Human resource management (HRM) in international business involves issues different from those in domestic or local business. The nature and characteristics of international business can be more complicated compared to domestic or local operations. It is necessary to account for different types of human resource management issues in global industries and markets. For instance, retailers, such as Costco Wholesale, Whole Foods Market, and Home Depot, experience HRM issues differently, in comparison to eBay and other e-commerce companies. HR managers must also choose the right staffing policy and approach based on the needs of the business organization. Effectively addressing and deciding on the various types of HRM issues and staffing policies lead to success in human resource management and development in international business.
In multinational companies, human resource managers make strategic decisions to optimize expatriation, compensation, and repatriation. In relation, companies apply ethnocentric, polycentric, or geocentric staffing to support their global operations. Multinationals, such as General Electric (GE), Nike, and Puma apply different staffing policies depending on the local or regional market under consideration.
Expatriation, Compensation, and Repatriation in International Business HRM
Multinational companies typically have expatriates for some job positions. In this regard, international businesses need to consider the following human resource management concerns, specifically for staffing:
In staffing in international business, HR managers determine when or where to implement expatriation. Many expats or expatriate workers are assigned to key positions in overseas operations. For example, Toyota, Ford, and other automakers have expatriates in some key management positions for their regional offices. Similarly, Pfizer and other multinational pharmaceutical firms have expatriates in overseas offices.
Human resource managers decide on compensation and related issues. Strategic decisions on compensation for expatriate workers are based on multiple variables, including industry best practices, employment regulations, and wage laws in overseas locations and in the home country. Airline companies, such as Southwest Airlines, have compensation packages that prioritize international airline industry standards. Also, HR managers decide on compensation packages to influence staffing success, expatriate performance, and business performance. For example, fast-food companies, such as Burger King and Wendy’s, have competitive compensation packages for expatriates in regional corporate positions. These compensation packages are also designed to reduce problems in the workplace, such as employee burnout, especially in high-stress jobs. However, these restaurant companies can use less competitive compensation packages for non-expatriates or local workers in countries where the labor market is not competitive.
Human resource managers address repatriation processes and associated issues. Repatriation happens when the expatriate worker comes back to the home country, usually to continue working for the company or to retire from employment. Repatriated workers experience problems relevant to HRM. Repatriation comes with challenges in sociocultural adjustment, logistics, and finances. For example, when expatriates working for Unilever or Procter & Gamble in Asia move back to the United States or Europe, these consumer goods companies need to help manage the logistics of the move, including the transportation of the workers’ belongings. Also, repatriated workers need to adjust to a different social or cultural environment. The employer must provide support, such as counseling, to minimize problems with sociocultural change, especially when the worker has lived and worked overseas for a long time. Moreover, human resource managers need to address possible changes in compensation accompanying the repatriation, considering differences in costs of living and employment regulations among countries and regions.
Types of Staffing Policy and Approaches in International HRM
In global businesses, human resource management typically employs one or more of the following types of staffing policies or approaches. It is worth noting that ethnocentric and polycentric staffing may be limited or prohibited in some countries, depending on legal or regulatory requirements regarding the employment of foreign nationals.
- Ethnocentric staffing
- Polycentric staffing
- Geocentric staffing
The ethnocentric policy or approach to staffing designates home-country nationals as top-ranking employees in global operations. For instance, some executive positions at consumer electronics companies, like Sony and Samsung, can assign Japanese and Korean nationals, respectively, to offices located in other countries. The main benefit of the ethnocentric staffing approach is that it allows the organization to ensure that the people in top corporate positions are experienced in the firm’s operations and strategies. This is especially the case in host countries or overseas locations that do not have enough qualified workers for staffing top positions in the business organization.
Ethnocentric staffing policies can be used to ensure that the culture of the entire multinational organization is unified rather than diversified. However, these policies do not fully support the transfer of local knowledge to the company. Expatriate managers of overseas operations may find it difficult to establish an in-depth understanding of the local workforce or local business environment. This issue may come with silo mentality, which reduces knowledge sharing between local workers and expatriates. In addition, the ethnocentric staffing policy or approach can block locals from promotion and career development in the organization.
The polycentric policy or approach to staffing typically assigns home-country workers to top positions in central offices or headquarters and assigns local workers to other positions in overseas operations. For example, 3M has Americans in key positions at its headquarters, and local managers at some of its facilities outside the United States. An advantage of the polycentric policy is that it facilitates organizational learning about local markets. This staffing approach also provides better opportunities for locals to improve their careers through promotion. However, a possible disadvantage of polycentric staffing policies is that they can create knowledge and performance gaps between overseas managers and home-country managers.
