Distinguish between Ethnocentric and Polycentric Human Resource Management policies used by Multinational Corporations, clearly outlining the advantages and disadvantages of each.
The ethnocentric staffing policy refers to the strategy of a multinational company to employ managers for key positions from the parent headquarters instead of employing local staff. In the ethnocentric approach, the cultural values and business practices of the home country are predominant. Headquarters develop a managing and staffing approach and consistently applies it throughout the world. Companies following the ethnocentric approach assume the home country approach is best and that employees from other parts of the world can and should follow it. Managers from headquarters develop practices and hold key positions in the subsidiaries to ensure consistency.
Reasons for adopting an ethnocentric approach in the staffing of operations include:
Starting up operations in host countries. This is a critical stage, and there is a need to place individuals in host countries that are fully aware of the needs of the multinational and any specifications that have been set by the headquarters. Normally it is individuals who are most familiar with the goals and demands of the multinational and who have been with the corporation for some time.
Technical expertise; Many times multinational corporations need to transfer scientific and technological knowledge, professional expertise, and managerial skills into new operations. In many cases the knowledge and skills do not exist in the local workforce, especially if the product is highly specialized and utilizes cutting edge technology. Therefore, it is necessary to deploy home country nationals in host country operations.
Maintenance of financial control and facilitation of coordination; A major need for the headquarters is effective and efficient communication as well as trust with key employees in host countries. It is natural to consider that this is more feasible when key positions in host country operations are filled with home country nationals.
Provision of international experience for promising managers and professionals; An assignment abroad normally requires ability to work independently and to show initiative in an unfamiliar environment. This serves as a test and as an opportunity for development for home country managers and professionals who are groomed for senior positions.
Need to maintain the foreign image of the multinational corporation; Sometimes the headquarters consider that it is in the best interests of the corporation that operations in particular countries are associated with the home country. This, for example, can be the case when products from a particular home country in a particular market have a very good reputation or when a particular home country is viewed positively by host country nationals.
The multi racial or multi religious population of the host country. In some cases the host country has a population that belongs to two or more races or religions that have a history of rivalry. In such cases it may be risky for the multinational corporation to appoint a local national, because nationals from the other races or religions may perceive it as bias against them.
Experience curve effects derive from standardization of production. The firm produces in the home country initially and transfers its core competency to the host country under the guidance of expatriate managers. These managers have the knowledge to create value through core competencies. They also contribute to the maintenance of the corporate culture. •
Organizational control and coordination are maintained and facilitated. •
Promising managers are given international experience
There is assurance that subsidiary will comply with company objectives, policies etc.
Parent country nationals continue to...
References: Ball D.A and McGulloth W.H (1998); International Business; Introduction and essentials, Richard D. Irwin
Dessler, G. 2003, Human Resource Management , 9th ed, Prentice Hall, Upper Saddle River , New Jersey , pp. 471-473: 'Selecting international managers '
Maore K.S (2007) International Business, published DLM Manual
United Nations Report (1973:23): The Multinational Corporation in the World Development.
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