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Essay: Modern Approaches To Human Resource Management In International Business

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Abstract

Within the frame of this coursework will be considered the modern approaches in human resource management in international business. Analyzed the main methods of the staffing activity within recruitment and selection of employees for purposes of multinational companies and the influences it has on their further development.

The structure of work is presented in following order: parts one containing a literature review, part two is the theoretical knowledge about the international stuffing also current situation analysis and discussion and finally the conclusions.  Also will be considered how international staffing practices need to be configured to ensure employee retention.

Contents

Table of contents

Abstract

1 Introduction

2 Analysis and Discussion:  four staffing approaches in MNC

a. Literature Review

b. The design and features of international staffing practices

c. Diversity  of opportunities between host-countries nationals, parent-country nationals and third-country nationals

d. Influence of culture for approach choice in multinational companies.

3 Conclusion and Recommendations

4 References

Table of figures

Introduction

This coursework is focusing on the modern direction of staffing in multinational companies in terms of globalization occurring in all types of organization. International Human Resource Management (IHRM) significantly differs from the Human Resources Management (HRM) in domestic companies, International HRM has more influenced by external factors, wider heterogeneity of management functions and a differentiated approach to the training of management personnel. Cultural variety, social differentiation, economic development and legal systems in those countries and globalization processes occurring in an international business affect on recruiting pattern in organizations all around the globe. The function of human resource management in multinational companies are very complicated in terms of adaptation the personnel management policies and procedures in the headquarters, to the branches in various countries around the world. In different countries, we can observe various behavioral pattern and methodology of staffing influenced by factors of management style and practice, the differences of labor markets and labor costs, problem of movement of labor, factors of industrial relations, the national orientation and control factors.

The necessity of effective HRM in a current period of globalization in the business scope leads to mobilization of better professional resources and play the significant role in controlling and implementing strategies in an international business. Implementation of international strategies by competent managerial personnel helps to minimize the risk of underperformance or failure in overseas assignments.

Analysis and Discussion:  four staffing approaches in MNC

Attracting, developing and retaining high-quality personnel is seen as a key to success (Pfeffer, 1994). Most of the academic books and sources in the sphere of Human resource management and almost all working organization in their HRM strategy states that people are the most valuable asset and resource for further success.  The interest occurring last three decades in international aspects of HRM has been associated with increasing numbers of businesses internationalizing their operations. The level of spreading business interests around the world or influence of globalization processes for the further existence of a particular organization can lead to the adoption or implementation of international strategies for the management of staffing activities.

Schuler et al (1993) including Dowling et al (1999) and Budhwar (2003), in reviewing of existing academic literature on international staffing, highlights four generic approaches to this area. Collings and Scullion (2006) linked back these approaches to the work of Perlmutter (1969), who was the first who defined different recruitment approaches for international staffing purpose in multinational organizations in terms of from which country the people recruited – ethnocentric, polycentric and geocentric. The further development of this theory was published in 1979 by Perlmutter and Heenan when they identified the fourth approach of international staffing – regiocentric.

Ethnocentric

Under this approach, the representatives of organization country origins known as expatriates often occupy the strategic senior management positions in the subsidiaries and overseas branches such as Chief Executive Officer (CEO) and financial director (CFO). Such a system enables to implement in the subordinated company the headquarters’ management style in term of standardization of strategic decisions making and stay subordinate and controlled on core issues by the parent company.

Advantages.

• Full organizational control.

• The facilitation and maintain of coordination within entire organization.

• Assurance that subsidiary will comply with organization objectives of the development strategy.

• Valuable international experience for perspective managers of the organization.

Disadvantages.

• Lack of knowledge and (or) misunderstanding of local business environment and cultural differences by HCNs that may lead to reduced productivity and increased turnover among that group.

• The adaptation of expatriate managers to new environment takes time during which these expatriates make poor decisions.

• Expenses for relocation compensation and salary for home country nationals – expatriates around 4 times higher than expenses for hiring local employees.

Polycentric

Under this approach, local professionals employees are hired on the base of their knowledge of the local system and existing rules of doing business in given country to implement company's strategic goals. Within this pattern subsidiaries are allowed to be more autonomous in operational activity and can diversify management tools in terms of adaptation to local circumstances.

Advantages.

• Removes cultural barriers in governing (language, traditions, behavior).

• Avoids issues with adaptation of expatriates and their families.

• Eliminates the need for cultural awareness training.

• Significant reduces of compensation expenses.

• Continuity of management of foreign subsidiaries thus reduces losses and turnover.

Geocentric

Staffing is undertaking on a worldwide basis. The HR practices, which emerge, have to stamp of staff from both headquarters and subsidiary units. Although there is more cultural flexibility contained in these practices, they are implemented consistently.

Regiocentric

This is the variant of the geocentric model in this case managers are recruited regionally and HR practices are consistent within specified regions.

In terms of transnational growth, the demand pattern of recruitment is determined by:

1. The periodic outflow of staff as in headquarters so as in overseas branches

2. The vertical and horizontal career moves.

3. The expansion of activities and the implementation of diversification of the company's intentions.

4. Territorial and market expansion and technology transfer in an international environment. 

Within the existing literature, all scholars define three type of employees according to nation or citizenship of employee: parent-country nationals (PCN), host-country nationals (HCN) and third-country nationals (TCN).

Three main sources of attraction of personnel can be identified in international human resource management:

1. The nationals of the original country (parent) one in which the headquarters of transnational organizations, or citizens of this country (parent country nationals – PCNs);

2. Nationals of the country where the subsidiary is organized branch of the company (the host country), or the citizens of that country (host country nationals – HCNs);

3. Nationals of third countries (third country nationals – TCNs), who are neither citizens of the country in which the headquarters of international companies or nationals of the country in which the country carries out its business operations.

The extent to which employees – PCNs, HCNs or TCNs at various levels of government depends on the geographical location of the subsidiaries.

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