Reflect on how MNCs Firms Choose Human Resources for International Assignments
In the recent past, there has been an increased interconnectedness among the world's nations. This move has been usually termed as globalization. As competition continues to surface, many businesses have found it indispensable to go global so as to cope with this ever increasing competition. They achieve this by enjoying the economies of scale and economies of scope offered by the global market. This has resulted to multinational companies (MNCs). A multinational corporation is a large modern organization conducting business in more than one country. In order to survive in the global market, an MNC must make some critical decision Viz. Human Resource Management (HRM) and staffing.
There are a variety of ways in which an MNC can staff its organization. The optimum staffing method, however, depends on relative cost and benefit. First, a Multinational corporation may decide to use expatriates for its international subsidiary. In this case, the management of such company in a particular country is controlled by foreigners; expatriates. These expatriates are usually associated with the parent company in terms of origin. Several arguments have been brought forth either in support of or opposing the employment of expatriates to run MNCs. Some arguments purport that expatriate usually has a better understanding of the company and would, therefore, yield much more satisfactory results than Home Country Managers (HCM). Moreover, it is more likely that expatriates will be more royal to an MNC than HCM.
Nevertheless, several arguments have been brought forth against the use of expatriates in preference to HCM. First, it is argued that expatriates increase the foreignness of a company. This will make the locals feel that they are not part of the company. In fact, empirical studies suggest that the use of expatriates impacts negatively on the sales of an MNC in that it leads to the deterioration of consumer loyalty to the company. Besides, many governments impose restrictions on the use of expatriates. They have considered it irrational to "import" employees whereas these countries are characterized by rampant unemployment. In most cases, governments impose quotas on the maximum number of expatriates to be hired by any multinational company.
On the other hand, an MNC may choose to use local personnel rather than using expatriates. Similarly, this International Human Resource (IHR) technique has also been supported by some and criticized by others. The advantage of using local manpower is that these people have a better understanding of a country as a market than foreigners; they better understand the tastes and preferences of the local people. This means that an MNC can design products that best suits the local market. The impression here is that local personnel can actually serve the local market better than the expatriates.
Moreover, a company that is managed by local managers is more likely to capture consumers' royalty than another company controlled by expatriates. In this scenario, the foreignness of the company is eliminated and local consumers feel a sense of belonging to the company. This will go a long way in boosting a product's brand image. Furthermore, compensating local personnel is usually less expensive than compensating expatriates. It is imperative to note that expatriates drain off a great deal of a company's revenue due to their expensive allowance packages. Expatriates qualify for more allowances than the local manpower. This means that by using domestic workforce, an MNC is able to save on relevant costs and thereby make a greater margin.
However, the use of local workforce has been criticized in that local managers may lack in essential skills necessary to run a company operating on a global scale. Such managers may have never experienced the great competition pressure like the one presented by an MNC. Local managers may also lack a proper understanding of the company. This is a major stumbling block towards the smooth running of activities for an MNC.
The primary goal of international assignments is to improve on a company's profitability. However, this goal may only be realized if a company manages, retains and exploits the knowledge and experience that their employees have gained during their term of international assignment. The costs of international assignments are very high, and even then, a company is not certain that it will still retain its employees after the assignment. International assignment, therefore, presents an MNC with the risk of losing both its employees and return on investment. The loss in returns emanates from the fact that a company may have used many funds in terms of salaries and allowances for their employees while on assignment, only to lose them.
As far as international assignments are concerned, several theories have been proposed in the quest to designing an appropriate assignment program. One school of managerial thought applies what is called Expectation Theory. This theory advocates for a sincere communication with employees to be put on the international assignment. Here, the employer gets the employees' view for instance on the kind of jobs they expect upon their returning home as well as financial remunerations that they expect. The expectation hypothesis observes that pleased expectation yields positive results while discontented expectation yields negative results. The HR managers who apply this theory, therefore, seek to satisfy the expectations of their employees who are to be put on the international assignment.
Another school of managerial thought applies Reentry Systems Theory to manage international assignments. These managers who employ this technique usually maintain communication with their employees at any point in time; prior to, during and even after assignment. This enables the returning employee to easily adapt to the company's environment. The strategy also involves communicating any organizational change to employees who are in a placement to help them quickly adapt when they return back. Many managers who employ this technique make extensive use of the intranet and usually have an expatriate section on their company's website.
Furthermore, some managers make extensive use of Equity Theory. This theory is closely related to the Expectation Theory and deals with factors like the commitment of an employee to the company. The theory also deals with motivation aspects the theory is used in the determination of the degree royalty exhibited by a returning employee to the company. The theory also deals with issues like an intention to quit and perceived fairness in the distribution of rewards among employees.
There are different criteria for choosing employees who qualify for an international assignment. One major yardstick is the nature of a job. It happens that at a certain particular time, an organization may be in need of a certain critical skill that cannot be trained in the mother country. In this scenario, only those employees falling in that job category would qualify. Another criterion is by use of performance appraisal. Here, the performance of employees is evaluated and the best put under international assignment as an incentive to motivate others.