Regiocentric Approach to International Human Resource free essay sample

The purpose of this report is to explore the regiocentric approach to International Human Resource Management and discuss the impact the use of this approach would have in the case of expanding to a new location. The Expatriate Management Cycle is covered to identify any considerations that may have to be made during the process. The report evaluates the use of a regiocentric method for an international start-up situation. This report was written to inform the Managing Director of DBS Engineering Ltd of any issues that may occur during the expansion and to assess their current choice of using a regiocentric approach to business. This evaluation was carried out by researching secondary resources on management approached to IHRM and the Expatriate Management Cycle. Significant findings were then compared drawing out any benefits or disadvantages of regiocentric practice and identifying any issues that may have to be faced during the process. It was found that the regiocentric approach choses to group countries by similarities such a geographic area: North America, Latin America, Europe, North Africa etc. We will write a custom essay sample on Regiocentric Approach to International Human Resource or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This approach combines the benefit of grouping operations to improve efficiencies and also allows for some extent of multi-cultural management; however it does not accept the idea of moving people out with their specific regions. This can limit learning and experience to some extent. It was found that overall the regiocentric approach is very viable in this situation with many benefits. There is however potential for sending a Parent-Country National to a new start-up no matter the region, to ensure the organisation maximises efficiency. Table of Contents Introduction4 The Regiocentric Approach4 Expatriate Management Cycle6 Strategic Planning6 Selection7 Preparation8 Performance Management9 Repatriation10 Conclusion11 References13 Introduction The author of this report is the HR Manager in DBS Engineering Ltd, a multinational organisation which has plans to expand further afield. The intention of the author is to examine the regiocentric approach to globalisation, which the company has already adopted and to analyse how this approach is likely to affect the management of expatriates in a start-up situation. Benefits and disadvantages of applying the regiocentric approach in a start-up environment will be discussed, looking in to each stage of the expat management cycle. Considerations that must be made during this process will be identified with significant recommendations provided. Conclusions will then be drawn of the overall effectiveness of the regiocentric approach in this circumstance. This analysis will be carried out by researching secondary information such as scholar articles, newspapers and textbooks. The Regiocentric Approach The regiocentric approach can be described as â€Å"using managers from various countries within the geographic regions of business. Although the managers operate relatively independently in the region, they are not normally moved to the company’s headquarters† (Dlabay, Scott, 2008, p278). Geographical regions are areas which can be grouped by similarities whether cultural or geographical. An example of this is â€Å"A U. S. company that focuses on the countries included in the North American Free Trade Agreement (NAFTA) the United States, Canada and Mexico† (Keegan and Green, 1997, p12). Similarly, if a US parented, Regiocentric Company has an Italian subsidiary; it is likely native Europeans would be recruited to manage it. (Dlabay, Scott, 2008, p278). This approach can be used as an alternative to the commonly accepted ethnocentric or polycentric approaches. According to Sparrow, Brewster and Larris, (2004, p164) â€Å"under an ethnocentric HRM perspective, subsidiaries will be staffed with expatriates in key management positions. Ethnocentric organisations will integrate their ways into foreign subsidiaries by sending out parent-country nationals. A polycentric orientated Organisation would take the opposite approach in which, â€Å"the MNC treats each subsidiary as a distinct national entity with some decision making autonomy. Subsidiaries are usually managed by local nationals (HCNs). Sparrow, Brewster and Larris, 2004, p164). The Regiocentric approach combines both these methods by obtaining the efficiency benefits of a standardised, polycentric approach whilst recognising the need for adapting to the differences in business culture globally, allowing for subsidiaries to react to their specific environments. â€Å"A single European strategy, for example, recognizes the similarities in European markets and operations, and seeks to gain efficiency by treating the company’s European subsidiaries as single strategic unit. At the same time, a different strategy may be enacted by the same MNC in Asia. †Ã‚  (Stahl, Grigsby, 1997, p71). This example is particularly relevant currently as the BBC had quoted in September 2011 that â€Å"The European Commission has predicted that economic growth in the Eurozone will come to a virtual standstill in the second half of 2011. † Whereas the Asian Development Bank claims â€Å"it now expects 14 countries, including China, South Korea and Indonesia, to grow by 7. 