In today’s global world Human Resource (HR) practices and polices have become very significant for further development of multinationals organizations. In order for multinationals companies to be competitive, it is necessary to have adequate international staffing approach. Management of employees in foreign subsidiary is a complex job. Nevertheless, Human Resource managers need to manage people across borders.
The aim of this paper is to present critical analysis of ethnocentric companies, advantages and disadvantages of this approach are demonstrated. Furthermore, role of expatriates managers and locals were described.
Table of contents:
2. Literature Review5
2.1. Advantages of Ethnocentric Staffing approach6
2.2 Disadvantages of Ethnocentric Staffing strategy7
Over the last few decades, multinationals companies (MNCs) have become very powerful instruments for transfer managerial skills, proficiency, technical knowledge, and capital across nations. In todays world, which has become a global market place, Human resource management (HRM) have significant role in conducting international staffing policies and practices. According to Perlmutter (1969), there are four different categories of multinationals: Ethnocentric, polycentric, regiocentric and geocentric companies.
• Ethnocentric companies: Home country oriented corporations; they believe that home country managers are more competent and trustworthy than foreign nationals. • Polycentric companies: Host country oriented organizations, local employee are recruited to control local operations. • Regiocentric companies: Is the combination pf staffing policies, adequate for specific geographic areas. • Geocentric companies: Organizations are tending to apply the best from headquarters and subsidiaries in order to develop coherent worldwide practices, nationality is not criteria for selecting managers.
The purpose of these researches is to present ethnocentric approach, and to point out the main differences between expatriates and local employees. Furthermore, advantages and disadvantages of ethnocentric approach are explained.
2. Literature Review
Ethnocentric companies tend to apply best practices to foreign subsidiaries through home country expatriates. According to Kopp (1994) and Peltokorpi (2008) Japanese firms have more ethnocentric human resource practice than American and European companies. Main reasons for this strategy are a lack of skilled host country nationals and necessity to provide good communication between headquarters and subsidiaries. However, such strategy can induce a number of disadvantages. The most renowned are retrenched career opportunities for host country managers, acclimatization of expatriates to new culture, socioeconomic, and legal system. (Widmier et al., 2008)
On the contrary, polycentric firms assume that local managers know more about local culture, tradition, market, and employment relations. Therefore, subsidiaries in each country should implement locally applicable practices under control of local people and with high level of autonomy. Further to O’Donnell (2000) culture distance has great influence on the level of control that parent firm has on the over forgiven subsidiary. In this way, there are no problems with adaptation to new culture, and there are no immense costs connected with expatriates compensations and performance appraisals. On the other side, such approach can cause problems with control over the subsidiaries operations, because local executives may not accept headquarters policy and practices. (Treven et al., 2008)
2.1. Advantages of Ethnocentric Staffing approach