HR Management

Staffing in the International Market

Introduction

The staffing or the recruitment process for a multinational organization is a far more difficult and complicated process than the recruitment process in an inland business organization. Other than the skills, academic and technical knowledge and other technical specifications, there are few other factors related to a region’s demographic, including culture, wage rates, literacy level, and economic level, that altogether influence their suitability in a multinational company’s (MNC) staffing strategy and process (Welch Björkman, 2015). 

The purpose of this report is to propose a suitable staffing strategy for a subsidiary situated in Australia and the home country is Malaysia and headquarter in Kuala Lumpur. This report presents, a critical evaluation of international recruitment policy and its three global staffing approaches with their comparative benefits and challenges, so that the best one can be selected as per the type and requirement of the business. The aim of this report is to provide a basic understanding of Analysing their suitability in different types of organizations.

This report has a scope to understand different staffing approaches, which can be used by HR managers. The HR management must have the capability to identify the global competitiveness of the potential applicants as well as a fair enough idea of the skills and availability of human resources in different labour markets globally in order to exploit the talent and positioning the right people at the right places. However, this report is based on a case study of a single firm, which might be its limitation to present adequate discussion.  

HR Staffing Methods Analysis in International Market

According to the study of Kang and Shen (2017), an international recruitment process is a combination of practices, policies, and strategies that the HR management of an MNC employs to hire the people from the global supply of talent and skill. In the study of Mosbah, et al., (2019), it is mentioned that there are basically three approaches for international recruitment, namely ethnocentric, polycentric, and geocentric, which can be applied in the international market as per the requirement and needs of the staffing in the business organisations.

Ethnocentric staffing policy:

Kim, Chung, and Brewster (2019) discussed the ethnocentric staffing approach refers to recruiting people from the home country in positions all over the world. If a company wants to fill the executive positions in a subsidiary company in a foreign country, it can either relocate its existing employee or employees from home country to the new destination or can hire a person from the home country and appoint at the executive position in the subsidiary. It is exhibited by Conrad and Meyer-Ohle, (2017) that Ethnocentric strategy is often applied by the MNCs to post the employees for key positions from the home country rather than employing the local staff of the host country. The main aim of this approach is to leverage the technical and business expertise of the parent company (Welch Björkman, 2015). In support of this, Kang and Shen (2017) argued that the other reason can be a lack of required expertise for the leading positions or the parent company’s strategy to the rapid substitution of expatriates possible from the host country market.

Mosbah, et al., (2019) asserted that the biggest issue that arises in the adaptation of expatriates is to deal with the cultural differences and managing psychological tensions in a new country due to language and communication gaps with the subsidiary teams. This may result in low morale and dissatisfaction in the local managers due to fewer opportunities for promotion and recognition. At the same time, the executive from the home country, who will operate in the subsidiaries has to deal with interpersonal and cultural conflicts with the local employees due to differences in value and perception and working environment. The expatriates are less sensitive to the needs and expectations of their subordinates. Thus, it is a highly expensive executive staffing process by MNCs with a high failure rate (Lakshman, Lakshman and Estay, 2017).

It is recommended to apply the ethnocentric method when the parent company has just opened a new branch or acquired a company recently and it wants to transfer the policies and procedures to the new branch and its team.  As per a common placement rule, the expatriates from a parent company and home country should be at the limit of 20% of the foreign office to limit the hiring costs and avoid losing the pulse of the local community (Kim, Chung, and Brewster, 2019).

Polycentric staffing policy:

Further, Uysal (2015) argued that the polycentric staffing approach of recruiting is about hiring local talent to fill the positions in subsidiaries in the foreign country. It can be done through making a contract with local recruitment agencies or placing the advertisement on the local job portals. Here, the MNCs let the host country’s nationals to manage the subsidiary in their land. Polycentric staffing is beneficial because there is no adaptation issues and no cultural and language barriers with the benefit of continuity. It is a less expensive recruitment policy for the headquarter and helps in enhancing the moral and career opportunities of the local employees (Uysal, 2015).

This is also supported by the governments of the subsidiary’s country. However, Greer and Stevens (2015) criticised and mentioned that by adopting this policy, there are chances of limited effective communication between the headquarter management and subsidiary office. These weak links may further cause the loss of effective control over these independent units or subsidiaries. In the absence of boundary persons, there are less coordination and the subsidiary management lacks the opportunity to learn with international experience, which is essential in the harsh competitive environment.

The polycentric staffing approach is recommended to the MNCs when they require the local skills and cultural knowledge to conduct the business. If an MNC aims to expand its clientele in the host country, then it should hire the local professionals in the subsidiary having a good market understanding and ability to cooperate with headquarters’ sales operations. Any other approach is often applied in the situation when it is difficult to find the right talent or qualified talent, even after a fair time (usually four to six months of launch).

