Diversity Management &

Cross Cultural HRM

• Diversity is ubiquitous. No two persons are similar.
• The world has been and is a stage of huge mix of people with
different backgrounds, religion, castes, race, culture, behavior, age,
marital status, nationality, educational qualification, political
affiliation, levels of ability, personality, gender and many more which
vary across the globe.
• Other sources of differences include socio - economic background of
individuals, membership and non membership of unions, forms and
quality/quantity of education, period and nature of employment,
drives to work, and work styles.
• Diversity, if properly managed, can increase creativity and innovation
in organizations as well as improve decision making by providing
different perspectives on problems. Diversity mainly came into the
picture when globalization came in 1990-91.
• Such convergence of distinctly different people presents tremendous
opportunities as well as challenges.
Managing Diversity
• A management system which eliminates the differences found in a
multicultural workforce in a manner which results in the highest level of
productivity for both the organization and the individual. In simple words
managing diversity means managing people in the best interest of employee
as well as employer.
• Managing diversity is an on-going process that explore the various talents
and capabilities which a diverse population bring to an organization,
community or society, so as to create a wholesome, inclusive environment,
that is “safe for differences,” enables people to “reject rejection,” celebrates
diversity, and maximizes the full potential of all, in a cultural context where
everyone benefits from Multiculturalism, as the art of managing diversity, is
an inclusive process where no one is left out.
• Earlier, the management followed melting pot approach to
differences in workforce. It was assumed that people who were
different would somehow manage with the majority group. But it is
now recognized that employees don‟t set aside their values, beliefs,
lifestyles, preferences, etc when they come to work.
• Therefore, it is desirable to recognize and value such differences by
adapting management practices to different life and work styles, etc
of the diverse group.
• Diversity management involves creating a supportive culture where
all employees can be effective.
• In creating this culture it is important that top management strongly
support workplace diversity as a company goal and include diversity
initiatives in their companies' business strategies. It has grown out of
the need for organization to recognize the changing workforce and
other social pressures that often result.
Why Manage Diversity
§A large number of women are joining the work-force.
§Work-force mobility is increasing.
§Young workers in the work-force are increasing
§Ethnic minorities' proportion constantly in the total work-force is
increasing.
§International careers and expatriate are becoming common.
Diversity can be seen through these figures in Indian context
ØOver 400 million women are employed in various streams
Ø Around 30 percent of the workforce in the IT sector is women
Ø Socially disadvantaged people (scheduled casts/tribes, etc.) have entered
organizations as a result of a policy of reservations and concessions.
Ø Old employees have grown in number because of improved medical and health
care.
Ø IT Industries like Infosys, TCS and Wipro are actively recruiting foreign nationals
and women, both by choice and design. Bharti Enterprise has mandated their
recruitment agencies to have a 25-30% percentage of women candidates at the
interview stage. Diversity in companies is no longer about being melting pots, but
being salad bowls
Challenges in Managing Employee Diversity
1. Individual versus Group Fairness: This issue is closely related to the “difference in divisive
versus better” i.e. how far management should go in adapting HR programs to diverse
employee groups.
2. Resistance to Change: Long established corporate culture is very resistant to change and
this resistance is a major roadblock for women and minorities seeking to survive and
prosper in corporate setting.
3. Resentment: Equal Employment Opportunities (EEO) was imposed by government rather
than self initiated. The response to this forced change was in many cases grudging
compliance.
4. Group Cohesiveness and Interpersonal Conflict: Although employee diversity can lead to
greater creativity and better problem solving; it can also lead to open conflict and chaos if
there is mistrust and lack of respect among groups. This means that as organizations
become more diverse, they face greater risks that employees will not work together
effectively. Interpersonal friction rather than cooperation may become the norm.
5. Segmented Communication Networks: It has been seen that most communication in
the organization occurs between people with some similarities either by way of gender
or by way of same place.
