Deciding on the Right Staffing Policy for a Multinational Enterprise
Multinational enterprises or MNE’s are complex organizations since they are global entities. Choosing the right staffing policy for your MNE is critical for your MNE to have success on the global stage.
Today we will go over the ethnocentric staffing policy, polycentric policy, and the geocentric policy, which can help you decide which is the best approach for your MNE.
Ethnocentric Staffing Policy
By definition, an ethnocentric staffing policy is used when expats are used to fill in the important roles of a foreign subsidiary. By doing this, its is argued that this staffing policy helps foreign subsidiaries stay connected with the domestic operations of a firm. The downsides to this approach is that, it is costly to implement as you will have to provide housing for the expats you send over to your subsidiary. Another negative is that this staffing policy may lead to cultural myopia. This can create differences between the expat executives and local employee’s, as the leaders may not be able to understand how business works in this new host country.
Simply put, when using a polycentric approach, all roles in the foreign subsidiary are filled by host country employees. So if your company has expanded into Turkey, then all employees will be Turkish, regardless of position. This approach is advantageous for some because it can be cost efficient for most company’s, especially if the host country for the subsidiary has low labor costs, as well as there is little to no chance for cultural myopia with this policy. The main downsides for this staffing policy is the lack of cohesiveness between the subsidiary and HQ. Another possible drawback is the lack of skilled labor, especially when the host country is a developing country, it may be hard to fill in job vacancies.
This staffing policy is used when firms hires the best employees regardless of where they live. Not only is this staffing policy the costliest to implement, but it is also the most complex to run. This is because your company, specifically your HR team, will have to deal with various economic and political environments, since your employees are essentially from all over the world. Because of this complexity, this policy should only be used by company’s who are truly a global entity.
Each of these staffing policies have their pro’s and con’s. It really is up to the company to decide which is the best one to implement. Theoretically, if we were to look at all 3 staffing policies, it is best to implement an ethnocentric approach when the subsidiary is new, because you can use expats to set things up, but once things are up and running, you can then transition into either a polycentric or geocentric approach.