Chapter 5 Sourcing HR for Global Markets Staffing

Chapter 5 Sourcing HR for Global Markets: Staffing, Recruitment & Selection IHRM, Dr. N. Yang 1

Chapter Focus and Aim n The previous three chapters have addressed the global, cultural, and organizational contexts for the increasing complexity and strategic role of HRM. n We now focus on the managing people aspect. n The aim is to establish the role of HRM in sustaining international business operations and growth. IHRM, Dr. N. Yang 2

Chapter Objectives n Issues related to various approaches to staffing foreign n n operations Reasons for using international assignments Various types of international assignments Expatriate, inpatriate and non-expatriate roles in supporting international business activities Recruitment and selection of international managers Debates and trends concerning expatriate failure and success Selection criteria Gender and dual career issues IHRM, Dr. N. Yang 3

Approaches to Staffing n Ethnocentric PCNs are favored n Polycentric HCNs manage subsidiaries n Geocentric Ability is more important than nationality n Regiocentric Similar to geocentric, but limited to a given region IHRM, Dr. N. Yang 4

Ethnocentric n Strategic decisions are made at headquarters; n Limited subsidiary autonomy; n Key positions in domestic and foreign operations are held by headquarters’ personnel; n PCNs manage subsidiaries. IHRM, Dr. N. Yang 5

Polycentric n Each subsidiary is a distinct national entity with some decision-making autonomy; n HCNs manage subsidiaries who are seldom promoted to HQ positions; n PCNs rarely transferred to subsidiary positions. IHRM, Dr. N. Yang 6

Regiocentric n Reflects a regional strategy and structure; n Regional autonomy in decision making; n Staff move within the designated region, rather than globally; n Staff transfers between regions are rare. IHRM, Dr. N. Yang 7

Geocentric n A global approach - worldwide integration; n View that each part of the organization makes a unique contribution; n Nationality is ignored in favor of ability: Best person for the job; n Color of passport does not matter when it comes to rewards, promotion and development. n IHRM, Dr. N. Yang 8

Approaches to Staffing n General staffing policy on key positions at headquarters and subsidiaries Ethnocentric Polycentric Geocentric Regiocentric n Constraints placed by host government n Staff availability IHRM, Dr. N. Yang 9

Table 5. 1 a Advantages and Disadvantages of Using PCNs IHRM, Dr. N. Yang 10

Table 5. 1 b Advantages and Disadvantages of Using TCNs IHRM, Dr. N. Yang 11

Table 5. 1 c Advantages and Disadvantages of Using HCNs IHRM, Dr. N. Yang 12

Figure 5. 1 Determinants of Staffing Choices IHRM, Dr. N. Yang 13

Staffing a New International Venture n An Australian wine company has successful and growing exports in three markets: U. K. , U. S. , and Scandinavia; n Gained a global recognition for quality wine; n Assisted by technological improvements, and aggressive marketing; n Now the Board wants the company to “ride the Australian wave” and gain more market shares in the European continent. n The company recently made n n n an acquisition in France, its first time FDI; Which is a middle-level player in the Fench home market; With efficient operation in the French context; Modest profit margin; Limited sales to EU neighboring countries; The Board believes there is room for improvement particularly in production techniques and marketing IHRM, Dr. N. Yang 14

How would you staff the new venture? n Staffing approaches to consider? n Key positions to be filled: n n n Managing Director, head of the new venture Production Manager Marketing Manager Chief Wine Technologist HR Manager Chief Finance Manager n Factors to consider: n Strategic goal n Mode of entry n Degree of control n French culture and labor law n EU works council n Competence transfer n Brands, the “Australian wave” IHRM, Dr. N. Yang 15

Reasons for International Assignments n Position filling, e. g. n Skills gap, launch of new endeavor, technology transfer n Management development n Training and development, assisting in developing common corporate values n Organizational development n n Need for control, transfer of knowledge, competence, procedures and practices Exploit global market opportunities IHRM, Dr. N. Yang 16

Types of International Assignments n Short term: up to 3 months, e. g. n n n Troubleshooting Project supervision A stopgap until a permanent arrangement is found n Extended: up to 1 year n May involve similar activities as short-term assignments n Long term n n Varies from 1 to 5 years The traditional expatriate assignment IHRM, Dr. N. Yang 17

