Explain the advantages and disadvantages of using home country nationals. In which situation would you use this staffing strategy? Question

Staffing Internationally LEARNING OBJECTIVES

1. Be able to explain the three staffing strategies for international businesses and the advantages

and disadvantages for each.

2. Explain the reasons for expatriate failures.

One of the major decisions for HRM when a company decides to operate overseas is how the overseas

operation will be staffed. This is the focus of this section.

Types of Staffing Strategy

There are three main staffing strategies a company can implement when entering an overseas market,

with each having its advantages and disadvantages. The first strategy is a home-country national strategy.

This staffing strategy uses employees from the home country to live and work in the country. These

individuals are calledexpatriates. The second staffing strategy is a host-country national strategy, which

means to employ people who were born in the country in which the business is operating. Finally, a third-

country national strategy means to employee people from an entirely different country from the home

country and host country. Table 14.4 "Advantages and Disadvantages of the Three Staffing Strategies" lists

advantages and disadvantages of each type of staffing strategy. Whichever strategy is chosen,

communication with the home office and strategic alignment with overseas operations need to occur for a

successful venture.

Table 14.4 Advantages and Disadvantages of the Three Staffing Strategies

Home-Country National Host-Country National Third-Country National

Advantages

Greater control of organization

Language barrier is

eliminated

The third-country national

may be better equipped to

bring the international

perspective to the business

Managers gain experience in

local markets

Possible better

understanding of local rules

and laws

Costs associated with hiring

such as visas may be less

expensive than with home-

country nationals

Possible greater understanding

and implementation of business

strategy

Hiring costs such as visas

are eliminated

Home-Country National Host-Country National Third-Country National

Cultural understanding

Morale builder for employees

of host country

Disadvantages

Adapting to foreign

environment may be difficult

for manager and family, and

result in less productivity

Host-country manager may

not understand business

objectives as well without

proper training

Must consider traditional

national hostilities

Expatriate may not have

cultural sensitivity

May create a perception of

“us” versus “them”

The host government and/or

local business may resent

hiring a third-country

national

Language barriers

Can affect motivation of

local workers Cost of visa and hiring factors

HUMAN RESOURCE RECALL

Compare and contrast a home-country versus a host-country staffing strategy.

Expatriates

According to Simcha Ronen, a researcher on international assignments, there are five categories that

determine expatriate success. They include job factors, relational dimensions, motivational state, family

situation, and language skills. The likelihood the assignment will be a success depends on the attributes

listed in Table 14.5 "Categories of Expatriate Success Predictors with Examples". As a result, the

appropriate selection process and training can prevent some of these failings. Family stress, cultural

inflexibility, emotional immaturity, too much responsibility, and longer work hours (which draw the

expatriate away from family, who could also be experiencing culture shock) are some of the reasons cited

for expatriate failure.

Table 14.5 Categories of Expatriate Success Predictors with Examples

Job Factors

Relational

Dimensions Motivational State

Family

Situation Language Skills

Technical skills

Tolerance for

ambiguity Belief in the mission

Willingness of

spouse to live

abroad

Host-country

language

Familiarity with host

country and

headquarters

operations Behavioral flexibility

Congruence with

career path

Adaptive and

supportive

spouse

Nonverbal

communication

Managerial skills Nonjudgmentalism

Interest in overseas

experience

Stable marriage

Administrative

competence

Cultural empathy and

low ethnocentrism

Interest in specific

host-country culture

Interpersonal skills

Willingness to

acquire new patterns

of behavior and

attitudes

Source: Adapted from Simcha Ronen, Training the International Assignee (San Francisco: Jossey-Bass,

1989), 426–40.

Most expatriates go through four phases of adjustment when they move overseas for an assignment. They

include elation/honeymoon, resistance, adaption, andbiculturalism. In the elation phase, the employee is

excited about the new surroundings and finds the culture exotic and stimulating. In the resistance phase,

the employee may start to make frequent comparisons between home and host country and may seek out

reminders of home. Frustration may occur because of everyday living, such as language and cultural

differences. During the adaptation phase, the employee gains language skills and starts to adjust to life

overseas. Sometimes during this phase, expatriates may even tend to reject their own culture. In this

phase, the expatriate is embracing life overseas. In the last phase, biculturalism, the expatriate embraces

the new culture and begins to appreciate his old life at home equally as much as his new life overseas.

Many of the problems associated with expatriate failures, such as family life and cultural stress, have

diminished.

