Managing_a_Global_Workforce_Challenges_and_Opportu…_—-_6_Global_Staffing.pdf

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6 Global Staffing

GLOBAL STAFFING AT THE ROYAL DUTCH/SHELL GROUP

Shell People Services handles all of the hiring for professional level employeeswithin the Royal Dutch/Shell Group of companies, with joint headquarters in theUnited Kingdom and the Netherlands and spanning over 145 countries. The ShellGroup employs over 119,000 globally with its energy and petrochemical businessof exploring, developing, producing, purchasing, transporting, and marketing crudeoil and natural gas, as well as generating electricity and providing energy effi-ciency advice.

Shell People Services provides only English-based tools and practices in its staff-ing services, as English is the global language of all professional employees withinthe Shell Group. Shell has put a great deal of effort in creating a strong recruitingfunction. To aid in global recruiting, Shell uses SAP, an inter-enterprise softwareapplication that provides a common database and a common workflow process. Shellprovides all potential candidates with global information about Shell and uses itscompany website as a global posting board for opportunities across the globe. Shellalso provides some general information to potential candidates around the world,such as job descriptions, whether specific positions require global travel, the initiallocation of positions, and how each position fits within Shell.

Shell also uses a global system to select administrative, clerical, and technicianpositions as well as globally standardized structured interview protocols for everyjob group they hire (such as engineering, business science, and technology). How-ever, due to the need for technology to be flexible to support different countries’legal issues, Shell has not pushed for a global platform for a standardized recruitingsystem but adapts technologies on a country and regional basis. One form of increas-ing standardization across several countries is mandated legal protection for job can-didates in the staffing process, such as avoiding employment discrimination. Overtime, through the influence of work councils, unions, and government regulations,countries are implementing laws that may look different but have similar intent.Shell has found that managers in non-litigious countries often do not fully appreciate

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:22.

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the rigor needed to ensure local compliance; therefore, the company actively pro-vides training to increase awareness of local legal requirements and practices toavoid legal problems.

In creating global staffing systems, Shell also faces issues of how to assess com-petencies on a global basis. Shell’s goal is to understand what each competencymeans across cultures and to devise assessment methods that will allow the companyto capture those culture-specific behaviors. Shell uses a global assessment center forassisting with candidate selection and has standard training for all assessors whoadminister the assessment center. To ensure the success of the assessment center,Shell allows for local accommodation due to compliance and cultural factors. Inaddition, Shell tries to be sure that candidates are not assessed differently because ofcultural differences between those participating in the assessments or interviews.For example, Shell would want to ensure that an assessor from an outgoing culturedoes not rate a candidate from a more reserved culture as inadequate simply due tocultural differences.

Shell’s emphasis has been to hire locals within each of their operating units, butthis practice has come under pressure due to the increasing number of global candi-dates. The company has found it challenging to remain loyal to local hiring prac-tices, yet at the same time utilize the talent that it is able to attract worldwide.1

INTRODUCTION

Once, through careful HR planning, work demand for achieving long- and short-term performance objectives has been identified and designed into jobs with specificgoals and tasks to accomplish and the decision has been made against outsourcingparticular work responsibilities, the focus shifts to the professional activity of staff-ing. As illustrated in the opening scenario with the Royal Dutch/Shell Group, staff-ing involves actively filling those jobs in a timely fashion with appropriately qualifiedindividuals from inside or outside the MNC, wherever they may be found in therelevant recruitment area (in some cases worldwide) and consistent with the MNC’sstrategy. The ability to attract qualified workers and keep the workplace adequatelystaffed is tied closely to careful assessments through HR planning of external labormarket conditions and government actions as well as the effectiveness of theorganization’s overall reward system to attract and retain workers—whose interestsand preferences are ever-shifting—relative to competing employers.

Staffing does not involve only bringing new people into the organization. From abroader perspective, staffing encompasses the many activities related to movingemployees into, throughout, and out of an organization in the pursuit of satisfyingwork demand and meeting organizational objectives.2 Staffing also considers how tobest retain desirable employees—to prevent them from moving out of the organiza-tion prematurely. Hence, staffing can involve such employee deployment and move-ment decisions and activities as recruitment, selection, transfers, promotions, layoffs,firing, and retirement as well as influence the total compensation package and re-ward system to provide optimal attraction to the company and reason to remain.

Although recruitment and selection often are used synonymously, they are dis-

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tinct and different processes. Recruitment involves considering both internal andexternal sources to produce viable candidates to apply to fill a given work demand,whereas selection involves gathering appropriate information and deciding fromamong those candidates who to choose to fill the work demand.3 In this chapter wewill limit our focus on global staffing to filling immediate work demand through theprocesses of recruitment and selection; for existing internal employees, staffing gen-erally pertains to transfers and/or promotions. We first will examine important gen-eral factors that influence global staffing in MNCs; then we consider more specificapproaches, tools, and important considerations for recruiting and for selecting vi-able candidates. In chapter 8, dealing with managing international assignments, wewill examine the special staffing activity involving transfer of an employee upon thecompletion of a foreign assignment back to his or her own country—a term knownas repatriation.

GENERAL FACTORS AFFECTING GLOBAL STAFFING

As with all other HR management decisions and practices, global staffing shouldbe linked to the overall strategy and objectives of the multinational enterprise.These strategies and objectives are of course influenced by and set within the con-text of the overall global business environment.4 Thus, employee recruitment andselection decisions comprising the process of immediate staffing to meet workdemands are influenced by such important general factors as the firm’s businessstrategy, stage of international development, specific foreign market experience,host government restrictions and incentives, host country sociocultural restrictions,and plans for individual and organization development. There also can be varioussituational factors such as economic trends and conditions, the nature and durationof the international work itself, MNC resources available for staffing, and avail-ability of willing and able candidates. We now will examine each of these factorsas they relate to staffing decisions.

MNC BUSINESS STRATEGY

The primary focus of a firm’s human resources agenda throughout all of its pro-cesses and activities should be the optimal support and reinforcement of companystrategy, in efforts and activities involving both strategy formulation and implemen-tation.5 The staffing function itself, directed by previous careful global HR planning,has a potentially huge impact on strategic management, including the recruitmentand selection of key MNC leaders who have a primary influence in formulatingMNC strategy, and the selection and placement of middle managers throughout theMNC who have a vital role in implementing and carrying out the strategic directionof the firm. As previously discussed with regard to global HR planning, staffingshould seek to fit and reinforce the purposeful direction and priorities of the MNC,such as being consistent with its ethnocentric, polycentric, regiocentric, and geocen-tric general strategic approaches in operating foreign wholly owned subsidiaries. Orwhere an MNC desires to follow a strategic alliance strategy of focusing on its core

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competencies and reducing labor costs,6 the staffing function will likely employoutsourcing to support this strategy, such as through increasing the outsourcing ofnon-core back-office operations,7 or even resort to a broader level of external partnerselection in complementary alliances, typically noted in international joint ventures.8

We now will examine particular implications for the staffing function, especially forupper levels of management, held by egocentric, polycentric, regiocentric, and geo-centric strategic approaches as well as the general alternative foreign entry modestrategy of international joint ventures.

Ethnocentric Approach

Staffing that is consistent with an ethnocentric approach is typically characterized byall or most key positions at a foreign operation being filled by parent-country nations(PCNs). As mentioned earlier regarding stages of company internationalization, PCNsare often utilized in earlier stages of internationalization to optimize control for thepurpose of transmitting company culture and instituting and implementing companyprocedures and methods.9 Or for much more experienced MNCs, the company mightdesire to retain a heavy use of PCNs for managing foreign operations due to the per-ceived lack of qualified local home-country national (HCN) talent.10

Yet some MNCs, as is often the case with Japanese, Korean, and German firms(compared to U.S. firms), persist with PCNs predominating in foreign operationmanagement ranks well beyond the early stages of country industrialization or com-pany development in the international arena.11 An overarching lack of comfort orconfidence extends authority beyond corporate headquarters, with a desire to maxi-mize control over local operations and maintain tight coordination with MNC head-quarters, utilizing a centralized approach to globalization.12 In their study of JapaneseMNCs, Konopacke, Werner, and Neupert found that for wholly owned subsidiaries,ethnocentric staffing was positively related to subsidiary performance.13 This needfor strategic control can be magnified by greater operational challenges posed bycultural distance or by nature of industry, particularly where product complexityand/or product safety concerns are high.14 As discussed by Binai and Sama, untillocal host country management has acquired the necessary skills for effectively dealingwith a hazardous technology, MNCs have an ethical responsibility to retain an eth-nocentric staffing policy.15 For example, the Bhopal tragedy in India occurred whenUnion Carbide, recognizing the rights of Indian workers to career advancement op-portunities, assigned local managers to supervise the production of a lethal gas. Butthe lack of proper local workforce training and crisis backup procedures combinedwith negligence on the part of undisciplined managers led to the deaths of thousandsat the worksite and in the surrounding community as well as contamination of theenvironment.16 Besides this close retention of strategic control by parent countryheadquarters, there also can be a strong ethnocentric interest in staffing foreign op-erations with PCNs for the developmental value that the foreign experience has forthe PCNs.17 This practice, however, is still at the developmental exclusion and ne-glect of those employees not from the parent country.

As in all international HR decisions, MNCs electing to follow an ethnocentric

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staffing approach should keep in mind several potential disadvantages and costs.18

First, expatriates represent a considerable direct cost for the MNC compared to HCNand typically third-country national (TCN) managers. Many estimates of the cost ofexpatriates run from three to as much as five times the expatriate’s normal salary.19

In addition, the adjustment process of expatriates to their host country surroundings,as well as of the HCNs to the new expatriate, often takes considerable time. Thisadjustment period, or “learning curve,” itself represents a time span of costly subop-timal performance and a chance for costs to be greatly expanded by mistakes andpoor decisions. There also can be significant costs associated with the often-over-looked adjustment of the HCNs to the new PCN. One of the authors noted this realityin a recent visit to a Japanese electronics manufacturing plant in Tijuana that contin-ues to follow an ethnocentric staffing approach for the plant’s upper management.The plant’s Mexican HR director mentioned that each change in Japanese seniormanagement every four or five years resulted in a less productive adjustment periodfor the employees to get to know the new managers and featured some added stressand anxiety with the need for the locals to prove themselves again to new superiors.

