IHRM, Dr. N. Yang1 Chapter 3 The Organizational Context.

IHRM, Dr. N. Yang 1

Chapter 3

The Organizational Context

IHRM, Dr. N. Yang 2

Chapter Objectives

Examine how international growth places demands on management and HRM

Standardization and localization of HRM practicesFactors driving standardization

Factors driving localization

The path to global statusStructural responses to international growth

Effect of responses on HRM approaches and activities

Control and coordination mechanisms, including cultural control

IHRM, Dr. N. Yang 3

Demands on Management by International Growth

Figure3.1

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The Global Mindset and Local Responsiveness

The aim of global standardization Consistency Transparency Ease of administration Efficiency and

effectiveness Sense of equity

The aim of global standardization Consistency Transparency Ease of administration Efficiency and

effectiveness Sense of equity

The aim of localization Respect for local culture

and traditions Adaptation to local

institutional requirements such as legislations and government policies

Educational system and HR practices

Workplace practices and employee expectations

The aim of localization Respect for local culture

and traditions Adaptation to local

institutional requirements such as legislations and government policies

Educational system and HR practices

Workplace practices and employee expectations

IHRM, Dr. N. Yang 5

5

Balancing the standardization and localization of HRM in MNEs

Figure3.2

Factors Driving Standardization

Large MNEs with long international history and extensive cross-border operations

Pursue multinational or transnational corporate strategies

Supported by corresponding organizational structures

reinforced by a shared worldwide corporate culture

IHRM, Dr. N. Yang 6

Factors Driving Localization

The host-country context The cultural environment The institutional environment

Mode of operation abroad Ownership and control

Subsidiary role Greenfield versus IJV M&A Implementer, innovator, integrator

IHRM, Dr. N. Yang 7

IHRM, Dr. N. Yang 8 8

Institutional effects on MNEsFigure9-2

Country of origin effects Home-country effects Host-country effects Reversed diffusion

Examples of impact of the cultural & institutional context on HRM practices

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Table3.1

Gupta and Govindarajan’s Four Generic Subsidiary Roles

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Table3.2


The Path to Global Status

As the nature and size of international activities change, organizational structures response, due to: The strain imposed by growth and geographical

spread The need for improved coordination and control

across business units The constraints imposed by host-government

regulations on ownership and equity The evolution path is common but the steps are

not normative


Stages of InternationalizationFigure3.4


Export department structureFigure

3.5


Sales subsidiary structureFigure3.6


International division structureFigure

3.7

HRM


International division StructureFigure3.7A

Headquarters


Global Product/Area Division

Strain of sheer size may prompt structural change to either of these global approaches

Choice typically influenced by: The extent to which key decisions are to be made

at the parent country headquarters or at the subsidiary units (centralization versus decentralization)

Type or form of control exerted by the parent over the subsidiary unit

Strain of sheer size may prompt structural change to either of these global approaches

Choice typically influenced by: The extent to which key decisions are to be made

at the parent country headquarters or at the subsidiary units (centralization versus decentralization)

Type or form of control exerted by the parent over the subsidiary unit


Global product division structureFigure3.8A

HRMHRM


Example of Global Product Division


Global area division structureFigure3.8B


Example of Global Area Division


Global matrix structure

Figure3.9


Example of the Matrix


Problems with the Matrix

Dual reporting Proliferation of

communication channels

Overlapping responsibilities

Barriers of distance, language, time and culture

Dual reporting Proliferation of

communication channels

Overlapping responsibilities

Barriers of distance, language, time and culture

Tend to lead to conflict and confusion

Creates informational logjams

Produce turf battles and loss of accountability

Make it very difficult to resolve conflicts and clarify confusion

Tend to lead to conflict and confusion

Creates informational logjams

Produce turf battles and loss of accountability

Make it very difficult to resolve conflicts and clarify confusion

HRM Issues in Matrix

Management skills and abilities Know the business in general

Have good interpersonal skills

Can deal with ambiguities of responsibility and authority inherent in the matrix system

Analytical and presenting skills for sharing ideas, joint authority, and decision-making in groups

Management development and HR planning are more critical in matrix MNEs than in traditional organizations.


