1. Why do individuals and organization have to become less ethnocentric and more polycentric when operating in an international context?
Brewster, Sparrow and Vernon (2007) claim that there is a significant debate between those who believe that the world is getting more globalized and therefore all aspects of management, including HRM, are becoming more alike, and those who believe that each country continues to have its own approach to management in general and human resource management in particular. Organizations have several choices in structuring their international operations according to Perlmutter (1969). The following two orientations mediate the response of organizations and how they structure themselves abroad according to such criteria as whether to emphasize the global or the local. Ethnocentric organizations are home country-oriented corporations which are run from the headquarters. The foreign subsidiaries are not given autonomy or power to make strategic decisions and are even managed by expatriates from the home country. Ethnocentric organizations seem to assume that practices that work in the home country will work successfully anywhere in the world without any kind of modification. Cultural sensitivity is regarded as of little importance and the organization assumes there is only one way to manage and organize. Polycentric organizations are host country centered organizations in which each subsidiary is given autonomy in its own decision-making. Each subsidiary is considered as a distinct national entity. Most subsidiaries are managed by local employees who are seldom promoted to positions at headquarters. The practice of the polycentric approach is the belief that each country is unique. This idea allows a company to adapt and develop unique business and marketing strategies to the cultures of each country the company works in. Franchises often use the polycentric approach successfully. These two orientations are not necessarily completely exclusive to one another but organizations should be able to change from one approach to another. Even though the rather arrogant ethnocentric approach might work in some circumstances, it has several flaws. The use of expatriates from the home country in the managing positions in subsidiaries is an important issue. First and foremost expatriates are high-cost investments. The organization will have to cover moving and relocation costs for the expatriate and his/her family members such as schooling for the kids and possible medical treatment. Not to mention insurance costs. Different cultures have different values which affect an individual's way of thinking and behavior. According to Geert Hofstede’s research (2001) on cultural dimensions, different countries and cultural areas differ tremendously from another. Expatriates or their families might have severe difficulties in adapting to foreign culture and norms and no expatriate can ever adapt so well to a different culture that he or she would understand the foreign country’s culture as seamlessly as a local-hired manager would. The polycentric approach recognizes the national and cultural differences and the need of the use of local managers. The use of ethnocentric approach is costly for the human resources making staff planning more complicated and selection procedures prone to errors. The HR team has to diversify and adjust in being flexible to accommodate the host country’s culture and employees’ norms and social relations in the workplace. If the organization’s HR team is formed ethnocentrically this might be extremely difficult or even impossible to accomplish. Even integrating the most basic HR systems might be problematic considering that the HR practices in the host country will most likely differ from the home country’s practices. The polycentric approach endows a company to be more flexible and more adaptive to the local environment in its HR management. The legislation of the foreign country...
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