6. Backlash: Some group in the organization feels that they have to defend themselves
against encroachments by those using their gender or ethnicity to lay claim to organizational
resources .Thus, while women and minorities may view a firms cultural diversity policy as
a commitment to improving their chances of advancement.
7. Retention: The job satisfaction levels of women and minorities are often lower than
those of majorities. Therefore it becomes difficult to retain such people in an
organization.
8. Competition for Opportunities: Already, there are rising tensions among the
disadvantaged groups jockeying for advancement. Employers are being put into the
uncomfortable position of having to decide which disadvantaged group is most deserving.
Diversity as an Asset
a) New Products and Services: Diversity generates ideas in geometric
progression fuelling greater creativity and innovation. It can stimulate
consideration of less obvious alternatives. This results in flurry of new products
and services to meet the customer‟s expectation and needs.
b) Better teamwork: Organizations are operating in such a fashion that it is
impossible to function without teamwork. Interacting with diverse workforce is
leading to better ideas and enhancing the morale and motivation in the
organization
c) Better Image: Companies that have diverse workforce are having better
image, reputation and patronage than those who do not encourage diversity.
This has huge impact on expansion of business as it can reduce the talent
crunch by targeting the diverse groups.
d) Effective and Happy workforce: Adept handling of diversity can multiply
motivation and enhance productivity due to the satisfaction employees enjoy
on being treated fairly, valued equally and given dignity at workplaces. It
reduces the chances of absenteeism and attrition too as the undue stress,
unnecessary frustration or low morale due to being insensitive, discriminatory
etc gets drastically reduced. Hence, many organization are charting diversity
initiative not merely to comply with legal obligations but reap the business
benefits especially in term of better recruitment and higher retention among
the talented workforce
e) Expansion of Markets: Globalization has brought together heterogeneous
teams to enhance the problem solving capabilities and produce creative
solutions leading to expansion of business landscape.
Major HR challenges
1. Change from a manufacturing to a service or knowledge economy: This
new economy is characterized by a decline in manufacturing and a
growth in service or knowledge as the core of the economic base.
A service economy can be defined as a system based on buying and
selling of services or providing something for others .
A knowledge economy is referred to as the use of information or
knowledge to generate tangible and intangible value
Some economists argue that service activities are now dominating
the economies of industrialized nations, and knowledge-intensive
services or businesses are considered a subset of the overall service
economy
2. Rise in globalization: . Globalization in this context refers to
organizations that operate on a global or international scale (Oxford
Dictionary, 2014b).
Organizations operating in a global environment face a number of new
challenges including differences in language and culture of employees,
and variations in social, political and legal systems.
Multinational corporations (MNCs) are large companies operating in
several countries that are confronted with new questions, including how
to create consistent HR practices in different locations, how to develop a
coherent corporate culture, and how to prepare managers to work in a
diverse cultural environment (Sparrow, 2007).
What is International Human Resource
Management
• IHRM can be defined as set of activities aimed managing
organizational human resources at international level to achieve
organizational objectives and achieve competitive advantage over
competitors at national and international level.
• IHRM includes typical HRM functions such as recruitment, selection,
training and development, performance appraisal and dismissal done
at international level and additional activities such as global skills
management, expatriate management and so on.
GLOBE Model in IHRM
• The GLOBE (Global Leadership and organizational Behaviour
Effectiveness).
• The Globe Project Team Comprises 170 researchers who have
collected the data over 7 years on cultural values& practices and
Leadership attributes from 17000 managers in 62 countries, covering
as many as 825 organizations spread across the world.
• The team identified Nine cultural dimensions that distinguish one
society from another and also have some important managerial
implications.
1. Assertiveness: This aspect is defined as the degree to which individuals
in the societies are expected to be tough, confrontational and
competitive.
2. Future orientation: This dimension refers to the level of importance a
society attaches to the future oriented behaviour e.g. proper planning
for future activities, training & Development, Investing in R&D etc.