Beyond the Matrix

The HeterarchyMNEs have different kinds of centers apart from ‘headquarters’

The TransnationalResources & responsibilities are interdependent across national boundaries

The NetworkSubsidiaries are nodes, loosely coupled political systems

At this stage, there is less hierarchy & no structure is considered inherently superior



The networked organizationFigure3.10

Five Dimensions of a Less Hierarchical Structure or Networked MNEs

Delegation of decision-making authority to appropriate units and levels

Geographical dispersal of key functions across units in different countries

De-layering of organizational levels De-bureaucratization of formal procedures Differentiation of work, responsibility and

authority across the networked subsidiaries


Beyond Networks: Meta-nationals

Locally imbedded sensing unitsUncover widely dispersed sources of engineering & market insights

Magnet unitsAttract innovative processes and create a business plan to convert innovations into products & services

Marketing & production unitsMarket and produce adaptations of these products & services for a range of customers around the world

A global tournament played at three levels is a race to identify and access new technologies and market trends ahead of the competition, a race to turn this dispersed knowledge into innovative products and services, and a race to scale and exploit these innovations in markets around the world.


The Place of HR in Response to Structural Changes Centralized HR firms

characterized by large, well-resourced HR departments responsible for a wide range of functions, typically within product-based or matrix structures

Decentralized HR firmscharacterized by devolving HR responsibilities to a small group, mostly for senior mgmt at corporate HQ; mostly within product- or regional-based structures

Transition HR firmscharacterized by medium-sized corporate HR with small staff at HQ; decentralized, operate mostly in product-based structure


Different Countries, Different Paths

European MNEs: ‘mother-daughter’ global with product/area divisions or matrix structure

Swedish MNEs: Tend to adopt mixture ofmother-daughter & product divisions

Nordic MNEs: may prefer matrix structure

U.S. MNEs: limited success with matrix

Japanese MNEs: similar to US, but evolve more slowly, possibly not changing structure

Chinese & Indian MNEs: Not much info yet



The role of MNE culture of origin


Control Strategies for Multinational FirmsFigure3.11

Summary

Issues of standardization & localization Mode of operations Subsidiary role Structural responses to international growth The effect of responses on HRM approaches

and activities Control & coordination mechanisms, including

cultural control


Vocabulary corporate culture agents of socialization international boundary spanners intrinsic & extrinsic rewards institutionalism perspective centralized set-up country-of-origin effect host country, home country effects reverse diffusion local responsiveness global standardization, localization Six Sigma Quality Control IJV Local innovator global innovator integrative player implementer

export oriented approach vs. integrative management orientation

corporate immune system knowledge-sharing hostility, knowledge

hoarding person & non-person oriented coordination stage model, born globals MNE structures:

mother-daughter, matrix, heterarchy, N-form, transnational, network, meta-national

chaebols greenfield building approach Bamboo network firm clan = social control social capital


IBUS 628 Dr. N. Yang 36

Discussion Questions

1. What are the stages a firm typically goes through as it grows internationally and how does each stage affect the HR function?

2. What are the specific HRM challenges in a networked firm?

3. Country of origin influences the firm’s approach to organization structure. As MNEs from China and India internationalize, to what extent are they likely to differ from that observed for Japanese, European and US MNEs?

1. What are the stages a firm typically goes through as it grows internationally and how does each stage affect the HR function?

2. What are the specific HRM challenges in a networked firm?

3. Country of origin influences the firm’s approach to organization structure. As MNEs from China and India internationalize, to what extent are they likely to differ from that observed for Japanese, European and US MNEs?

IHRM, Dr. N. Yang1 Chapter 3 The Organizational Context.

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