2% on average in 2012. † (BBC, 2011). Therefore with economic growth continuing in Asian subsidiaries may be looking to expand or recruit as opposed to their European counterparts who are likely to be downsizing to survive the recession. Expatriate Management Cycle The expatriate management cycle portrays the iterative process of planning an international assignment. This involves; selecting the right candidate(s) for the job, preparing the chosen expatriates and if necessary their families, managing the performance of expats whilst they are on assignment and finally preparing them to return to their home country once the assignment is complete. The stages of the management cycle can differ depending on many variables, such as; the length and nature of assignment, the expatriates’ experience of the culture and language, the host-countries cultural expectations. Strategic Planning Planning is essential before any international assignment to increase the likelihood of success. â€Å"HR planning is the process of assessing demand for labour against the potential supply. It is an important tool in putting the business strategy into practice, and in informing organisational capability. † (CIPD, 2011). This is specifically important in a start-up situation as the organisation has to consider the size of their expansion and how many employees in total will needed. Before this however, DBS engineering limited must consider where it plans to expand to as the location can have a great implication on the expatriate management process. If the organisation is planning to move into another country but in the same region, for example a UK based company moving into France with a regiocentric approach, they can choose to recruit employees from all over Europe including sending Parent Country Nationals (PCN’s) from the UK headquarters. Sending a PCN to a European subsidiary would have many benefits during start-up in fact Harris, Brewster and Sparrow (2004, p146) say it is â€Å"Appropriate for entry into international business†. Training local employees on the business operation, quality standards, strategy and any necessary technological skills is essential during start up and a PCN has the best experience to do this. Dlabay and Scott (2008, p276) suggest sending a PCN â€Å"is useful when prior experience is important (†¦) the goal is to prepare host country employees to manage the business†. However, sending a PCN can often dishearten local employees as it can be seen as discriminatory or ignoring a talent-pool. If the UK based company planned to expand into Dubai, with a regiocentric approach it would be unusual to send an expatriate from entities in the European area, they would instead recruit within the Arab region. Whilst this means the new entities are not receiving knowledge from a manager with personal DBS Engineering experience, there are other benefits. By resourcing employees from the Arab region (North Africa and Western Asia), cultural and language barriers would become less of an issue as most Arabic citizens speak classical Arabic as well as their countries own dialect. (UCL, 2011). Also the majority of the Arab population share the Islamic religion and therefore share beliefs. This is likely to help save costs as training and development does not need the same level of intensity, also with a lower risk of culture shock an expatriate is less likely to leave the assignment, reducing chances of project failure. On this basis the organisation must consider whether to recruit Host Country Nationals (HCNs) or Third Country Nationals (TCNs). In a start-up situation it could be recommended that the best person from the widest viable pool should be selected based on industry experience. Selection Once the purpose of the international assignments has been established in this case the need for skills and transferring business practice to local employees the ideal candidate(s) can be identified. â€Å"The selection decision for international assignees is critically important. Errors in selection can have major negative impact on the success of overseas operations†. (Briscoe, Schuler Claus 2009, p137). As with all selection processes it is important to identify candidates with the right qualifications, skill levels and experience; however the international aspect increases the importance of the individual’s personal characteristics. Briscoe, Schuler Claus (2009) suggest 4 areas should be taken into consideration: * Candidate maturity; life experience is invaluable. * Able to handle/speak foreign Language * a positive outlook on assignment. Appropriate personal characteristics, e. g. adaptability to new environments. In this stage the selection method must be chosen. As there is no existing subsidiary where the expatriates are going and the recruitment area is wide the organisation may wish to use online applications to cheaply reach a wide audience. Once a smaller pool of applicants is formed, interviews can be carried out via phone or inter net conferencing, however, it is important to be aware of cultural differences in interview situations (CIPD, 2011). The use of psychological testing may want to be avoided as there use â€Å"does attract some controversy. This is particularly true in international settings† (CIPD, 2011). Preparation Preparation for an international assignment is of utmost importance to reduce the risk of failure. This includes Pre-departure training, practical considerations and cross-cultural