CHAPTER 10
STAFFING AND TRAINING FOR GLOBAL OPERATIONS
Opening profile: Oleg and Mark-Equal Work but Unequal Pay
The case tracks Oleg and Mark, project managers at the Moscow subsidiary of
a multibillion dollar international company. Oleg is a Russian, Mark an
American expatriate. While they are the same age and perform similar tasks,
Mark’s compensation is considerably higher than that of his domestic peer.
Further, Mark has exceptional benefits that Oleg does not enjoy. The two
have differing perspectives about the equity of their compensation.
I.
Staffing Alternatives for International Operations
Alternate philosophies of managerial staffing abroad are known as the
ethnocentric, polycentric, regiocentric, and global approaches.
Firms using the ethnocentric approach fill key managerial positions with
persons from headquarters. They use PCNs—parent company nationals.
With a polycentric staffing policy, local managers (HCNs - home country
nationals) are hired to fill key positions in their own company. One
disadvantage of a polycentric policy is the difficulty of coordinating activities
and goals between the subsidiary and the parent company, including the
potentially conflicting loyalties of the local manager.
In the global staffing approach, the best managers are recruited from within
or outside of the company, regardless of nationality—a practice used for some
time by many European multinationals. Recently, as more major U.S. companies
adopt a global strategic approach, they are also considering foreign executives
for their top positions. Exhibit
10-1 illustrates a global staffing policy as a means of maintaining globalization
momentum.
Those firms with a truly global staffing orientation are phasing out the entire
ethnocentric concept of a home or host country; and as part of that focus, the
term transpatriates is increasingly replacing that of expatriates.
In the regiocentric approach to staffing, recruiting is done on a regional basis.
II. Global Selection
The initial phase of setting up criteria for global selection is to consider which
overall staffing approach or approaches would most likely support the
company’s strategy. These are typically just starting points using idealized
criteria; however; in reality, other factors creep into the process, such as host
country regulations, stage of internationalization, and—most often—who is
both suitable and available for the position.
The selection of personnel for overseas assignments is a complex process. The
criteria for selection are based on the same success factors as in the domestic
setting, but additional criteria must be considered related to the specific
circumstances of each international position. There are five categories of
success for expatriate managers: 1) job factors; 2) relational dimensions, such
as cultural empathy and flexibility; 3) motivational state; 4) family situation;
and 5) language skills. The relative importance of each factor is highly
situational and difficult to establish.
A more flexible approach to maximizing managerial talent, regardless of the
source, would certainly consider more closely whether the position could be
suitably filled by a host-country national. This contingency model of selection
and training depends on the variables of the particular assignment, such as the
length of stay, the similarity with the candidate’s own culture, and the level of
interaction with local managers in that job.
Most MNCs tend to start out their operations in a particular region by
selecting primarily from their own pool of managers. Over time, and with
increasing internationalization, they tend to move to a predominantly
polycentric or regiocentric policy because of: (1) increasing pressure (explicit
or implicit) from local governments to hire locals (or sometimes legal
restraints on the use of expatriates); and (2) the greater costs of expatriate
staffing, particularly when the company has to pay taxes for the
parent-company employee in both countries. In addition, in recent years,
MNCs have noted an improvement in the level of managerial and technical
competence in many countries, negating the chief reason for using a primarily
ethnocentric policy in the past.
For MNCs based in Europe and Asia, human resource policies at all levels of
the
A.
Problems with Expatriation
When staffing overseas assignments with expatriates, many other
reasons, besides poor selection, contribute to expatriate failure among
U.S. multinationals. A large percentage of these failures can be
attributed to poor preparation and planning for the entry and reentry
transitions of the manager and his or her family. One important
variable, for example, often given insufficient attention in the selection,
preparation, and support phases, is the suitability and adjustment of the
spouse. The following is a synthesis of the factors frequently
mentioned by researchers and firms as the major causes of expatriate
failure:
 selection based on headquarters criteria rather than assignment
needs
 inadequate preparation training and orientation for the assignment
 alienation or lack of support from headquarters
 problems with spouse or children—poor adaptation, family
unhappiness
 insufficient compensation and financial support
 insufficient compensation
 poor programs of career support and repatriation
III.