As an additional potential disadvantage, an ethnocentric staffing approach limitsthe promotional and developmental opportunities of HCNs, which might lead totheir increased dissatisfaction and related costs of lower productivity and increasedturnover. Also, due to PCN compensation typically being based on home countryrates and often increased by inducement premiums and allowances, there may be asignificant pay gap with HCNs whose compensation is based at a lower local rate,potentially causing additional dissatisfaction due to perceptions of inequity.20 Thesepotential sources of HCN dissatisfaction are likely linked to the generally negativeattitudes toward PCNs found by Hailey21 when he examined the attitudes and per-ceptions toward their expatriate colleagues of local managers working for multina-tional companies in Singapore. He found that many of the local managers were openlyresentful of expatriates and often considered them technically unqualified, unable orunwilling to accommodate to the local culture, and representative of a “colonialmentality” of the parent company.

Polycentric Approach

As described previously in chapter 4, a polycentric strategic approach22 is similar towhat is often described as a multidomestic strategy23 and involves customizing com-pany products, services, and practices to meet the often differing market and nonmarketcircumstances, needs, laws, and accepted practices of individual countries or regions.Here each major overseas subsidiary is usually somewhat independent and is typicallymanaged by a local HCN who is very familiar with the competitive demands of thislocal market. Some major advantages of the staffing of foreign operation managementwith HCNs consistent with this approach include a strong familiarity of operation man-agement with local social norms and customs, language fluency, costs that are typi-cally less than an expatriate assignment, and no foreign adjustment problems for anemployee and any accompanying family members. And despite being a multinationalcorporation with headquarters in some distant country, the heavy use of HCNs from

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top management down in the operation can win the support and confidence of the localgovernment and people who see the operation as benefiting their citizens.

A powerful example of this advantage of significant HCN staffing occurred in theUnited States when anti-France fervor was growing after France continued to blocka U.S.-backed measure at the U.N. Security Council on disarming Iraq. The U.S.state of South Carolina, well known for its protectionist and ultrapatriotic stancetoward American manufacturing, took up a resolution calling for a boycott of Frenchproducts, which passed overwhelmingly in its state house of representatives. Butbefore the measure was taken up in the state senate, it was dropped when lawmakersrealized that many of the Michelin tires of France-based Group Michelin SA that aresold in the United States are actually made in factories in South Carolina, whichprovide many jobs for Americans from senior management on down.24

A major disadvantage of a polycentric staffing policy may be the lack of effectiveflow of information and productive interaction between MNC headquarters and theforeign subsidiary due to language and cultural differences as well as the growth ofunfavorable “us versus them” stereotypes caused by a lack of local meaningful inter-action and common experience between PCNs and HCNs. Additional disadvantagescan include the lack of international professional skill enhancement and career de-velopment opportunities for HCNs who remain in their host country operations,25

as well as suboptimal sharing of valuable knowledge and information and cross-cultural understanding that can be enhanced through HCN inpatriate assignments atMNC headquarters.26 Furthermore, with severely restricted international manage-ment opportunities in foreign subsidiary operations, PCN managers and executivesmight also miss valuable global competency development opportunities, which canultimately lead to lower effectiveness on the part of the MNC headquarters strategicmanagement team.27

Regiocentric Approach

A staffing policy may also be in operation under a prevailing regiocentric strategicapproach, where the firm’s operations or particular functions (for example, sales) arestructured by multiple country areas or major economic regions,28 such as a WesternEuropean or Latin American division. Here we often see a predominance of HCNstaffing at the local subsidiary, however, with an increased movement of senior HCNmanagers to head up operations in other countries of the economic region, such as aFrench national to a Spanish operation of IBM in Madrid. In these cases we also oftensee PCNs represented at regional headquarters, which provides opportunities for cross-cultural interaction beyond what is found in the polycentric approach. The formerHCN managers themselves (now considered TCNs) with these cross-border assign-ments also gain useful albeit less culturally distant international career experience;however, they are still generally limited to this regional level with little chance ofpromotion to the top management strategic team back at parent company headquar-ters. Another possible advantage of the regiocentric approach is that it may contribute,through this expanded level of cross-border assignments, to building useful interna-tional competencies, representing a helpful transition to an eventual global strategy

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featuring a geocentric approach to staffing.29 However, as with the polycentric ap-proach that risks developing multiple independent national units with little commonlinks and identification with MNC headquarters, a regiocentric staffing policy can con-tribute to regional “kingdoms” or “federations” that have a less-than-optimal exchangeof knowledge and resources among themselves or with MNC headquarters.

Geocentric Approach

MNC staffing policy driven by a geocentric approach considers and selects the besttalent for important jobs throughout the world operations of the MNC, regardless ofnationality. This staffing policy works well especially within industries whose prod-ucts or services involve minimal cultural differentiation such as in the electronics orautomotive industry. The geocentric approach is illustrated in the very successfulturnaround case of the French automotive company Renault, which acquired therapidly plummeting Nissan Motors of Japan and then replaced the previous JapaneseCEO with Renault’s high-performing international executive, Carlos Ghosn. Ghosnwas born in Brazil of Lebanese descent, educated in France, and earned significantwork experience in South America, North America, and Europe.30 And as Ghosn’ssuccess demonstrated, there likely could not have been a better choice anywhere inthe world for this new task of heading and turning around Nissan.

Besides aiming to secure the best human talent regardless of national passport forpositions throughout the MNC, both at MNC headquarters and in its other operationsand foreign subsidiaries, several significant advantages of the geocentric approachexist. These include increased global leadership development opportunities for HCNswho were heretofore held back, especially by ethnocentric and polycentric staffingpolicies; increased opportunity for cross-cultural learning and knowledge sharingthroughout the firm, with meaningful cross-border interactions; greater opportunityfor developing a common MNC identity and mind-set; and a more widespread de-velopment of key global competencies throughout the MNC leading to a distinctcompetitive advantage in human capital.31 Nevertheless, a geocentric staffing policymay be restricted in cases where local governments require certain levels of HCNprofessional and managerial presence in their host country operations or place sig-nificant documentation and qualification requirements for hiring foreign nationals.A geocentric staffing policy may also prove prohibitively expensive to implementfully due to compensation adjustment needs and relocation expenses. Furthermore,as mentioned earlier, staffing decisions might also have a major objective of skilldevelopment for the selected employee, whose skills for the assignment are accept-able but certainly do not represent the greatest talent available within the MNC—thus overruling a purely geocentric approach.

International Joint Ventures

Where international joint venture (IJV) strategies are implemented, staffing deci-sions are essential to the success of the operation and often have implications andrelate to issues around potential cross-cultural conflict, control, and temporary ver-

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sus permanent (that is, one-way) staffing assignments. Figure 6.1 lists critical ques-tions about IJV staffing decisions to address once the number of employees and skillneeds have been determined through careful HR planning. Due to its important posi-tion as a major strategic mode of entry into foreign markets,32 we will now carefullyexamine IJV staffing issues and practices in more detail.

One staffing question facing IJVs is how to staff these operations in a manner thatminimizes costly cross-cultural conflict. Alliance strategies such as domestic jointventures are difficult enough to pull off with any degree of success without addingthe additional potentially exacerbating IJV element of national culture differences.But although cross-cultural differences can lead to disruptive and wasteful conflictin IJVs, an analysis of high-performing IJVs with multinational management teamsindicates that cultural diversity does not necessarily lead to poor performance. Infact, there is evidence that this diversity might even contribute to a competitive ad-vantage by providing a broader range of perspectives for managing the IJV withinsuch complex economic and cultural systems.33 Salk and Brannen suggest that nega-tive outcomes of cultural differences among IJV employees (including within theIJV management team) can be minimized and even avoided where staffing decisionsfocus more on expertise and interpersonal skills in filling IJV management responsi-bilities and less on the ability to exert traditional power and control.34

In the early days of Corning’s long-term IJV with Samsung in a manufacturingoperation in South Korea, Corning as the senior partner desired to have daily opera-tional control and therefore staffed the South Korean operations with a managementteam of American expatriates.35 Both partners soon found, however, that the closeinvolvement of Corning managers at this operational level led to significant ineffi-ciencies and delays due to language and cultural differences. A major step forwardfor improvement then took place when both sides agreed to staff the IJV manage-ment with Korean managers transferred from Samsung, retaining, however, oneCorning executive to serve primarily in an IJV coordinating role with Corning head-quarters. This new staffing arrangement, with Corning releasing significant directcontrol and Samsung Korean managers primarily in charge of the local South Ko-rean daily operations, also led to an increased feeling of mutual trust and respectbetween the two IJV partners, which contributed to further productive interactionsand learning between the two IJV partners.

Figure 6.1 Critical Staffing Decisions for International Joint Ventures

• Which partner is to have primary control of staffing the IJV management? Of staffing IJV lower-level employees? How will senior employee selection decisions be made?

• Who is responsible for forecasting ongoing IJV staffing needs?• Who will have which specific IJV recruitment responsibilities?• What preference in IJV management staffing is there for temporary versus permanent job

assignment with the IJV?• How much cross-cultural diversity is desired in the IJV management team? What positions

should be filled by each IJV parent company?• For whom do the employees work? For one of the partners, or for the separate IJV?• To what degree and for what positions must there be agreement on staffing among IJV partners?

How will disagreements regarding staffing be resolved?

