Different approaches to multinational staffing decisions
True to their name, multinational companies (MNCs) operate globally. Their operations are so diverse that they need to have more than one approach to hiring people in top management positions.
Over the years, boards of companies, human resources (HR) experts and talent management specialists (including executive search firms) have developed a set of approaches to make multinational staffing decisions effective and efficient.
There are four key approaches to talent management at the top and senior levels in MNCs:
- Geo-centric approach: When an MNC recruits the right candidate for a role irrespective of their nationality.
- Ethno-centric approach: When an MNC recruits the right candidate for a role but ensures that the candidate’s nationality is the same as the parent company’s (the MNC’s).
- Poly-centric approach: When an MNC recruits local people from the same country where the position is based. Which is, people of the same nationality as the host country of the MNC’s relevant operations.
- Region-centric approach: When an MNC’s operations in a geographic region are headed by a person who belongs to the same region. Which is, for example, when a Singapore-headquartered company hires a Thai national as its operations head in India. The region here is Asia. And the employee too hails from the region but is leading the operations in a different country in the region.
The geo-centric approach
This is the approach that is most preferred by global companies. These companies have the advantage of scale, size, resources (legal, regulatory and HR) and reach to follow this approach.
An MNC that follows this approach has only one goal: Hire the right candidate for the role. The candidate’s nationality is not a consideration or a limiting factor. Or, to put it differently, no matter what the candidate’s nationality is, if they fit the role, just hire them.
Hiring people from different nationalities for roles in global operations is a complex process. But global companies have perfected this method through years of operations. They work with the best talent specialists to achieve this. These specialists are both in the company and are working with executive search firms. The costs of recruitment for such top management positions is high. But that’s not a problem when the recruiter is a MNC with worldwide operations.
The ethno-centric approach
The best examples of this approach are evident in the global operations of Japanese and Korean MNCs. Their top management members across the world will invariably be either Japanese or Korean, as the case may be.
This approach focuses on the global operations of the MNC being headed in various countries by people who are of the same nationality as the parent company’s headquarters. Such top management people are called parent company nationals (PCNs).
This approach also signifies the keenness of such MNCs to have their values and culture be mirrored in the local operations in countries around the world. The boards of these companies believe that only people from their own country will have a deep understanding of their values and culture. Which is why these companies stick to this approach unwaveringly.
The poly-centric approach
Some multinational companies, on the other hand, prefer that their local operations in different countries across the world are headed by people who hail from the host countries. These MNCs welcome the diversity that this approach brings with it. These top management executives represent the local culture and their leadership style too is very effective in the local country’s context.
Many European MNCs follow this approach. They have achieved remarkable business results with this approach too. What the local leaders offer the MNCs is a great understanding of local cultures, business policies, the national politics and the market trends.
These local top management leaders are called host company nationals (HCNs).
The region-centric approach
In following this approach, MNCs are able to have the benefit of diversity in a limited context. Regionally, businesses do operate in a given culture. But leaders coming from a different country in the region bring a fresh outside-in view that helps the operations immensely. Also, since the entire management team hails from the same region, any gaps in understanding or knowledge can be quickly filled by bringing in the relevant subject matter experts.
The drawback of this approach is that the entire management team may, at times, not have a global perspective. Their views and experiences may be very regional.
Summary
Over the years, what MNCs have achieved in developing leadership for global operations is remarkable.
What is interesting is that MNCs are not really run typically by their founders. They are mostly run by professional boards. Yet, the top management culture at MNCs, irrespective of where they are headquartered in the world, is oriented towards delivering operational excellence. This means talent management, leadership development and consistently demanding and getting high performance are normal focus areas for these MNCs.
In many of these companies, the leadership pipeline is well oiled. They know exactly how to attract the right talent, recruit them and retain them. This is irrespective of which approach to recruitment they take.
Some MNCs, for instance, may adopt a mix of approaches as well. The selection process for recruitment is focused on high performance and is not necessarily about which approach they are using. Their human resources management principle appears to be simple: No matter which approach is chosen, the outcome must be high performance.