3. Performance Orientation: Performance orientation measures the
importance of performance and excellence in society and also refers to
whether people are encouraged to strive for continued performance.
E.g. Japanese people believe in Kaizen, Constant improvement, Zero
defects etc.
4. Human Orientation: It is understood as the degree to which
individuals in organizations or societies encourage people for being
caring, generous and kind to others.
5. Gender Differentiation: This is understood as the extent to which a
society resorts to role differentiation or gender discrimination. e.g. Arab
countries’ societies .
6. In Group Collectivism: This refers to the degree to which to which
people are loyal and show cohesiveness in their organizations and
families as well. Japanese societies show more cohesiveness, than
American.
7. Power Distance: This refers to the degree to which organizational
members or citizens of a society expect and agree that power should
be unequally distributed. The French employees high in power distance
, often dominates the management processes and prefer a structure
which is more centralized.
3 approaches in HR in the international
context
Research on HR in the international context has focused on three
approaches to understanding the issues that arise in global
environments:
• International,
• Comparative, and
• Cross-cultural HR
1. International approaches focus on HR strategies, systems, and practices in
different socio-cultural contexts and different geographic territories. It also
outlines the anatomy of MNCs, and considers the unique set of HR
issues that occur in these contexts.
• Factors that affect HR practices in global environments:
(a) contextual variables (such as the host country's legal system,
cultural distance between host country and employees' country),
(b) firm-specific variables (such as the stage of internationalization,
type of industry, link between strategy and structure), and
(c) situational variables (such as staff availability, need for control,
locus of decision making)
2. Comparative HR explores the context, systems, and national patterns of HR in different
countries, and discusses the idiosyncrasies of various institutions and economic
environments.
• Most of the research on comparative HR indicated that HR practices differ across nations,
and are aligned with national cultures.
• Two examples of that research include a study by Schuler and Rogovsky (1998) that
assessed the relations between Hofstede's national culture dimensions and the design of HR
practices. These authors found that a national emphasis on individualism was positively
correlated with a company's use of pay-for-performance pay systems.
• Individualistic nations (e.g., UK, France, and Spain) were more likely to use calculative HR
strategies (e.g., pay for performance) than collective nations (e.g., Scandinavian countries).
Conversely, collective nations (Scandinavian countries) were more likely to use collaborative
practices (e.g., employee participation) than individualistic countries (e.g., Germany, France
and Spain).
The 6-D model of national culture- Hofstede's
national culture dimensions
• Individualism : Individualism is the extent to which people feel independent, as
opposed to being interdependent as members of larger wholes. https://
www.youtube.com/watch?v=zQj1VPNPHlI&t=4s
• Power Distance: Power Distance is the extent to which the less powerful
members of organizations and institutions (like the family) accept and expect
that power is distributed unequally. https://
www.youtube.com/watch?v=DqAJclwfyCw&t=5s
• Masculinity : Masculinity is the extent to which the use of force in endorsed
socially. In a masculine society, men are supposed to be tough. Men are supposed
to be from Mars, women from Venus. In a feminine society, the genders are
emotionally closer. Competing is not so openly endorsed, and there is sympathy
for the underdog. https://www.youtube.com/watch?v=Pyr-XKQG2CM&t=4s
• Uncertainty Avoidance: Uncertainty avoidance deals with a society’s tolerance for
uncertainty and ambiguity. Uncertainty avoidance has nothing to do with risk
avoidance, nor with following rules. It has to do with anxiety and distrust in the face
of the unknown, and conversely, with a wish to have fixed habits and rituals, and to
know the truth.
https://www.youtube.com/watch?v=fZF6LyGne7Q&t=2s
• Long-term orientation : Long-term orientation deals with change. In a long-time-
oriented culture, the basic notion about the world is that it is in flux, and preparing
for the future is always needed. In a short-time-oriented culture, the world is
essentially as it was created, so that the past provides a moral compass, and adhering
to it is morally good. As you can imagine, this dimension predicts life philosophies,
religiosity, and educational achievement.
