CO TWO

The role of International HRM in Successful

MNC

By Dr. Urvashi Bhamboo

 Strategic Control Needs

 There are various methods of classification of management control in Multinational

Enterprises (MNEs).
 By levels of control here it is meant whether the parent / corporate level managers or
subsidiary/country-level managers are involved.
 The former might be called higher level and the later lower level control.
 Depending on the sphere of focus we have two types of control called Strategic
control and Operational control.
 In the MNE’s context, strategic control is the responsibility of parent and operational control is the
preserve of the subsidiary.
 Another way puts ‘management control, tactical control and transactional control’ as the 3 levels
of control respectively carried out by the corporate top management, collectively by corporate &
subsidiary management and subsidiary management in the case of MNEs.
 Strategic Control Needs

 The forward looking information is provided by strategic control systems.

 It is ‘external response’ oriented.
 It gives managers timely ‘quantitative and qualitative’ information they need to ‘drive into the
future’ with confidence and success.
 In dynamic and uncertain business environment with extended competitive challenges this system
functions well.
 Sensing and responding to change, detecting changes in assumptions and coping with a dynamic
environment are the specific issues in strategic control.
 Operational control is ‘internal response’ oriented to ensure targets are achieved. Managers use
performance measurement and operational control measures to ensure fulfillment of targets.
Competitive Strategy of Multinational
corporations
 Competitive Strategy of Multinational
corporations

 Multinationals such as Kia and Wal-Mart must choose an international strategy to guide
their efforts in various countries. There are four main international strategies available:
 International
 Multi-domestic
 Global
 Transnational
 International
Competitive Strategy

 Firms pursuing an international strategy are neither concerned about costs nor adapting to
the local cultural conditions.
 They attempt to sell their products internationally with little to no change.
 When Harley Davidson sells motorcycles abroad, they do not need to lower their prices or
adapt the bike to local motorcycle standards. People in other countries buy a Harley
particularly because it is different from the local motorcycles.
 Belgium chocolate exporters do not lower their price when exporting to the American
market to compete with Hershey’s, nor do they adapt their product to American tastes. They
use an international strategy.
 Starbucks and Rolex watches are other examples of firms pursuing the international
strategy.
 Multi-domestic
Competitive Strategy

 A firm using a multi-domestic strategy does not focus on cost or efficiency but
emphasizes responsiveness to local requirements within each of its markets.
 Rather than trying to force all of its American-made shows on viewers around the
globe, Netflix customizes the programming that is shown on its channels within dozens
of countries, including New Zealand, Portugal, Pakistan, and India.
 Similarly, food company H. J. Heinz adapts its products to match local preferences.
Because some Indians will not eat garlic and onion, for example, Heinz offers them a
version of its signature ketchup that does not include these two ingredients.
 Outback Steakhouse uses the multi-domestic strategy in the multiple countries where it
operates, adapting to local eating preferences but not lowering prices significantly.
 Global
Competitive Strategy
 A firm using a global strategy sacrifices responsiveness to local requirements within each of its
markets in favor of emphasizing lower costs and better efficiency.
 This strategy is the complete opposite of a multi-domestic strategy.
 Some minor modifications to products and services may be made in various markets, but a global
strategy stresses the need to gain low costs and economies of scale by offering essentially the
same products or services in each market.
 Microsoft, for example, offers the same software programs around the world but adjusts the
programs to match local languages.
 Similarly, consumer goods maker Procter & Gamble attempts to gain efficiency by creating
global brands whenever possible.
 Global strategies also can be very effective for firms whose product or service is largely hidden
from the customer’s view, such as silicon chip maker Intel.
 Lenovo also uses this strategy. For such firms, variance in local preferences is not very important,
but pricing is.
 Transnational
Competitive Strategy
 A firm using a transnational strategy seeks a middle ground between a multi-domestic
strategy and a global strategy.
 Such a firm tries to balance the desire for lower costs and efficiency with the need to
adjust to local preferences within various countries.
 For example, large fast-food chains such as McDonald’s and Kentucky Fried Chicken
(KFC) rely on the same brand names and the same core menu items around the world.
 These firms make some concessions to local tastes too. In France, for example, wine
can be purchased at McDonald’s.
 This approach makes sense for McDonald’s because wine is a central element of
French diets.
 In Saudi Arabia, McDonalds serves a McArabia Chicken sandwich, and its breakfast
menu features no pork products like ham, bacon, or sausage.
Structuring for Optimal global Performances

