Multinational corporations face numerous challenges and ethical dilemmas in their global operation. According to Keinert-Kisin, one of the main issues that these companies face is the staffing dilemma (51). When a country chooses to open a new branch in a foreign country, it is always challenging to recruit the most appropriate staffing strategy. A firm may choose to hire home country nationals in most of the positions, including the managerial posts. A company may also decide to hire host-country nationals. In other cases, it may be more advisable to hire third-country nationals because of the needed skills and prevailing forces in the new market.
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Gilbert argues that whichever strategy that a firm takes, various factors have to be considered (18). The cost of labor, the skills, experience needed of them, the ability to understand organizational culture and remain loyal to the firm, and employment policies in the host country must be taken into account. On the one hand, a firm may wish to have parent-country nationals holding the top managerial positions to instill the right organizational culture and enhance loyalty to the headquarters. On the other hand, hiring host-country nationals in the top managerial positions is a sign that the headquarter trusts the locals and is willing to let them run the overseas branch as per the local culture with some little guidance. The dilemma makes hiring one of the most challenging tasks for a company planning to start its operations in a foreign country. In this paper, the researcher seeks to analyze the ethical dilemma in staffing policies that multinational corporations often face, and how they can overcome them.
According to Werner et al., employees are the most important resources in any organizational setting (38). They are responsible for the implementation of policies set by the top leaders of a given organization. The success of a company directly depends on the nature of the work of its employees. Keinert-Kisin observes that recruiting and retaining a team of highly talented and experienced employees is always the desire of every organization (33). Identifying talents is a complex process, especially when one is in a new environment. A candidate may present impressive academic credentials that can convince the recruiting team that he or she has the right skills needed in the organization. However, that may not be a guarantee that he or she can undertake specific assignments that may be given to them. Some positions are so sensitive that they cannot be assigned to random individuals because they have provided impressive academic credentials. For instance, the position of regional director requires a highly talented individual who must have the right experience in similar positions. Such an employee should also have proper knowledge about the parent country’s vision, mission, and organizational culture. In most cases, many companies consider placing one of their employees from the headquarters to head such new branches.
The positions of regional finance officer and operational officers also require the right skills and experience. The temptation to have top employees heading all important positions in these overseas branches may be great. However, Syed and Kramar warn that it is a dangerous approach because it may be seen by the locals as a show of lack of trust (42). The locals may feel that the top managers do not value the local workforce. It means that a delicate balancing is needed. As the top managers take care of the interest of the shareholders, the staffing approach taken should not ignore the interest of the host-country nationals. Guo et al. argue that even when the host country does not have laws forcing the foreign companies to hire locals in a given ratio, ethics should be the principle that defines the approach that is taken (24). It is important to look at some of the staffing policies that a firm may take. The following theoretical models are always popular:
The management may choose an ethnocentric approach of hiring employees in the overseas branches. Banai and Sama define ethnocentric staffing as a situation where the firm decides to “assign the headquarter personnel to top-level management positions in overseas subsidiaries while maintaining an executive staff at the home of parent-country nationals” (223). It is a rare move that emphasizes the need to trust only those who have worked with the company at its headquarters. When using this strategy, all the important managerial positions are held by the parent-country nationals. The locals may be assigned non-managerial positions that may not affect policy formulations in the company. They may also be considered for supervisory positions, but not top positions that require their involvement in the decision-making processes. The strategy is popular when a firm is going to a host country where the technical skills needed at the top managerial positions are not easily available. Keinert-Kisin observes that although the strategy may be beneficial to the top managers at the headquarters, it is one of the most unpopular approaches among the host-country nationals (65). It makes them feel less trusted than the foreigners. They may not develop a sense of belonging because of the presence of parent-country nationals at the top leadership positions.
The polycentric policy is another theoretical model of staffing that a company may consider when planning on making an entry into a foreign country. According to Banai and Sama, in this model, an organization ‘chooses to fill top management positions abroad exclusively with host-country nationals, and equivalent positions at home with parent-country nationals,” (223). From an ethical perspective, it is the most recommended strategy for the locals because it demonstrates the concern and respect that the firm has towards the locals in the host country. It is a sign of total trust and an indicating that the company is willing to integrate the locals in the firm’s top management positions. It is a motivating approach to managing employees in a foreign country because they will feel that they have an opportunity to make it through to the top management positions.
