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Unit 1: Introduction to Global HRM

live and work away from their parent country. There are a variety of reasons for using PCNs. Notes
The most common reason was to start up operations. MNCs prefer to have their own people
launch a new venture. The second most common reason was that the parent country people had
the necessary managerial and technical expertise (Tung, 1982).
Host Country Nationals (HCNs): HCNs are local managers who are hired by the MNC. There
are many reasons for hiring them at the lower or middle-level ranks. Many countries require
the MNC to hire local talent as part of opening their markets to MNCs. For example, in Brazil,
two-thirds of employees in any foreign subsidiary have to be Brazilian nationals. In India too,
before approving joint venture agreements, the government restricts the number of expatriates
to be employed, primarily to limit the foreign exchange outflow and to prepare Indian nationals
to undertake the responsibility at a future time.

PCNs fill usually top positions, but this is not always the case. For example, companies following
the multi-domestic philosophy or polycentric approach would select most positions, including
top ones, from the host country, but usually after starting the operations.

Example: Hindustan Lever Ltd., a subsidiary of the Unilever group in India is currently
headed by an Indian.
Tung (1981) identified four reasons for use of host country managers:
1. These individuals are familiar with the culture;

2. They know the language;
3. They are less expensive and know the way things are done, the rules of local market and
how to get things done or who can influence; and

4. Hiring them is good public relations.
Third Country Nationals (TCNs): TCNs are managers who are citizens of countries other than
the one in which the MNC is headquartered or the one in which it is assigned to work by the
MNC. Tung (1991) found that the two most important reasons that American MNCs use third
country nationals are:

1. These people have the necessary expertise,
2. They were judged to be the best ones for the job.
Japanese companies usually do not hire TCNs, while Phatak (1995) found that US companies
usually prefer TCNs from Europe. TCNs are found typically in large MNCs in advanced stages
of growth. A number of advantages are cited for using them. One is that their salary package is
usually less than that of a PCN. The knowledge of local language, like English was the reason for
choosing British managers by US companies in former British colonies like India, Jamaica, West
Indies and Kenya.
Today, a new breed of multi-lingual, multi-experienced ‘global-managers’ has emerged. These
new managers are part of a growing group of international executives who can manage across
borders and do not fit the traditional third country mould. With a unified Europe, and North
America and Asia becoming business hubs, such global managers are in great demand.

1.1.4 Model of International HRM

An article by Morgan (1986) on the development of international HRM presents a model of
international HRM that consists of three dimensions:
1. The three broad human resource activities: Procurement, allocation, and utilisation.

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