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Another challenge of control through IJV staffing was illustrated by an Americanbeer manufacturer that began an IJV with a junior beverage manufacturing partner inSouth Korea that was considered to have a good sense of the local South Koreantarget market. The American partner desired to retain direct control in key localoperational decisions and hired a local Korean manager (not from the Korean part-ner) from the local labor force in Seoul to head up the IJV operations. The Americancompany didn’t want to place someone at the head who came from the Korean juniorpartner firm because they were concerned that this person would sense an allegianceto the junior partner and make decisions primarily according to the Korean partner’sinterests and perspectives—even contrary to the wishes of the American senior part-ner. However, the American partner soon found that this South Korean national atthe head of the South Korean IJV operation was still greatly influenced by the localculture and predominant local ways of thinking and continually made decisions ac-cording to the often-conflicting wishes of the junior South Korean partner. Increas-ingly we note that to retain active and direct control of foreign IJV operations andstill have leaders who are very familiar with the local market, many MNCs now hirelocal talent and train them in company strategy, culture, and procedures for a signifi-cant period, either locally in the host country or as inpatriates at MNC headquarters,then place these prepared host country managers in key leadership positions back inthe local host country IJV.36

Useful research has been conducted on leadership staffing of the two primaryforeign entry mode strategies, wholly owned subsidiaries and IJVs, with temporaryPCNs versus more permanent local HCNs.37 The findings suggest that the new for-eign venture leaders’ development of trust and organizational commitment are great-est, regardless of whether PCNs and HCNs are used, when the wholly ownedsubsidiary entry mode is employed, primarily due to the organization’s long-termcommitment to the success of the venture, where the IJV is often perceived as only atentative or experimental venture. This research supports a general trend for IJVstaffing on the value, where possible, of creating a sense of permanence or long-termpersonal stake in the success of IJV assignments. Where foreign partner PCNs areused, they should expect to remain with the IJV without a clear expectation of returnto the parent company, or that their future career with the parent organization isdirectly dependent on their success with the IJV. Or they might be used more for thepurpose of developing future IJV leadership talent and serving as a temporary sourceof knowledge transfer and for filling critical technical knowledge gaps.38

Due to the potentially greater disruptive impact of an international assignment onpersonal lives and professional careers, the foreign partner might experience greaterdifficulties than the host country local partner in finding willing and capable leadersfor IJV assignment,39 thus again favoring the HCN for IJV leadership selection. How-ever, where foreign partner PCN staffing of IJV leadership is perceived as essential,such as when HCNs lack technical knowledge and managerial expertise needed forsuccessful IJV strategy implementation, these difficulties facing foreign partner PCNstaffing can be surmounted by a clear demonstration by top management of theircommitment to the success of the IJV and the PCNs assigned there. For example,when Proctor & Gamble recognized an immense long-term market development

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opportunity and entered China in the 1980s, government restrictions made IJVs theonly entry mode option, but the Chinese partners clearly did not have adequate mana-gerial and technical talent to meet IJV staffing needs. To attract top talent withinProctor & Gamble to staff these new IJVs, Proctor & Gamble’s top management,including the CEO himself, were actively involved in the recruitment, selection,ongoing support, and repatriation of those assigned to the IJVs. This clear demon-stration by top management of its long-term commitment to the success of its marketdevelopment strategy in China and to the welfare of the PCNs themselves was es-sential to the successful staffing of the IJVs with highly qualified PCNs.40

STAGE OF INTERNATIONAL DEVELOPMENT

Several studies have supported a general concept of progression of businesses throughvarious stages of international development, or “internationalization,” beginning withexport activity and progressing through the development of foreign sales offices, li-censing agreements and foreign direct investment with manufacturing facilities, inter-national division formation, multinational status, and finally integrated global enterprise.41

However, firms of all sizes differ greatly in the pace of their evolution toward increasedinternationalization, and some bypass stages through acquisitions and joint ventures.And some “born global” new ventures even begin with a primary focus on the globalmarketplace, skipping the earlier traditional forms of internationalization.42

Staffing decisions at each of these stages of internationalization can differ signifi-cantly due to the unique work demands of each stage. At the simple export stage afirm is likely interested in obtaining the contracted services of an export agent andeventually a sales firm or independent sales representatives to promote product dis-tribution. For example, firms interested in starting up cost-saving manufacturingoperations across the U.S.–Mexico border frequently contract with local experiencedfirms that provide “shelter operation services” that assist with the procurement ofthese Mexican maquiladora border facilities as well as the subcontracted staffingand day-to-day management of Mexican assembly workers.43

At the more advanced level of the multinational enterprise, firms are often greatlyinterested in transferring company knowledge and technical expertise to foreignwholly owned subsidiaries, as well as coordinating with headquarters and control-ling foreign operations to ensure consistency with parent company policies and pro-cedures.44 MNCs frequently accomplish these knowledge transfer and control purposesthrough expatriate PCNs assigned to these operations, as seen in the continuing re-placement of American executives with German PCNs after the DaimlerChryslermerger.45 Finally, at the stage of integrated global enterprise the firm has a largeassortment of internal talent to consider for its staffing of both domestic and globaloperations. Following the geocentric approach described earlier, the MNC at thisstage recruits and selects internal talent based on a determination of the best talentavailable and representing the highest return on staffing investment, regardless ofnational boundaries. External and non-standard or contingent sources of employeesare also frequently considered at this level, again depending on the nature of theparticular work demand and the comparative advantage of these sources.

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SPECIFIC FOREIGN MARKET EXPERIENCE

As in the very early stages of internationalization, multinational firms that havelittle experience with a specific foreign market are likely to staff these new foreignoperations to a significant degree with local management that is very familiar withthe specific market. This staff may be local HCN managers who have been instru-mental in the planning for this new market entry, or TCNs, perhaps from a neigh-boring country, who have considerable experience and expertise with the localmarket. Although PCNs might be involved to ensure proper communication andcoordination with company headquarters, local HCNs or experienced TCNs canmore effectively address initial critical decisions faced by the new foreign opera-tion, including the complete staffing of this operation most likely with HCN em-ployees. In some cases, especially where the firm is reluctant to hire an experiencedHCN or TCN from outside the MNC on a long-term basis, this experienced man-ager might be hired on a short-term (for example, three years) or full-timeconsultancy basis until the firm has had enough time to develop internal talent foreffectively managing the foreign operation.

HOST GOVERNMENT RESTRICTIONS AND INCENTIVES

Host governments, in following their traditional safeguarding responsibility on be-half of their working citizens, often require MNCs to demonstrate that HCNs are notavailable to fill certain managerial or technical professional positions before theygrant entry visas and work permits to PCNs and TCNs selected by the MNC. Withregard to labor available to staff lower-level employment positions, Western Euro-pean governments and their political movements are actively moving to restrict andreduce the number of foreign asylum seekers and immigrants, who are perceived aslow-wage threats to existing national employment opportunities.46 Often new busi-ness development abroad can be significantly delayed due to governments blockingwork permits for expatriates selected for heading up this new international work. Or,because a work permit is granted generally only for an expatriate and not for anaccompanying spouse or partner, expatriates might be reluctant or even refuse toaccept a foreign assignment without an accompanying spouse or partner who alsodesires employment. However, many governments have begun to change their lawsor quota restrictions related to employment-related immigration to better meet theirlocal economic-development demands, especially for higher-skill jobs, thus facili-tating international transfers and cross-border staffing.47 This significant change inimmigration practice in support of national economic growth was seen in the UnitedStates during the dramatic growth of the Internet dot-com industry with a quotaincrease for the H-1B work visa.48

Governments and NGOs also might place demands or lobby for staffing require-ments for MNCs that are making foreign direct investment, especially in developingcountries, such as specifying that certain numbers of HCNs be hired and at particularlevels.49 These requirements might also stipulate what minimal percentage of super-visor and management level positions must be staffed by HCNs at a future date,

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giving the MNC some time to develop this managerial expertise among the HCNs.Governments can also provide significant tax, tariff, local labor force training, andother incentives to encourage MNCs’ foreign direct investments, leading to signifi-cant HCN staffing.50 For example, China, with its entry into the WTO, is making amajor commitment to attract FDI to increase levels of regional and national employ-ment through providing tax and other financial incentives to foreign MNCs as wellas investing in infrastructure improvements and basic skill enhancement for a laborforce that presents a very attractive low wage rate.51

GLOBAL WORKFORCE PROFESSIONAL PROFILE 6.1

MARCELO A. HERNANDEZ PEREZ:STAFFING CHALLENGES IN CHILE AND AUSTRALIA

Tremendous ongoing industrial development in China and other developing countries is fueling thegrowing demand for energy, mineral, and metals resources. This industrial growth and increasingdemand point to significant future growth for BHP Billiton, the world’s largest diversified resourcescompany headquartered in Melbourne, Australia, with over 36,000 employees in approximately 100operations in twenty-five countries. And Marcelo Hernandez Perez, senior human resources internalconsultant in the company’s base metals division in Santiago, Chile, plays an important role inrealizing the company’s future growth. Perez brings to his work a broad background of experiencein human resources and other operations in the mining, packaging, and banking industries. Hereceived an MBA in Spain and focused on organizational psychology for his undergraduate study.

Perez continues to be busy in developing feasibility plans involving human resource staffing andmobilization for copper and other mining operations in northern Chile and in Australia. Some of theseoperations involve newly constructed “greenfield” facilities and operations, which call for the planningand overseeing of extensive contracted construction services involving over 10,000 workers. Otherplans deal with newly acquired, pre-existing “brownfield” operations, which present the uniquechallenge of the integration of an existing workforce into BHP Billiton’s new operations andprocedures—often involving staffing changes, new hiring, and even layoffs to shape the workforceto meet the needs of the projected new business demands. Perez’s feasibility plans reach far beyondthe recruitment and selection of workers for these new operations and include detailed workdescriptions and skill qualifications for the new jobs, the nature of training required to bring newemployees up to work performance mastery, and even compensation and benefit package plans thatwill attract and retain talented employees at different levels for the new operations.

“Our staffing plans in Australia face a special challenge,” states Perez. “Because of a major boomin business growth in Australia, and especially in our industry, we face a shortage of qualified people.”Because of this Australian labor shortage, Perez continues, “We are planning to send employees invarious positions from Chile to Australia. We are especially interested in finding people who arebilingual in Spanish and English and who will be able to succeed in functional and corporatemanagerial positions.”

For the longer term, to ensure that his company’s higher-level staffing needs are met, Perez alsokeeps in close contact with graduate programs in Peru, Chile, Argentina, and Australia to recruit futurehigh-caliber graduates. And regarding his own ongoing professional development, Perez also isplanning to study Mandarin Chinese to support the future staffing and other human resource activitiesunderlying his company’s current and growing plans for operations in China.

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SOCIOCULTURAL CONSIDERATIONS

There are often important social and cultural considerations affecting staffing deci-sions. Two of these considerations that we will now examine are general social normsand, more specifically, women in international staffing.

General Social Norms

Segalla et al. have suggested the importance of symbolic as well as more traditionalfunctional considerations in making international staffing decisions, where culturemay have an important influence on staffing policy.52 The consideration of such fac-tors as gender, age, consanguinity (that is, family ties), or previous friendships mightseem irrelevant and even unethical in some cultures where the primary focus is acandidate’s technical ability to perform a job.53 For example, placing a younger HCNover an older one could be problematic in some cultures that accord special respectand privilege on older members of society. And nepotism (that is, hiring extendedfamily members) may prove to be a very useful staffing approach in different cul-tural context in Asia and the Middle East.54 Therefore, due to the reality of the influ-ence of social expectations and cultural preferences in the workplace, these factorsshould at least be acknowledged and considered where appropriate when makingstaffing decisions.

