Expatriate Selection and International Recruitment Challenges

Introduction

When businesses feel that they have enough financial resources and competencies to grow in the market, they either choose to grow locally or decide to expand their operations to a foreign country (Schuler, Dowling, & De Cieri 1993). Setting up a business in an international market is not an easy task for a new entrant; it requires the organization to utilize its strengths and competencies in such a fashion that it can grow profitably and competitively (Ashamalla 1998). In international business expansion projects, organizations hire new workforce at all levels and job positions. These positions are filled either with residents of the local market or with expatriates from the home country (Dowling & Welch 2008).

This research study is carried out with an aim to discuss the recruitment and selection process in an international work setting and to highlight the problems and issues this process brings for organizations. The study does not aim to disprove existing theory or criticize existing literature; rather, it has the overall objective of bringing together relevant knowledge and understanding of the topic from the literature reviewed, reaching a definitive conclusion, and providing recommendations to business organizations on how they can better manage their human resources in international markets.

Selection of expatriates for international assignments is the most critical task in the international business expansion process.

The main purpose of this research study is to determine the challenges and issues which business organizations face when they must recruit and select employees for international projects. The overall aim is to identify the most important factors considered when this research question arises in the minds of business managers, students, scholars, researchers, teachers, and analysts. International recruitment and selection may also lead organizations toward serious industrial relations issues; therefore, providing recommendations based on analysis and results is also among the main objectives.

The core objectives of this research study are:

This research study is based entirely on secondary resources; that is, the problem statement, discussion, and analysis are explained through already-existing literature in the field of international human resource management. The whole research can therefore be classified as secondary research, whose purpose is to explain a specific research question in the light of past research. None of the sections are based on interviews or questionnaires, meaning the study has no link to primary sources.

When businesses go international, they face a number of issues and challenges in their expansion strategies. The external environment of the country in which they set up business, the micro- and macroeconomic factors, and heavy legal and operational expenditures are the most important issues which modern business organizations have faced for the last few decades (Pires, Stanton, & Ostenfeld 2006). When a new business is set up in an international market, the need for recruiting highly skilled and qualified workforce arises (Dowling & Welch 2008). The organization can either recruit from the target country or call on existing workforce from the parent country. This recruitment and selection of workforce is considered one of the most critical steps in international business expansion.

Literature Review

The literature reviewed for this research study contains books and journal articles on a range of topics. The books provide comprehensive knowledge and understanding of the research question, while journal articles offer deep insights into the issues and challenges which business organizations face in managing human resources in international markets. In recent years, numerous studies have been conducted specifically to address problems in international recruitment and selection processes (Pires, Stanton, & Ostenfeld 2006).

Through this literature review, an effort has been made to extract the most relevant books and journal articles that can aid both the reader and future researchers in finding pertinent material on international recruitment and selection in one research paper. The major focus is on discussing the ways in which modern organizations can best utilize their human resources in the international working environment and avoid or mitigate the negative consequences that arise in the process.

Businesses go international when they have enough financial resources and capabilities to operate in international markets in a competitive and profitable fashion (Leveson, Joiner, & Bakalis 2009). International business expansion is carried out as part of a growth strategy (Dowling & Welch 2008). Generally, small and medium-scale businesses look to developed countries to start their international expansion projects, as they do not have sufficient competencies or financial resources to operate in a risky business environment. Large-scale multinational organizations, by contrast, can expand into developed, developing, and under-developed countries alike, drawing financial support and brand-image strength from their already-established presence in multiple countries (Leveson, Joiner, & Bakalis 2009).

An organization has multiple choices when recruiting its workforce for international assignments. It can recruit from the home country (Parent Country Nationals), the target or host country (Host Country Nationals), or from a third country (Third Country Nationals). Just as international business expansion is more complex than local expansion, international recruitment and selection is more challenging than local hiring. Selection, placement, benefits and compensation strategies, performance appraisal, and other HR decisions are made at a much larger scale than in local work settings (Sanchez, Spector, & Cooper 2000).

