ms-97 mba assignment july dec 2010 Question 4

4. Discuss the approaches adopted by multinational enterprises to meet its manpower requirements.

Approaches to nationality problem:

A multinational enterprise may use any one of the following four approaches or a mix of some of these to meet its manpower requirements:

• Ethnocentric
• Polycentric
• Regiocentric and Geocentric

These terms, though explained in one of the previous units, need to be discussed in the context of human resource management. Ethnocentric policy is characterized by a MNEs preference for using home country nationals for all senior positions and rewarding them more generously over the host country nationals. The discrimination if carried too far alienates and demoralizes other country nationals who may feel having (getting) a second class citizens' status and treatment. Hardship may be created for some country nationals also if they have to go on frequent tours to transfers.

In polycentric approach the host country nationals are preferred for local positions. The local units get greater degree of autonomy in recruiting personnel for managerial and other positions. The knowledge of local language, culture and environment on the part of local managers helps create a more favourable attitude among employees of the local organisation and the dealers and customers. The danger from too much localizing is that it may alienate the local unit from the mainstream organisation because of the absence of expatriate managers who serve as links in the communication process.

In region centric approach, managers are recruited on regional basis. For instance, an American multinational operating, in Europe may prefer to have European managers at regional headquarters in Europe in large numbers instead of sending people from the headquarters. IBM has two international headquarters: one in New York and the other in Paris. This approach helps in reducing the cost of recruitment, maintenance and training and also enables handling regional problems more effectively.

The geocentric approach is based on the philosophy of global outlook of the management. It shows MNEs commitment to employ best brains available from anywhere. The top positions even in headquarters may go to host or even third country nationals. Very few multinationals follow this approach as the culture and tradition of the corporation is built over the years on the basis of certain objectives. philosophies and practices.

Legal Considerations

The laws of most countries require employment of local nationals if available in adequate numbers from within. Immigration visa is a pre-requisite to take up any assignment by foreigners. In US and Germany, for instance, the rules for work .

Recruitment: sources and stages

MNEs meet their manpower requirements from three sources (1) home country nationals, (2) host country nationals and (3) third country nationals. The home country nationals are those who belong to the place of origin of the company. The host country nationals are the citizens of the place of location of subsidiaries and third country nationals conic from- other than the home and host countries of MNEs. In the early phase of internationalisation of business most companies recruited from home office or home country. As the business expanded and activities diversified, managers were recruited from the host country, and if needed, from the third countries.

An MNE which starts with export of goods in overseas markets relies heavily on local managers and sales personnel in the first stage of operations. When it starts MNEs manufacturing abroad the top and senior managerial and technical personnels are sent from the head office. It may recruit some managers from the host country who’ll behelpful in obtaining licences, doing liaison work with local politicians, government officials, industry associations, banks and financial institutions.

When entering into manufacturing operations abroad, an MNE may bring technical experts from home. The locals may be recruited for junior managerial supervisory or operative jobs. Their familiarity with local language, culture and environment is helpful in starting and controlling the operations. When the MNE diversifies introduces new technology or wants to penetrate into new markets, it may like to recruit third country nationals with relevant expertise and experience.

Well established MNEs may centralise operational and managerial techniques, manufacturing processes technologies and standards in other countries. This may require transfer from one unit to another, training at head office, creating a pool of expert personnel and making them available to different units on short or long term assignments. On top managerial and technical posts MNEs may prefer to place home nationals. Studies show that 75% of the chief executives in American multinationals are from U.S.A., 92% in European multinationals are from Europe and almost 100% in Japanese multinationals are from Japan. The practice to send large number of expatiate managers overseas to manage the operations of subsidiaries has declined over the years. Host country nationals are preferred for managerial and technical jobs by many companies. American MNEs in Europe for instance have around 70% senior management personnel from Europe. US companies were also the first to allow more locals in their subsidiaries in developing countries. Japanese MNEs, however, prefer their own nationals to fill up senior and in many cases even supervisory positions in their subsidiaries overseas.