The increasing number and flavors of multinational employers in the world today has resulted in a hunger for relevant and accurate data on how to manage this unique set of global employees. How does one structure a company’s management and culture? Should the headquarters’ norms prevail or should leadership err on the side of decentralization and respect for each country office’s preferences? If one wanted a balance of the two, how would one even go about it?
Let’s consider Hiring or Recruitment just by itself. There are usually four major hiring orientations that have been observed across the International HR practices of major multinational companies such as Coke, Pepsi, Nike, Sony, etc.:
1. Ethnocentric – With this strategy, a company’s HR policies are aligned to those of the parent country. For instance, Coke’s U.S. headquarters may have established policies related to labor, safety as well as compensation. Those are applied across Coke’s affiliated country and regional operations, in the same manner. The leadership positions in each subsidiary of Coke will usually have staff who are parent country nationals (PCNs). Local nationals might be recruited for more junior positions in order to maintain headquarters’ influence as the primary. In practice, however, this approach is rather old-fashioned and is very rarely applied nowadays.
2. Polycentric – In today’s highly competitive business environment, a company following an ethnocentric HR practice, may end up losing out on finding the best talent. A better approach to international HR might be the Polycentric one. Here, HR strategies are designed primarily according to the need in a particular region or a country, which may not necessarily align with those at headquarters. As a critical departure from the ethnocentric approach, in a polycentric environment, host country nationals (HCNs) are employed in foreign subsidiaries while parent country nationals (PCNs) govern the strategies at the headquarters. As a result, there are more employment as well as career advancement opportunities for the local population. At the same time, the employer is free to recruit from a more diverse pool of talent.
3. Regiocentric – This is perhaps the most common strategy followed by successful companies across the globe. In a Regiocentric HR practice, people (especially those in leadership positions) are recruited with a view towards having them serve throughout a particular region, rather than just one specific country. For instance, the Asia Pacific head of marketing for Coca Cola manages all marketing efforts for South East Asia and the Pacific, including Australia, New Zealand and their neighboring countries. Similarly, Coke may also hire a South Asia Marketing Lead, as well as a Middle East representative. They all have the same responsibility as each other, but catering to specifically to their region. The employer still retains the ability to transfer these employees between regions, as business need dictates.
4. Geocentric– In theory the most profitable, Geocentric HR strategies are employed when people are hired, both at the top as well as in the middle management, based on their skills and capabilities, irrespective of nationalities. Therefore, one can technically say that a meritocratic system is being used in order to attract and retain the best talent.
Although the temptation of ‘the best minds under one roof’ is one that is hard to pass up, most companies do not follow such a strategy because of the many challenges involved:
- A foreign national serving as an expatriate in another country may face issues related to both cultural and personal adjustment, especially if they are on assignment without their family and in a geography with which they may not be at all familiar. This discomfort could result in productivity issues at work which could then, result in attrition and resignation from the assignment.
- Another common problem faced by expats is the sense that his career growth is truly back in their home country and that an international assignment will cause their progression and advancement to stall and perhaps even slide backwards. This anxiety could also lead to distraction from their new assignment.
- Finally, if an assignee is not familiar with their assignment location, especially if it’s considered a ‘hardship post’ or even one that has a significantly higher cost of living compared to their home country, they may find themselves spending more time adjusting to the geography rather than focusing on the job. A company looking to retain their international assignees will ensure their success by putting in place tools for adjustment such as global relocation services, cross cultural counseling, language courses, etc.
Depending on the company’s business or industry, they may choose to staff their international offices using a variety of the strategies outlined above. For example, for companies producing local goods or services who have their major share of revenues coming from that country or region might be served best by having a higher proportion of host country nationals on staff. Other companies who are either looking for a short-term knowledge transfer or establishment of parent company processes and methods might bring on expatriates, either third country nationals or people from the headquarters country, in order to set up the local office before handing over reins to local leadership. These expats are usually experts in their fields who are relocated on a relatively short-term basis in order to establish sustainable and manageable operations in country.
Given the myriad needs of multinational companies and the veritable buffet of cultures and norms to which they must adhere, employers have shown themselves to be creative with their HR practices in recent years in order to achieve global success. With the advent of technology and the sense of the world as a ‘global village’, we should expect new international HR practices to take shape, surpassing those in existence today in their creativity and impact.