https://www.youtube.com/watch?v=H8ygYIGsIQ4&t=5s
• Indulgence : Indulgence is about the good things in life. In an
indulgent culture it is good to be free. Doing what your impulses want
you to do, is good. Friends are important and life makes sense. In a
restrained culture, the feeling is that life is hard, and duty, not
freedom, is the normal state of being.
https://www.youtube.com/watch?v=V0YgGdzmFtA&t=3s
3. Cross cultural HR : Examines the degree to which individuals' cultural
values influence the acceptance and effectiveness of HR practices. Most
of the theories in HR and Organizational Behavior (OB) were developed
in Western nations and assume that the cultural values of individuals in
organizations are homogeneous.
However, it is clear that employees' cultural values differ in U.S. and
global contexts, and organizations need to align their HR processes with
these cultural values . For example, cross-cultural research indicated
that individuals' cultural values shape their reward preferences, and
their reactions to negative feedback.
Eg: individuals who valued individualism preferred reward allocation
systems based on equity or proportionality, but those who valued
collectivism preferred equality-based allocation systems. As a result,
pay-for-performance systems may motivate employees who are
individualistic, but group-based or profit-sharing systems may be more
effective with those who value collectivism
Individuals who endorse collectivism were more likely to accept
negative feedback than those who stress individualism. Given that most
organizations are operating in a global environment, we expect that the
field will pay even more attention to these issues in the future.
Models of staffing the multinational
enterprise
• The orientation of a MNC’s top management team toward the staffing
of the organisation’s foreign subsidiaries will have a significant impact
on the nature of the international human resource management
policies introduced within the firm which will in turn impact on the
final configuration of the management teams in subsidiary
operations.
Perlmutter introduced a classification of multinationals which
differentiated between firms based on their attitude toward the
geographic sourcing of their management teams. Initially he identified
three approaches to the staffing of MNCs, namely
• Ethnocentric,
• Polycentric and
• Geocentric (Perlmutter, 1969)
• Regiocentric approach (Heenan and Perlmutter, 1979).
The ethnocentric orientation
• Ethnocentric organisations are primarily home-country orientated. Key
positions in the headquarters (HQ) and subsidiaries are filled by parent country
nationals or citizens of the country where the HQ is located.
• In these organisations home based policy, practice and even employees are
viewed as superior and foreigners can be viewed as, and feel like second class
citizens.
• Ethnocentric staffing policies are most appropriate during the early stages of
set-up of a foreign subsidiary when the need for control is greatest. They may
also be used where there is a perceived lack of qualified host country nationals.
It has also been argued that ethnocentric policies are appropriate strategies
after international acquisitions in ensuring the acquired firm complies with
corporate policy.
• The ethnocentric orientation is most consistent with Bartlett and
Ghoshal’s (1989) conceptualisation of global companies. In this regard
global companies are characterised by standardisation and the
promotion of organisational efficiency. They are focused on the
integration of production and the production of standardised
products in a cost-effective manner.
The polycentric orientation
• Polycentric organisations on the other hand are primarily host country
orientated.
• Foreign subsidiaries are primarily staffed by host country nationals or
managers from the subsidiary location. Perlmutter has compared these
organisations, to confederations, or as ‘loosely connected group[s] with
quasi-independent subsidiaries as centres’ (1969: 12).
• Subsidiaries are allowed to develop with minimal interference from HQ and
generally controlled through good financial monitoring and procedures.
Thus while polycentric organisations provide ample opportunity for
promotion within foreign subsidiaries, the opportunity for advancement
beyond the subsidiary is also limited in organisations of this type.
• Polycentric staffing policies are most likely to be evident where
organisations serve heterogeneous product markets and where
products and services must be adapted and marketed to suit specific
national tastes.
