Human resource management in international business presents issues that are different from those in domestic or local business. The nature and characteristics of international business are more complicated than domestic or local business. As such, it is necessary to account for different types of human resource management issues in international business. HR managers must also choose the right staffing policy approach based on the needs of the organization. Effectively addressing the various types of human resource management issues and deciding on the most suitable staffing policy approach leads to success in HRM in international business.
This article presents the types of human resource management issues in international business, the types of staffing policy approaches in international HRM, and the use of expatriate management in the case of the UAE.
Types of Human Resource Management Issues in International Business
Three types of human resource management issues in international business are as follows:
In staffing in international business, HR managers must determine when or where to expatriation. Expatriate workers are frequently assigned to key positions in overseas operations. Human resource managers must also decide on the issue of compensation. The compensation of expatriate workers must be examined along with compensation of local workers and the compensation of workers in the home country. Differences in compensation packages have significant implications on staffing success, expatriate performance and business performance. HR managers must also address the issue of repatriation. Repatriation happens when the worker needs to come back to the home country, usually to continue working for the company. Repatriation also happens when the expatriate worker retires. These issues have significant effects on the perspectives and performance of expatriate workers and local workers, and the effectiveness of HRM in staffing.
Types of Staffing Policy Approaches in International HRM
In international human resource management, the types of staffing policy approaches are as follows:
- Ethnocentric staffing
- Polycentric staffing
- Geocentric staffing
The ethnocentric policy approach to staffing designates home country nationals as top ranking employees in global operations. For instance, executive positions are given to Americans in an office of an American company located in Indonesia. The main benefit of this staffing policy approach is that it allows the organization to ensure that the people in the top positions are experienced in the business of the firm. This is especially the case where the host country does not have enough qualified workers for staffing top positions in the organization. The ethnocentric staffing policy approach is also used to ensure that the culture of the entire organization is unified rather than diversified. However, the problem with the ethnocentric policy approach is that it does not fully support the transfer of local knowledge to the company. Also, this staffing policy approach could block locals from promotion in the organization.
The polycentric policy approach to staffing assigns home country workers to top positions in the central offices or headquarters, and overseas local workers to other positions. The main advantage of this policy approach is that it facilitates organizational learning on local markets. This staffing policy approach also provides better opportunities for locals to improve their careers through promotion. However, this promotion is limited to key positions in the local operations, and does not include central or corporate top positions. This staffing policy approach is disadvantageous because it could create knowledge and performance gaps between overseas managers and managers in the home country.
The geocentric policy approach to staffing assigns job positions to any person best suited for the position, regardless of the employee’s background, culture or country of origin. The main advantage of this staffing policy approach is that it is highly flexible. It can increase the firm’s cultural knowledge about the different markets and countries. However, a disadvantage of this staffing policy approach is that it could be difficult to apply. Immigration policies, costs of worker relocation and diversity management create pressure on HR management.
Case Example: UAE Expatriate Management Policy in HRM
In the UAE, expatriate management policy in HRM is on how to manage expatriate workers to succeed in staffing operations in the country. A firm’s expatriate management policy would consider the needs of expatriate workers in relation to the needs of other workers in the organization, who may be locals in the UAE or the region. In staffing, HR managers would be concerned about how to bring expatriates to the UAE and how to ensure that these expatriates perform as expected in the context of operations in the UAE.
The expatriate management policy in the UAE would also limit expatriate workers to staffing key positions in the organization. The UAE government supports expatriate workers and allows expatriate management policies that require expatriate workers in top ranking positions. However, a firm’s expatriate management policy and staffing policy in the UAE must support local workers in the organization to ensure that the regulations of the country are satisfied. These regulations cover local employment in addition to expatriate employment in the firm’s staffing policy. The involvement of local workers also has the benefit of organizational learning based on workers’ local knowledge of the UAE market.
The staffing policy approach suitable for the UAE is either polycentric or ethnocentric. The final choice depends on the specific needs of the organization at the time of the implementation of the staffing policy approach. Overall, the expatriate management policy in the UAE is comparable to those of the US and other countries in the Middle East.
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