CROSS CULTURAL HRM

C 14 Headquarters and Subsidiary

Richard Mead

Salient Points

Risk for a multinational Control mechanisms Strategic HRM in a multinational

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Risk for a Multinational

Options

Options like licensing / franchising , turnkey arrangement, JV , Acquisition , Subsidiary Right option to be in line with perceived risk v/s envisages gains

Risks
Environmental

risk .. Biggest of risks Operational risk Culture risk

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Environmental Risks

Competitive risk

Change in technology / obsolescence New strong entries Change in supply / demand structure

Political risk

War / conflicts , terrorism , instability Restrictive / protectionist policies

Economic risk

Unsatisfactory economic condition Local resources , infrastructure Taxation , tariffs can be discriminatory Restriction on repatriation
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Operational Risks

Industry type
Banking

, securities , technology driven /

telecom

Subsidiary operations
Young

, inexperienced operation Underperforming Operating in volatile , unstable environment

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Culture Risks
HQ need for high uncertainty avoidance High culture distance Tendency towards centralised control accentuated for an un established operation

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Control

Control costs

Insufficient control loss of profits Over control forgoing new opportunities , high people turnover

Nature / extent of control will vary for different subsidiaries Mechanisms of control

Structural relationship Organisational culture Budgetary control Technology ( transfer ) Staffing policy ( Ethno/ Geo / Poly )

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Structural control

Griffin , Pustay study :

Multi

domestic

Each country market is different , independence encouraged

Global

The world is one market place . All processes including production , marketing are standardised
Combines global scale with local responsiveness . Aims at flexibility & integration HO decisions on R& D , production , investments Greater independence on functions like Marketing , HR
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Transnational

Control Mechanisms

Organisational culture
Philosophy

: Ethno / Poly / Geo Informal control via values , beliefs Extent of control depends on trust relationship

Budgetary control
Annual

budgets , strategic plans Pre approval on resources , authority limits Regular reporting
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Empowerment

A function of management philosophy Knowledge based , customer oriented businesses need greater decentralisation Depends on

Skills at Subsidiary level HO confidence in local operations Impact of empowerment on employee morale , efficiency Cost / benefit of empowering subsidiary

Empowerment is localisation of control may not mean local staffing Empowerment is two ways : Earned , given May not be 100 % . HO will need some control
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Strategic HRM in Multinational

HR management should contribute to strategy especially on people Advise on skill, knowledge gaps & need to supplement HR management to build capacity to prepare organisation for :

Knowledge transfer / leveraging across operations Flexible , culture sensitive , mobile managers Managers capable of handling empowerment with maturity & efficacy
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