What are the pros and cons of different approaches to staffing policy in international business?
Ethnocentric approach
Key management positions are filled by employees of same nationality as the firm. Why?
→ They may believe the host country lacks qualified individuals to fill senior management positions.
→ The best way to maintain a unified corporate culture
→ If the firm is trying to create value by transferring core competencies to a foreign operation, it may believe that the best way to do it is to transfer parent-country nationals who have knowledge of the competence to the foreign operation.
The ethnocentric approach could limit advancement opportunities for host-country nationals due to resentment resulting in lower productivity. It can also lead to cultural myopia (=the lack of interest in learning/seeing the good in other cultures)
Polycentric approach
Requires host-country nationals to be recruited to manage subsidiaries while key positions at corporate HQs have home-country nationals filling positions.
The firm is less likely to suffer from cultural myopia with this approach and it is also less expensive to implement.
On the other hand, host-country nationals have limited ability to gain experience outside their own country and cannot progress beyond senior positions.
Geocentric approach
When the firm seeks the best people for key positions throughout the organization, regardless of nationality, which is the most common approach. It makes the best use out of its human resources and helps the firm build a cadre of international executives who feel at home working in different cultures.