• They may also be evident where organisations have low levels of
production integration between foreign operations and thus
subsidiaries may be relatively autonomous and have little impact on
production in other subsidiaries or operations.
• The polycentric orientation is consistent with Bartlett and Ghoshal’s
(1989) multidomestic organisation model.
• The multidomestic companies are characterised by a decentralisation
of decision making and manufacturing driven by a desire for local
responsiveness. The differentiation of products and services to
accommodate local tastes and requirements is more important than
the standardisation which is characteristic of global firms.
The geocentric orientation
• Geocentricism involves filling positions at both HQ and subsidiary
level with the ‘best person for the job’ regardless of nationality.
Nationality and superiority are not related concepts. ‘The skill of the
person is more important than the passport’ (Evans et al. 2002: 25).
• Geocentricism aims to produce a truly global approach to the
management of MNCs. It has been argued that geocentric
organisations represent the most complex form of organisational
structure, thus requiring high levels of communication and integration
across borders, the aim of the structure is to de-emphasise national
culture and to emphasise an integrating corporate culture.
• Geocentric organisations are consistent with Bartlett and Ghoshal’s
(1989) transnational model of organization.
• The transnational is characterized by flexible organisational strategy
which can respond to emerging developments in the business
environment. The MNC is conceptualized as an integrated network of
sub-units within which expertise and resources are neither centralized
nor completely decentralized.
• Geocentric staffing policies are most likely to be seen in organisations
where production is integrated to a large extent across subsidiaries.
Organisations which have a large percentage of their operations outside the
home country or where a large percentage of sales are outside the home
country are also potentially more likely to pursue a geocentric staffing
policy.
• Obviously organisations pursuing a geocentric approach are more likely to
have managers with global mindsets, as referred to above, than
organisations with an ethnocentric or polycentric orientation. This is likely
to aid the organisation in competing in the global marketplace as decisions
and top management action are underscored by a deep understanding of
the international business environment.
• The disadvantages of the geocentric approach include relocation
costs, costs associated with the relocation of spouse and family,
cultural adjustment training etc.
• As Dowling and Welch (2004) note, organisations would require a
large cohort of PCNs (Parent country nationalist), TCNs (Third country
nationalist) and HCNs (host country nationalist) to be sent abroad in
order to develop and maintain the international team required to
support a geocentric organisation.
• The decision on how to fill the key positions in business entities abroad
(subsidiaries, affiliates or representative offices) is usually based on
how certain choices will affect the transfer of knowledge, control and
coordination of the activities that will take place outside the country, as
well as how to get the knowledge on local conditions and specificities
of the host county
• In order to find an optimal solution some of the authors in the field of
IHRM offer us a seemingly simple formula: international staffing policy
should strive to achieve compliance (fit) between the strategy of the
firm and its specific characteristics with the characteristics of the
external environment or contextual characteristics of the host country.
ALTERNATIVES IN CHOOSING THE
INTERNATIONAL STAFF: PROS AND
CONS
• International staffing is usually defined as a set of activities in the
recruitment and selection process aimed at attracting a sufficient
number of qualified candidates to apply for the positions in entities
abroad, as well as the selection of those who are considered to be the
best.
• International staffing in general is a very important part of IHRM since
the persons who are selected for international activities influence to a
large extent the performance that the companies will achieve.
• In addition, the policy of international staffing affects other activities in
the field of IHRM, such as training of the staff, reward system, policy of
retention of key personnel, etc.
As we said earlier, when it comes to filling positions in the entities
abroad, MNCs have three options, i.e. they can opt for three solutions:
• persons from the parent country,
• persons from the host country and
• persons from the third-country.
i) Parent Country National(PCN): When a company of a country recruits employee from its own
country is known as PCN. Here the country is called parent country.
Example: when a Bangladeshi international company, recruits employees from
Bangladesh.
(ii) Host Country National(HCN): When a company of a country runs their business in another
country and recruits employees from that country then it is known as HCN. Here the second
country is the host country.