Women and International Staffing

Despite national laws and policies that might prevail at company headquarters pro-hibiting discrimination against women in the workplace, cultural norms and expec-tations widely held in other counties, such as some Islamic and Asian societies and insome areas of Mexico and Latin America, might need to be considered when makingstaffing-assignment decisions about women in those countries, especially involvingwork and supervisory interactions with men.55 We are not suggesting that a company’scommitment to equal opportunity as a core value must be compromised when doingbusiness abroad, only that an awareness of local expectations regarding women inthe workplace can serve as a warning about where conflict and dissatisfaction mightarise and where possible open communication, sharing of company values and clearbehavioral expectations, and training interventions might be useful to help avoidconflict and unnecessary difficulty, including wasteful litigation. And in some casesit might be determined that it is just not worth the effort and difficulty in trying toforce gender diversity into a line of male machine operators at a manufacturing plantin the Philippines or into an all-female section of toy-parts assembly in a maquiladoraplant near the U.S. border in Mexico—especially where no opposite gender candi-dates show an interest.

Nevertheless, women have been relatively untapped as a source of human talentin the international business arena.56 But the key to international business successwill be the ability to mobilize and utilize human resource talent to the fullest extentin formulating and implementing new global business strategies. This imperative is

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particularly challenging because the number of skilled, educated workers in manylabor markets, particularly in developed countries, is decreasing at the same time asthe demand for them is increasing.57 Therefore, where possible, MNCs can benefitgreatly by broadening their employment sources by recruiting and hiring peoplefrom outside their traditional labor pool and by not limiting their pool of talentedhuman resources by excluding particular groups of employees due to personal char-acteristics that are irrelevant to job performance, such as gender.58 To illustrate, oneWestern bank, when it was attempting to enter the Japanese market several yearsago, was quite concerned about its ability to compete locally for top-quality talent.However, this Western bank found that the heavy local Japanese cultural preferencefor male university graduates gave it a distinct advantage over Japanese banks witha relatively open field in recruiting and hiring top female graduates.

One particularly persistent bias against women in international business concernswomen in U.S. and other Western MNCs serving as expatriates. Although there hasbeen an increase in the number of women being sent to foreign assignments to ap-proximately 18 percent in 2002, women still lag significantly behind their male MNCexpatriate counterparts, although they constitute close to 50 percent of the middlemanagement ranks from which expatriates are usually recruited.59 Not only does thissuboptimal utilization of the labor force represent a significant threat for MNCs inmeeting growing demand for international talent but it also points to fewer opportu-nities for professional skill and career development for women. And with an increas-ing premium being placed on previous foreign business experience in consideringemployees for advancement and executive promotion,60 individuals who are unfairlydenied these important career-enhancing foreign business opportunities might beginto seek legal redress at an increasing rate.

Some of the most powerful obstructing factors that have influence in the earlyselection phase of expatriate assignments appear to involve unfavorable perceptionsfrom management at headquarters regarding interest among women in obtainingforeign work experience as well as general concerns about female candidates’ suc-cess potential in foreign assignments. A common assumption held by predominantlymale managers who may provide input on or directly make expatriate assignmentdecisions is that women have less interest than men in obtaining international workexperience in the form of an expatriate assignment.61 Therefore, unless a woman isassertive in making her interest in international work experience clearly known bymanagement, she may be less likely to be on the list of those being considered forforeign assignments.

Other major reasons given by managers for selecting men over women for foreignexpatriate assignments typically have fallen into the category of business necessity—to avoid costly failure and to promote and optimize the competitive viability of busi-ness operations abroad.62 However, it is rather perplexing to hear these argumentswhen a majority of women on expatriate assignments allegedly claim that their in-ternational assignments were successful, even in such countries as Japan and Koreawhere male managers seem to almost completely dominate business circles.63 Infact, many women in field research have cited distinct advantages over their malecounterparts.64 Steinberg noted that a major benefit of being a woman in overseas

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business is high visibility.65 When competing for the attention of a foreign executivein obtaining a desired business deal, a sole female sales representative will have theadvantage of being remembered among the otherwise homogeneous male sales rep-resentative competition. Researchers examining a reportedly high success rate ofWestern female expatriates have concluded that these women are not necessarilysubject to the same traditional gender-based restrictions in local business interac-tions and involvement as are their HCN sisters.66 It has even been suggested thatfemales also may benefit from a positive self-fulfilling prophesy or halo effect heldby the foreign business persons who expect that the female expatriate is extremelycapable and talented because she was able to overcome all of the gender-biasedobstacles that were presumed to be placed in her way back home.67 Field studies alsohave pointed to women’s advantage in social skills, which are of great value in buildingtrusting relationships with employees and customers in the international market-place, including good listening skills, a less direct and confrontational communica-tion approach, and emphasis on cooperation over competition.68

To further examine an apparent unfounded bias against women serving in expa-triate assignments, we compared the perceptions of American managers in theUnited States, who had potential input on foreign assignment selection decisions,with the perceptions of managers and businesspersons in foreign environments ofGermany, Korea, and Mexico on several measures regarding the viability of Ameri-can women serving in expatriate assignments. We found that overall the Americanmanagers held a less positive view regarding American women’s potential for suc-cess in the foreign business environment than those representing actual interna-tional business environments. These results only add to previous studies and voicesof women in the international workplace who suggest that the biggest obstaclefaced by women for international business career success was not in their foreignbusiness environments but rather in their own corporate headquarters where closed,informal selection procedures for international assignments and unfounded nega-tive perceptions about the probability of female expatriate assignment success of-ten discouraged managers from seriously considering selecting female candidatesfor foreign assignment in the first place.69

To effectively recruit and increase the number of women in expatriate positions,companies should consider the following field-tested ideas:

• Create a system for identifying and keeping track of employees willing to takeforeign assignments, with a concerted effort to include potential female can-didates in this database. This approach helps to organize and formalize thecareer planning and expatriate selection process, making it less random andprone to bias.

• Use successful female expatriates to recruit other women, providing seminars andless formal interactions to talk about the pros and cons of foreign assignments.

• Be flexible about timing, providing a reasonable deadline for deciding whetherto accept an assignment and being flexible about the starting date to accom-modate possible childcare responsibilities that tend to fall more frequently onthe mother.

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• Provide employment assistance where possible for an accompanying male spouse,who might be feeling greater stress as a “trailing spouse” in the couple’s newforeign experience.70

PLANS FOR INDIVIDUAL AND ORGANIZATIONAL DEVELOPMENT

As mentioned in the previous chapter on human resource planning, immediate staff-ing decisions can also be influenced by longer-range goals and objectives of the firmrelated to individual employee development or the development of the organization’scapability as a whole. Caligiuri and Harvey et al. have discussed the value of staffingPCNs in expatriate assignments and HCNs in inpatriate assignments for enhancingtheir individual global competencies,71 which when continued over time can collec-tively contribute to greater organizational capability and global competitiveness.72

The selection of HCNs for inpatriate assignments also has been recommended as areverse knowledge-transfer strategy for building greater capability at company head-quarters in considering diverse perspectives and meeting the demands of global di-versity as well as enhancing the capability of the MNC’s strategic management teamin making decisions that reflect the realities of the host country business environ-ment.73 Finally, the benefits of the selection of HCNs for inpatriate assignments andPCNs for expatriate assignments have been examined relative to their respectivecontributions to organizational learning and development through global knowledgemanagement.74

SITUATIONAL FACTORS INFLUENCING STAFFING DECISIONS

Some fairly obvious but still important situational determinants of international staffingdecisions include the nature and duration of the task or work assignment itself, thefinancial resources of the MNC available for staffing, the availability of qualifiedand willing candidates, and economic trends and conditions. A task of immediateneed that requires a high level of specialized expertise in computer systems design orstrong foreign language fluency would direct the staffing efforts to only those candi-dates possessing the requisite skills. And if the work need is only for a perceivedshort duration, such as the completion of a special project or seasonal workload or tohandle an unusual, immediate emergency, staffing would most likely consider con-tingent labor sources such as temporary employees or consultants or internally in theform of a temporary assignment or an ad hoc work team.

Staffing needs often influence an MNC’s selection decision for the location offoreign direct investment, where there increasingly is a preference, due to greaterdependence upon advanced technologies in operations, for countries that can offerlabor with relative higher levels of literacy, skills, and discipline rather than merelythe lowest wages.75 Where qualified talent is not available internally and the interna-tional firm lacks the financial resources or inclination to hire on a regular full-timebasis someone to fill the work demand, staffing might consider a less expensivecontingent labor source or, where time is not a critical factor, develop the requisiteskills within the firm through targeted employee training. In a host country work

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situation, often PCN and TCN employees are recruited and selected simply due tothe present lack of qualified employees within the host country labor force. And, ofcourse the availability of not only qualified but also willing candidates is also insome situations a critical factor, such as with work that carries with it significantdanger and personal risk, as noted with Bechtel’s and Halliburton’s efforts to staffworkers for projects to help rebuild Iraq76 or oil production companies in Colombiaand Ecuador that repeatedly have been besieged by terrorism and kidnappings.77

Finally, the state and health of regional, national, and global economies canhave a significant influence on staffing activity. For example, the East Asian fi-nancial meltdown of 1997 quickly spread from Thailand to other neighboring coun-tries, greatly depressing economic health and plans for new business development,and in turn greatly reducing staffing levels and plans for filling previously per-ceived work demand.78 More recently, staffing plans within the tourism industrywere indefinitely postponed or cancelled completely in floundering Asian andCanadian markets that were seriously hurt by the 9/11 developments and the sub-sequent SARS outbreak.79

In the remainder of this chapter we will go beyond general staffing issues to ex-amine special considerations and methods for international recruitment and selec-tion. The level of sophistication in the practice of international recruitment andselection is still relatively rudimentary, and these existing practices often are notvery rational and objective.80 Nevertheless, the ideas presented here based on currentresearch and leading practice should be weighed carefully for their potential to con-tribute to international business success.

GLOBAL RECRUITMENT OF HUMAN RESOURCES

As mentioned earlier, HR recruitment involves finding and encouraging qualifiedindividuals to apply for a job opening. Particularly important areas to consider in-clude the geographic scope of recruitment and whether internal versus external can-didates should be sought.