The geocentric approach to staffing assigns job positions to employees who are best for the positions, regardless of the workers’ country of origin. For example, McDonald’s, Hard Rock Café, Starbucks, and many other food-service companies use geocentric staffing policies for their restaurants or cafés. Also, Disney’s amusement parks use this staffing policy to optimize positive rapport between employees and customers.
An advantage of the geocentric staffing policy is that it is flexible. It can increase the firm’s cultural knowledge about different markets and countries. However, a disadvantage of the geocentric approach to staffing is the difficulty of filling job positions in situations where qualified local workers are not available. In such cases, immigration policies, costs of expatriate worker relocation, and diversity management create pressure on human resource management.
Virtual Teams and Telecommuting
International businesses can benefit from virtual teams and telecommuting. Virtual teams are composed of workers who meet and work online. These virtual employees are not necessarily collocated and may go to the company’s office locations when needed. Intel, IBM, Alphabet (Google), Microsoft, Apple, Netflix, Facebook, and many other information technology and online service businesses use telecommuting and virtual teams to support some business functions in their international operations.
Virtual teams and telecommuting can improve job satisfaction. This approach reduces the need for travel and the issues that come with expatriation and repatriation. However, information overload is a common issue in cases where virtual teams are poorly managed and bombarded with too much information and too many tasks. Also, human resource managers must address motivation and the satisfaction of virtual employees’ needs, such as the needs specified in Maslow’s hierarchy of needs. In addition, change management in virtual teams and organizations presents challenges in communication, employee satisfaction, and performance monitoring, due to the virtual nature of the situation. Moreover, considering the nuances of customer experience in brick-and-mortar operations and in e-commerce, human resource management must account for the effects of telecommuting and virtual workers on the quality of customer service.
Case Example: UAE Expatriate Management Policy and HRM
In the United Arab Emirates, foreign companies’ HRM and staffing policies involve managing expatriates. Human resource managers consider the needs of expatriate workers in relation to the needs of other employees, who may be locals in the UAE or the region. In staffing, HR managers are concerned about how to bring expatriates to the UAE and how to ensure that these expats perform as expected in the context of operations in the country. HR management decisions align with the organization’s strategic planning to streamline changes in the workforce, as foreign workers are brought into locations in the UAE.
Human resource management policies in the UAE can limit staffing to expatriate workers for some key positions in the organization. The UAE government supports foreign employment and allows expatriate management policies that designate expats to top-ranking positions. However, a firm’s expatriate management policy and staffing approach must support local workers in the organization to ensure that the country’s regulations are satisfied. These regulations cover local employment in addition to expatriate employment in staffing policies. The involvement of local workers benefits organizational learning based on the workers’ local knowledge of the UAE market. Overall, expatriate management in the UAE is comparable to that of other countries, especially in the Middle East, regarding employment regulations.
- Abbasi, S. G., Tahir, M. S., Abbas, M., & Shabbir, M. S. (2022). Examining the relationship between recruitment & selection practices and business growth: An exploratory study. Journal of Public Affairs, 22(2), e2438.
- Donnelly, R., & Hughes, E. (2023). The HR ecosystem framework: Examining strategic HRM tensions in knowledge‐intensive organizations with boundary‐crossing professionals. Human Resource Management, 62(1), 79-95.
- Edwards, T., Almond, P., Murray, G., & Tregaskis, O. (2022). International human resource management in multinational companies: Global norm making within strategic action fields. Human Resource Management Journal, 32(3), 683-697.
- Gaur, A., Pattnaik, C., Singh, D., & Lee, J. Y. (2022). Societal trust, formal institutions, and foreign subsidiary staffing. Journal of International Business Studies, 53(6), 1045-1061.
- Han, S. J., & Hazard, N. (2022). Shared leadership in virtual teams at work: Practical strategies and research suggestions for human resource development. Human Resource Development Review, 21(3), 300-323.
- Munir, M., & Djaelani, M. (2022). Information technology and repositioning of human resource management functions. Journal of Social Science Studies (JOS3), 2(2), 50-55.
- Tucker, E. (2022). Strategic workforce planning: from closing skills gaps to optimizing talent. Strategic HR Review, 21(1), 14-19.
- U.S. Department of Labor – Bureau of Labor Statistics – Occupational Outlook Handbook – Human Resource Managers.
- U.S. Department of Labor – Office of Disability Employment Policy – Flexible Work Arrangements.