In firms pursuing a localization strategy, a polycentric staffing approach is mo
ID: 2746590 • Letter: I
Question
In firms pursuing a localization strategy, a polycentric staffing approach is most common and there are relatively few expatriates or the associated pay issues. Expatriates are more common in firms with international strategies, and when an ethnocentric staffing approach is utilized. In this situation the pay is often based on home country levels, with adjustments as required for differing living costs and taxes as outlined by the balance sheet approach. Firms pursuing global or transnational strategies most often use a geocentric approach to staffing, where the best individuals (regardless of nationality) are chosen fill positions in any country. Here the pay issues for expatiates can become particularly complex, as allowances must be made for home country norms, host country costs and expectations, and global norms across the company.
Explanation / Answer
For firms following a localization strategy, a polycentric approach is mostly used. In such a strategy, the managers and employees are hired locally. This helps the firm to minimize the impact of cultural challenges. As the firm is follwoing a localization strategy, it can get valuable inputs from its local employees which will help it in modifying the product and make it suitable to meet the taste and preferences of the local economy and market.
For firms following international strategies, the strategy is a common one and this strategy is used on an international scale. For such a scenario, ethnocentric staffing is apt. In an ethnocentric strategy the management personnel that are hired are of the same nationality as the parent company. This helps in efficient transfer of stratgeic values already being followed in other offices.
For firms following a transnational strategy, geocentric staffing policy is apt. In such a staffing scenario, companies use employees who are nationals of parent country, employees who are nationals of the host country and employees who are nationals of third countries. The idea is to select the best mix of staff.
Now, in a polycentric approach, there is no complexities regarding determination of pay scale. It is determined as per the local industry averages.
In an ethnocentric appraoch, the expatriates have to be paid on the scales that are determined by the levels existing in the home country. This is adjeusted for difference in standard of livings between the two countries. Many expatriates from developed countries who are required to work in developing countries are paid hardship allowance.
The pay scale determination is most complex in a geocentric approach. As the staff is a mix of home country, host country and are also from third countries, the existing norms of the home country will have to be optimally combined with the norms of the host country.