Staffing choices in a far-flung global company are more complex as well. Issues of cost, cultural savvy, familiarity with local conditions, language skill, family issues, and more must all be considered carefully as staffing decisions are made. In addition to many of the standard human resources challenges that inevitably arise, determining where employees will be sourced from represents one of the most important decisions facing companies as they set up operations abroad. In general, employees may come from any of the following sources: the headquarters (home) country, the host (local) country, or a third country (neither home, nor host). These choices are outlined briefly below.
Ethnocentric staffing involves staffing overseas positions with home country personnel. These “expatriates” are usually assigned to fairly senior or technical positions in the overseas organization. An example of this staffing choice would be when a Japanese company sets up an office in the United States and sends a Japanese executive from their headquarters in Tokyo to staff the new office in Chicago.
Advantages: Home country staff, when sent overseas, are familiar with the home country operations and culture. Because of this, they may be able to better communicate with headquarters, access needed resources, and tap into a home-country network. In addition, the home country may know these people well from past collaboration that can lead to high levels of trust and confidence between the parties. Familiarity with the company often means that these individuals bring special company-specific expertise along with them, as well as technical skills and knowledge related to the company’s product offering. They may also bring general technical, or managerial skills that may be in short supply in the host country. Ethnocentric staffing offers the additional benefit of building a global mindset among the home country workforce. Those individuals who are sent overseas as expatriates will often return home with a more globalized perspective.
Disadvantages: Home country employees are expensive. Many companies estimate that sending an expatriate overseas costs about 2-5 times their annual salary. This means that sending an executive and their family overseas can cost hundreds of thousands of dollars or more per year. The home country employee is usually less familiar with the local culture and employment conditions, and the employee and the family may find it hard to adapt to the new local living and working conditions. In fact, according to widely cited research, failure of the spouse and of the family to adapt to local cultural differences are two of the most frequent reasons that an employee assigned to an overseas post will fail to complete their assignment. Ethnocentric staffing practices are also sometimes criticized for preventing talented local employees from filling the positions held by expatriates.
Polycentric staffing involves hiring local personnel to fill needed overseas positions. For example, under this model, a South African company setting up an office in Brazil would hire a Brazilian to fill an open position.
Advantages: A polycentric staffing strategy is much less expensive than the ethnocentric model. Relocation costs are usually much lower and a standard compensation package consistent with the local market is usually sufficient. Local employees are usually more familiar with the local culture and language and may have access to networks and relationships with local stakeholders.
Disadvantages: Talent is often short in host countries. Lack of familiarity with the home country conditions, culture and language may become a barrier to effective communication with the headquarters staff. Lack of familiarity with headquarters operations may make it difficult for the local staff to access needed resources and assistance.
Geocentric staffing involves staffing a location without regard for the employees’ place of origin. Companies simply scan their global workforce for the best qualified candidate to fill a position. In this model, a Chinese company might fill a position in their Mexico office with an employee from the United Kingdom.
Advantages: The geocentric model offers the most employment flexibility and choice to the company. The company can search the entire global workforce to find the most qualified candidate for a certain position. Opportunities for cross-cultural development are extended to company employees no matter which country they come from. The additional global interaction taking place can foster teamwork across countries and a better cross-border understanding of company operations. A cadre of globally savvy employees with experience in multiple company locations can be a powerful asset as the company continues to seek additional overseas opportunities.
Disadvantages: Geocentric staffing can be as expensive as ethnocentric staffing practices. Employees and families often have to be relocated across country boundaries and long distances. Geocentrically placed employees may be unfamiliar with local practices.
Regiocentric staffing involves staffing within a global region. In this case, a Korean company might fill a position in Italy with a Spanish employee.
Advantages: Moves are often made over shorter distances as employees are relocated. Cultural and linguistic differences may be less pronounced. Employees gain the benefits of cross-cultural experience as they work outside their home country.
Disadvantages: Costs of relocation often remain fairly high. While cross-cultural perspective is built, a truly global perspective may still be lacking. It is also important to note that cultural and language differences will often be significant factors even within region.
All of the above models have strengths and weaknesses which must be seriously considered. In most companies with multiple employees in overseas locations a mixed strategy will often make the most sense both in terms of efficiency and effectiveness. A few select positions may best be filled with either home country or third country nationals while the vast majority of employment positions are usually filled by local employees. Because cross-cultural difference will be encountered in almost any overseas staffing configuration, significant investment in cross-cultural skills training will be extremely valuable.