Non-standard Assignments Commuter assignments Rotational assignments Contractual assignments Virtual assignments Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment. IHRM, Dr. N. Yang 18

Table 5. 2 Differences between Traditional and Short-term Assignments IHRM, Dr. N. Yang 19

Figure 5. 2 The Roles of an Expatriate IHRM, Dr. N. Yang 20

Factors that influence effectiveness of international assignments n n n An environment of openness and support for crossfertilization of ideas and implementation of “best practice” Knowledge and information to travel dyadically between the expatriate, host country, and parent country Consideration for personal networks Some knowledge transfer requires longer assignments (e. g. , where there is much tacitness) Expatriate’s ability and motivation to act as an agent of knowledge transfer Abilities, motivation and relationship of local employees IHRM, Dr. N. Yang 21

The Role of Non-expatriates n People who travel internationally yet are not considered expatriates as they do not relocate to another country n Frequent fliers, road warriors, globetrotters, and flexpatriates n Much of international business involves visits to foreign locations, e. g. n n Sales staff attending trade fairs Periodic visits to foreign operations, subcontractors, etc. Dealing with foreign agents, clients, distributors, suppliers, subcontractors, alliance partners, etc. Meeting with host-country government officials IHRM, Dr. N. Yang 22

Stress Factors with International Business Travelers n Home and family issues n Work arrangements n Travel logistics n Health concerns n Host culture issues IHRM, Dr. N. Yang 23

The Role of Inpatriates n As both knowledge senders and receivers n n Share their local contextual knowledge with the HQ staff Socialize in the HQ corporate culture and learn firm-specific routines and behaviors n Increasing the capabilities of organizations to “think global and act local” IHRM, Dr. N. Yang 24

Drivers for Recruiting and Transferring Inpatriate Managers n Desire to create global core competency and a cultural diversity of strategic perspectives in the top management team n Desire to provide career opportunities in host countries, i. e. for HCNs and TCNs n The emergence of developing markets which often are difficult locations for expatriates: » » Quality of life adjustment Cultural adjustment IHRM, Dr. N. Yang 25

Recruitment & Selection of International Managers n Recruitment Searching for and obtaining potential job candidates in sufficient numbers and quality so that the organization can select the most appropriate people to fit its job needs n Selection The process of gathering information for the purpose of evaluating and deciding who should be employed in particular jobs IHRM, Dr. N. Yang 26

International vs. Domestic Recruitment and Selection n Predispositions of the firm n The constraints imposed by host-country governments n Smaller number of external recruits n Preference for internal recruitment » » To reduce selection risk To secure present & past human capital investments n Headhunting IHRM, Dr. N. Yang 27

Expatriate Failure and Success n Definition: Premature return of an expatriate n Under-performance during an international assignment n Retention problem upon completion IHRM, Dr. N. Yang 28

Table 5. 3 Expatriate Failure Rates IHRM, Dr. N. Yang 29

Reason for Expatriate Failure n US Firms n Japanese Firms Inability to cope with larger overseas responsibilities Difficulties with the new environment Personal or emotional problems Lack of technical competence Inability of spouse to adjust Manager’s inability to adjust Other family problems Manager’s personal or emotional immaturity Inability to cope with larger overseas responsibilities European Multinationals: Inability of spouse to adjust. IHRM, Dr. N. Yang 30

Expatriate Destinations Top Emerging Destinations § China § Singapore § United States § India § U. A. Emirates § Canada Locations with Highest Failure Rates § China § India § United States § Saudi Arabia § United Kingdom § Russia Source: Global Relocation Trends Survey Report, Brookfield 2010. IHRM, Dr. N. Yang 31

Expatriate Turnover n Premature return 7% n n n Spouse/partner dissatisfaction 65% Other family concerns 47% Poor candidate selection 39% n Expatriate attrition average annual 13% n n During assignment 17% Within 1 yr. of return 38% Between 1 -2 yrs. of return 23% Over 2 yrs. 22% Source: Global Relocation Trends Survey Report, Brookfield 2010. IHRM, Dr. N. Yang 32

Direct Costs of Expatriate Failure n Direct costs: n n Airfares Associated relocation expenses Salary and benefits Training and development n Costs vary according to: n n Level of position Country of destination Exchange rates Whether a ‘failed’ manager is replaced by another expatriate n Averaged $250, 000 per early return IHRM, Dr. N. Yang 33

