Page 207 - DMGT548_GLOBAL_HRM

Global HRM

Notes (b) Sales in Peru may be booming but headquarters management was unaware that
under Peruvian accounting rules, sales on consignment are counted as firm sales.
How should the headquarters accounting system handle these sales relative to sales
from other subsidiaries that do not consider sales on consignment as firm sales?
Physical measures of performance are easier to interpret but difficulties may still arise.

Example: Notions of adequate quality control checks can vary from one country to
another, import tariffs can distort pricing schedules, a dock strike in one country can unexpectedly
delay supply of necessary components to a manufacturing plant in another country, and local
labour laws may require full employment at plants that are producing at below capacity. These
factors can make an objective appraisal of subsidiary performance problematic and may
complicate the evaluation of individual subsidiary managers.
3. Volatility of the International Environment: The turbulence of the international
environment requires that long-term goals be flexible in order to respond to potential
market contingencies. An approach may mean that subsidiaries could be pursuing strategies
that no longer fit the new environment.

Example: Consider the impact on international business of major events in the last
decade such as the collapse of communist rule beginning in 1989 throughout Eastern Europe and
the former Soviet Union, the Persian Gulf War in 1991, the formation of the Single European
Market in 1992, recent market reforms in China, the hand over in 1997 of the British colony of
Hong Kong to the control of the People’s Republic of China (PRC), and the current economic
downturn in the so-called ‘tiger’ economies of South-East Asia.
Each of these events has profound implications for the global and local strategies of
multinationals operating in these countries. Because subsidiaries operate under such
volatility and fluctuation, they must tailor long-term goals to the specific situation in a
given market.

4. Separation by Time and Distance: The congruence between the multinational and local
subsidiary activities are complicated by the physical distances involved, time-zone
differences, the infrequency of contact between the corporate head-office staff and
subsidiary management, and the cost of the reporting system. Developments in
sophisticated worldwide communication systems like video telephone, teleconference,
and e-mail do not fully substitute for face-to-face contacts between subsidiary managers
and corporate staff. Meeting personally is often necessary to fully understand each person’s
situation. So, many multinational corporate managers spend a considerable amount of
time travelling in order meet expatriate and local managers in foreign locations. So, it is
imperative for HR corporate staff to take account of country-specific factors when designing
performance management systems.
5. Variable Levels of Maturity: Without the supporting infrastructure of the parent, market
development in foreign subsidiaries is generally slower and more difficult to achieve
than at home where established brands can support new products and new business areas
can be cross-subsidised by other divisions.

Example: One does not fire a Mexican manager because worker productivity is half the
American average. In Mexico, it means that this manager is working at a level three or four
times as high as the average Mexican industrial plant. The harassed Mexican manager has to live
with Mexican constraints, not European or American ones, and these can be very different. The

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