Third Country National Essay ⋆ Business Essay Examples ⋆ EssayEmpire

A third country national (TCN) is an individual who is a citizen of neither the contracting government nor the host country or area of operations. A TCN is hired by the host government to perform a significant role in multinational corporations. This person is differentiated from the parent country national (PCN) and the host country national (HCN) or locals.

For example, a multinational company based in the United States may send a U.S. citizen (PCN) to Vietnam to establish operations there. Normally, if the PCN temporarily resides in the new country, the PCN will also be referred to as an expatriate. Once the multinational corporation establishes operations in the new country, the corporation must decide how the corporation will be managed and led. The multinational company can then use the PCN (the U.S. citizen) to run operations, the locals (HCN) to run operations, or someone who is neither a U.S. citizen (PCN) or Vietnamese citizen (HCN) to run the operations (hence the term third country national).

Usually, a TCN brings language skills that the PCN does not have. Additionally, TCNs can have a more adept understanding of the local culture than a PCN would have. TCNs can have a greater interest in the success of the operation, since they would have to seek other employment, while the PCN would simply return into the multinational corporation’s fold should operations in the country fail. A TCN’s value as a manager is highest when they come from a culture similar to the PCN, understand the language of the PCN, and understand the language and culture of the host nation as well. For instance, using a seasoned British or Irish TCN in Russia to manage local operations may be more advantageous for an U.S. multinational company seeking to expand operations in Russia over using a U.S. citizen (PCN) who must be trained in both language and customs. TCNs normally stay with the foreign national operations longer than a PCN, who may see this as a temporary assignment on his/her way up the corporate ladder. However, TCNs should not be seen as a cheaper alternative in providing management for foreign operations. If the multinational firm needs close coordination of efforts between the foreign operation and its headquarters, a PCN would serve the corporation better.

TCN Challenges

Particularly difficult issues in using TCNs in a multinational environment are compensation, promotion, and retirement. PCNs normally receive salary and benefits from the multinational corporation that allow them to live as well as or better than they would in the parent country. TCNs are normally equipped with similar skill sets and better language skills than a PCN (or an expatriate). However, multinational companies will often pay TCNs on the same scale as the host country nationals, or similar to the PCNs but without benefits, such as free housing, cost of living allowances, and medical and dental care.

Additionally, multinationals have to consider where the TCN will retire, in order to adequately help the TCN in his or her retirement. For a TCN living in a third world country (for example, Vietnam), the TCN will probably return to his or her home country for retirement. Therefore, the multinational may pay into the TCN’s home country’s retirement system, or may simply consider the TCN’s salary as full payment for all services including retirement benefits.

As an example, the author of this essay worked in a U.S. embassy in the Middle East as an administrative officer. Only one HCN actually worked at the embassy. Other workers including people from east Africa (Somalia, Eritrea, Ethiopia), the Levant (Syria), Pakistan, and India, working in skilled (accounts, analysts, and translators), and unskilled (driver, laborer) positions. The embassy provided annual allowances for TCNs to return to their home country, and paid monies into a retirement fund for the TCN after they finished his or her service at the embassy. Establishing the retirement fund this way allowed the TCN to use the fund for retirement at a place of their choosing.

When hiring a TCN, the multinational corporation must specify all promotion opportunities to the TCN. Some TCNs may seek to find additional foreign postings with the multinational company, while the multinational company may see the TCN as little more than an HCN with additional skill sets. Clearly, discussing promotion opportunities upon hiring the TCN will provide a basis for future opportunities with the multinational corporation. Of particular concern in using TCNs in foreign operations is the TCN’s ability to remain in the country and issues of morale. In many countries, the TCN must have a sponsor to remain in the country. The company may or may not be able to perform this sponsorship function. For both first and third world countries, the TCN may lose residency status if the country has sufficient HCNs with the same skills as the TCN. Recent research has shown that TCNs can suffer more issues with morale than either a PCN or an HCN. Morale problems will normally arise from lack of promotion opportunities and/or adequate compensation.

Bibliography:

Harvey, C. Speier, and M. M. Novecevic, “A Theory-based Framework for Strategic Global Human Resource Staffing Policies and Practices,” The International Journal of Human Resource Management (September 2001);
Reynolds, “Strategic Employment of Third Country Nationals: Keys to Sustaining the Transformation of HR Functions,” Human Resource Planning (v.20, 1997);
Selmer, ed., Expatriate Management: New Ideas for International Business (Quorum Books, 1995).

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