• Example: when a Bangladeshi company runs their business in India and recruits Indian citizens
for their organization.

(iii) Third Country National(TCN): They are the citizens of one country employed by a company
from another country who worked in a third country.
• Example: when a Bangladeshi firm recruits employee from India for their Canada branch.
Hiring Parent Country Nationalist
If MNCs' managers decide to employ PCNs (which in literature are commonly
called expatriates) for key positions in entities abroad, their transfer to the
subsidiaries abroad can be basically motivated by various reasons
• (a) filling positions in the subsidiaries abroad because the local staff is not
qualified enough,
• (b) development of expatriate managers who will gain international
experience and be prepared for future important tasks in subsidiaries
abroad or in the parent company, and
• (c) organizational development, where transfers enable development of
strategic coordination and control, as well as the development of
communication channels in the MNCs.
• The selection of PCNs for the key positions in the entities abroad is associated with a
number of advantages.
• First of all, such people are typically familiar with the objectives, policies and
procedures of the parent company and there is an assumption that this fact will
positively affect the subsidiaries to be in the course of strategic goals of the company.
• Also, sending PCNs facilitates communication with the top managers of the MNCs. On
the contrary, communication with the members of other nationalities and cultures can
be difficult because of the different styles of verbal and nonverbal communication.
• Besides that, the problem with different language may also arise. Having that in mind,
managers from the headquarters of MNCs usually prefer to have some managers from
the home country in the entities abroad
Hiring Host Country Nationalists
• Hiring HCNs also has its good and bad sides.
• First, by their engagement the problem of adapting to the new socio-
economic, political and cultural environment is avoided, as well as the
necessity of learning the business practices of the host country.
• Second, the costs of their employment usually are lower comparing
to the costs of the expatriates. In addition, opportunities for
promotion and advancement of local staff can have a positive effect
on their motivation.
• However, the decision on the employment of HCNs for the key
positions in entities abroad may lead to serious problems. In fact,
some MNCs that are deployed persons from the host country and
persons from the third-country in key positions in the subsidiaries
abroad, have faced the problem of losing control of such subsidiaries.
• Also, they have increased their dependence on managers who do not
come from the company's headquarters and its managers have
limited opportunity to gain global experience .
Third Country Nationalist
• MNCs engage persons from the third-countries (TCNs) for the key positions in entities abroad.
• In this way a special kind of compromise between the need of providing technical and
managerial expertise and the ability to adapt to foreign socio-economic and cultural
environment should be made.
• This is possible since the third-country nationals usually have some experience in the process
of adapting to foreign environment. Also, studies indicate that TCNs typically cost less than the
members of the home country.
• In addition, in some cases it is confirmed that TCNs are more familiar with the situation in the
host country than the PCNs.
• From the above mentioned follows that any decision on the selection of international staff has
both good and bad sides, which indicates that the problem of international staffing is very
complex and that in the process of deciding on this issue companies should take into account
numerous variables.
Some statistics
• From the above mentioned follows that any decision on the selection of
international staff has both good and bad sides, which indicates that the problem
of international staffing is very complex and that in the process of deciding on
this issue companies should take into account numerous variables.
• MNCs whose headquarters are placed in Scandinavian region have the lowest
percentage of PCNs at the key positions in the subsidaries abroad, while the
largest percentage of PCNs have Japanese MNCs, 76.5%. This can be explained by
the fact that a HRM in Japan has some specifics comparing to the Western
countries.
• Characteristics of Japanese HRM system that have an impact on the choice of
PCNs are: lifetime employment, extensive use of the practices such as transfer of
employees, salary based on seniority, total quality control, JIT procedures, etc.
THE KEY FACTORS OF
INTERNATIONAL STAFFING POLICY
• In order to recruit and select the staff for the subsidiaries and
affiliates abroad, MNCs must analyze the effects of three groups of
factors:
• factors related to the specificity of the host country,
• factors related to the specificity of the companies and
• the so-called hybrid factors.
