Third‐country Managers in Multinational Corporations
| Pages | 32-37 |
| Published date | 01 January 1977 |
| DOI | https://doi.org/10.1108/eb055325 |
| Date | 01 January 1977 |
| Author | Yoram Zeira,Ehud Harari |
| Subject Matter | HR & organizational behaviour |
Third-country Managers in
Multinational Corporations
Yoram Zeira
Graduate School of Business, Tel-Aviv University
Ehud Harari
Faculty of Social
Sciences,
Hebrew
University,
Jerusalem
Introductiona
The staffing policy of most multinational corporations
(MNCs) is increasingly criticized as being discriminatory and
counter to multinationalization.1 Despite professed adher-
ence to the principle of staffing top positions according to
merit rather than nationality, MNCs tend to do otherwise.
They prefer to reserve the top positions in their subsidiaries
for parent-country managers (PCMs), or to limit the mana-
gerial staff in their subsidiaries to host-country managers
(HCMs).2 Naturally, these policies do not represent a multi-
national approach; the first gives preference to PCMs at HQ
and in the subsidiaries, and the second makes it almost impos-
sible for HCMs to reach top positions at HQ or in subsidiaries
outside their home country.
This type of discrimination is highly resented by senior
HCMs.3 They emphasize that the gap between professed and
actual staffing policies illustrates that MNCs do not make
sufficient efforts to be integrated social entities. They claim
that a genuine multinational personnel policy would staff all
top positions at HQ and in the subsidiaries according to merit,
not according to nationality, and that it is impossible to unite
the subsidiaries and the HQ into one organic international
entity without opening all top positions to all managers in the
corporation.4
The number of MNCs which staff all top positions regardless
of nationality is still very limited. Even in these MNCs, the
way of HCMs to the top positions at HQ is still full of obsta-
cles.
However, a growing number of corporations enable out-
standing HCMs to be transferred to top positions in sub-
sidiaries located in third countries. These are the third-
country managers (TCMs). Although this has been a limited
phenomenon, this personnel policy deserves careful analysis-
since there are several indications that it will be more preval-
ent in the near future.
This paper discusses the organizational and morale problems
of TCMs. The analysis is based on a recent international
comparative study of the personnel management of 51
MNCs. Our research reveals that this transfer policy, which is
highly acclaimed as a major contribution to multinationaliza-
tion, has several serious inherent dysfunctions which have
been ignored in the professional literature. The study clarifies
that TCMs in top managerial positions face serious problems
created by the structure of their corporations. The purpose of
this paper is to identify these problems, to discuss the reasons
for their existence, and to draw several conclusions.
The Study
The study had two main stages. The first stage was conducted
in six subsidiaries of MNCs located in the US, Japan, Western
Europe and Israel. The HQs of these subsidiaries were in
North and South America, Western Europe and Israel. The
objectives of this stage were:
1 to reveal the present organizational behaviour of the
three types of employees in these subsidiaries - PCMs,
TCMs and HCMs;
2 to disclose the desired managerial behaviour as per-
ceived by these employees;
3 to measure the level of satisfaction, and to define the
reasons for dissatisfaction with current managerial
policies and practices.
The findings of the first stage revealed that several serious
problems in the subsidiaries stemmed from their staffing
policies, especially in regard to the selection, training, transfer
and evaluation methods of PCMs, TCMs and HCMs. In order
to analyse these issues more intensively, a questionnaire was
constructed for the second stage. It was sent to the senior
personnel vice-presidents of 70 leading MNCs headquartered
in Western Europe and the US. Of the 70 corporations, 51
responded: 2 petroleum corporations, 4 automobile corpora-
tions,
7 chemical concerns, 2 cosmetic corporations, 17 air-
lines,
12 banks, 4 international hotel corporations and 3 elec-
tronics corporations. In addition, 39 of the 51 senior vice-
presidents (or their deputies) and members of their staffs at
HQs were personally interviewed.
This paper analyses in detail the problems of TCMs in one
major corporation which approximates the genuine multina-
tional model, against the background of our previous studies.
This corporation is headquartered in the US, and has over 60
subsidiaries abroad. Most of the top positions in the sub-
sidiaries of this corporation were staffed by TCMs. Although
there were no TCMs in the top positions at HQ, the policy of
this corporation has been to promote the rotation of outstand-
ing HCMs among its overseas subsidiaries, and to encourage
them to assume key positions in third countries.
Data were collected at two levels: HQ and subsidiaries. At
HQ,
the data were collected through interviews with top per-
aThe
research reported
here
was
sponsored by the
Israel Institute
of
Business Research
at Tel-Aviv
University.
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