What determines whether firms use locals or expats? Ideally, rational reasons like cost and competency will prevail. However, the company’s top executive’s values will also undoubtedly play a role. For example experts often classify top executives values as ethnocentric polycentric, or geometric. In an ethnocentrically run corporation the prevailing attitude is that home country attitudes management style, knowledge evaluation criteria and managers are superior to anything the host country might have to offer. In the polycentric corporation there is a conscious belief that only host country managers can ever really understand the culture and behavior of the host country market; therefore the foreign subsidiary should be managed by local people. Geocentric executives believe they must scour the firm’s whole management staff on a global basis, on the assumption that the best manager for a specific position anywhere may be in any of the countries in which the firm operates.
The notion that home country attitudes, management style, knowledge evaluation criteria and managers are superior to anything the host country has to offer.
These values translate into three broad international staffing policies. With an ethnocentric staffing policy, the firm fills key management jobs with parent country nationals. At Royal Dutch Shell, for instance most financial officers around the world are Dutch nationals. Reasons given for ethnocentric staffing policies include lack of qualified host country senior management talent a desire to maintain a unified corporate culture and tighter control and the desire to transfer the parent firm’s core competencies (for instance, a specialized manufacturing skill) to a foreign subsidiary more expeditiously.
A conscious belief that only the host country managers can ever really understand the culture and behavior of the host country market.
A polycentric oriented firm would staff its foreign subsidiaries with host country nationals and its home office with parent country nationals. This may reduce the local cultural misunderstandings that might occur if it used expatriate managers. It will also almost undoubtedly be less expensive. One expert estimates that an expatriate executive can cost a firm up to three times as much as a domestic executive because of relocation expenses and other expenses such as schooling for children annual home leave and the need to pay income taxes in two countries.
The belief that the firm’s whole management staff must be scoured on a global basis, on the assumption that the best manager of a specific position anywhere may be in any of the countries in which firm operates.
A geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of nationality. This may let the global firms use its human resources more efficiently by transferring the best person to the open job, wherever he or she may be, It can also help build a stronger and more consistent culture and set of values among the entire global management team.
Why Expatriate Assignments fail?
Because international assignments are the heart of international human resource management it’s disconcerting to see how often such assignments fail. The exact number of failures is hard to quantify in part because failure means different things to different people. For example some expatriates may fail less consciously quietly running up the hidden costs of reduced productivity and poisoned customer and staff relations. However there is some evidence that the rate of early departures to least is declining. This appears to be because more employers are taking steps to reduce expats problems abroad. For example they are selecting expats more carefully, helping spouses to get jobs abroad, and providing more ongoing support to the expat and his or her family. Another example, some companies have formal global buddy programs. Here local managers assist new expatiates with advice on things such as office politics norms of behavior and where to receive emergency medical assistance.