Page 189 - DMGT548_GLOBAL_HRM

Global HRM

Notes Multinational headquarters involvement in industrial relations is influenced by several factors
as detailed below:
1. The Degree of Inter-subsidiary Production Integration: A high degree of integration was
found to be the most important factor leading to the centralisation of the Industrial relations
function within the firms. Industrial relations throughout a system become of direct
importance to corporate headquarters when transnational sourcing patterns have been
developed; that is, when a subsidiary in one country relies on another foreign subsidiary
as a source of components or as a user of its output. A coordinated industrial relations
policy is one of the key factors in a successful global production strategy.

2. Nationality of Ownership of the Subsidiary: There are differences between European and
U.S. firms in terms of headquarters involvement in industrial relations. U.S. firms tend to
exercise greater centralised control over industrial relations than do British or other
European firms. U.S. firms tend to place greater emphasis on formal management controls
and a close reporting system to ensure that planning targets are met. The foreign-owned
multinationals in Britain prefer single-employer bargaining and are more likely to assert
managerial prerogative on matters of labour utilisation. U.S. – owned subsidiaries to be
much more centralised in industrial relations decision-making than British-owned. This
is due to the more integrated nature of U.S. firms and the more ethnocentric managerial
style of U.S. firms.
3. International Human Resource Management Approach: The various international human
resource management approaches utilised by multinationals have implications for
international labour relations. An ethnocentric predisposition is more likely to be associated
with various forms of industrial relations conflict. A geocentric firm will bear more
influence on host-country industrial relations systems, due to their greater propensity to
participate in local events.
4. MNC Prior Experience in Industrial Relations: European firms have tended to deal with
labour unions at industry level rather than at firm level. The opposite is more typical for
U.S. firms. In the United States, employer associations have not played a key role in
industrial relations system and firm-based industrial relations policies are the norm.
5. Subsidiary Characteristics: A number of subsidiary characteristics to be relevant to
centralisation of industrial relations:

(a) Subsidiaries that are formed through acquisition of well established indigenous
firms tend to be given much more autonomy over industrial relations than are
greenfield sites set up by a multinational firm.
(b) Greater intervention would be expected when the subsidiary is of key strategic
importance to the firm and the subsidiary is young.

(c) Where the parent firm is a significant source of operation or investment funds for
the subsidiary, that is, where the subsidiary is more dependent on headquarters for
resources, there will tend to be increased corporate involvement in industrial
relations and human resource management.
(d) Poor subsidiary performance tends to be accompanied by increased corporate
involvement in industrial relations. Where poor performance is due to industrial
relations problems, multinationals tend to attempt to introduce parent-country
industrial relations practices aimed at reducing industrial unrest or increasing
productivity.

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