Page 85 - DMGT548_GLOBAL_HRM

Global HRM

Notes 2. Employment of HCNs allows a multinational company to take a lower profile in sensitive
political situations.
3. Employment of HCNs is less expensive, even if a premium is paid to attract high-quality
applicants.
4. Employing HCNs gives continuity to the management of foreign subsidiaries. This
approach avoids the turnover of key managers that, by its very nature, results from an
ethnocentric approach.
A polycentric policy, however, has its own disadvantages. Perhaps the major difficulty is that of
bridging the gap between HCN subsidiary managers and PCN managers at corporate
headquarters. A second major problem associated with a polycentric staffing policy concerns
the career paths of HCN and PCN managers.
Geocentric Approach: The geocentric approach option utilises the best people for the key jobs
throughout the organisation, regardless of nationality. There are two main advantages to this
approach: it enables a multinational firm to develop an international executive team, and it
overcomes the “federation” drawback of the polycentric approach. Phatak (1995) believes the
feasibility of implementing a geocentric policy is based on five related assumptions:
1. Highly competent employees are available not only at headquarters, but also in the
subsidiaries;
2. International experience is a condition for success in top positions;
3. Managers with high potential and ambition for promotion are constantly ready to be
transferred from one country to another;
4. Competent and mobile managers have an open disposition and high adaptability to
different conditions in their various assignments; and
5. Those not blessed initially with an open disposition and high adaptability can acquire
these qualities as their experience abroad accumulates.

There are disadvantages associated with a geocentric policy. First, host governments want a
high number of their citizens employed and will utilise immigration controls in order to force
HCN employment if not enough people with adequate skills are available. Most Western
countries require companies to provide extensive documentation if they wish to hire a foreign
national instead of a local national. Providing this documentation can be time-consuming,
expensive, and at times, futile.
Another disadvantage is that a geocentric policy can be expensive to implement because of
increased training and relocation costs. Finally, large numbers of PCNs, TCNs, and HCNs need
to be sent abroad in order to build and maintain the international team required to support a
geocentric staffing policy.
Regiocentric Approach: One illustration of this approach is a regiocentric policy, which Heanan
and Perlmutter (1979) define as functional rationalisation on a more-than-one country basis. The
specific mix will vary with the nature of a firm’s business and product strategy. For example, a
U.S-based firm could create three regions: Europe, the Americas, and Asia-Pacific. Staff transfers
to the Asia-Pacific region from Europe would be rare, as would transfers from the regions to
headquarters in the United States.
One motive for using a regiocentric approach is that it allows interaction between executives
transferred to regional headquarters from subsidiaries in the region and PCNs posted to the
regional headquarters. There are some disadvantages in a regiocentric policy. It can produce
federalism at a regional rather than a country basis and constrain the organisation from taking
a global stance. Another difficulty is that while this approach does improve career prospects at

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