January 10th, 2018
TNT’s HRM Strategy for Use in China|Expatriation and Repatriation
A challenge that affects many MNCs is staffing top positions in foreign subsidiaries. The choice between the use of PCNs and HCNs in staffing top positions in foreign entities is not an easy one (Harzing 2001). Though three types of MNC’s: those that use PCNs to mitigate agency difficulties (ethnocentric); those that use HCNs to minimize challenges associated with cultural distance between the two countries (polycentric); and those that fill positions based on individual qualifications irrespective of nationalities – geocentric – have been identified in literature; many situations may hamper the constant application of any one strategy (Collings, Morley & Gunnigle, 2008). Ethnocentric approaches have for instance been argued to promote control and communication between the parent company and its subsidiary and also help in rapid transfer of knowledge and global awareness in the subsidiary (Harzing, 2001). For effective control however such expatriation must be of individuals who possess adequate host country cultural knowledge (Paik & Sohn, 2004) and in some cases HCNs and third country nationals (TCNs) could be used even in those entities that need substantial control over their foreign subsidiaries (Collings, et al. 2008).
Cultural distance is thus one of the core considerations that entity’s need to evaluate when staffing foreign entities. TNT’s expansions plans are for instance faced with a challenge of wide cultural differences between its parent country – the Netherlands and the host country – China (Itim International 2009). Use of HCNs in such a case could thus help the entity reduce adjustment costs and mitigate the cultural differences (Harzing 2001) but may lead to increase in ex-post transaction costs such as training (Benito, Tomassen, Bonache-Perez, & Pla-Barber 2005). Overall; HCNs’ managerial experience is inversely related to cost while cultural distance increases such costs (Benito, et al. 2005). Organizations that find a mode of transferring knowledge and skills to persons conversant with cultural practices of the host country people thus stand to gain.
To enable such knowledge transfer to occur, there has been an increasing trend to short-term expatriate assignment in contrast to the traditional prolonged assignments (Tahvanainen, Welch & Worm 2005). Through such an approach, companies wish to gain from the knowledge transfer as well as reduce the cost of expatriate deployment (Tahvanainen, et al. 2005). The knowledge of cultural practices of the host country however proves important to the effectiveness of even such short-term assignments (Tahvanainen, et al. 2005). TNT’s staffing functions in China should thus be established with the knowledge of how the wide cultural difference between the host and parent country will be bridged. One way of doing such as noted in the company’s HR strategy is recruiting fresh candidates from universities and colleges into managerial traineeship positions (TNT 2008d).