The Staffing Challenge in MNCs: Expatriates or Locals in Overseas Locations

Why MNCs Need to Follow a Glocal Approach in Staffing of their Operations Overseas

Unlike domestic firms that operate in their own countries, Multinational Corporations or MNCs that operate worldwide face several challenges in terms of staffing and other Human Resource Management (HRM) functions as they have to deal with cultural, legal, logistical, and strategic issues in overseas locations.

Take for instance the case of an MNC that is operating in India or China. It not only does have to comply with domestic laws and rules and regulations, but, also has to deal with challenges in terms of adapting its global organisational culture to the local conditions without losing the “essence” of what it means to be an MNC.

In other words, it has to ensure that it does not lose its global focus and at the same time, melds itself into the local milieu.

What this means is that MNCs have to follow what is known as a Glocal approach (a term coined by the celebrated columnist and expert on globalisation, Thomas Friedman) wherein it retains its global organisational DNA and at the same time, adapts itself to local strategic imperatives.

While the Glocal approach can be applied to any and all of MNCs functions, we focus on the specific case of the staffing function in MNCs.

Staffing Challenges for MNCs in the Initial Phases of Operations in Overseas Locations

To start with, MNCs usually send expatriates in the initial stages of their operations overseas.

This is done to ensure that when the basic structures, not to leave out the physical premises, are being setup, it is necessary for Senior Level Expatriates, with enough experience in the parent firms to be based in the local offices overseas so that they can train and guide the local staff about the type and nature of the policies and the strategies that the parent firm is known for.

In other words, when MNCs setup operations overseas, they have to ensure that there is enough senior staff from their parent offices so that adequate guidance and knowledge transfer can happen to the local staff.

At the same time, it is also the case that this handholding and walking the local staff through the paces cannot continue indefinitely and hence, it is also common for MNCs to gradually withdraw their expatriate staff once the overseas locations are up and running.

Indeed, in our working experience, we have come across many expatriate managers who based themselves in locations all over India when their firms were setting up shop.

When to Transition to Local Staff and How to Retain some Expatriates

Having said that, it is also the case that many MNCs often ask some of such expatriate staff to remain in the overseas locations even after the initial setup is done and after the local subsidiaries are up and running.

The reason for this is that MNCs need their expertise and specialised knowledge in the management of operations and the administration of local units that cannot be provided by the local managers.

This is the case with MNCs that are in banking (investment banking and equity research and trading, to name a few) and in highly niche BPOs or Business Process Outsourcing units.

Moreover, even automotive majors such as Suzuki and Honda usually have expatriates running their overseas locations for reasons as specified earlier.

In addition, they also have expatriates on deputation for short and medium term periods to ensure that the strategic focus and the tactical direction of the firms are in the right paths as decided by their parent firms.

For instance, Amazon, which is betting big on India, has been seeing several high profile visits as well as permanent basing of its expatriate staff to ensure that its overall strategic thrust is maintained.

Cultural Challenges, Clamour for Locals as Staff, and Other Staffing Issues for MNCs

On the other hand, MNCs also realise that they cannot have too many expatriates based in the overseas locations as cultural and other challenges arise that can derail their objectives.

For instance, while India is known to have a large number of English speakers who are also more or less attuned to Western trends and lifestyles, the same cannot be said of other countries where expatriates often find it tough to adjust to the local milieu.

Moreover, there is also the case of the so-called Hardship Allowance that is paid to expatriates for being based overseas.

In addition, there are many countries (including some Indian states in recent months) that have been passing laws that mandate locals to be employed and hence, taken together, these challenges mean that MNCs have to necessarily be Glocal in their approach.

Apart from this, expatriate pilots and other service sector staff too now face challenges in many countries (including India) where there is a growing backlash against hiring them when local talent is available.

What more, it is also a challenge for expatriates to understand the administrative and legal as well as logistical challenges that confront MNCs in overseas locations and which can be easily dealt with by the local staff.

Finding the Optimum Staffing Mix

Therefore, the choice between expatriates and locals in the staffing matrix can be dealt with by taking into account all these factors and once the balance is achieved, then MNCs can glide into the smoother drive.

Of course, finding this balance can be tricky at times and this is where most management experts are now veering around to the view that a Glocal approach works best for MNCs.

To conclude, the desire for profit is the strategic imperative that drives MNCs into overseas locations and at the same time, it is counterbalanced by cultural challenges and hence, staffing challenges do arise which need to be dealt with professionally and with adaptability.

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Human Resource Management