adjustment. The Spouse of expatriates may also have to go through training. Expatriates must be trained in issues such as the host-country’s background: e. g. history, politics and economics; cultural differences including language training; and any relevant laws or behaviour expectations. For example, Saudi Arabia has strict regulations on women being fully covered (Doumato, 2008); this is true even in comparison to some other Islamic nations such as Tunisia where women are expected to dress modestly but are allowed to reveal skin. These issues may deter women from wanting to work in such countries from fear of discrimination. The importance of this training becomes increased in a start-up situation as there are no current local employees to form a buddy system, in which expatriates could speak to a local associate about any integration problems they are experiencing. Practical implications must be thoroughly planned during this stage. This involves organising housing and visa’s. If family are moving with the expatriate this could mean arranging schooling and helping spouses find work. Rewards must also be arranged. The expatriates could be coming from many different countries and their reward packages must all reflect what they were earning before to ensure the assignment is attractive. It also must be suitable to the where they are moving, to ensure they can afford the cost of living. The headquarters must also decide on how communication is going to be held between expats and their office. Performance Management As the international assignment is for a start-up subsidiary, the performance of expatriates will likely be monitored by the home-country managers. Performance management can be complicated in an international setting â€Å"For instance, notions of what constitutes adequate quality control checks can vary widely from one country to another, import tariffs can distort pricing chedules, or a dock strike in one country can unexpectedly delay supply of necessary components to a manufacturing plant in another country (Dowling, Welch Engle, 2008,p270). The success of the international assignment can be measured by comparing the result of the assignment to the original objectives of the parent company and that of the expatriates. For a start-up situation the project is likely to have been a success if the business is up and running efficiently with the local e mployees fully trained and aware of how the business is run. Also healthy relationships with local buyers/suppliers should have been built. Expatriates should feel they have gained experience, improved their skills and furthered their career opportunities. Repatriation â€Å"Repatriation involves the move of the international assignee and family back â€Å"home† from the foreign assignment. For many expatriates and their families, the move â€Å"back home† is even more difficult than the original move abroad. Even so, it is often overlooked or minimized in the management of the total expatriation process†. (Briscoe, Schuler Claus 2009, p188). In this situation the expatriates have witnessed the subsidiary develop from the start and may have become very attached to it, this means they may not want to leave. It has been found â€Å"the process of repatriation is not a satisfactory experience for most managers, who on their return often experience culture shock, lost career opportunities and even unemployment. † (Edwards Rees, 2006, p174). Also for expatriates who may be returning to the same organisation in their home country there may not be a position present for their new level of experience and they are likely to have lost relationship connections. These issues often lead to expatriates leaving the organisation on return, after the organisation has invested in sending them abroad to improve their skills at the increased expatriate rate of reward. â€Å"It is widely accepted that the cost of expatriate turnover are considerable, very few firms have formal repatriation programmes to assist those involved† (Brewster, Sparrow Vernon, p10). This suggests the risk of losing employees could be improved by creating a good repatriation process, making sure the employee is welcomed back to their home subsidiary with an appropriate management position. Conclusion The regiocentric approach is an interesting mix of both ethnocentric and polycentric approaches. The organisation can benefit from reduced costs of training as the culture shock for expatriates should be less extreme. It allows for the great benefit of HCNs working on the project to bring local market knowledge into the subsidiary but also with the advantage of having TCN’s who can bring different experiences into decision making and ideas for a fresh outlook. However if a new subsidiary is opening in different region from the parent company the regiocentric approach would not allow for a PCN to go and help orientate the new employees on how the currently successful business carries out processes. Whilst this allows for local people to achieve higher management positions it could result in the new subsidiaries lacking efficiency. It could be recommended that a PCN is sent out for the first year of start-up to train employees and a find a replacement for themselves. It is important for the HR department at Headquarters to take all the expatriate management cycle steps seriously, investigating options to make clear decisions, to increase the chance of success.