When confronted with difficulties in their home markets, it is common practice for firms to expand their presence into new markets. While the expansion offers the companies opportunities for growth, it also presents challenges. Hiring competent employees to oversee the international operations is one of these challenges. In particular, the firms need to adopt a cost-effective and fair compensation package for its expatriate employees. When the employees find that their compensation is insufficient to sustain their needs and lifestyles, their satisfaction and productivity may suffer. Paul Fierman exemplifies the difficulties of designing compensation packages for expatriates.
There are various staffing frameworks that firms adopt in their management of human capital. Chicago Food and Beverage Company (CFB Co.) has adopted the ethnocentric approach. The firm has dispatched Americans to head its operations in the Asian markets (Bodolica & Waxi, 2007). The key feature of the ethnocentric approach is that instead of promoting locals to head operations, firms bring in employees from their home markets (Dlabay & Scott, 2010). This approach enables firms to ensure a unified culture across all their operations. Moreover, the ethnocentric framework makes it possible for companies to place their global operations under the careful and competent leadership of employees from home markets (Dlabay & Scott, 2010).
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As noted above, the ethnocentric approach is the framework that CFB Co. has adopted. This approach will undoubtedly affect Paul’s capacity to execute his mandate. The ethnocentric approach enables firms to place competent individuals in charge of their operations in foreign markets. Paul’s academic qualifications and his familiarity with the firm’s operations make him ideal to lead the Vietnam operations. However, one of the drawbacks of the ethnocentric approach is that it fails to exploit local culture and competencies (Aswathappa, 2007). It can be argued that since he would be intimately familiar with the Vietnamese business climate, a native Vietnamese would be a better fit. Therefore, since the ethnocentric approach does not recognize or empower locals, it can be expected that Paul will encounter difficulties.
The ethnocentric approach is not the only framework for managing employees in an international context. The polycentric and geocentric approaches are other models that a firm could adopt. Essentially, the polycentric approach involves placing natives in charge of the foreign operations of a company. The key advantage of this approach is that the natives are more familiar with the environment of the foreign country (Ungson & Wong, 2008). As a result, they are better placed to align the operations with local conditions. On the other hand, the geocentric approach is blind to the national or ethnic background of the individuals mandated to lead a firm’s foreign operations. Had it adopted any one of these two approaches, CFB Co. would have avoided the many hardships that Paul encountered. It is recommended that the firm’s headquarters should adopt the polycentric approach. Through this approach, it will be able to empower locals while placing its Vietnamese operations in the hands of a leader who is more in tune with local conditions. Moreover, since the cost of living in Vietnam is lower, the company will reduce its wage bill.
In applying for the position to lead the Vietnamese operations, Paul is driven by a number of factors. One, Paul hopes that through the position, he will gain the knowledge and experience that will advance his career (Bodolica & Waxi, 2007). Two, he is motivated by the financial prospects that the job promised (Bodolica & Waxi, 2007). He had hoped to earn a higher salary. Generally, Paul is a good candidate for the job. The fact that his academic qualifications are impeccable and that he has worked at CFB Co. makes him perfect for the job. However, there are some issues that raise questions about Paul’s suitability. The fact that he lacks international experience and that he has a young family is among these issues. His lack of international experience has made his transition to Vietnam difficult. Moreover, the move to Vietnam has left his family feeling frustrated and unhappy (Bodolica & Waxi, 2007).
Expatriates play a crucial role in the operations of firms with an international footprint. However, there is no doubt that the management of these employees is complex and remarkably sensitive. Firms need to ensure that the expatriates are able to cope with the harsh and unfamiliar realities of the host countries. Moreover, the companies should offer compensation which accounts for the economic situation in the host countries and adequately addresses the needs of the expatriates. The case of Paul confirms the delicate nature of expatriate management. Despite the efforts by the company to make his transition to Vietnam smooth and seamless, he still encountered hardships. His example shows that monetary compensation is not the only issue that firms should consider in the management of expatriates. The companies also need to safeguard the quality of life and the overall wellness of their expatriates.
The text reveals a number of compensation methods for expatriates. Negotiation is one of these methods. Essentially, this method involves a case-by-case discussion of the benefits and pay that an expatriate is to be offered (Bodolica & Waxi, 2007).. A mixed approach is another method that the text examines. Using this method, junior and senior expatriates are offered compensation calculated using different techniques. On the one hand, the compensation of junior expatriates is based on the economic realities in the home country (Bodolica & Waxi, 2007).. On the other hand, the financial situation in the host country serves as the basis for the compensation of the senior expatriates with more than six years of international experience.
The text reveals that Paul is unhappy and does not derive much satisfaction from his job. While the poor compensation is the main source of his concerns, the inherent challenges of working in a foreign market are largely to blame for his troubles. To address the various issues with expatriate compensation and satisfaction, it is recommended that CFC Co. should overhaul its compensation scheme for junior expatriates. The company needs to offer the expatriates fairer and higher compensation. By doing this, it will address most of the issues that such expatriates as Paul face. For example, with higher pay, Paul will be able to travel to cities where the conveniences he experienced while in the US are available.
In conclusion, expansion into new markets holds the key to business growth. However, as they enter new markets, firms should be wary of the challenges that the markets present. In particular, the firms should understand the complexities of expatriate management. Expatriates encounter numerous difficulties as they attempt to adjust to the life in the host countries. To streamline the transition, firms should offer adequate support and compensation. It is also important for the companies to respond promptly to the concerns that their expatriates raise.
References
Aswathappa, K. (2007). International HRM. Tata McGraw-Hill Education.
Bodolica, V., & Waxi, M. (2007). Chicago food and beverage company: The challenges of
Managing international assignments. Journal of the International Academy for Case Studies, 13(3), 31-42.
Dlabay, L., & Scott, J. C. (2010). International business. Boston: Cengage Learning.
Ungson, G. R., & Wong, Y. (2008). Global strategic management. M.E. Sharpe.