GEOGRAPHIC SCOPE OF RECRUITMENT

The geographic scope of sources considered for locating qualified potential jobcandidates might be worldwide when the company is following a geocentric ap-proach and is searching for top talent regardless of national pedigree. And moreout of necessity, a broad scope can be followed when particular professional skillsare highly sought after but are in short supply, such as to fill critical national nurseshortages.81 Or the geographic scope might be relatively narrow, such as whenrecruiting for executive-level employees, found mostly at or near company head-quarters, needed for new foreign operations that lack an MNC’s proprietary knowl-edge and expertise, and especially subject to an ethnocentric staffing orientation.Although the low costs of Web-based recruiting have allowed the geographic areafor recruitment to increase dramatically,82 other costs and restrictions related to theoverall staffing effort, such as candidate travel for interviews and dealing with

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difficult country visa and immigration policies, might lead to minimizing the geo-graphic recruitment area as long as it is likely to produce a reasonable supply ofqualified candidates for a job opening.

INTERNAL VERSUS EXTERNAL CANDIDATES

Another important consideration in planning for recruitment is whether to search forcandidates beyond entry level from sources inside or outside of the organization. Ofcourse, in the early phases of staffing for a new wholly owned subsidiary in a foreignhost country, most of the staffing at lower and middle levels would likely result fromexternal recruitment sources located locally within the host country. Nevertheless,many MNCs, including Merck, 3M, and IBM, encourage an internal recruitment“promotion from within” policy where possible, in the home country and abroad, inhiring for job openings at all levels beyond entry level.83 They follow this preferencefor internal recruitment due to the following advantages of this approach:

1. Where effective human resource information systems (HRIS) are in use, quali-fied candidates are easier to identify and contact, representing significantsavings in time and financial resources.

2. With an effective HRIS, the work performance background and develop-mental progress of potential candidates are readily available to enhance se-lection decision validity.

3. Promotion from within can have a significant boost on employee morale andmotivation, increasing retention and productivity, both for the promoted can-didate and for employees who see such an internal staffing practice as hold-ing promise for their own career advancement within the firm.84

4. Reduction in training and socialization time and costs are very possible be-cause existing employees are likely to be much more aware of the uniqueorganizational culture, priorities, procedures, and overall business practicesthan is a newcomer.85

The fourth advantage is particularly important for traditional expatriate assignmentswhere the expatriate is expected to carry considerable company knowledge to the hostcountry operation to maintain foreign operation control in alignment with the MNCsgoals and strategic objectives.86 Also particularly pertinent to expatriate assignments,Harvey and Novicevic have added the following additional advantages to the list:

5. Internal candidates are frequently easier to persuade into taking an assign-ment abroad.

6. With their social knowledge of the company’s culture, internal candidates arefamiliar with the value of international career paths within the organization.

7. Because they have an internal track record (see point 2), internal candidatesare more likely to be trusted in the organization and, therefore, generate con-fidence in their ability to extend needed headquarters control to the globaloperations.87

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On the other hand, recruiting new employees from the outside may provide thefollowing benefits:

1. Bring fresh new ideas and viewpoints into the organization.2. Reduce training costs where technically trained employees are recruited.3. Provide additional greatly needed human resources, especially in times of

growth, without overusing and overburdening existing internal staff.4. Provide greater objectivity and flexibility in making critical decisions, with-

out a history of past commitments, relationships, and expectations that canimpede needed change.88

Nevertheless, especially with regard to filling expatriate assignment needs, anemphasis on the utilization of external expatriate candidates is problematic. Thisconcern is due to the lack of verifiable information on the external candidates’ pastexperience, typically higher recruitment costs when they are coming from the homecountry labor market, little knowledge and experience regarding company cultureand strategy, and lack of a history with MNC headquarters to develop trust and on-going support.89

GLOBAL RECRUITMENT METHODS—INTERNAL

Where internal candidates are sought for the reasons mentioned in the previous sec-tion, organizations can use formal and informal means to search for potential em-ployees inside the MNC who have interest and possess appropriate skills for aparticular foreign assignment. The primary internal methods that we will considerhere include job posting, skills inventories, and internal network referrals.

Job Posting

Company newsletters, bulletins, and computerized intranet in-house communicationsystems can carry announcements of job openings for a foreign assignment or can beused in a foreign operation to support a local “promotion-from-within” policy. Theseinternal company announcements about job openings can include information aboutthe nature of the position and major qualifications required as well as how to applyor “bid” for this job opportunity. In many cases the company might want to targetthese internal communications according to its overall purposes and objectives. Forexample, it wouldn’t make much sense for a large MNC to fill a general companynewsletter—received by company employees around the globe—with informationabout supervisory opportunities in a facility in the Philippines, especially if thecompany’s purpose is to develop and promote local talent in the Philippines.

Skills Inventories

Many organizations have developed useful skills inventories on both local and globallevels that facilitate an internal search for employees with interest and requisite skills

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to fill an international assignment.90 For example, a Belgian firm with existing opera-tions in Spain, Chile, and Argentina might desire to open a new facility in Mexico,headed by a manager with significant company experience, technical capability, andstrong Spanish language fluency. By keeping a current skills inventory of its world-wide employees and entering into this database search specifications about such im-portant factors as years of experience, nature of technical skills, and degree of Spanishfluency desired, the MNC might be able to readily identify and make plans for how toattract potential candidates with the desired attributes for this foreign assignment.

Internal Network Referrals

Organizations typically use informal communications as a means to “spread the word”and identify possible internal candidates for promotion or transfer assignment.Through their contacts throughout the organization, managers often are able to learnof qualified individuals who have previously expressed an interest in the type of jobopening available. The manager then can contact these individuals directly. Severalexpatriates currently serving on foreign assignment have identified this informalnetworking means of internal recruitment, often through their own manager to whomthey had previously expressed an interest, as the primary way they were informed ofan international assignment opportunity.91 For this informal approach to effectivelywork there must be an open sharing of career interest information, such as throughthe ongoing performance management process between manager and employee, aswe will examine in chapter 9.

GLOBAL RECRUITMENT METHODS—EXTERNAL

Particularly when recruiting to fill entry-level positions or when internal talent is notavailable or desirable to fill other job opportunities, various external recruitmentmethods can be employed. We will now briefly examine several of these methodsincluding advertising, employee referrals, field recruiting, internships, Internet andrelated software, and professional recruitment firms.

Advertising

Direct advertising to the external public can reach a large number of potential appli-cants in a number of ways, from a simple “Help Wanted” sign in a shop window to atransnational search involving multiple forms of media. In a recent trip to Tijuana,Mexico, we even noted a van driving through the city with a loudspeaker blaring out anappeal for people to come apply for work at a nearby factory. Regardless of the methodor medium, it should fit the local culture and regulatory conditions. In the openingscenario, the banner advertisement outside a Chinese factory that read, “JOB OPEN-INGS FOR GREAT NUMBER OF WOMEN WORKERS,” may be acceptable in thehinterlands of China but would quickly run afoul of antidiscrimination law in the UnitedStates, as would German expectations that job candidate resumes include birth dates.Advertisements also should be directed at reaching the intended audience. Too broad

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of an advertisement approach might attract unqualified candidates and create an extraload on the selection process, whereas too narrow of an approach might miss qualifiedcandidates who could bring great value to the organization.

Employee Referrals

Many companies have found the employee-referral approach to be very useful inattracting competent and committed employees—especially small- to medium-sizeoperations that might not have the demand or budget to justify professional recruit-ment agencies. In many companies and operations around the world, 25 percent to30 percent of the new hires come from employee referrals. And Mike Weston, CEOof LogicaCMG Offshore Services, believes this percentage is growing.92

Under an employee-referral approach employees typically are provided a financialreward and/or gift for referring a candidate who is eventually hired. In some successfulcases employees have even brought in groups of friends with whom they had worked

GLOBAL WORKFORCE CHALLENGE 6.1

IN STAFFING, SHOULD NEPOTISM ALWAYS BE AVOIDED?

For many, nepotism is synonymous with corruption. It is commonly touted as bad for business—itfavors relatives over those who may have more talent. It therefore rewards the incompetent, harmsefficiency, reduces social mobility, and perpetuates class barriers. But this common perception aboutnepotism is not accurate in business today, and a broad trend in family member hiring and successionis becoming more and more apparent as family enterprise continues to explode globally.

A recent survey by the Raymond Institute for Family Business places the number of family-runbusinesses in the United States at over 24 million and finds that they are posting higher revenuesdespite a slower economy—up 50 percent since 1997. Family businesses are also slower to lay offemployees in difficult economic times, plan better for the future, and provide more opportunities forwomen than non-family businesses. And a study in the Journal of Finance finds that family-runbusinesses are 5 percent to 6 percent more profitable and tend to be valued 10 percent higher bythe stock market than their non–family-run counterparts.

Though they may be reluctant to admit it, many companies prefer to hire the relatives of existingemployees. In addition, most people do in fact find jobs through kin-based networks. Motorola, acompany that has been family-run for three generations, promotes family involvement through asummer camp program for employees’ children. Before they are allowed to join the ranks, successfulcompanies often require family members to earn advanced degrees in business or other relatedfields, or spend at least five years working for another firm—especially a competitor where differentperspectives can be brought to the company. Other companies put family members through arigorous apprenticeship program designed to discourage all but the truly committed.

Contrary to the assumption that nepotism in hiring is always and everywhere bad and somethingto be avoided, the record of many businesses in the United States and abroad tells a different story.What we are seeing is essentially a return to the entrepreneurial family model that has always beenthe heart of the capitalist system.

Source: Adapted from A. Bellow, In Praise of Nepotism (New York: Doubleday, 2003).

