Approaches to Strategic International HRM

1. Ethnocentric Approach:

Here the MNC simply transfers HR practices and policies used in the home country to subsidiaries in foreign locations. Expatriates from the MNCs home country manage the foreign subsidiaries and the MNCs headquarters maintain tight control over the subsidiaries policies.

2. Polycentric Approach:

In this case, the subsidiaries are basically independent from headquarters. HR policies are developed to meet the circumstances in each foreign location. Local managers in the foreign sites are hired to manage HRM activities.

3. Region-Centric Approach:

This approach represents a regional grouping of subsidiaries. HR policies are coordinated within the region to as much an extent as possible. Subsidiaries may be staffed by manager from any of the countries within the region. Coordination and communication within the region are high, but quite limited between the region and the MNCs headquarters.

4. Geocentric Approach:

In this case, HR policies are developed to meet the goals of the global network of home country locations and foreign subsidiaries. This may include policies which are applied across all subsidiaries, as well as policies adapted to the needs of individual locations depending on what is best to maximize global results.

The firm is viewed as a single international business entity rather than a collection of individual home country and foreign business units. HRM and other activities throughout the MNC are managed by individuals who are most appropriate for the job regardless of their nationally. Thus, one may find a British manager handling HRM activities in the New York office of a Dutch MNC.

Practices of International Human Resource Management

An organization needs to consider the purpose for which it needs to send the employees for international assignments. For example, an organization may send its employees aboard to set up or explore a new market, or prepare them for top management positions. After the purpose of the international assignment is specified, the organization can initiate the process of selecting the best employees for the international project.

The following are the aspects of concern in IHRM:

1. International staffing
2. Pre-departure training for international assignments
3. Repatriation
4. Performance management in international assignments
5. Compensation issues in international assignments.

International Staffing:

International staffing refers to the selection of the most appropriate employees for international operations of an MNC.

The selection of the most appropriate employees can be done by using the following three sources:

• Home Country or Parent Country Nationals (PCNs):

Refer to the citizen of the country in which the headquarters of the MNCs is located. PCNs are not the citizens of the country in which they are working. For instance, an Indian citizen who is posted to an overseas subsidiary of an organization that has its headquarters in India is a PCN. In addition, PCNs are termed as expatriates.

Generally, PCNs are hired to occupy key and top-level management positions because they possess sound knowledge about the operations of parent organization. The knowledge about parent organization helps the PCNs in ensuring proper linkage between foreign subsidiaries and the headquarters. However, hiring PCNs is a costly affair for an organization as it has to bear the relocation cost for them.

• Host Country Nationals (HCNs):

Refer to the employees of an organization, who are citizens of the country in which the foreign subsidiary is located. An Indian manager working in an Indian subsidiary of a US organization is an HCN. For example, IBM normally hires HCNs. In addition, HCNs generally occupy middle and lower management level positions. The recruitment of HCNs is not a costly affair for an organization because it does not need to incur extra cost in cross-cultural training of employees.

• Third Country Nationals (TCNs):

Refer to the citizens of a country, other than the country where the organization is headquartered and the country that is hosting the subsidiary. Staffing is done on the basis of ability and not on the basis of nationalism. For example, a British citizen working in the Indian subsidiary of an organization whose headquarters is located in the US, is termed as a TCN. You should note that a TCN has substantial international experience and exposure that is quite advantageous for an organization.

The approach of internal staffing differs from organization to organization.