Host-Country National

The advantage, as shown in Table 14.4 "Advantages and Disadvantages of the Three Staffing Strategies",

of hiring a host-country national can be an important consideration when designing the staffing strategy.

First, it is less costly in both moving expenses and training to hire a local person. Some of the less obvious

expenses, however, may be the fact that a host-country national may be more productive from the start, as

he or she does not have many of the cultural challenges associated with an overseas assignment. The host-

country national already knows the culture and laws, for example. In Russia, 42 percent of respondents in

an expatriate survey said that companies operating there are starting to replace expatriates with local

specialists. In fact, many of the respondents want the Russian government to limit the number of

expatriates working for a company to 10 percent. [1] When globalization first occurred, it was more likely

that expatriates would be sent to host countries, but in 2011, many global companies are comfortable that

the skills, knowledge, and abilities of managers exist in the countries in which they operate, making the

hiring of a host-country national a favorable choice. Also important are the connections the host-country

nationals may have. For example, Shiv Argawal, CEO of ABC Consultants in India, says, “An Indian CEO

helps influence policy and regulations in the host country, and this is the factor that would make a global

company consider hiring local talent as opposed to foreign talent.” [2]

Third-Country Nationals

One of the best examples of third-country nationals is the US military. The US military has more than

seventy thousand third-country nationals working for the military in places such as Iraq and Afghanistan.

For example, a recruitment firm hired by the US military called Meridian Services Agency recruits

hairstylists, construction workers, and electricians from all over the world to fill positions on military

bases. [3] Most companies who utilize third-country national labor are not new to multinational

businesses. The majority of companies who use third-country national staffing have many operations

Figure 14.2 Phases of Expatriate Adjustment

already overseas. One example is a multinational company based in the United States that also has

operations in Spain and transfers a Spanish manager to set up new operations in Argentina. This would be

opposed to the company in the United States sending an American (expatriate) manager to Argentina. In

this case, the third-country national approach might be the better approach because of the language

aspect (both Spain and Argentina speak Spanish), which can create fewer costs in the long run. In fact,

many American companies are seeing the value in hiring third-country nationals for overseas

assignments. In an International Assignments Survey,[4] 61 percent of United States–based companies

surveyed increased the use of third-country nationals by 61 percent, and of that number, 35 percent have

increased the use of third-country nationals to 50 percent of their workforce. The main reason why

companies use third-country nationals as a staffing strategy is the ability of a candidate to represent the

company’s interests and transfer corporate technology and competencies. Sometimes the best person to

do this isn’t based in the United States or in the host country.

KEY TAKEAWAYS

 There are three types of staffing strategies for an international business. First, in the home-

country national strategy, people are employed from the home country to live and work in the

country. These individuals are called expatriates. One advantage of this type of strategy is easier

application of business objectives, although an expatriate may not be culturally versed or well

accepted by the host-country employees.

 In a host-country strategy, workers are employed within that country to manage the operations

of the business. Visas and language barriers are advantages of this type of hiring strategy.

 A third-country national staffing strategy means someone from a country, different from home

or host country, will be employed to work overseas. There can be visa advantages to using this

staffing strategy, although a disadvantage might be morale lost by host-country employees.

EXERCISES

1. Choose a country you would enjoy working in, and visit that country’s embassy page. Discuss the

requirements to obtain a work visa in that country.

2. How would you personally prepare an expatriate for an international assignment? Perform

additional research if necessary and outline a plan.

[1] “Russia Starts to Abolish Expat jobs,” Expat Daily, April 27, 2011, accessed August 11, 2011, http://www.expat-

daily.com/news/russia-starts-to-abolish-expat-jobs/.

[2] Divya Rajagorpal and MC Govardhanna Rangan, “Global Firms Prefer Local Executives to Expats to Run Indian

Operation,” Economic Times, April 20, 2011, accessed September 15,

2011, http://articles.economictimes.indiatimes.com/2011-04-20/news/29450955_1_global-firms-joint-ventures-

investment-banking.

[3] Sarah Stillman, “The Invisible Army,” New Yorker, June 6, 2011, accessed August 11,

2011,http://www.newyorker.com/reporting/2011/06/06/110606fa_fact_stillman.

[4] “More Third Country Nationals Being Used,” n.d., SHRM India, accessed August 11,

2011,http://www.shrmindia.org/more-third-country-nationals-being-used.