Why Do Many Mncs Continue to Recruit Internally from the Home Country Instead of the Local Labour Market When Seeking to Hire Managerial Staff for Overseas Subsidiaries? What Are the Limitations of This Approach and How

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  • Topic: Management, Expatriate, Repatriation
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  • Published : March 24, 2009
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Q4. Why do many MNCs continue to recruit internally from the home country instead of the local labour market when seeking to hire managerial staff for overseas subsidiaries? What are the limitations of this approach and how should management respond?

Abstract

A selection of perceived and valid reasons encourage Multi National companies (MNCs) to recruit Parent country nationals (PCNs) for managerial positions at overseas subsidiaries rather than employing Host or Third Country Nationals (HCN/TCNs). The reasons range from a good ‘fit’, of the person to their environment (Tarique, 2006) and, the employees actual capabilities of doing the job. However, limitations exist when adopting this approach in various aspects of the process. These limitations are associated with the failure of the international assignments and are addressed in this paper in order to deduce comprehensive suggestions for management that will minimise or at least reduce the risk of failure, that the hiring of PCNs at overseas subsidiaries pose.

The choice of hiring a PCN instead of a HCN for an assignment in a foreign country can be defined as the ethnocentric approach to recruitment. It uses PCNs, the majority of the time when filling key positions. This occurs when a high degree of control and co-ordination is required by the MNC. (Tarique, Schuler & Gong, 2006). All internal factors focus on what the firms’ current resources are and how best to apply them. The external factors usually limit the employment of PCNs in the host country and promote HCN/TCN employment. The exception in this case is technology, because in-house systems from home country may need to be transferred and implemented to the subsidiary. Working knowledge of the systems and technical expertise will need to be transferred to HCN/TCN colleagues.

“Expatriates are primarily selected on the bias of their technical competence alone” Balifa and Baker, 1985; Harvey 1985; Mendenhall et al., 1987; Miller 1972 . This reason is further strengthened by Millers 1972 view, that the selection of employees for international business is a risky operation. Both statements explain why so much importance is placed on technical competence and managerial qualifications (Harris & Brewster 1999). This geocentric approach to hiring takes into account the best people for the job rather than where they come from. Because nationality is a secondary factor competency based jobs this type of hiring is likely to occur in technical or the I.T sectors. Firms hire from their existing resource pool because they believe they have access to high calibre candidates that are available, although this may be the case the selection that is made may not be right, in terms of future success. When employees are selected from the parent company, in most instances they are receptive to working abroad and gaining international experi

The future response of management is discussed on the basis of selection, adjustment and repatriation. Academic recommendations of formal and professional approach should be implemented, because thorough selection techniques can quantify the candidate’s capabilities and experiences in order to avoid failure in the future. During selection processes it has been reported in research that little attention was paid to determining the soft skills of the candidate for examples cultural empathy, emotional stability and maturity and family situation. These aspects must be addressed by management as leaving risks unidentified increases the likelihood of assignment failure (Shen & Edwards, 2004). Language fluency is assessed however according to Shaffer et al., 1999 it may not benefit the results of the international assignment and may result in more conflict. This is because fluency means that the expatriate is aware of the contradictory demands from the host country causing a conflict of adjustment, therefore an MNC must not disregard a candidate on the basis that they can not speak the...
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