 In any organization, team ability is more than the sum of individual abilities.
 But coordinating team members' varied skills and levels of knowledge to make a highly performing team is
a major challenge.
 Some key aspects to consider while structuring for optimal global performance are :-

 TOP-DOWN VS. DECENTRALIZED MODELS

 Conventional wisdom relies on the analysis of formal procedures and group structure to recommend two
canonical structures for teams: a centralized, top-down configuration and a more decentralized one.
 The former relies on a key individual to lead the team and manage requirements gathering, client
interaction, task delegation and so on.
Structuring for Optimal global Performances

 But in recent years, the limitations of this model became apparent: having just one person overseeing large
teams results in a bottleneck.
 “There is a limit on how much a single person can coordinate,”.
 So more decentralized methods have been proposed, with flexible roles and collaborative decision making.
 One popular concept in such “agile” structures is “pairing”, with not one but two supervisors working
together, with more back-and-forth and more chances to catch errors.
 But again, this model, perceived as more relevant for small teams, is far from perfect, as increased
interaction creates increased coordination challenges, delaying decision-making for instance.
 It is no accident that groups that need to react quickly, such as the military, are organized in that hierarchical
way, because clearly defined roles and responsibilities mean more efficiency.
 In a surgical team, for example, everyone contributes depending on their expertise, but in the end the
surgeon makes the call.
Structuring for Optimal global Performances

 DISTINGUISHING BETWEEN TYPES OF TASKS

 So how to take the debate a step further than centralized vs. decentralized?
 Optimal team configuration depends on the type of expertise being coordinated.

 KNOWLEDGE AND CONFLICT

 When design is centralized, the process may be perceived as arbitrary and unfair, because team members
don't know how the solution was chosen among the many alternatives.
 When design questions are handled in a decentralized way, with more people bouncing ideas back and forth
and discussing their respective merits, the outcome is better accepted, resulting in less conflict and
eventually better team performance.
 Understanding culture

 Organizational culture influences the success of any company from new hire recruitment
to talent retention to employee engagement. 
 Company culture directly affects the types of candidates it attracts and the employees it
hold on to.
 While any given organizational culture will evolve with time — especially as the team
grows and onboard new hires, management can take steps to tailor its culture to better fit
organization’s values and mission.
 But first, one need to understand the type of organizational culture that currently exists at
the company.
 Organizational culture — often called company culture — is defined as the shared
values, attitudes and practices that characterize an organization. It’s the personality of the
company and it plays a large part in employees’ overall satisfaction.
 Major models of National Culture

 There isn’t a finite list of corporate cultures, but the four styles defined by Kim
Cameron and Robert Quinn from the University of Michigan are some of the most
popular.
 These are :-
 Clan
 Adhocracy
 Hierarchy
 Market
 Major models of National Culture

 Clan :- A hallmark of many small businesses, start-ups and family-run organizations,

Clan culture has an inward focus. It nurtures those who work within the company and
emphasizes interpersonal relationships, communication and collaboration. By doing so,
it aims to create one big happy family.

