What is a third country national employee?
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One of the major decisions for HRM when a company decides to operate overseas is how the overseas operation will be staffed. This is the focus of this section. Show Types of Staffing StrategyThere are three main staffing strategies a company can implement when entering an overseas market, with each having its advantages and disadvantages. The first strategy is a home-country national strategy. This staffing strategy uses employees from the home country to live and work in the country. These individuals are called expatriates. The second staffing strategy is a host-country national strategy, which means to employ people who were born in the country in which the business is operating. Finally, a third-country national strategy means to employee people from an entirely different country from the home country and host country. Table 14.4 “Advantages and Disadvantages of the Three Staffing Strategies” lists advantages and disadvantages of each type of staffing strategy. Whichever strategy is chosen, communication with the home office and strategic alignment with overseas operations need to occur for a successful venture. Table 14.4 Advantages and Disadvantages of the Three Staffing Strategies Home-Country NationalHost-Country NationalThird-Country NationalAdvantagesGreater control of organizationLanguage barrier is eliminatedThe third-country national may be better equipped to bring the international perspective to the businessManagers gain experience in local marketsPossible better understanding of local rules and lawsCosts associated with hiring such as visas may be less expensive than with home-country nationalsPossible greater understanding and implementation of business strategyHiring costs such as visas are eliminatedCultural understandingMorale builder for employees of host countryDisadvantagesAdapting to foreign environment may be difficult for manager and family, and result in less productivityHost-country manager may not understand business objectives as well without proper trainingMust consider traditional national hostilitiesExpatriate may not have cultural sensitivityMay create a perception of “us” versus “them”The host government and/or local business may resent hiring a third-country nationalLanguage barriersCan affect motivation of local workersCost of visa and hiring factorsHuman Resource RecallCompare and contrast a home-country versus a host-country staffing strategy. ExpatriatesAccording to Simcha Ronen, a researcher on international assignments, there are five categories that determine expatriate success. They include job factors, relational dimensions, motivational state, family situation, and language skills. The likelihood the assignment will be a success depends on the attributes listed in Table 14.5 “Categories of Expatriate Success Predictors with Examples”. As a result, the appropriate selection process and training can prevent some of these failings. Family stress, cultural inflexibility, emotional immaturity, too much responsibility, and longer work hours (which draw the expatriate away from family, who could also be experiencing culture shock) are some of the reasons cited for expatriate failure. Table 14.5 Categories of Expatriate Success Predictors with Examples Job FactorsRelational DimensionsMotivational StateFamily SituationLanguage SkillsTechnical skillsTolerance for ambiguityBelief in the missionWillingness of spouse to live abroadHost-country languageFamiliarity with host country and headquarters operationsBehavioral flexibilityCongruence with career pathAdaptive and supportive spouseNonverbal communicationManagerial skillsNonjudgmentalismInterest in overseas experienceStable marriageAdministrative competenceCultural empathy and low ethnocentrismInterest in specific host-country cultureInterpersonal skillsWillingness to acquire new patterns of behavior and attitudesSource: Adapted from Simcha Ronen, Training the International Assignee (San Francisco: Jossey-Bass, 1989), 426–40. Most expatriates go through four phases of adjustment when they move overseas for an assignment. They include elation/honeymoon, resistance, adaption, and biculturalism. In the elation phase, the employee is excited about the new surroundings and finds the culture exotic and stimulating. In the resistance phase, the employee may start to make frequent comparisons between home and host country and may seek out reminders of home. Frustration may occur because of everyday living, such as language and cultural differences. During the adaptation phase, the employee gains language skills and starts to adjust to life overseas. Sometimes during this phase, expatriates may even tend to reject their own culture. In this phase, the expatriate is embracing life overseas. In the last phase, biculturalism, the expatriate embraces the new culture and begins to appreciate his old life at home equally as much as his new life overseas. Many of the problems associated with expatriate failures, such as family life and cultural stress, have diminished. Figure 14.2 Phases of Expatriate Adjustment Host-Country NationalThe advantage, as shown in Table 14.4 “Advantages and Disadvantages of the Three Staffing