Page 58 - DMGT548_GLOBAL_HRM

Unit 3: Global Status and Control Mechanism in MNCs

It is important to remember that international growth affects the firm’s approach to HRM and Notes
the HRM implications at each stage of internationalisation. Firms vary from one another as they
go through the stages of international development, and react in different ways to the
circumstances they encounter in the various foreign markets.
International operations place additional stresses on control mechanisms. There is also additional
stress on the firm’s ability to coordinate resources and activities.
Traditionally multinational firms have emphasised more formal, structural forms of control. As
presented earlier in the chapter, strategy is implemented via the factoring of work flows, the
articulation of control by some combination of specialisation characterised by functional, global
product division, national, regional (area) divisions, or matrix structures. Structure results in
hierarchies, functional authority and increasingly prescribed job descriptions, selection criteria,
training standards and compensable factors. Human resource activities act to implement existing
structural systems of control. Communication and relationships are formalised and prescribed
and budgetary targets and ‘rational’, explicit, quantitative criteria dominate performance
management systems.
Complementary, yet definitely secondary control is developed and maintained via more informal
personal and social networks – the informal organisation. The unique cultural interactions and
the contextual and physical distances that characterised multinational operations may have
outstripped the capabilities of solely structural and formal forms of control.

Did u know? As long ago as 1981, William Ouchi termed the phrase ‘clan control’ to describe
social control as a legitimate control system to supplement or replace traditional structural,
bureaucratic control.
A more cultural focus emphasises the group level potential of corporate culture, informal social
processes, personal work networks and the investment in social capital to act as sources of more
complete and nimble control in a complex multi-product, multi-cultural environment. On the
individual level, an emphasis on persons (as opposed to jobs), their competencies and skills, and
the investment in human capital become the focus of more customised human resource practices
and processes. Formal, structural controls still exist, but they are not the primary source of
control. The complexities related to subsidiary mandate, reliance on local or corporate
technologies and skills, as well as the cultural distance between the corporate and host cultures
need to be considered in determining the mix of formal and informal control. Clearly more
research is called for in this topic area.

Control though personal relationships: A consistent theme in the descriptions of transnational
and networked organisation forms is the need to foster vital knowledge generation and diffusion
through lateral communication via a network of working relationships. Networks are considered
as part of an individual’s or organisations social capital: contacts and ties, combined with norms
and trust that facilitate knowledge sharing and information exchanges between individuals,
groups and business units.
As network relationships are built and maintained through personal contact, organisations
need processes and forums where staff from various units can develop types of personal
relationships that can be used for organisational purposes. For example, working in cross-
functional and/or cross-border teams can assist in developing personal contacts. Training and
development programs, held in regional centres or at headquarters, become an important forum
for the development of personal networks that foster informal communication channels.

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