Indirect Cost of Expatriate Failure n Damaged relationships with key stakeholders in the foreign location n Negative effects on local staff n Poor labor relations n Loss of market share n Negative effects on expatriate concerned n Family relationships may be affected IHRM, Dr. N. Yang 34

Figure 4 -3 ROI Indicators for Calculating Intl Assignments IHRM, Dr. N. Yang 35

Steps to Calculate Expatriate ROI 1. Identify financial and non-financial costs and benefits. 2. Link the costs and benefits to the purpose of the long-term assignment. 3. Identify the appropriate antecedents from a system’s perspective. 4. Conduct the calculation at an appropriate time within the context of the assignment’s purpose. IHRM, Dr. N. Yang 36

Selection Criteria n A two-way process n Concerning both individual and situational factors IHRM, Dr. N. Yang 37

Figure 5. 3 Factors in Expatriate Selection IHRM, Dr. N. Yang 38

Figure 5 -2 The U-Curved Phases of Cultural Adjustment IHRM, Dr. N. Yang 39

The Phases of Adjustment n The U-Curve is not normative n The time period involved varies between individuals n The U-Curve does not explain how and why people move through the various phases n It may be more cyclical than a U-Curve n Needs to consider repatriation IHRM, Dr. N. Yang 40

Table 5. 4 Overview of Important Adjustment Variables IHRM, Dr. N. Yang 41

Current Expatriate Profile Category To/From HQC (56%) Gender Age (Yrs) Marital status Male (83%) 40 -49 (40%); 50 -59 (16%) Married (70%) MM (63%), MF (37%) Spouse/Partner (79%) Female (17%) 20 -29 (10%); 30 -39 (32%) Single (26%) Partner (7%) Children (47%) Dual career couples Employment status Duration Before assignment 50% New hires (8%) Long-term (64%) Extended (32%) During assignment (9%) From within (92%) Short-term (21%) On schedule (59%) Intra-regional transfers EMEA (49%) Americas (26%) Asia-Pacific (25%) Primary reason Prior international experience Fill skill gaps (43%) 10% MGR (22%); Tech (21%) Accompanied by To/From non-HQC (44%) Source: Global Relocation Trends Survey Report, Brookfield 2010. IHRM, Dr. N. Yang 42

Solutions to the Challenges of Dual -career Couples n Alternative assignment arrangements n Short-term, commuter, others (e. g. unaccompanied, business travel, virtual assignments) n Family-friendly policies n n Inter-company networking Job-hunting assistance Intra-company employment On-assignment career support n n n Language training, educational assistance Employer-sponsored work permits Career planning assistance IHRM, Dr. N. Yang 43

Table 5. 6 Strategies for Breaking the Expatriate Glass Ceiling IHRM, Dr. N. Yang 44

Summary n n n Through this chapter we have looked at various approaches to international staffing with context specifics Primary reasons for using international assignments Traditional and alternative types of international assignments Various roles of expatriates, inpatriates, and nonexpatriates Expatriate failure, success, and implications Issues concerning gender and dual-career couples in managing international assignments IHRM, Dr. N. Yang 45

Vocabulary n ethnocentric, polycentric, geocentric, regiocentric n types of assignments: traditional – short-term, extended, long-term; nontraditional – commuter, rotational, contractual, virtual, self-initiated n Expatriate roles: language node, agent of direct control, agent of socializing, network builder, transferor of competence & knowledge, boundary spanner n n n n n best practice tacitness ethnorelativism inpatriates, external recruits, internal recruitment, headhunting expatriate failure, EFRs, direct & indirect costs selection criteria, soft skills, intercultural competence, cultural intelligence, common corporate language honeymoon = tourist phase coffee-machine system IHRM, Dr. N. Yang 46

Discussion Questions 1. Outline the main characteristics of the four approaches to international staffing. 2. Which factors determine the choice of a staffing approach? Would a MNE choose the same staffing approach worldwide? Place your arguments in the context of the model outlining determinants of staffing choices and pros and cons of using PCNs, TCNs, and HCNs. 3. What are the reasons for using international assignments? 4. What is the role of inpatriates? Do inpatriates guarantee a geocentric staffing policy? 5. Why is it important to measure return on investment of international assignments? Which indicators can be used? 6. What are the most important factors involved in the selection decision? IHRM, Dr. N. Yang 47