The middle-to-upper-level managers that international business organizations hire from their home country are called Parent Country Nationals (PCNs) or expatriates. They are generally existing employees performing services in their home countries (Harvey & Novicevic 2001). Businesses turn to expatriates when they feel that handing over new business endeavors to newly hired employees from target markets may be risky. PCNs are considered the most loyal employees of an organization because they have a professional attachment that motivates stronger performance on every new project (Leveson, Joiner, & Bakalis 2009).

The recruitment of parent country nationals for international assignments is simultaneously cost-effective and more expensive. It is cost-effective because organizations do not need to train expatriates on organizational culture, working patterns, and specific job responsibilities they already know (Harvey & Novicevic 2001), thereby saving substantial training and development costs (Schuler & Rogovsky 1998). Conversely, salary and administrative costs are greater for expatriates than for locally hired employees in the host country (Pires, Stanton, & Ostenfeld 2006).

One of the biggest challenges in international recruitment and selection is managing a culturally diverse workforce. Employees hired for international assignments come from different cultures and nationalities and are found at every organizational level — from lower-level laborers to top executives. Managing this workforce is difficult due to cultural issues that arise when people with different cultural backgrounds, societal values, and religious beliefs join one organizational setup to work together. In severe cases, when the thoughts and ideas of these workers clash, managers must contend with serious conflicts (Leveson, Joiner, & Bakalis 2009). Such conflicts give rise to critical industrial relations issues that ultimately affect operational and financial performance (Harvey & Novicevic 2001).

One of the biggest issues in international recruitment and selection is the hiring of female employees for top and middle-level managerial and non-managerial positions (Janssens & Steyaert 2003). Recent research shows that multinational corporations are much more exposed to cultural diversity and gender discrimination when making new hires for international projects. The two basic reasons for gender discrimination are lower organizational confidence in female employees and the greater turnover of females due to maternity and family reasons. Generally, international business organizations hesitate to place female employees in high-level positions because of the more challenging business environment (Darmadi 2010).

The business environment of the target country is entirely different from that of the home country, and the environmental forces present are far more complex (Leveson, Joiner, & Bakalis 2009). The major external forces in an international market include economic forces; social, cultural, and demographic forces; technological forces; political and governmental forces; competitive forces; and legal forces (Harvey & Novicevic 2001). Each of these forces produces positive or negative impacts on the company's operations and policies. International business organizations must therefore analyze these forces when recruiting new employees for international projects (Pires, Stanton, & Ostenfeld 2006).

International business expansion costs significantly more than local growth strategies. Business setup costs, marketing and promotional expenses, legal charges, and various operational costs increase overall business expenditures. Salary and administrative costs are among the major expenses in an international expansion project. Because an international project is carried out at a larger scale than local projects, these costs are incurred at a correspondingly larger scale. For example, expatriates hired for international assignments receive additional benefits from the organization to convince them to work in a foreign country (Harvey & Novicevic 2001).

Most hiring in international assignments involves new employees from the host country and neighboring countries. Lower-level workers, technicians, and laborers are hired from the host country, while managers and employees are hired from both the host country and third countries (Harvey & Novicevic 2001). Because these newly hired employees are unfamiliar with the organization's business operations, systems and processes, rules and regulations, technologies, organizational culture, and other operational aspects, the organization must arrange comprehensive training and development sessions for all of them (Schuler & Rogovsky 1998).

Training and development of employees is essential on a regular basis to equip them with the most advanced skills, knowledge, and capabilities required in their daily job responsibilities. Organizations bear all costs associated with these sessions while employees benefit from free professional development that serves them throughout their careers. These costs vary with the type of training provided (Schuler & Rogovsky 1998).

For example, training for lower-level workers may last only a few days and cost hundreds of dollars. By contrast, professional development sessions for managerial-level employees may span months and cost thousands of dollars per month. Similarly, the training and development costs are much higher for employees selected for international assignments than for those operating in local settings.