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in previous companies.93 The employee-referral approach tends to be very effective inattracting qualified and loyal new employees similar to their successful internal com-pany employees who have referred them. Gautam Sinha, CEO of TVA Infotech, aBangalore-based IT recruitment firm, believes that employee referrals are successfulbecause employees are generally well equipped to sell the company to their friendsand acquaintances. These current employees also tend to have a clear idea of the re-quired skill sets and requirements for success with the company. In addition, the newlyrecruited employee, through informal orientation already provided by the person mak-ing the referral, tends to know what to expect from the job and the company, thusdecreasing the likelihood of early departure due to unfulfilled expectations.94

However, this similarity has a downside in terms of developing workforce diver-sity, because employees naturally tend to refer friends and people from their socialcircles who are similar to themselves.95 In fact, in some countries, such as the UnitedStates, an over-reliance on the referral approach can lead to accusations of discrimi-nation and costly litigation when it can be shown that this approach tends to givesome ethnic group an advantage over others (that is, the predominant employee eth-nic group generally referring candidates of the same ethnicity).96

A particular class of employee referral involves hiring not only friends who arerecommended by valued employees but their family members as well. This practiceof hiring family members, sometimes referred to as nepotism, is often banned andassociated with corrupt business practices.97 Nevertheless, this practice may be highlypreferred and valued in different cultural contexts, such as in Asia and the MiddleEast.98 And where careful control is placed on hiring those who are truly qualifiedfor a job, nepotism can be very helpful in recruiting several highly committedemployees in a timely manner and at a very low cost, resulting in high workforcestability and continuity.99

Field Recruiting

Many companies actively send professional internal recruiters out into the externalenvironment in field recruiting activities, such as to domestic or international collegecareer centers, company- or government-sponsored outplacement service centers,school- or local government–sponsored career fairs, or meetings of professional asso-ciations—all places where potential candidates might seek employment opportunities.An engineering firm in Munich, Germany, for example, might send a recruitment team(for example, including a professional recruiter and an engineer) to a job fair in easternGermany sponsored by a local municipal government to meet with potential engineer-ing candidates who have been laid off due to plant closures and corporate restructuring.

Internships

Companies are increasingly working closely with domestic and international univer-sity programs to develop internship arrangements where students may work on apart-time basis during a school year or full-time during a summer prior to gradua-tion. This working arrangement, whether in exchange for pay, academic credit, or

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both, can provide valuable experiential learning and resume-building experience forthe student.100 And as a recruitment tool, appealing internships can be successful inattracting very capable students whom managers can assess further for organiza-tional fit and potential before making hiring decisions. Especially for potential fu-ture international assignments, international internships also serve as a valuable trialtest of an individual’s ability to adapt and adjust to a foreign work environment.Those who want to return for regular employment to a foreign location where they inthe past had significant internship experience are already self-screened and would bereturning with their eyes wide open and likely not pose the adjustment risk and pro-ductivity toll of those without work and living experience in that region. However,internships might not be appropriate when employees need to be hired fairly quickly.In addition, when performed effectively internships tend to require considerable com-pany time in planning and supervision.101

The Internet and Related Software

There has been tremendous growth in the use of the Internet as an external recruit-ment tool. As evidence, Internet usage for recruiting purposes in Global 500 compa-nies increased from 29 percent in 1998 to 88 percent in 2001.102 With increasingwidespread availability and usefulness of the Internet and e-mail for resume andapplicant data collection, as well as availability of integrated software tools for auto-mated applicant data scanning and analysis for screening purposes, companies arefinding that the use of these new technologies is significantly reducing both the costand time needed to fill many positions. The Internet is also able to improve on tradi-tional advertising by targeting specialized websites and electronic newsletters andbulletin boards to more effectively reach particular groups of interest (such as expa-triate newsletters and relocation services). In addition, through effectively designedwebsites, companies can develop realistic job and working environment previewsfor potential candidates who can use this information to determine their degree ofinterest for a particular job opportunity—and in many cases screen themselves out ina very cost-effective fashion.

Despite its strengths, the use of e-recruitment has potential drawbacks, as outlinedby Sparrow:

• Attracts too many applicants to process effectively and in a timely manner, cre-ating an excessive workload and possibly hurting the company’s image.

• Presents a challenge when the recruiting company is not well known in newforeign markets.

• Attracts questionable data of highly variable quality; offers a lack of qualitycontrol in getting a response from truly interested targeted groups.

• Contains an inherent discrimination against other qualified candidates due tomostly male candidates applying from a small range of countries.103

Notwithstanding these shortcomings of the Internet and related software, theredoubtless will continue to be significant growth in new cost-effective technological

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applications for improving external recruitment. As with other advancements in bestpractices, managers should regularly monitor these e-technology advances for adop-tion where deemed appropriate for improving company recruitment efforts.

Professional Recruitment Firms

There is a rapidly growing worldwide industry for firms that perform various formsof assistance in “sourcing,” or providing labor to fit company employment needs.104

These service providers can range from agencies such as Adecco or Manpower, whichprovide “temps” or employees that work for the company for a limited period, toexecutive search firms, such as Korn/Ferry International, which assist only with theexternal recruitment of senior executives. Up to 50 percent of executive searchesnow cross international borders, and thus the ability of executive search firms tooffer an integrated service with cross-border capability is a competitive edge.105 Thereis a growing trend among smaller search firms to use global partnerships, allowing amuch wider geographical sourcing of candidates, whereas larger firms are goingpublic and opening offices in large metropolitan areas around the world.

A fairly new and developing segment of the professional recruitment servicesindustry is often called “temp-to-hire,” which provides employees from entry tomiddle management levels initially on a temporary basis, but afterwards these em-ployees are hired by the company on a regular employment basis when future workdemand and employee fit warrant such a decision. In fact, even when future workdemand is certain, companies are increasingly using such temp-to-hire firms to re-cruit employees on a temporary basis and then carefully watching these workers as aprobationary test prior to making regular-hire decisions.

GLOBAL SELECTION OF HUMAN RESOURCES

The selection decision of which job candidates to accept and which to reject canhave powerful implications for future business success. At the executive level, theselection decision determines what kind of leadership is going to guide the organiza-tion and shape its future. We first will briefly examine general principles of selectionthat increase the likelihood that an employment decision will benefit the organiza-tion and encourage you to seek additional specialized sources of information on thegeneral practice of selection. We then will discuss important considerations andmethods of selection pertaining particularly to international assignments.

GENERAL PRINCIPLES AND PRACTICES OF EMPLOYEE SELECTION

Triangulation

This term literally means to measure something from three different angles to achievean accurate assessment. Many human resource selection techniques and tools areavailable to provide information about a candidate for making a selection decision—whether or not to hire. And each measure used to assess a candidate generally has

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particular strengths and limitations. The more kinds of measures used provides afield of data, and the areas of agreement or convergence of the data from these mea-sures tend to provide much more accuracy in predicting the future success of a can-didate than data provided by a single measure or assessment. When only one approachor measure is used, the quality of that decision will be vulnerable to the limitations ofthat particular measure. To illustrate, there reportedly was once a company presidentwho desired to surround himself with brilliant employees and decided to use a stan-dard I.Q. test alone to select all new employees. In time the president found that hehad indeed hired a large number of intellectually superior employees. However, heregrettably noted that company performance and productivity had deteriorated con-siderably due to internal conflicts and poor coordination of effort—his individuallybrilliant employees didn’t know how to work together as a team. Clearly, additionaland different selection measures would have been helpful.

Focus on Job Relevance

The actual requirements of a job should guide all selection activities and decisions,and the results of the various assessments of a job candidate should be judged againstthose relevant job requirements. We recently noted in a newspaper in Argentina thatthe qualifications requested in a job announcement for a secretary included suchcharacteristics as “young woman” and “attractive.” Although an employer mightpersonally desire a particular gender and attractiveness in a candidate, those charac-teristics in themselves will be inadequate in getting the required work done. Of course,local mores may prescribe particular characteristics such as those related to age andgender, and in these cases a fit with local cultural expectations might represent animportant job qualification. Nevertheless, to increase the likelihood of making effec-tive selection decisions in hiring the best talent—and in some countries, to also avoidcostly litigation due to claims of unfair treatment and discrimination related to age,gender, ethnic background, and so forth—a general rule to follow would be to besure that all selection methods and decisions are clearly job-related.

In some cases a strict focus on job-relatedness and a candidate’s ability to performthe actual requirements of a job can result in the hiring of candidates who otherwisemight not even be seriously considered. For example, in the United States the Ameri-cans with Disabilities Act requires that employers make reasonable accommoda-tions for hiring people with disabilities who, with accommodation, would qualify fora job opening. Employers are now not allowed to simply rule out a candidate with adisability without consideration of possible accommodation. And as part of the se-lection process, managers are strongly encouraged to not refer directly to the disabil-ity but to ask the candidate to demonstrate or explain how, with a reasonableaccommodation, he or she would perform the critical responsibilities of the job. Wehave met several managers who have indicated that if they had not been directed bythese legal guidelines when considering candidates with disabilities, they would havesimply dismissed many of these candidates, assuming that they would be unable toperform the job. But when forced to allow the candidates to demonstrate their abilityto perform relevant job requirements, these managers were repeatedly amazed at

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how wrong their assumptions proved to be, resulting in the hiring of very valuableemployees for the company. They clearly learned how their faulty assumptions andnegative expectations regarding people with disabilities were much greater and lim-iting than the actual disability.

Investment in Developing Interviewing Skills

The employment interview is generally the most frequently used method for em-ployee selection, yet in the hands of untrained managers and supervisors, it often hasone of the lowest validity rates in predicting the future company success of a jobcandidate.106 Therefore, to increase the accuracy of this widely used and potentiallyvaluable selection method, organizations should invest in training on interviewingskills for their managers and supervisors and other employees involved in the selec-tion process. Such training should cover different interviewing approaches and whenthey can be most effectively used, practices for conducting an effective interview,and what to avoid in an interviewing situation (for example, interviewer domination,asking of questions unrelated to the job, and premature judgments of the candidate).

An important focus of this training should be on the behavioral interview tech-nique, which is becoming a primary and highly successful interviewing tool for manyorganizations. Based on the strong evidence that past behavior is the best predictorof future behavior,107 this approach requires the candidate to describe specific expe-riences in the past in which he or she demonstrated an important job-related behav-ior. Situational interviews can also be effective, which require the candidate to describehow he or she would solve a particular problem relevant to the job. For both behav-ioral and situational interview approaches, the interviewer should carefully preparebeforehand by examining the critical behaviors needed for the job and developingbehaviorally based questions that elicit a picture of how the candidate performedthose behaviors in the past or how he or she would perform those behaviors in aparticular situation relevant to the job.

Influence of Culture on Selection Measures

In carrying out employee selection on a global scale a careful consideration shouldbe made regarding the possible influence of cultural differences in affecting the re-sults and conclusions of selection tests and other methods and measures for assess-ing candidate fit and qualifications. For example, in some Western cultures nonverbalbehavior, such as a firm handshake and considerable eye contact, exhibited by a jobcandidate in an initial interview might convey the impression that the candidate isconfident, enthusiastic, and forthright, whereas a weak handshake and evasive, mini-mal eye contact might convey to the Western interviewer the impression of insecu-rity, low self-esteem, or even untrustworthiness and intent to withhold truth. However,in many Asian cultures the latter behavior by an interviewee would be consideredvery appropriate, with direct eye contact held to a minimum as a sign of respect forthe interviewer.