The geocentric policy is defined by Banai and Sama as a theoretical model of staffing where “all top management positions, both at home and overseas, are filled based on the competence from a global pool of workers, nationality notwithstanding” (223). The strategy neither favors the home country nationals nor host-country nationals. Of interest is to ensure that highly talented individuals are hired from any part of the world. It is a tough decision to make, but it may be one of the most appropriate ways of getting the needed talents for specific jobs. The host-country nationals will be given equal opportunity for various positions within the firm as the home country and third-country nationals when applying for various positions (Werner et al. 56). It may be seen as a harsh strategy that may not be very beneficial to the local employees, but Syed and Kramar believe that they will always be reminded that their capabilities defined their positions within the firm (81).
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The ethical dilemma that multinational corporations often face when staffing overseas subsidiaries affect the decisions often made hiring top managers. Gilbert notes that the decisions made by the top management unit may have serious implications, especially when local laws and ethical considerations are ignored (41). Table 1 below is a conceptual framework that shows how the three theoretical models discussed above can be moderated to have the most appropriate composition of employees in an organization.
As shown in the table above, the decision of hiring managers in the overseas subsidiaries should take into consideration the concepts of all three theoretical frameworks. To ensure that the interest of the parent-country is taken into account and that the culture is passed to employees in the new branch, elements of home country nationals are needed at the top management unit as stated in the ethnocentric policy. To ensure that the locals at given opportunity within the firm, it will be necessary to have specific management positions specifically meant for the host-country nationals as discussed in polycentric policy. For the management to ensure that the firm has a team of highly skilled employees in all its departments, the geocentric approach may also have to be embraced. Integrating all these policies will enable the firm to have an acceptable composition of employees capable of delivering the desired value to the new branch.
Research Aim and Objectives
Staffing is one of the main fields of research in human resource management that has attracted the attention of many scholars. When researching this area, it is crucial to define in clear terms the aim and objectives of the study. This research paper aims to discuss the ethical dilemmas in MNC’s international staffing policies. The following are the specific objectives that should be realized:
- To identify various staffing models used by MNCs in the overseas subsidiaries
- To discuss the advantages and disadvantages of each of the staffing models.
- To identify how the staffing dilemma can be overcome by using a combination of the concepts of these models.
The conceptual framework above shows that there is no single staffing model, discussed in the literature review, which can be considered superior to the rest when a multinational corporation is planning to hire employees in an overseas subsidiary. The polycentric approach, as discussed above, would be the most appropriate for the local workforce because they will be given priority. However, using this policy has some challenges that the top management should not ignore. One of the biggest challenges is the possible lack of expertise in the local market. When employees trusted with top leadership positions cannot direct employees as expected, the new branch may not realize the desired goals. Keinert-Kisin notes that the strategy makes it difficult to inculcate the organizational culture in the new branch (45). If the top leaders do not understand the culture, they may not take any interest in promoting it. The management should also be keen on ensuring that the host-country employees, especially the top managers, remain loyal and committed to the top executives at the headquarters.
The ethnocentric policy may be the best approach for the top executives. According to Gilbert, other than the unpopularity of the strategy among the local employees, a firm that seeks to use the approach should be ready to deal with a host of other challenges (75). One of the greatest hindrances to this strategy is the language barrier. If the language spoken in the new market is different from that used in the home country, it may not be easy for the parent-country nationals to work with local employees. Communicating instructions and receiving feedback may be very complex. Another issue that the firm should be ready to deal with is a culture shock.
When a top female executive from Los Angeles City, California, is transferred to Riyadh in Saudi Arabia, the socio-cultural environment in the host country may be too shocking to embrace. In Saudi Arabia, women were not allowed to drive. Although the country recently enacted a law changing this practice, it is still odd to find a woman driving in this country. The local culture does not allow women to make critical decisions without the input of men (Werner et al. 71). Having a situation where the overseas subsidiary is headed by a woman can be challenging because she will not only be required to make critical decisions but also issue orders to men as well. The environment in a foreign country can be so frustrating that it may be impossible to survive. The legal environment is another critical factor. Some country defines the composition of employees for foreign companies working in the local market. These and other challenges make the strategy less popular among multinational corporations.
