Sourcing Human Resources for

Global Markets – Staffing,

Recruitment, and Selection
Elif DURSUN & Mudallala Mousa
Presented in ISYO9010
March 2, 2022
Istanbul University, PhD
Approaches to Staffing
• Ethnocentric
• Polycentric
• Geocentric
• Regiocentric
Ethnocentric
• In ethnocentric firms, few foreign subsidiaries have any autonomy,
and strategic decisions are made at headquarters.
• Key positions in domestic and foreign operations are held by
managers from headquarters.
• Subsidiaries are managed by staff from the home country (PCNs).
• Reasons for pursuing an ethnocentric staffing policy:
• perceived lack of qualified HCNs.
• The need to maintain good communication, co-ordination and control links
with corporate headquarters.
Ethnocentric
• Disadvantages:
• It limits the promotion opportunities of HCNs, which may lead to reduced
productivity and increased turnover within that group.
• The adaptation of expatriate managers to host countries often takes a long
time, during which PCNs often make mistakes and poor decisions.
• When PCN and HCN compensation packages are compared, the often
considerable income gap in favor of PCNs may be viewed by HCNs as
unjustified.
• Changes may affect expatriates’ sensitivity to the needs and expectations of
their host country subordinates, which may be quite different to the
perceptions of the PCN manager.
Polycentric
• Involves the MNE treating each subsidiary as a distinct national entity with some
decision-making autonomy.
• Subsidiaries are usually managed by HCNs, who are seldom promoted to positions at
headquarters, and PCNs are rarely transferred to foreign subsidiary operations.
• Main advantages:
• Employing HCNs eliminates language barriers, avoids the adjustment problems of expatriate
managers and their families, and removes the need for expensive cultural awareness training
programs.
• Employment of HCNs allows a multinational company to take a lower profile in sensitive political
situations.
• Employment of HCNs is often less expensive, even if a premium is paid to attract high-quality local
applicants.
• This approach gives continuity to the management of foreign subsidiaries and avoids the turnover
of key managers that, by its very nature, results from an ethnocentric approach.
Polycentric
• Disadvantages:
• Bridging the gap between HCN subsidiary managers and PCN managers at corporate
headquarters is difficult.
• Language barriers, conflicting national loyalties and a range of cultural differences (for
example, personal value differences and differences in attitudes to business) may isolate the
corporate headquarters staff from the various foreign subsidiaries.
• The result may be that an MNE could become a ‘federation’ of independent national units with
nominal links to corporate headquarters.
• Host-country managers have limited opportunities to gain experience outside their own
country and cannot progress beyond the senior positions in their own subsidiary.
• Parent-country managers also have limited opportunities to gain overseas experience.
• As headquarters positions are held only by PCNs, the senior corporate management group will
have limited exposure to international operations and, over time, this may constrain strategic
decision-making and resource allocation.
Geocentric
• The MNE is taking a global approach to its operations, recognizing that
each part (subsidiaries and headquarters) makes a unique contribution
with its unique competence.
• It is accompanied by a worldwide integrated business, and nationality is
less important than ability.
• Main Advantages:
• It enables an MNE to develop an international executive team which assists in
developing a global perspective and an internal pool of labor for deployment
throughout the global organization.
• It overcomes the ‘federation’ drawback of the polycentric approach.
• This approach supports co-operation and resource sharing across units.
Geocentric
• Challenges and Disadvantages:
• Host governments want a high number of their citizens employed and may utilize
immigration controls in order to increase HCN employment if enough people and adequate
skills are available, or require training of HCNs over a specified time period to replace foreign
nationals.
• Most countries (both advanced economies and developing economies) require MNEs to
provide extensive documentation if they wish to hire a foreign national instead of a local
national.
• Can be expensive to implement because of increased training and relocation costs.
• Large numbers of PCNs, TCNs, and HCNs need to be sent abroad in order to build and
maintain the international cadre required to support a geocentric staffing policy.
• Requires relatively long lead times and more centralized control of the staffing process. This
necessarily reduces the independence of subsidiary management in these issues, and this
loss of autonomy may be resisted by subsidiaries.
Regiocentric
• This approach reflects the geographic strategy and structure of the MNE. Like
the geocentric approach, it utilizes a wider pool of managers but in a limited
way.
• Staff may move outside their home countries but only within the particular
geographic region.
• Regional managers may not be promoted to headquarters positions but enjoy
a degree of regional autonomy in decision-making.
• For example, a US-based MNE could create three regions: Europe, the
Americas, and Asia-Pacific. European staff would be transferred throughout
the European region, but staff transfers to the Asia-Pacific region from Europe
would be rare, as would transfers from the regions to headquarters in the USA.
Regiocentric
• Advantages:
• It facilitates interaction between managers transferred to regional headquarters
from subsidiaries in that region and PCNs posted to the regional headquarters.
• It reflects some sensitivity to local conditions, since local subsidiaries are usually
staffed almost totally by HCNs.
• Disadvantages:
• It can produce federalism on a regional rather than a country basis and constrain
the MNE from developing a more global perspective.
• While this approach does improve career prospects at the national level, it only
moves the barrier to the regional level.
• Talented managers may advance to jobs in regional headquarters but less
frequently to positions at the MNE headquarters.
The advantages and disadvantages of using
PCNs, TCNs, and HCNs
Parent-country nationals (PCNs)
• Advantages
• Organizational control and co-ordination is maintained and facilitated.
• Promising managers are given international experience.
• PCNs may be the best people for the job because of special skills and experiences.
• There is assurance that the subsidiary will comply with MNE objectives, policies, etc.
• Disadvantages
• The promotional opportunities of HCNs are limited.
• Adaptation to the host country may take a long time.
• PCNs may impose an inappropriate headquarters style.
• Compensation for PCNs and HCNs may differ.
The advantages and disadvantages of using
PCNs, TCNs, and HCNs
Third-country nationals (TCNs)
• Advantages
• Salary and benefit requirements may be lower than for PCNs.
• TCNs may be better informed than PCNs about the host-country environment.
• Disadvantages
• Transfers must consider possible national animosities (e.g. India and
Pakistan).
• The host government may resent hiring of TCNs.
• TCNs may not want to return to their home country after the assignment.
The advantages and disadvantages of using
PCNs, TCNs, and HCNs
Host-country nationals (HCNs)
• Advantages
• Language and other barriers are eliminated.
• Hiring costs are reduced and no work permit is required.
• Continuity of management improves, since HCNs stay longer in their positions.
• Government policy may dictate hiring of HCNs.
• Morale among HCNs may improve as they see future career potential.
• Disadvantages
• Control and co-ordination of headquarters may be impeded.
• HCNs have limited career opportunities outside the subsidiary.
• Hiring HCNs limits opportunities for PCNs to gain foreign experience.
• Hiring HCNs could encourage a federation of national rather than global units.
Determinants of staffing choices
The external and internal contingencies facing an internationalizing firm
influence its staffing choices. These include the following:
Determinants of staffing choices
Local unit specificities
Context specificities
• Establishment method
• Cultural context
• Strategic role and
• Institutional context
importance
• Staff availability
• Need for control
• Type of industry
• Locus of decision

Company specificities
IHRM practices
• MNE structure and
• Selection
strategy
• Training and
• International
Staffing Choices development
experience
• Compensation
• Corporate governance • Ethnocentric
• Career management
• Organizational culture • Polycentric
• Regiocentric
• Geocentric
TRANSFERRING STAFF FOR
INTERNATIONAL BUSINESS ACTIVITIES
• Importance of international assignments