Strategies”, of hiring a host-country national can be an important consideration when designing the staffing strategy. First, it is less costly in both moving expenses and training to hire a local person. Some of the less obvious expenses, however, may be the fact that a host-country national may be more productive from the start, as he or she does not have many of the cultural challenges associated with an overseas assignment. The host-country national already knows the culture and laws, for example. In Russia, 42 percent of respondents in an expatriate survey said that companies operating there are starting to replace expatriates with local specialists. In fact, many of the respondents want the Russian government to limit the number of expatriates working for a company to 10 percent1. When globalization first occurred, it was more likely that expatriates would be sent to host countries, but in 2011, many global companies are comfortable that the skills, knowledge, and abilities of managers exist in the countries in which they operate, making the hiring of a host-country national a favorable choice. Also important are the connections the host-country nationals may have. For example, Shiv Argawal, CEO of ABC Consultants in India, says, “An Indian CEO helps influence policy and regulations in the host country, and this is the factor that would make a global company consider hiring local talent as opposed to foreign talent” (Rajagorpal, 2011). Third-Country NationalsOne of the best examples of third-country nationals is the US military. The US military has more than seventy thousand third-country nationals working for the military in places such as Iraq and Afghanistan. For example, a recruitment firm hired by the US military called Meridian Services Agency recruits hairstylists, construction workers, and electricians from all over the world to fill positions on military bases (Stillman, 2011). Most companies who utilize third-country national labor are not new to multinational businesses. The majority of companies who use third-country national staffing have many operations already overseas. One example is a multinational company based in the United States that also has operations in Spain and transfers a Spanish manager to set up new operations in Argentina. This would be opposed to the company in the United States sending an American (expatriate) manager to Argentina. In this case, the third-country national approach might be the better approach because of the language aspect (both Spain and Argentina speak Spanish), which can create fewer costs in the long run. In fact, many American companies are seeing the value in hiring third-country nationals for overseas assignments. In an International Assignments Survey2, 61 percent of United States–based companies surveyed increased the use of third-country nationals by 61 percent, and of that number, 35 percent have increased the use of third-country nationals to 50 percent of their workforce. The main reason why companies use third-country nationals as a staffing strategy is the ability of a candidate to represent the company’s interests and transfer corporate technology and competencies. Sometimes the best person to do this isn’t based in the United States or in the host country. Key Takeaways
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1“Russia Starts to Abolish Expat jobs,” Expat Daily, April 27, 2011, accessed August 11, 2011, http://www.expat-daily.com/news/russia-starts-to-abolish-expat-jobs/. 2“More Third Country Nationals Being Used,” n.d., SHRM India, accessed August 11, 2011, http://www.shrmindia.org/more-third-country-nationals-being-used. ReferencesRajagorpal, D., and MC Govardhanna Rangan, “Global Firms Prefer Local Executives to Expats to Run Indian Operation,” Economic Times, April 20, 2011, accessed September 15, 2011, http://articles.economictimes.indiatimes.com/2011-04-20/news/29450955_1_global-firms-joint-ventures-investment-banking. Stillman, S., “The Invisible Army,” New Yorker, June 6, 2011, accessed August 11, 2011, http://www.newyorker.com/reporting/2011/06/06/110606fa_fact_stillman. What means thirdA third-country national is a citizen of a state that is not member of the EU nor a citizen of Iceland, Lichtenstein, Norway or Switzerland.
What is an advantage of hiring thirdThe main reason why companies use third-country nationals as a staffing strategy is the ability of a candidate to represent the company's interests and transfer corporate technology and competencies. Sometimes the best person to do this isn't based in the United States or in the host country.
Are third country nationals expatriates?Expatriates who are from the country where the company is headquartered are referred to as headquarters expatriates. An expatriate may also be referred to as a parent-country national. Third-country nationals (TCNs). These employees are not from the home country or the host country.
What is the difference between a host country national and a thirdHost country nationals are local employees that work for a foreign subsidiary. Third-country nationals are employees from one country that work for a foreign subsidiary in a second country that is headquartered in a third country.
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