinational company is complicated by the more diverse environment (business, economic, political, legal), cultural implications & the Parent company's need for control. This impacts acceptability, effectiveness & management of human resources. It is not common to see staffing policies for the host country is written with the parent's viewpoints. Often this tends to be parochial & ethnocentric resulting in tensions between parent & subsidiary management. Often the subsidiary management will not directly point at the problem in the company's HR policies, especially if the policy was written by the "headquarters". As a result real reasons are not noticed until its very late. In the book "Borderless world", Ohmae has put forth a strong argument for companies to abandon the "Headquarters" mentality and allow subsidiaries more freedom. This freedom is more important in framing HR policies. The main point companies must learn that the HR policies followed at home may not be applicable in the host country.

Multinational Companies are yet to get over their home country mentality. The members of top management are invariably from the home country. The board of directors, senior positions are exclusive preserve of home country nationals. (Even when majority of the profits are coming from the foreign subsidiaries). In many cases, non-home country nationals have even been discriminated against.

The problem is not isolated to US companies, its is prevalent across all MNC's irrespective of their nationality. In Europe, things are changing as the move towards a more integrated EU. However, the top management positions in European MNC's are still reserved for Europeans only. Even in the emerging countries like Korea, Taiwan Thailand etc., its the same story. Indian companies have not fared any better.

Need for change

The nature of international business is undergoing a sea change. The rapid expansion of global trade (Currently about $7 trillion), business consolidation & geographical diversification are pushing companies for changes in their management structure and style. Global companies now need to consider regional market conditions and develop strategies to cater to each of the regional markets. The companies will see big benefits if they have foreign executives with expertise in each region contributing to strategic planning, rather than simply striving to implement decisions taken by those with limited knowledge of the region.

Another factor driving the need for change is the global mergers & acquisitions. Companies acquire other companies abroad need to change their HR policies as it is not applicable on the acquired company. It is beneficial to invite top executives of the acquired firm to join the parent's top management.

Current Staffing policies

Franco, Heenen and Perlmutter observed that MNC's usually adopt one of the four options when staffing their foreign subsidiary.

Appoint a home country nationals to lead the foreign subsidiary. (Ethnocentric approach) This is more common in the early stages of internationalization. (Many Indian companies are in this stage) The objective is to establish the parent company's corporate culture in the subsidiary. While this reduces the communication between headquarters and the subsidiary and increases control by the headquarters, this policy has serious disadvantages. The cultural differences & environmental differences will be huge and expatriates may not be able to cope up with. Thus resulting in costly management mistakes. Examples are Korean MNC's Hyundai, Samsung , Indian MNC's TCS, Infosys, Wipro. US MNC's GE, Citi corp, Exxon.


Appoint a host country executive along with a home country executive to support or vice-versa (polycentric approach) This elements the problems associated with the ethnocentric approach while reaps the benefit of local country management. E.g.: US MNC's P&G, Pepsi, Coca cola. Indian MNCs Ranbaxy.


Appoint the best person for the job irrespective of the nationality (Meritocracy approach) This again suffers from problems similar to that of ethnocentric approach. E.g.: Nestle, Unilever, HP, Nortel.


Appoint the best host country national who has worked in the home country or at the headquarters. This is a variant of the third approach. This approach is the most mature & successful for a global company. Brooke & Buckley recommended this option for mature multinationals to achieve a global perspective. E.g.: Intel, Microsoft, Oracle, Sun Microsystems.

Closing Thoughts

A need for International staffing strategy is slowly being felt as multinational companies become global corporations. However the inertia prevents the policies from changing overnight. Over the next decade we will see more and more companies change their policy as they become global corporations. Looking ahead, I see that companies are increasingly adopting option 2 & 4 which gives them best value. If global trade increases at the current rate, businesses will soon be dealing with a "Borderless world" where headquarters will play a role of facilitator rather than that of a controller. HR policies will be localized which meets the goals of a global corporation.

Implications for India

Indian companies are slowly emerging as multinationals. For several software companies, revenues from US & Europe far exceeds that from India. These companies have to change their HR policies from an ethnocentric to that of a global approach. Often Indian companies do not find persons who have expertise in both home & host country's business. (It is very difficult to find persons who are of American or European origin but have extensive experience in India) In such cases, companies must look towards appointing an Indian national to lead the foreign subsidiary but is assisted by a host country national. This two in a box arrangement will work best if and only if they get along and work as a team. In addition, Indian companies must appoint foreign nationals into their boards and top management in their headquarters. This will provide invaluable expertise while developing global strategies.


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