Training and Development
In earlier discussions, the text noted that reports indicate that up to 40 percent
of expatriate managers end their foreign assignments early because of poor
performance or an inability to adjust to the local environment. About half of
the expatriates who do remain function at a low level of effectiveness. The
direct cost alone of a failed expatriate assignment is estimated to be from
$50,000 to $150,000. The indirect costs may be far greater, depending on the
position held by the expatriate.
A.
Cross cultural training
Even though cross-cultural training has prove to be effective, less than
a third of expatriates are given such training. In a 1997 study by
Harvey of 332 U.S. expatriates (dual-career couples) the respondents
stated that their MNCs had not provided them with sufficient training
or social support during the international assignment. Much of the
rationale for this lack of training is an assumption that managerial
skills and processes are universal.
The demands on expatriate managers have always been as much a
result of the multiple relationships that they have to maintain as they
are of the differences in the host-country environment. Those relations
include family relations, internal relations with people in the
corporation, both locally and globally, especially with headquarters,
external relations (suppliers, distributors, allies, customers, local
community, etc.), and relations with the host government. It is
important to pinpoint any potential problems that an expatriate may
experience with those relationships so that these problems may be
addressed during pre-departure training. The model shown in Exhibit
10-4 presents various development methods to address these areas
during pre-departure training, post-arrival training, and reentry
training.
B. Training Techniques
Many training techniques are available to assist overseas assignees in
the adjustment process. These techniques are classified by Tung as: (1)
area studies; that is, documentary programs about the country’s
geography, economics, socio-political history, and so forth; (2) culture
assimilators, which expose trainees to the kinds of situations they are
likely to encounter that are critical to successful interactions; (3)
language training; (4) sensitivity training; and (5) field
experiences—exposure to people from other cultures within the
trainee’s own country.
Similarly categorizing training methods, Ronen suggests specific
techniques, including a field experience called the host-family
surrogate, where the MNC pays for and places an expatriate family
with a host family as part of an immersion and familiarization
program. Exhibit 10-5 shows this and other training methods, some
examples of the techniques used for each method, and the purpose of
each.
Most training programs take place in the expatriate’s own country prior
to leaving. While this is certainly a convenience, the impact of
host-country (or in-country) programs can be far greater than those
conducted at home because crucial skills, such as overcoming cultural
differences in intercultural relationships, can actually be experienced
during in-country training rather than simply discussed. Exhibit 10-6
shows some global management development programs for junior
employees.
C. Integrating Training with Global Orientation
It is important to remember that training programs, like staffing
approaches, be designed with the company’s strategy in mind. Exhibit
10-7 suggests levels of rigor and types of training content appropriate
for the firm’s managers, as well as those for host country nationals, for
four globalization stages.
D. Training Host-Country Nationals
IV.
The continuous training and development of HCNs and TCNs for
management positions is also important to the long-term success of
multinational corporations. As part of a long-term staffing policy for a
subsidiary, the ongoing development of HCNs will facilitate the
transition to an indigenization policy.
Expatriate Compensation
The significance of an appropriate compensation and benefit package to attract,
retain, and motivate international employees cannot be overemphasized.
There must be a "fit" between compensation and the goals for which the firm
wants managers to aim.
The premature return of expatriates or the unwillingness of managers to take
overseas assignments can often be traced to their knowledge that the
assignment is detrimental to them financially, and usually to their career
progression.
The high cost of maintaining the expenses and appropriate compensation
packages for expatriates has led many companies to cut back on overseas
assignments as much as possible.
The ability to design and maintain an appropriate package is more complex
than it would seem because of the need to consider and reconcile parent and
host country financial, legal, and customary practices. Exhibit 10-8 provides
an example of a compensation score card for expatriate managers.
To assure that expatriates do not lose out through their overseas assignment,
the balance sheet approach is often used to equalize the standard of living
between the host country and the home country and to add some compensation
for the inconvenience or qualitative loss. (See Exhibit 10-9).
In fairness, the MNC is obliged to make up additional costs the expatriate
would incur for taxes, housing, and goods and services. The tax differential is
complex and expensive for the company, and generally MNCs use a policy of
tax equalization: the company pays any taxes due on any type of additional
compensation that the expatriate receives for the assignment; the expatriate
pays in taxes only what she or he would be paying at home.