Assessment centers are generally seen as one of the most robust and valid selec-

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tion techniques. But their often culture-bound assumptions about “appropriate” can-didate behavior in one country might not effectively translate elsewhere. For ex-ample, British Airways experienced difficulty in applying its standard approach inrecruiting Japanese candidates for its Graduate General Manager Program. The can-didates found it difficult to take the lead in group exercises or to use the word “I.”But with some modification in exercise design and cross-cultural sensitivity train-ing, candidates were able to demonstrate in their own culturally comfortable waysthe relevant competencies targeted for assessment.108

Differential effects of culture are particularly problematic in the use of person-ality tests. The subtle interaction between language and culture make it hard todiscern if test results are due to national cultural differences or individual candi-date characteristics. For example, the personality assessment questionnaire item,“I work hard,” although meaningful to British managers, is associated with themuch less desirable concept of “toil” for French managers.109 Consistent with theprinciple of triangulation, for overcoming potentially misleading effects of cul-tural differences it is preferable to use multiple selection methods and not to placetoo much weight on one approach.110

SELECTING EMPLOYEES FOR FOREIGN ASSIGNMENTS

The cost of making a poor selection decision can be great, especially so when itinvolves a foreign assignment. In the final section of this chapter we will examinekey considerations and important methods for effectively selecting employees forforeign assignment. Although we will present this information in terms of expatriateselection, in many cases these considerations and methods are applicable across in-ternational employee categories of PCN, TCN, and HCN.

Focus on the Most Important Criteria for Success

Related to the previously mentioned important general practice of focusing all selec-tion efforts on job relevance, the most important criteria for achieving success withthe international assignment should be considered carefully. And the most importantselection criteria depend on the nature of the international assignment. An extendedassignment that will feature considerable interaction with a foreign workforce whoseculture is very different from that of the expatriate (for example, one with high cul-tural distance) might point to important selection criteria such as a candidate’s locallanguage fluency, ability to adjust, and ability to relate in a sensitive way with othercultures. However, these abilities might not be as important in a much shorter assign-ment to a foreign operation representing little cultural distance (for example, fromSouthern Germany to Austria) or involving predominant interaction with PCNs andlittle HCN interaction.

The primary criterion for selecting employees for a foreign assignment tradition-ally has been “demonstrated technical competence”—again based on the notion thatpast behavior is a strong predictor of future performance. However, the major flawwith that reasoning is that the past technical competence likely took place in a do-

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mestic work environment without the significant number of uncertainties, unfamil-iar conditions, and differing cultural variables contained in the intended new foreignwork environment. Selection criteria are now gradually changing to a wider range ofskills and personality characteristics—such as interpersonal skills, personal intentand motivation for obtaining international work experience, cross-cultural sensitiv-ity, adaptability, tolerance for ambiguity, and overall inquisitiveness—all deemedappropriate for the flexible manager in the foreign work environment.111 In particu-lar, because the ability to adjust to the foreign environment—both on the part of theexpatriate and any accompanying family members—appears to have as great or evengreater determination in foreign assignment success than the expatriate’s technicalcompetence;112 the measure of this adjustment ability should likely be given signifi-cant weight in the overall selection decision.

Methods for Selecting Employees for a Foreign Assignment

Three major approaches can be used, often in combination, for selecting employees fora foreign assignment: (1) a psychometric approach for predicting international man-agement competencies, (2) an experiential approach, and (3) an overall clinical riskassessment approach. We now will briefly examine each of these major approaches.

Psychometric Approach. This general approach using personality tests argues thatthere are identifiable competencies associated with foreign assignment success andthat the accurate measurement of these competencies can be used to identify andpredict effective performers in international assignments. As with domestic selec-tion measures, many MNCs develop their own customized competency measures.For example, the Society for Worldwide Interbank Financial Telecommunicationmeasures thirty critical success factors, and one of primary importance they assess is“international mind-set.”113

However, significant challenges facing these assessments based on a psycho-metric approach include their difficulty in measuring predictive success and reli-ability due to the questionable quality of data from the greatly variable and diverseforeign work environments. They also may tend to be too cumbersome in theinternational staffing setting where more of a concern may be placed on simplyfinding willing internal candidates for foreign assignments. Thus, many MNCsmay decide not to emphasize the use of psychometric testing for expatriate selec-tion purposes. This inclination is reflected in the following experienced advice toother international human resource professionals by Michael Schmidt of HumanResource Consulting:

I don’t think that psychometric testing is required prior to sending people abroad. Nor is itestablished HR practice, to the best of my knowledge. . . . Personally, after twenty-fiveyears of HR experience in managing international transfers and having been transferredfrom Germany to the United States myself, I am unconvinced that any single personalitytrait can be identified that either helps or hinders an employee’s (or their family members’)transferability across country and culture borders.114

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Experiential Approach. There are three main forms of this second approach, whichemphasizes the expatriate candidate’s direct experience with many of the realities ofthe future assignment. These forms differ primarily in their level of time perspectiveand expense. The first approach, which utilizes an assessment center technique (in-cluding in-basket exercises, relevant job assignments, and work simulation), placesthe candidate in various relevant situations and with common and critical tasks thathe or she likely would face in the foreign assignment. Therefore, the assessment andcomparison of competing candidates’ performance on these job-related tasks wouldtend to have a high degree of validity.

The second form of experiential approach, which requires more time and expense,is a foreign site preview visit, or familiarization trip. Here the candidate and her/hisspouse and even children may be invited to visit the actual area of the proposed foreignassignment to experience it firsthand. It is of great importance that this brief visit beplanned and made as realistic as possible to provide an accurate preview rather than

GLOBAL WORKFORCE CHALLENGE 6.2

THE INCREASING ATTRACTIVENESS OFOLDER EXPATRIATES

In a global environment where companies have less money for country-club memberships and othertraditional expatriate perks, older workers are an increasingly attractive option because their relativemobility, immersion in corporate culture, and experience make them the cheapest option to get anoperation up and running—including in developing countries. For instance, sending an older workeroverseas usually means avoiding international school tuition for children, which in China can cost asmuch as $26,000 per child per year. When it comes to pioneering expatriate employees for newoperations in developing countries like China, a surprising number are older people. China inparticular is attracting people who would be thinking about retirement if they were back home in theUnited States or Europe, but who are now in hot demand in a nation long on laborers but short onleaders—and a nation especially noted for its respect for its elders. Ford Motor Company over theyears has resorted to its pool of retired U.S., German, British, and Australian auto workers when itneeded something done right on the operations side of the China business.

When 61-year-old Gene Allison was looking around Greenville, South Carolina, for a way to capoff a long manufacturing career, he struck upon an idea to move to China. He jumped on plans byhis company, Rockwell Automation, Inc., to build a plant in Shanghai, encouraged by his wife whoalways had a fascination with Asia. He worked for four years setting up the facility and more recentlyhas shifted to keeping tabs on machinists and providing local coaching and advisement at factoriesrun by local suppliers in China. “I think I’ll be here the rest of my career—which might be only oneor two more years,” Allison says. Unlike old-timers, younger workers in U.S. plants often haven’t beenexposed to the lower-tech manufacturing methods that still power much Chinese industry. In addition,in their later career stage, older expatriates are likely more interested in developing and mentoringothers. Mr. Allison is comfortable, nearing the end of his career, providing a valuable contribution bygrooming a team of Chinese quality-control experts to take his place when he finally retires.

Source: Adapted from J.T. Areddy, “Older Workers from US Take Jobs in China,” Wall StreetJournal, 22 June 2004, B1, B6.

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merely an enticing tourist-oriented experience in a foreign and exotic location. Thisforeign site familiarization trip can be very effective in providing a realistic picture toensure that the candidate makes an informed decision as well as helping prepare theexpatriate—intellectually and emotionally—for the foreign assignment, fostering en-hanced adjustment. Nevertheless, it can represent a significant time investment andexpense, as indicated by Martin Asdorian of LAMA Associates, Inc., “It can be a bigbucks item. To fill a position in Port-of-Spain, Trinidad, I once had to send four candi-dates with their spouses before I got one willing to take the job.”115

A third form of the experiential approach for expatriate selection, developingan internal international cadre or talent pool, requires significant HR planningand a much longer time perspective than the other forms. This method relies onthe MNC’s long-range investment in building within its managerial ranks interna-tional competencies through foreign work experience. Where a significant num-ber of managers are involved in international developmental assignments ofrelatively short duration in their early careers, the MNC is able to build up a talentpool of experienced potential candidates for longer-range expatriate assignments.And the quality of the candidates’ performance during their early experience canbe used as a sound basis for predicting their likelihood of future success in theextended expatriate assignment.

As part of its long-range effort to identify and develop an internal supply of inter-national leadership to meet the demands of future international business growth,Cadbury Schweppes annually has sent sixteen managers through an internationalassignment as part of its accelerated development program, generating relevant dataabout each individual’s intercultural adaptability and potential for success in ex-tended foreign assignments.116 This method requiring long-range planning and coor-dination is recommended by international HR consultant Michael Schmidt, whoasserts, “The best indicator for future success in international assignments is pastsuccess in international assignments. So you may want to build and maintain aninternational mobile cadre of managers and professionals in your organization. Short-or medium-term assignments (six to twelve months) at an early stage of a person’scareer may be part of your HR strategy as well—call it real-life testing.”117

Clinical Risk Assessment Approach. This third approach investigates candidatecompetencies and ability to adjust to the demands of the foreign assignment in addi-tion to other factors affecting success beyond the expatriate, including the adaptabil-ity of the accompanying partner, dual-career difficulties, the nature of supportingstructure in the foreign assignment, cultural distance and technical difficulty of theassignment, and accountabilities and responsibilities.118 Through this comprehen-sive assessment, candidates who present an overall picture of greatest potential withminimal risk might be the best choice for a foreign assignment.

SUMMARY

Important general factors that influence global staffing at all employee levels includecompany business strategy, company stage of international development, specific

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foreign market experience, host government restrictions and incentives, socioculturalconsiderations, plans for individual and organization development, and situationalfactors. Important areas of consideration for global recruitment include the geo-graphic scope of recruitment and whether internal versus external candidates shouldbe sought. Managers should consider several alternative recruitment methods to en-sure that they are able to attract an optimal number of qualified candidates at areasonable cost.

