Chapter 10 online

Goal: To analyse HR strategy in multidivisional firms

Content:
 Structure and control in multidivisional firms
 The implications of private equity for the multinational
company
 Challenges for HR strategy in the multidivisional
company
 Structure and control in multidivisional firms

To begin with, the traditional firm adopts a functional or unified

form (‘U-form’) in which specialists in marketing, operations,
finance and HRM each coordinate their own areas, linked to the
board of directors through the chief executive (CEO)

As firms diversify, this structure is placed under severe strain

The American solution to the problem of how best to manage

diverse businesses was the adoption of the multidivisional (‘M-
form’) structure in which there is a corporate office presiding
over the company’s ‘strategic business units’ (SBUs)

Boxall and Purcell (2016) Strategy and Human Resource Management. 4th Edition. Palgrave
 Structure and control in multidivisional firms

As firms diversify, this structure is placed under severe strain

The American solution to the problem of how best to manage

diverse businesses was the adoption of the multidivisional (‘M-
form’) structure in which there is a corporate office presiding
over the company’s ‘strategic business units’ (SBUs)
 The implications of private equity for the multinational
company
The growth of private-equity firms, which are typically constituted as limited
partnerships rather than companies, has challenged this model

Private equity is part of a trend over recent decades towards the

‘financialization’ of capitalism: a process in which the finance sector has
greatly expanded in influence and in which business people have
increasingly been pursuing the profits to be made from financial investments
and the trading of currencies and financial securities
Challenges for HR strategy in the multidivisional company

There are two fundamental approaches to corporate HRM in the multidivisional

firm

1. The ‘bonus-driven model’ of corporate HRM that occurs in multidivisional

firms that emphasise financial targets and controls, keeping the business units
at arm’s length from the centre and often from each other
2. The ‘development-oriented model’ of corporate HRM that place more
emphasis on ‘synergy’ or networking, sharing and deepening the firm’s
special know-how across the group

Boxall and Purcell (2016) Strategy and Human Resource Management. 4th Edition. Palgrave
Lecture conclusions

1. As companies grow corporate executives are under pressure to secure a

financial return from the multidivisional corporation that is greater than the sum
of its parts.
2. The separation of the firm into discrete accounting units, allowing the centre to
‘manage by the numbers’, is a very prevalent philosophy among large Anglo-
American firms, spawning a ‘bonus-driven model’ of HRM in which executives
have high levels of performance-related pay but in which longer-run investment
in people may be compromised
3. An alternative philosophy focuses more on synergistic economies, fostering the
‘development-oriented model’ of HRM in which investment in the workforce is
greater

Boxall and Purcell (2016) Strategy and Human Resource Management. 4th Edition. Palgrave