The geocentric approach was considered very effective in enabling a firm to identify and recruit top talents in overseas subsidiaries. However, just like the two policies, it has its weaknesses that cannot be ignored. According to Guo et al., although the third-country nationals may be highly talented, they may not be socially acceptable to the home country executives and host-country employees (54). To the top executives at the headquarters, third-country nationals may not have the experience of working at the firm that may make them capable of popularizing the company’s culture in the new country. Their loyalty to the firm and top executives at the headquarters may also not be guaranteed. On the other hand, the host-country employees will view them as foreigners. They may not be easily accepted by the locals, especially when they are viewed as people who have taken over their opportunities. The best decision that should be made, as suggested in the conceptual framework, is to integrate the three policies. The management should ensure that the three categories of employees (parent-country nationals, host-country nationals, and third-country nationals) are properly represented in the management unit of the new branch to realize the desired goals (Guo et al. 56).
Managerial Implications within UAE
The United Arab Emirates is home to numerous subsidiaries of multinational corporations in different industries. According to Syed and Kramar, the city of Dubai is currently one of the top global business hubs (77). Regionally, it is the most robust transit route for many manufacturing companies targeting the markets of the Middle East and entire Africa. Companies operating within the country should understand that hiring employees is one of the most important decisions that must be made with utmost keenness. The managers must ensure that the people they hire can undertake specific responsibilities. Keinert-Kisin warns against a staffing approach that only focuses on specific issues and ignores other important areas (97). Overemphasis on the need to have a team of acceptable employees while ignoring the need to have a competent team of workers can be dangerous. However, it does not mean that the firm should ignore the need to have a team of managers who are widely accepted by the employees. The findings made in this paper have the following managerial implications for multinational corporations operating within the United Arab Emirates:
- The top management unit should start the decision-making process by defining all human resource needs at the new branch, from the top management unit to the junior employees. Important areas that should be stated include the level of expertise needed, loyalty expected of the bearer of the office, and the level of acceptance the officer should have among the locals.
- The staffing approach should focus on selecting individuals based on the above three needs. When the office requires an employee who must be loyal to the head office, then a parent-country national should be the most appropriate candidate. When the office requires a highly talented employee, the firm should use a geocentric policy of staffing. In case the officeholder should be highly acceptable to the locals, then the firm will need to use a polycentric policy of staffing.
- The discussion shows that there is a need to have a delicate balancing act when hiring parent-country, host-country, and third-country nationals in the overseas branches. Sometimes the outcome of the analysis of the needs may emphasize the need to hire any of the three categories of employees. It is the responsibility of the company executives to ensure that host-country nationals and parent-country nationals are effectively represented while at the same time having the right skills and experience needed in the firm (Keinert-Kisin 98).
Staffing is one of the most important tasks in a firm that defines the nature of employees in each of the departments. Companies are currently keen on ensuring that they recruit top talents capable of delivering the best output in assignments given to them. When a firm considers operating in a foreign country, additional factors will have to be considered beyond the competencies of the employees. It is at this stage that the management may start facing an ethical dilemma because their decisions cannot just be tied to the competencies. They have to consider other factors such as the loyalty of the individuals necessary to ensure that they work as per the interest of the parent company and the ability of the locals to accept them. The study suggests that multinational corporations should give priority to parent and host-country nationals when hiring the top managers, but that should not be at the expense of having skilled workers capable of delivering the desired value to the firm. The three models of staffing should be balanced delicately to achieve the desired goals.
Banai, Moshe, and Linda Sama. “Ethical Dilemmas in MNCs’ International Staffing Policies: A Conceptual Framework.” Journal of Business Ethics, vol. 25, no. 3, 2000, pp. 221-235.
Gilbert, Joseph. Ethics for Managers: Philosophical Foundations and Business Realities. 2nd ed., Routledge, 2016.
Guo, Ying, et al. Global Talent Management and Staffing in MNEs. Edited by Pervez N. Chauri, Emerald, 2016.
Keinert-Kisin, Christina. Corporate Social Responsibility and Discrimination: Gender Bias in Personnel Selection. Springer International Publishing, 2016.
Syed, Jawad, and Robin Kramar. Human Resource Management: A Global and Critical Perspective. 2nd ed., Palgrave, 2017.
Werner, Steve, et al. Managing Human Resources in the Oil & Gas Industry. PennWell, 2016.
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