Research has identified three types of staffing policies in international businesses: the ethnocentric approach, the polycentric approach, and the geocentric approach.
We will review each policy and link it to the firm’s strategy.
The most attractive staffing policy is probably the geocentric approach, although there are several impediments to adopting it.
The Ethnocentric Approach
An ethnocentric staffing policy is one in which parent-country nationals fill all key management positions.
This practice was widespread at one time.
Firms such as Procter & Gamble, Philips NV, AND Matsushita originally followed it.
In the Dutch firm Philips, for example, all important positions in most foreign subsidiaries were at one time held by Dutch nationals, who were referred to by their non-Dutch colleagues as the Dutch Mafia.
In many Japanese and south Korean firms, such as Toyota, Matsushita, and Samsung, key positions in international operations have often been held by home-country nationals.
According to the Japanese Overseas Enterprise Association, in 1996 only 29 percent of foreign subsidiaries of Japanese companies had presidents who were not Japanese.
In contrast, 66 percent of the Japanese subsidiaries of foreign companies had Japanese presidents.
Firms pursue an ethnocentric staffing policy for three reasons.
First, the firm may believe the host country lacks qualified individuals to fill senior management positions.
This argument is heard most often when the firm has operations in less developed countries.
Second, the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate culture.
Many Japanese firms, for example, prefer expatriate Japanese managers to head their foreign operations because these managers have been socialized into the firm’s culture while employed in Japanese.
Procter & Gamble until recently preferred to staff important management positions in its foreign subsidiaries with U.S. nationals who had been socialized into P&G’s corporate culture by years of employment in its U.S. operations.
Such reasoning tends to predominate when a firm places a high value on its corporate culture.