Selection of the optimal alternative in the international staffing will be
the resultant of the effects of all three groups of factors and their
mutual causality in the case of a specific company.
Contextual factors of the host country
• Institutional characteristics of the host country : “the bigger the
institutional distance is, the greater the likelihood that the orientation
in international staffing policy will be toward PCNs”.
• Economic factors : The level of the economic development of the
country, the purchasing power of its citizens, as well as the prospects
for its future prosperity, are also important issues for MNCs when
they decide about filling management positions in entities abroad
Political risk : Political risk in the host country may also influence the
decision on the composition of the staff in the subsidiaries.
• Generally speaking, political risk can have different causes. So, there
are firms specific risks, which is also known as
• micro risk,
• country-specific risks, also known as macro risk,
• and global specific risks (global risks) [22].
• The most common cause of micro risk arises from a conflict between the goals and
objectives of certain MNC and those of the host government. This type of risk does
not reflect on all foreign companies, but only on some. Therefore, this type of risk
is called micro risk.
• The macro risk is associated with a risk of the specific country. The two most
common macro risks are cultural and regulatory risks, and they come from the
ownership structure, religious norms, nepotism, protectionism, intellectual
property rights in a particular country, etc.
• Global risk is the one that affects MNCs in a specific country but its origin is on the
global level. It can be, for example, terrorism, anti-globalization movement,
concerns for environmental protection, etc. If the company estimates that any kind
of risk is high, it is more likely to opt for ethnocentric orientation in the staffing
policy.
Company's specific features
• Orientation in the business strategy : Orientations in business strategy
concerning internationalization can be ethnocentric, polycentric,
regiocentric or geocentric.
• Stage in the life cycle of the company : Some authors point out that
the choices in the international staffing policy could be affected by the
phase of the life cycle in which the company decided to enter the
international market. Thus, companies that implement a phased
approach in internationalization of the business and international
activities usually apply the so-called EPRG orientation.
• Industry : Some studies have shown that a proportionately higher
percentage of ethnocentric orientation in the provision of managerial
staff is identified in the financial sector, while a smaller percentage is
identified in the advertising industry, food production, computer
industry, etc.
• This can be explained by the fact that in the banking sector the issue
of control is very important, which causes that in this sector an
ethnocentric orientation is dominant, while in others, such as services
sector, possessing knowledge of the local market is more important.
Therefore, in such sectors of the economy, the polycentric or
regiocentric orientations are prevalent.
• Characteristics of the subsidiaries : Characteristics of the subsidiaries
influence the approach in staffing policy in a way that when it is about a
newly formed subsidiary, ethnocentric orientation is more likely.
• On the other hand, if the subsidiary has a longer history of operations, a
polycentric or regiocentric orientations are more likely to be implemented.
• In addition, when the subsidiary is relatively new, difficulty in recruiting staff
from the local labor market goes in favour of the ethnocentric orientation.
• These problems, however, almost do not exist if the subsidiary has a long
history of successful business. A polycentric approach is more likely in a
situation when the knowledge of local market is very important and the
subsidiary is new.
Hybrid factors
• This group of factors comprehends transaction costs related to
employing staff. Namely, when it comes to making such decisions,
these costs should be compared in terms of what is their amount in
the host country and what is their amount in the home country.
• Transaction costs that affect the policy of international staffing consist
of two main categories, namely: (a) the amount of salary for
personnel performing tasks in entities abroad, and (b) staffing costs.
• Staffing costs, however, include the costs of recruitment, selection,
and costs caused by the need for controlling and monitoring the
employees' behavior.
• Researches generally confirm that the level of the expatriates' salary
is usually higher than the salary of local population [29], as well as
that their salary is not lower than the earnings they would have in the
home country. In some countries, it is found that expatriates earn
between 20 and 50 times higher salary than the local population .