Pros and Cons of Polycentric Staffing by Perlmutter (1968)

1 Introduction

1.1 Research problem

Multinational enterprises become increasingly significant in our progressive globalising world. Political, social and economic affairs within a country are persistently affected by their international activities which have worldwide impacts, consequently international ventures are incrementally gaining authority. In the highly competitive strive for achieving the highest degree of multinationality by various means, companies want to obtain sustainable prosperity since a mondial performance is related to motions towards a bright future.

A further scope that is no longer of national interest is the matter of staffing. In the contemporary advancing world, in which country-borders are of dwindling relevance, the recruitment of the ideal staff seems to become increasingly challenging as a rising number of people are being enabled to move to another state in order to search for a suitable and attractive employment. Hence, local human resources become gradually seldom, so qualified staff from all over the world is needed and sought for.

Howard V. Perlmutter, a worldwide recognised expert on the internationalisation of firms and other institutions , adopts this difficult topic and introduces the four approaches which become visible when people are engaged on managerial positions in multinational companies. Hiring the most eligible employees for their company, managers of multinational enterprises would conduct with a mix of an ethnocentric, polycentric, regiocentric or geocentric attitude. Perlmutter's findings are demonstrated in the so-called EPRG concept which is frequently discussed since 1968 and still an essential subject on international human resource literature.

As there are always two sides of the same coin, there are also advantages and disadvantages of each of the different staffing practices. By virtue of the manager's attitude, he acquiesces in the pros and cons that are accompanied by the chosen staffing philosophy.

This term paper will investigate the advantages and disadvantages that go along with a polycentric attitude concerning international recruitment in multinational enterprises. It will further examine the definitions of the common applied staffing approaches originated by Howard V. Perlmutter.

1.2 Research methodology

This term paper analyses the pros and cons of polycentric staffing according to Howard V. Perlmutter in context of global staffing in international corporations. Hence, an outlook on the causes and consequences of international recruitment as well as on the measures that are used to describe a company's multinationality is required. Furthermore, the induction into Perlmutter's EPRG concept which analysis will give information about the four staffing approaches will highlight polycentrism and its impacts. Additional examinations to this topic by other authors can either support or doubt Perlmutter's statements and consequently reveal new views. Thus, a comparison of different literary works is inevitable.

1.3 Way of investigation

Corresponding the research question that has been postulated in chapter 1.1, it is worthwhile to describe the term "multinationality" and its perception in chapter 2. An investigation of the measures defining the degree of multinationality within an enterprise will follow. Thereafter, factors that contribute to the establishment of a global company will be elucidated.

In chapter 3, special importance will be on global staffing and its repercussions. The causes and consequences that are related with hiring people from different countries for and because of various purposes due to the upcoming significance of international recruitment will be examined.

As Howard V. Perlmutter is one of the literate pioneers who potters at multinational corporations and their personnel, his EPRG concept will be addressed in chapter 4. To emphasise the difference between the four staffing approaches, ethnocentrism, polycentrism, regiocentrism and geocentrism will be illustrated. Focus will be on the polycentric staffing approach. At first, its advantages will be pointed out, followed by a reflection of its disadvantages. Moreover, reasons and impacts for these pros and cons will be suggested.

A summary of the findings, a critical acclaim and an outlook will be subject to the conclusion in chapter 5.

2 Degrees of multinationality and how to measure them

2.1 General assumptions

Being successfully present on a global level and create a universally applicable image that attracts people all over the world is depicted as the ideal goal of a multinational enterprise. But what is so special about being considered as "multinational"? To most of the managers achieving this state means being prestigious as the company is then regarded as being more progressive and dynamic , striving after the future at the peak of economic prosperity.

There are surely diversified opinions about the term multinationality and there are certainly many companies which title themselves with this attribute justifying it with miscellaneous arguments. Those firms may have accomplished a particular degree of multinationality; but how to quantify it? There are certain benchmarks suggested such as the ownership criteria, the organisational structure, the nationality of senior executives or the percent of investment overseas which could help to identify a firm's global performance. Yet, it is stated that no single yardstick alone could define the level of multinationality. Two hypotheses shed light on its idiosyncrasy.

The first hypothesis claims that "... the degree of multinationality is positively related to the firm's long term viability." The quality of decision making is of major importance since it leads to survival, growth and profitability of a multinational enterprise in the evolving world economy. If a company's subsidiary is not successful in one country, another one may compensate this by its own sale and associated success in another country. The failure likelihood of a multinational concern is hence lower than a provincial traditional one. If the company then establishes the number of those prosperous subsidiaries or creates even new ones, reducing or supporting the number of inefficient branches, it may establish a worldwide succeeding brand image of the firm and hence, also enhances its degree of multinationality.

The second hypothesis asserts that multinational enterprises