Geocentric staffing policy:

At the same time, Greer and Stevens (2015) argued that the geocentric approach of HR staffing is entirely different from the ethnocentric and polycentric approach in terms of operations and hiring people. In detailed meaning, it is about recruiting remote employees from the region, where there is no existing business of the company and it is planning to launch it soon (Plakhotnik, et al., 2015). It includes the dual process of bringing foreign talent to the MNC or may of its subsidiary because of his or her skill, expertise, and experiences. 

Geocentric staffing helps MNCs to develop a pool of senior executives having international experience and contacts across geographical boundaries. It further opposes the people’s identification on the basis of their nationality and origin (Plakhotnik, et al., 2015). By adopting this staffing approach, the managers can gain opportunities to hire the personnel, who have knowledge about the cross-cultural environment and who are seeking to deal with challenges of cultural differences (Conrad and Meyer-Ohle, 2017).

Though, Lakshman, Lakshman and Estay (2017) asserted that at present, several host countries tend to amend their immigration laws in order to require the employment of local nationals, where possible. This highly expensive approach involves high training, compensation, and relocation costs. This approach further requires a fair global mechanism to overview the vacancies and availability of persons with suitable qualification profiles. This staffing method requires the advertisement on the global job portals and sourcing candidates online regardless of their current location. The selection can be made after detailed negotiation concerning the qualification and experience, they hold, expected to join location and compensation, and require training and upgradations. 

Selection of an adequate staffing policy for a business

Type of Business

The business is related to fashion and imitation jewellery, headquartered in Kuala Lumpur. The home country is Malaysia. The business is running well in the home country and there a need for business expansion, so the target market is Australia, because of the high potential and demands of fashion and imitation jewellery.

Expansion of Business

Lunching a subsidiary in Australia is quite different and challenging because it is an un-experienced territory for the company owners and HR managers. With the high-quality exclusive imitation and semiprecious jewellery, the company aims to develop a customer base for long term relationship building in Australia. Thus, the company needs to hire experienced and talented staff and employees, who can carefully determine and assure easy functionalities of business and without any conflicts among the home country and host country operations.

Suitable type of Staffing Policy:

For hiring and recruiting employees, this is the most crucial part of the entire process. Lakshman, Lakshman and Estay (2017) mentioned that for approaching an adequate style of staffing in the international market, it is essential to have a comprehensive consideration of all the defined methods. As the business type and expansion, if the home-based operations of the company are in Kuala Lumpur and subsidiary is in Australia, selection of staffing approach should be based on the density of a subsidiary in the terms of long term easy functionality, smooth and sound employee relationship, healthier work environment, the level of morale and satisfaction in the organization and profitable execution of the goals set by the headquarter (Welch Björkman, 2015).

Here, both the ethnocentric and polycentric have equal benefits and shortfalls as per the type of business. And the geocentric approach seems impractical and unnecessarily expensive in the concern of the market of exclusive jewellery and cosmetics in Australia, with a unique cultural background of western paradise.  

The recruitment process will work in two stages, the first for earlier six months and the second is for the long term. In the first, the staffing strategy will ethnocentric approach at the top level to make the subsidiary team aware of the home company’s policies, procedures and way of operations as well as leveraging their managerial know-how, related experience and expertise in the international market (Kang and Shen, 2017). Here, expatriate hiring should be based on the appropriate capabilities and talent in the organization and he should have knowledge about western culture. Apart from this, the capabilities to deal with the challenges of working in a new culture and conflict management skills due to interpersonal issues should be high. The candidate should have cultural empathy to join the subsidiary in Australia country. 

At the same time, the middle-level workforce will be a combination of ethnocentric and polycentric recruitment approach so that the local managers may get understand the MNC's way of working, its policies, and procedures. This strategy will be focused on the complete polycentric approach at the middle-level management and reduce the number of ex-pats at key positions and handling the responsibilities to the local professionals. This will help the company to understand the customer culture and its requirements in the local market. It is an ideal staff orientation in a subsidiary where the headquarter helps in developing the base for performance and then allow the local leaders to manage the operations with their understanding of market and accountability for their actions (Mosbah, et al., 2019). For dealing with the interpersonal cultural conflict, the company can organize a training program to enhance the cultural awareness of both the top-level and middle-level employees from different countries. 

Conclusion

International staffing is a crucial process. The HR managers need to understand the several approaches of staffing, so that they can develop the best possible combination of these approaches as per the demand of the market, rather than being fixed to a specific policy.  The fact is, being realized by the MNCs that the best way to understand the international business is to recruit the locals at the key positions as they know the market better. The next thing that during expansion, business firms should appoint their experienced executives from the home country to the host country to various concerning departments to share best practices followed at the international level with the local employees in the host country. Further, through the empowerment of the leaders from the local teams, the MNCs can get a better market understanding, facilitate the growth while making the most appropriate decisions and bring the best products to the target local customers based on their choice and expectations.