General guiding principles and practices for global selection include triangula-tion, maintaining a focus on job relevance, investing in building interviewing skillsamong supervisors, and being aware and controlling for the potentially distortinginfluence of cross-cultural differences. When selecting employees for foreign as-signments, MNCs might consider psychometric, experiential, and clinical risk as-sessment approaches. Finally, to increase the likelihood of foreign assignment success,MNCs should more broadly consider other candidate characteristics besides techni-cal competence, including interpersonal skills, personal intent and motivation forobtaining international work experience, cross-cultural sensitivity, adaptability, tol-erance for ambiguity, overall inquisitiveness, and the viability of a positive experi-ence for accompanying family members.

QUESTIONS FOR OPENING SCENARIO ANALYSIS

1. Based on what you have learned from this chapter, how would you critiquethe Shell People Services staffing function? Particular strengths? Any weak-nesses or potential limitations?

2. What are various methods used by Shell People Services to maximize itsability to have a global reach for talent yet fit local workplace conditions?

3. How is the Shell Group using its global staffing function to contribute tooverall competitive advantage?

CASE 6.1. MNC STAFFING PRACTICES AND LOCALANTIDISCRIMINATION LAWS

The U.S. legal landscape is full of lawsuits by minorities and women claimingdiscrimination at the hands of whites and men. And in recent years there also havebeen lots of claims by whites claiming “reverse discrimination” against preferen-tial treatment with affirmative action. But the case against Marubeni America, theNew York subsidiary of a big Japanese trading company, involves a different sortof alleged prejudice—a U.S.-based foreign-owned company discriminating againstpeople who fall outside of their ethnic group or national origin. This pattern ofdiscrimination is a growing concern due to the increasing presence of MNCs in theUnited States. Though the Marubeni case isn’t unprecedented, the e-mails andother evidence cited in this case offer a rare inside look into the employment prac-tices of an MNC operating in a host country where local law conflicts with em-ployment practice.

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The plaintiffs in this case—two Caucasian executives—accused the local subsid-iary, general manager, chief financial officer, and head of human resources of dis-criminating against Americans, non-Asian minorities, and women. The suit allegesthat non-Asians are promoted less frequently and paid less than Asians. The 200-worker company has no African Americans or females and just one Hispanic amongits 121 top officers and managers, the suit says, and just three African-Americanlower-level employees. The suit also claims that weekly meetings were conductedin Japanese, effectively excluding non-Japanese-speaking employees, and that someexecutives frequently used racial and ethnic slurs. The suit was brought by KevinLong, a senior human resources employee, and Ludvic Presto, the company’s topinternal auditor, both of whom were placed on paid administrative leave—a movetheir lawyers claim was retaliation for complaining about discrimination. The twomen are asking for a minimum of $4 million each in severance payments, plus pen-sion and other benefits, and $55 million in damages and legal costs. Two currentfemale human resource workers also filed similar complaints with the U.S. EqualEmployment Opportunity Commission.

Although Marubeni strongly contests the validity of these claims about dis-crimination, damning e-mail records suggest otherwise. Mr. Long received thefollowing e-mail from Yuji Takikawa, a vice president of the U.S. company’stextile unit, requesting help hiring a salesperson: “I want a person who has aggres-siveness, high I.Q. We prefer male and 25 to 30 years old. Asian, like Chinese,Japanese, of course American or others is fine. As you know, in case of Americanguy, once reach high income, all of a sudden stop working. This is my feeling.” Onanother occasion, an executive wrote in an e-mail to Mr. Long that two other topcompany officials had discussed replacing a pregnant employee because they wereworried “about her unstable situation after the delivery.” Mr. Long replied thattheir grounds for wanting to replace the woman, who had been with the companyfor fifteen years, were “inappropriate and considered pregnancy discrimination inthis country.” The head of human resources of the local operation, in a farewell e-mail upon retirement, wrote that the company’s outside lawyers had “done a mas-terful job” at protecting the company from litigation from groups that he describedusing racial slurs.

Marubeni isn’t the first Japanese-owned U.S.-based company accused of national-origin discrimination. In 1980, thirteen female American secretaries suedSumitomo Shoji America, Inc., alleging it hired only male Japanese nationals formanagement jobs. The company claimed it was immune from the suit based on a1953 treaty with the United States that gave both countries’ corporations limitedimmunity from each other’s employment discrimination laws so they could makesure that only their own citizens held targeted positions in operations based in theother country. But the U.S. Supreme Court rejected this argument, ruling that allforeign-owned subsidiaries in the United States are subject to U.S. employmentlaws. Sumitomo agreed in a settlement to pay more than $2.6 million to currentand former employees and to accelerate efforts to recruit and promote qualifiedwomen.

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QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. What message does this case have for MNCs as they plan and carry outstaffing and other workforce management activities in their foreign hostoperations?

2. What evidence does this case provide that local management was guilty ofunfair discrimination according to U.S. labor laws?

3. Do you believe that the behavior of local Marubeni managers would be ac-ceptable in other counties where it is not specifically prohibited by locallabor laws?

4. Besides avoiding legal costs, can you think of any other reasons to avoiddiscriminatory behavior when making staffing decisions in global workforcemanagement?

Source: Adapted from K. Scannell, “Lawsuit Charges US Unit of Japanese Company with Bias,”Wall Street Journal, 20 January 2005, B1, B2.

CASE 6.2. LOCAL STAFFING FOR GLOBAL BUSINESSOUTSOURCING SUCCESS

Wipro Technologies of Bangalore, India, was having trouble persuading Germancompanies to outsource offshore their chip and software design work to Wipro—until the company hired Walter Ortmueller. The German engineer talks, looks, andthinks like the Indian outsourcer’s prospective clients, and that puts him in a betterposition than his Indian bosses to overcome common local fears about sending high-tech production and back-office operations halfway around the world to workerswho speak a different language. Using a middleman “from the same country gener-ates automatic trust,” says Mr. Ortmueller, whose twenty years of contacts in theindustry now help him scout and win clients for Wipro. The company had only twotechnology-design customers when it found Mr. Ortmueller in March 2003, and ayear later had ten, most of which it attributes to having a center in Germany staffedwith German engineers.

Outsourcing is finally beginning to crack the European market, once a staffingstrategy was added of using a heavy sprinkling of local representatives from thesame cultural background as the target clients. “Local presence was a must for thecustomers” in Europe, says Sangita Singh, Wipro’s chief marketing officer. Euro-pean businesses “want to be sure that their voice can be heard within a large orga-nization that doesn’t have its center of operations in Europe,” she says. Usinglocals also provides “the cultural and linguistic ties that make the clients smile andhelps us build stronger relationships,” Ms. Singh adds. Mr. Ortmueller understands,for example, that German businesspeople would rather take a direct and unam-biguous “no” response for an answer than receive a delayed response. Germans, hesays, also are not as open to bargaining as Indian or U.S. companies are. “If theydon’t like the price, they say ‘thanks’ and call the next provider,” he says.

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Offshore outsourcing is growing dramatically in Europe, although still behind theU.S. pace due to European labor laws that make relocating jobs through offshoreoutsourcing a long and costly process. To avoid layoffs, many European companiesoutsource only work and projects that require new hiring. But European businesspersonsalso are generally more reluctant than Americans to take risks or try out new ideas,Indian outsourcers say. But local hires like Mr. Ortmueller help clients overcome thisreluctance. “Without a local partner, our clients would simply not do outsourcing. Webridge the distance between different geographies that can generate a lot of misunder-standings,” says Ortmueller. When Mr. Debjit Chaudhuri first came to Germany in1999 to open an outsourcing office for India’s Infosys Technologies, Ltd., a Bangalore-based consulting and IT services firm, German companies “didn’t know what I wastalking about,” he says. “You need to build confidence, trying to keep it as German aspossible, while giving you the benefits of outsourcing.”

Mr. Chaudhuri’s office hires Germans for their knowledge of the country’s lawsand regulations as well as its markets. It also tends to use locals for face-to-faceinteractions with German customers to bridge language and cultural differences.Wipro has similar client-development centers in Sweden, Britain, the Netherlands,and Finland and puts the same emphasis on using locals in each country. The com-pany also has sales offices in eight countries in Europe, and for each the marketingteam is about 90 percent locals, Ms. Singh says, compared with only 30 percent inthe U.S. sales offices. She adds that in the United States, where language andcultural differences are less of an issue, the sales staff “could all be Indian.”

QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. Usually hiring locals is associated with a general multidomestic or polycen-tric overall strategic approach to international business. Is this the case withWipro Technologies of Bangalore, India?

2. How does Wipro’s and other similar companies’ local staffing approach inEurope support company strategy and help achieve competitive advantage?

3. Why is this local staffing approach to support outsourcing client develop-ment so important in Europe compared to the United States? Is this approachnecessary in all global operations? What added costs might be associatedwith this local staffing approach?

Source: Adapted from A. Campoy, “Think Locally: Indian Outsourcing Companies Have FinallyBegun to Crack the European Market,” Wall Street Journal, 27 September 2004, R8.

RECOMMENDED WEBSITE RESOURCES

The International Association of Corporate & Professional Recruitment (www.iacpr.org). An interna-tional group of senior-level corporate human resource and recruitment executives, retained executive-search professionals, human capital consultants, and academics committed to the recruitment andsuccess of executive leadership.

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International Executive Search Federation (www.iesfed.com). An international group of senior-levelcorporate human resource and recruitment executives, retained executive-search professionals,human capital consultants, and academics committed to the recruitment and success of executiveleadership.

Diversity Directory MindExchange.com (www.mindexchange.com/europe.htm). Extensive list of Euro-pean firms providing staffing, recruitment, and employment advertising services.

Manpower (www.manpower.com). A world leader in the employment services industry, offering a con-tinuum of services in permanent, temporary, and contract recruitment; employee assessment; andcareer transition management. With 4,300 offices in sixty-seven countries and territories, the largestmarket is France, followed by the United States and United Kingdom. In 2003, there were 25,000staff employees worldwide and 2.3 million people placed on temporary and contract assignments in2003.

Robert Half International (www.rhi.com). World’s largest specialized staffing services firm with morethan 325 offices in North America, Europe, Australia, and New Zealand.

Selection Research International (www.sri-2000.com). An international group of corporate psycholo-gists and management consultants specializing in providing organizations research-based guidance,assessment tools, and other resources for global staff assessment and selection.

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