Having been a part of two multi-country, family-owned companies over the past five years, I have seen firsthand two distinctly different management mindsets toward doing business in another country or countries. Based on my experience, I concur with Perlmutter (1969) that these mindsets are not fixed mentalities, rather that they represent points on an evolutionary march toward progress.
As Moran, Abramson, and Moran (2014) describe, a company chooses to expand into another country in order “to find greater competitive advantage” than those opportunities which are present in its native location. (P.107) This desire to expand and to grow into other markets to support overall growth was certainly the original impetus for both companies in which I worked and work. However, their perspectives differ at this juncture.
In the first organization, a Dutch-based professional services firm chose to enter the US market almost fifteen years ago. From the perspective of increasing their scope, the firm recognized that the US market represented a large opportunity for spending in market research, their offering, and far larger than the Dutch market. (D. Huisman, personal communication, May 2011)
When I joined the organization in August 2011, the US office (in New York) was not succeeding as the firm hoped–even after almost ten years in business. Whether assessed on revenues, profit, retaining employees or other measures, the firm was not thriving. The approach up until then was one that Perlmutter (1969) would describe as an ethnocentric mindset. Managers in the US office were Dutch. Decision-making authority (hiring, strategy, budgets) rested in the home office in Rotterdam. Even in those ten years, the “administrative heritage” Moran, Abramson, and Moran describe (2014) was virtually impossible to change in spite of poor performance.
In 2013, the first very senior local (US-based manager) was hired, and the US division of the firm began to operate from a more polycentric mindset. In the intervening three years, the senior manager in the US began hiring and developing local staff as well as continuing to incorporate Dutch staff within the US operations. Further, the US division’s revenue base has changed and reflects the company’s doing business with a preponderance of US-based companies, rather than only US divisions of European companies. In addition, the US division now has offices in San Francisco and Atlanta, in addition to New York.
By hiring an experienced American at the very top of the organization in America, the cultural mores of the US began to supplant Dutch mores in the American organization. At this stage, the company remains in this polycentric mode–Dutch management of the Dutch and other European branches, and American management of the now three American branches. At this point, the organization as a whole acknowledges that local branches are best poised to move forward with local talent. At this stage, the senior US manager does not believe there is a world-wide approach to best practices, or a geocentric model. (M. Mabey, personal communication, August 2016)
Contrast this evolution of one organization with the current position of the organization I am part of now. An American company in business for more than 40 years, two years ago we opened an office in Amsterdam. I, as an American having lived in Europe for six years and the first employee, perceive our current organization state as distinctly ethnocentric.
While staffing includes two Dutch salespeople, both instructors who deliver the company’s products are American. Perlmutter would refer to this aspect of ethnocentric mindset as recruiting and staffing people of the home country for key positions in Amsterdam. The Managing Director of the Amsterdam office, while Dutch, does not control the finances of the Amsterdam office. The decision-making authority and the organizational evaluation and control (Perlmutter, 1969) for the Amsterdam office rests in Atlanta. Credit cards for staff use are issued through the American office. Our European headquarters reflects more of an ethnocentric American mindset than any real identification with the Netherlands or the European Union.
What buoys me is, again, the concept that this evolution toward a geocentric mindset simply takes time. If, in the fifteen years it took my former employer to progress to a polycentric mindset, my current employer could also do so, I would consider this serious progress.
Moran, R. T., Abramson, N. R., & Moran, S. V. (2014). Managing cultural differences. Routledge.
Perlmutter, H. V. (1969). The tortuous evolution of the multinational corporation. Columbia Journal of world business, 4(1), 9-18. Retrieved from: http://s7f8147710141dd57.jimcontent.com/download/version/1359499033/module/7238636686/name/Master%20DMU%20%20Howard_V_Perlmutter_-_The_tortuous_evolution_of_the_multinational_enterpri%20se.pdf