 Adhocracy:- A culture that runs on adrenaline and thrives on disrupting the status quo.
Defined by its readiness to take risks, an Adhocracy culture prizes innovation and
initiative and rides the waves of change with confidence. It also fails fast and learns
from mistakes quickly to make the necessary changes next time. Tech companies are a
prime example: entrepreneurial, dynamic and visionary.
 Major models of National Culture

 Hierarchy:- A place for everyone and everyone in their place. There’s a formality to this
particular organizational culture, with leaders at the top and an established chain of
command. In essence, it’s the traditional corporate structure.
 Market:- The most aggressive of the organizational culture types. Expect a workplace
driven by targets, deadlines and the need to get results, with staff performance closely
monitored. Clan and Adhocracy cultures embrace flexibility, but Market culture needs
stability to function, making it a common feature in bigger and long-established
companies.
It’s also outwards focused, keeping its sights trained on the customer and how to beat
its competitors. Reputation matters, as does staying one step ahead.
 Linking Human Resource management practices to
Competitive Strategy and Organization Structure

 Rapid developments in the global economy, including privatization, liberalization, and

globalization, have exerted great pressure on organizations to cope with changes and
adopt competitive advantages to achieve survive and continue.
 Achieving a competitive advantage for these organizations no longer depends merely on
potential and material resources but also relies heavily on human resources and how these
people distinguish themselves in the workplace.
 Human resources and management have recently been viewed as vital to the attainment
of competitive advantage prompting many organizations to pay more attention to their
most valuable resource, their employees.
 HR practices are the primary means by which firms can influence and shape the skills
and behaviors of individual people to do their jobs and thus achieve organizational goals.
 HRM practices have been described as having numerous characteristics.
 Linking Human Resource management practices to
Competitive Strategy and Organization Structure

 HRM practices as a system that attracts, develops, motivates, and retains employees to
ensure the effective implementation and the survival of the organization and its members.
 In addition, HRM is thought to be a collection of internally steady strategies and practices
intended and executed to guarantee that a firm’s human capital contributes to the
accomplishment of its business objectives .
 Therefore, HRM practices relate to specific practices, formal policies, and attitudes that are
made to attract, improve, inspire, and preserve employees who ensure the operative
functionality and subsistence of the organization .
 Competitive advantage includes characteristic proficiencies that set an organization apart
from competitors. A company achieves competitive advantage when its actions in a market
or domain create economic value and when only a few competitors are engaged in similar
activities.
 Linking Human Resource management practices to
Competitive Strategy and Organization Structure

 Staff performance is the key to the success of the institution. Whenever employees perform to the best of their
ability, the institution is more successful.
 Organization’s HR not only leads to failure to achieve goals but also affects the performance of the organization.
 Philosophy of people management is based on the belief that an organization gains competitive advantage by
using its people effectively and efficiently.
 Organizational structure and organizational effectiveness are interrelated, because organizational structure
impacts organizational effectiveness based on organization creativity.
 In general, adaptive organizational forms (e.g. matrix, networks, collateral or parallel structures) increase the
odds for creativity. Bureaucratic, mechanistic, or rigid structures decrease the probability of organizational
creativity.
 Organizational effectiveness and its relation to structure are determined by a fit between information processing
requirements so people have either too little or too much irrelevant information.
 Without clearly defined roles and responsibilities of getting information, any organization structure becomes
dysfunctional.
 Paradigm Shift of international Human Resource Management form
contingency model to Process Development 
 Contingency theory suggests that in order to be effective, HRM must be consistent with other aspects of the
organization and/or external environment.
 Contingency decisions within HRM have largely been understood on the basis of external and internal fit.
 The contingency approach is a management theory that suggests the most appropriate style of management is
dependent on the context of the situation and that adopting a single, rigid style is inefficient in the long term.
 Contingency managers typically pay attention to both the situation and their own styles and make efforts to
ensure both interact efficiently.
 Contingency theory is beneficial to organizations because of the potential for learning from specific situations
and using these lessons to influence future management of the same or similar situations.
 The ability to adapt to external pressures and changes is also an advantage. Contingency theory may also
produce more well-rounded leaders who are able to develop their skills in multiple areas.
 But now as the things are progressing, there is a paradigm shift of international human resource management
form contingency model to Process Development , where each and every activity has been standardized.
Thank You