The Geocentric Approach
Geocentric Staffing Policy
A staffing policy where the best people are sought for key jobs throughout an MNE, regardless of nationality.
A geocentric staffing policy seeks the best people for key jobs throughout the organization, regardless of nationality. This policy has a number of advantages. First, it enables the firm to make the best use of its human resources. Second, and perhaps more important, a geocentric policy enables the firm to build a cadre of international executives who feel at home working in a number of cultures. Creation of such a cadre may be a critical first step toward building a strong unifying corporate culture and an informal management network, both of which are required for global standardization and transnational strategies.13 Firms pursuing a geocentric staffing policy may be better able to create value from the pursuit of experience curve and location economies and from the multidirectional transfer of core competencies than firms pursuing other staffing policies. In addition, the multinational composition of the management team that results from geocentric staffing tends to reduce cultural myopia and to enhance local responsiveness.
In sum, other things being equal, a geocentric staffing policy seems the most attractive. Indeed, in recent years there has been a sharp shift toward adoption of a geocentric staffing policy by many multinationals. For example, India’s Tata Group, now a $70 billion global conglomerate, runs several of its companies with American and British executives. Japan’s Sony Corporation broke 60 years of tradition in 2005 when it installed its first non-Japanese chairman and CEO, Howard Stringer, a former CBS president and a U.S. citizen who was born and raised in Wales. American companies increasingly draw their managerial talent from overseas. One study found that by 2005, 24 percent of the managers among the top 100 to 250 people in U.S. companies were from outside the United States. For European companies, the average is 40 percent.14
ANOTHER PERSPECTIVE Women in International Assignments
Would you send a woman expatriate to Saudi Arabia, Kuwait, Japan, or Korea? How are Western women expatriates doing in foreign cultures that have traditionally limited women’s public roles? Women sent to these countries have met with substantial success. Their key challenge is to get the assignments! Once in place, women expatriates are successful. This is in part because once in the culture, women expatriates are seen first as expatriates who fall outside the local role for women. In addition, “expat” women also have salience in their new environment—they are noticed—and this can be a distinct business advantage. Locals often take pride in developing business relationships with women expatriates because by doing so they can suggest that the foreign stereotype of their culture is superficial and incomplete.
However, a number of problems limit the firm’s ability to pursue a geocentric policy. Many countries want foreign subsidiaries to employ their citizens. To achieve this goal, they use immigration laws to require the employment of host-country nationals if they are available in adequate numbers and have the necessary skills. Most countries, including the United States, require firms to provide extensive documentation if they wish to hire a foreign national instead of a local national. This documentation can be time consuming, expensive, and at times futile. A geocentric staffing policy also can be expensive to implement. Training and relocation costs increase when transferring managers from country to country. The company may also need a compensation structure with a standardized international base pay level higher than national levels in many countries. In addition, the higher pay enjoyed by managers placed on an international fast track may be a source of resentment within a firm.
The advantages and disadvantages of the three approaches to staffing policy are summarized in Table 17.1. Broadly speaking, an ethnocentric approach is compatible with an international strategy, a polycentric approach is compatible with a localization strategy, and a geocentric approach is compatible with both global standardization and transnational strategies. (See Chapter 12 for details of the strategies.)
TABLE 17.1 Comparison of Staffing Approaches
Overcomes lack of qualified managers in host nation
Produces resentment in host country
Can lead to cultural myopia
Helps transfer core competencies
Alleviates cultural myopia
Limits career mobility
Inexpensive to implement
Isolates headquarters from foreign subsidiaries
Global standardization and transnational
Uses human resources efficiently
National immigration policies may limit implementation