11.7 Summary
This chapter began by looking at the role of the HRM function in the context of the MNE's strategy. The key point is that the firm's HRM policies should be congruent with the firm's international strategy, its structure and its control systems.
We then looked at four approaches to staffing policy and noted that:
- An ethnocentric approach emphasises the importance of parent country nationals (PCNs) in key positions. It is congruent with an international strategy, but it may breed cultural myopia.
- A polycentric approach uses host country nationals (HCNs) to manage subsidiaries and PCNs to manage corporate headquarters. This approach avoids cultural myopia but may produce tensions between home and host country operations. This approach suits a multi-domestic strategy.
- A geocentric approach employs PCNs, HCNs and third country nationals (TCNs) to get the best people for the job regardless of nationality. This approach builds a strong organisation culture and is suited to both global and transnational strategies.
- In a regiocentric approach (not covered by your textbook), PCNs, HCNs and TCNs are used to employ the best person within a region rather than worldwide as in the geocentric approach. The regiocentric approach might be viewed as a scaled down version of the geocentric approach or a transition stage between an ethnocentric and a polycentric approach.
The problem of expatriate failure was addressed, together with the means used by MNEs to select expatriates who are less likely to fail. We then looked at the training and personal development of expatriate managers to prepare them for their overseas assignments. We noted that training is directed at the acquisition of skills and the development of the acquisition of knowledge and (hopefully) wisdom.
Management development is used as a strategic tool to build a strong organisation culture and to promote informal networking, both of which support global and transnational strategies.
We looked at the performance appraisal and noted the existence of bias in the host country because of cultural factors, and in the home country because of distance and lack of familiarity with the local scene on the part of home country assessors.
Compensation practices were reviewed. We noted that there are three approaches to compensation: the home country approach, the host country approach and the regional approach. The most common form of expatriate compensation is based on the home country and is known as the balance sheet approach. The balance sheet contains six elements: the home country base salary, and five categories of outlays - goods and services, housing, income tax, contribution to savings, education expenses and social security taxes, and shipment and storage charges on personal and household effects.
Finally, we looked in outline at the vast topic of international labour relations. We noted that there is considerable disparity in the conduct of labour relations across countries and for this reason a decentralised management approach is logical. However, the need to conduct operations globally or on a transnational basis makes it desirable to centralise some management decisions.
Unions are concerned about pay, job security and working conditions and they are especially concerned about the power of MNEs to switch operations from one country to another. Unions have been generally unsuccessful in countering the bargaining power of MNEs, but there is potential for gaining a competitive edge if employees are allowed to participate in decision making through quality circles, semi-autonomous work groups and the like. This need not necessarily include participation by unions, but where management has enlisted the cooperation of unions, good management-employee relations have followed.
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