Methods of training and development have changed with the passage of time. Numerous technological and non-technological tools and techniques are now available for business managers to groom their employees and get work done in the most effective and efficient manner. Just as training and development costs are greater in international markets than in local markets, the management techniques used for expatriates at the international level are more complex and sophisticated than those used for local employees (Harvey & Novicevic 2001).

The research study by Sonal Pathak (2011), Managing Cultural Diversities in Internationalization of Business, reveals that employee performance is largely affected by certain personality characteristics. These characteristics influence behavior toward family members as well as toward supervisors, subordinates, and co-workers in other departments. They also affect performance and attitude toward work when employees join the company in a new international setting. Managing these attributes in an effective and respectful manner is another major challenge for multinational organizations in their international expansion projects (Harvey & Novicevic 2001).

In addition to the organization's own internal culture, there is an external culture present outside its offices and business units — one that relates to the values, beliefs, lifestyles, and perceptions of the residents of the country in which the organization operates. Tony Fang (2005) argues that the local culture of the host country must not be ignored by multinational corporations if they wish to ensure a sustainable future there. He explains the significance of local culture in his research paper From "Onion" to "Ocean": Paradox and Change in National Cultures in comprehensive detail.

In an international business expansion project, the culture of the host country plays an important role in the success or failure of a business organization (Paik & Sohn 2004). A multinational corporation must not only offer market-based salaries and compensation packages but also consider working conditions, employment regulations, flexible work options, and other employment-related services offered by local organizations and other multinationals operating in that country (Fang 2005).

International business expansion strategies are adopted to develop a brand name in international markets. Before expanding internationally, however, an organization must conduct an internal analysis of its corporate-wide policies and procedures to ensure that strong business ethics and corporate social responsibility (CSR) principles are in place. Ferro (2004) explains the importance of these principles in his research Cross-Country Ethical Dilemmas in Business: A Descriptive Framework, noting that any minor non-compliance or ethical issue can put a black mark on the company's public image in both international and local markets.

The analysis of corporate-wide business ethics and CSR efforts is also critical when a business organization begins its international recruitment and selection process (Champ & Carter 2001). The organization must assess the degree to which its existing employees follow business ethics and respect CSR efforts. These efforts are naturally at a larger scale when businesses expand internationally, and the issues they raise are correspondingly more complex and difficult to handle (Harvey & Novicevic 2001).

The international recruitment and selection process is also affected by the scale and nature of operations. The larger the scale of operations, the greater the need for recruiting a large and skillful workforce. Unlike local business operations, international projects are set up after huge investments across every area of the company's operations. The organization must therefore find employees from diverse fields and qualifications from the host country or other countries. Finding these employees becomes even more difficult when business operations must begin within a very short time span (Champ & Carter 2001).

It is commonly observed that organizations must initially run their international business operations at limited capacity due to shortages of labor and skilled staff. Such shortages may prevent them from maintaining profitability or even from operating effectively in a risky business environment.

Competitive forces in the external environment also exert pressure on businesses operating under capacity. An additional threat in international recruitment and selection is competitors' policies of attracting the most skilled and experienced expatriates away from new business organizations through higher salaries and more attractive compensation packages. This issue is observed by multinational corporations at a larger scale in international markets than in local ones.

This section is dedicated to reviewing and critically analyzing the available literature on the international recruitment and selection process. A number of journal articles and books have been reviewed to gain deep insights into the research question and reach a definitive conclusion. The analysis has been divided into subsections, each addressing a particular area of international recruitment and selection.

Conclusion

International business expansion strategies are among the biggest decisions that multinational corporations make (Leveson, Joiner, & Bakalis 2009). These strategies require heavy investment costs, extensive market research and analysis, and assessment of critical organizational processes — all carried out to ensure a successful entry into the international market. In addition to analyzing the external environment, an organization must also assess the human resource needs of its international projects (Forester 1999).