International Staffing: Home or Local?

Multinational companies (MNCs) employ several types of international managers. Locals are citizens of the countries where they
are working. Expatriates (expats) are non-citizens of the countries in which they are working (an American working in France is an
expat). Home country nationals are citizens of the country in which the multinational company has its headquarters (so an American
working for America based GMs subsidiary in China is a home country national as well as expat). Third country nationals are
citizens of a country other than the parent or the most country for example, a British executive working in the Tokyo branch of a
US multinational bank. Expatriates still represent a minority of multinationals managers. Most managerial positions are filled by
local rather than expatriates in both headquarters and foreign subsidiary operations.
Using Local
There are several reasons employers rely more on local managers to fill their foreign subsidiarys management ranks. Many people
dont want to work in a foreign country, and the cost of using expatriates is usually far greater than the cost of using local workers.
In one survey employers reported a 21% attrition rate for expatriate employees, compared with an average of 10% for their general
employee populations. Local people may view the multinational as a better citizen if it uses local management talent, and some
governments even press for the nativization of local management. There may also be a fear that expatriates knowing theyre posted
to the foreign subsidiary for only a few years may overemphasize short term results rather than more necessary long term tasks.
Some companies dont realize that it actually cists to send an expatriate abroad. Agilent Technologies routinely estimated that it cost
about three times the expatriates annual salary to keep the person abroad for one year. When Agilent outsourced is expatriate
program, is discovered that the costs were much higher. The firm then dramatically reduced the number of expats it sent abroad
from about 1000 to 300 per year.
Its also become more difficult to bring workers into the United States from abroad. Under new rules in effect since 2005, US
employers must now try to recruit US workers before filing foreign labor certification requests with the Department of Labor. In
particular employers must now first post open positions in the departments of labors job bank, and run two Sunday newspaper
advertisement before filing such requests.
Using Expats:
Yet there are also reasons for using expatriates either home country or third country nationals for staffing subsidiaries. The main
reason is usually technical competence. In other words employers often cant find local candidates with the required technical
qualifications. Multinationals also view a successful stint abroad as a required step in developing top managers. (For instance after a
term abroad the head of General Electrics Asia Pacific region was transferred back to a top executive position as vice chairman at
GE.). Control is another important reason to sue expatriates .The assumptions here is that home country managers are already
steeped in the firms policies and culture and thus more likely to apply head quarters ways of doing things.