Polycentric Human Resource Policy

The term polycentric is derived from the Hellenic (Greek) word πολυκεντρικός, a composite word that consists of the term πολύ, which means multi, and the term κέντρο, which means center. Hence, the term suggests an attitude that adopts multiple points of view. Multinational corporations that adopt a polycentric approach tend to respect and take into account the host culture in their operations abroad, including their human resource policies.

Under a polycentric human resource approach, policies and systems that are used in the home country are reconsidered to take into account the work culture and traditions of the host countries. Alternatively, popular human resource systems in use in the host countries are kept with some adaptation to the principles and philosophy of the headquarters. The idea is that particular systems and policies have been developed within particular cultures because they fit these cultures best. Hence, to achieve maximization in the added value of human resources in the host operations, local systems have to be respected and preserved. Therefore, the polycentric approach to human resource management pays maximal attention to local factors. The approach is in line with evidence suggesting that cultural factors limit the transferability of human resource systems across national boundaries.

A trademark characteristic of the polycentric human resource approach is the employment of host country nationals in key positions in operations abroad. Reasons for adopting a polycentric approach in the staffing of operations include the following:

• 1.
  Host country expectations and regulations. In many cases host country governments impose strict regulations on multinational corporations, including regulations regarding the percentage of the workforce that should be host country nationals.
• 2.
  Insufficient numbers of qualified home country nationals (expatriates) to fill professional and managerial positions in host countries. As internationalization and globalization become more potent, multinational corporations further expand their operations outside their home countries, which means that they need increasing numbers of qualified staff. However, the home country is unable to meet this demand, and, therefore, they have to consider local nationals for their staffing needs.
• 3.
  The high cost of expatriates. An expatriate may cost up to five times more than the respective incumbent in the home country, which renders the use of expatriates very expensive. Because of increasing demands of multinational corporations for qualified managers and professionals, exclusive use of expatriates for key positions in operations abroad becomes unduly expensive or not feasible. The alternative route is the employment of host country nationals, who normally cost a fraction of the cost of expatriates.
• 4.
  Host country nationals' knowledge of local culture and language as well as connections with key institutions and individuals in the host country. Knowledge of local language and culture, including how to deal with institutions, government agencies, and officials, are critical issues for the success of operations abroad. In most cases locals are able to assist in this domain.
• 5.
  Public relations exercises and the need, in certain cases, for multinational corporations to promote the image of offering opportunities to local nationals and promoting local talent.
• 6.
  The increasing levels of education in the workforces of most developing countries, where many multinational corporations choose to establish operations. This increases the pool of [Page 1295]qualified managers and professionals from the host country.

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