There are four primary approaches that multinational companies use in staffing decisions, including geocentric, ethnocentric, polycentric, and regiocentric approaches.
The geocentric staffing approach does not focus on one nationality over the other. Instead, upper level management positions are held by the most qualified employees selected form a global pool of candidates. These managers are considered third country nationals, or TCNs. The most qualified candidates are selected, but no single nationality is stressed.
The Geocentric Approach is one of the methods of international recruitment where the Multi National Companies recruit the most suitable employee for the job irrespective of their Nationality.
When a company adopts the strategy of recruiting the most suitable persons for the positions available in it, irrespective of their nationalities, it is called a geocentric approach. Companies that are truly global in nature adopt this approach since it utilizes a globally integrated business strategy. Since the HR operations are constrained by several factors like political and ethnical factors and government laws, it is difficult to adopt this approach. However, large international companies generally adopt the geocentric strategy with considerable success.
For international recruitment, especially on foreign soil, organizations generally use manpower agencies or consultants with international connections and repute to source candidates, in addition to the conventional sources. For an effective utilization of the internal source of recruitment, global companies need to develop an internal database of employees and an effective tracking system to identify the most suitable persons for global postings.
The ethnocentric staffing approach heavily focuses on the norms and practices of the parent company where upper management positions are typically held by corporate personnel from the home country. These managers are considered parent company nationals, or PCNs. Japanese and Korean firms follow this approach quite often.
Countries with branches in foreign countries have to decide how to select management level employees. Ethnocentric staffing means to hire management that is of same nationality of parent company.
When a company follows the strategy of choosing only from the citizens of the parent country to work in host nations, it is called anethnocentric approach. Normally, higher-level foreign positions are filled with expatriate employees from the parent country. The general rationale behind the ethnocentric approach is that the staff from the parent country would represent the interests of the headquarters effectively and link well with the parent country. The recruitment process in this method involves four stages: self-selection, creating a candidate pool, technical skills assessment, and making a mutual decision. Self-selection involves the decision by the employee about his future course of action in the international arena. In the next stage, the employee database is prepared according to the manpower requirement of the company for international operations. Then the database is analysed for choosing the best and most suitable persons for global assignments and this process is called technical skills assessment. Finally, the best candidate is identified for foreign assignment and sent abroad with his consent.
The polycentric staffing approach heavily focuses on the norms and practices of the host company where upper management positions are typically held by corporate personnel from the local country. These managers are considered host country nationals, or HCNs. European firms often follow this approach.
When a company adopts the strategy of limiting recruitment to the nationals of the host country (local people), it is called a polycentric approach. The purpose of adopting this approach is to reduce the cost of foreign operations gradually. Even those organizations which initially adopt the ethnocentric approach may eventually switch over lo the polycentric approach. The primary purpose of handing over the management to the local people is to ensure that the company understands the local market conditions, political scenario, cultural and legal requirements better. The companies that adopt this method normally have a localized HR department, which manages the human resources of the company in that country. Many international companies operating their branches in advanced countries like Britain and Japan predominantly adopt this approach for recruiting executives lo manage the branches.”
The regiocentric staffing approach, a more recently identified approach, is where upper level management positions are held by employees from a particular region (North American region, European Region, Asian region, etc.). This approach is similar to the polycentric approach, but it reflects a specific region rather than a specific country. For instance, a U.S. company in Mexico may consider hiring an employee from Canada to fill a management role.
The regiocentric approach uses 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 headquarters.
The regiocentric approach is adaptable to the company and product strategies. When regional expertise is needed, natives of the region are hired. If product knowledge is crucial, then parent-country nationals, who have ready access to corporate sources of information, can be brought in.
One shortcoming of the regiocentric approach is that managers from the region may not understand the view of the managers at headquarters. Also, corporate headquarters may not employ enough managers with international experience.