Chapter 3ihrm

Chapter 3
THE
ORGANIZATIONAL
CONTEXT
Chapter 3
For use with International Human Resource Management 6e ISBN-10: 1408032090
By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr. © Cengage Learning
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THE ORGANIZATIONAL
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CONTEXT
C O N T E N T S
 Vocabulary
 Objectives
 Introduction
O F
 Standardization & localization of HRM practices

TA B L E
 Factors driving standardization

 Factors driving localization
 The path to global status
 Control mechanisms
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Vocabulary (1 of 2)
 local staff
 corporate culture
 agents of socialization
 international boundary spanners
 intrinsic & extrinsic rewards
 institutionalism perspective
 centralized set-up
 country-of-origin, host country, & home country effects
 reverse diffusion
 local responsiveness
 global standardization, localization
 SOEs, WOSs
 Six Sigma Quality Control
 IJV
 global innovators
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 local innovators
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Vocabulary (2 of 2)
 integrative player
 global innovator
 implementer
 export oriented approach vs. integrative management orientation
 corporate immune system
 knowledge-sharing hostility, knowledge hoarding
 person & non-person oriented coordination
 born globals
 MNE structures:
mother-daughter, matrix, heterarchy, N-form, transnational, network,
meta-national
 chaebols
 greenfield building approach
 Bamboo network firm
 clan = social control
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 social capital
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Objectives
We learn about:
1. Issues of standardization & localization
2. Structural responses to international growth
3. Control & coordination mechanisms,
including cultural control
4. The effect of responses on
HRM approaches & activities
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Introduction
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Figure 3.1
Management demands of international growth
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Standardization & localization
of HRM practices
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Why globally standardize HRM?
Consistency
Transparency
Alignment
of a geographically fragmented workforce

around common
Principles
Objectives
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Why locally responsive HRM?
To respect Cultural values
local Traditions
Legislation
Government policies
Education systems
regarding HRM and work practices
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Figure 3.2
Balancing the standardization and localization of HRM in MNEs
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Factors driving standardization
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MNEs that standardize
 pursue multinational or transnational
corporate strategies
 supported by corresponding org structures
that are
 reinforced by a shared
worldwide corporate culture
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Factors driving localization
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Localization factors include:
 Cultural environment
more social context  more complete balance of
extrinsic & intrinsic rewards
more individual  more extrinsic rewards
or fast changing
personal & social contexts
 Institutional environment (country-of-origin & HC)

 Mode of operation abroad
 Subsidiary role: e.g., global innovator,
integrated player, implementer
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Figure 3.3
Institutional effects on MNEs
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Table 3.1
Examples of impact of the cultural & institutional context on HRM practices
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Table 3.2
Gupta & Govindarajan’s four generic subsidiary roles
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The path to global status
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Organizational structures
typically change due to
 Strain imposed by growth & geographical spread
 Need for improved coordination & control across
business units
 Constraints imposed by host-government
regulations on ownership and equity
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Figure 3.4
Stages of internationalization
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Figure 3.5
Export department structure
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Figure 3.6
Sales subsidiary structure
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Figure 3.7
International division structure
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Two major MNE issues of structure
 Extent to which key decisions are made
at PC headquarters or at subsidiary units
(centralization vs. decentralization)
 Type of control exerted by the parent over

the subsidiary unit
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Figure 3.8A
Global product division structure
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Figure 3.8B
Global product division structure
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Figure 3.9
Global matrix structure
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Internationally, matrix is difficult
 Dual reporting can cause conflict & confusion
 Many communication channels can create
information logjams
 Overlapping responsibilities can produce
- turf battles
- loss of accountability
 Distance, language, time, & culture barriers
make it difficult for managers to resolve conflicts
& clarify confusion
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Matrix requires managers who
 Know the business in general
 Have good interpersonal skills
 Can deal with ambiguities of
responsibility & authority
 Have training for presenting ideas in groups
HR planning in matrix MNEs is more critical

than in traditional organizations
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Beyond the matrix org. structures
 The Heterarchy
MNEs have different kinds of centers apart from
‘headquarters’
 The Transnational
resources & responsibilities are interdependent
across national boundaries
 The Network
subsidiaries are nodes, loosely coupled political
systems
At this stage, there is less hierarchy & no
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structure is considered inherently superior
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Figure 3.10
The networked organization
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5 dimensions of networked MNEs
1. Decision-making authority is delegated to
appropriate units & levels
2. Key functions are dispersed geographically across
units in different countries
3. Fewer organizational levels
4. Formal procedures are less bureaucratic
5. Work, responsibility, & authority are differentiated
across the networked subsidiaries
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Beyond networks: meta-nationals
Meta-nationals have 3 types of units:
1. Sensing units
Uncover widely dispersed engineering & market insights
2. Magnet units
Attract & create business plan to convert innovations
into products & services
3. Marketing & production units
Market & produce adaptations of these
products & services around the world
Think:
An M-N = global tournament played at 3 levels
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HR’s place in structural forms
Three ways HR develops with international growth:
1. Centralized HR firms
large, well-resourced:
typically product-based or matrix structures
2. Decentralized HR firms
small group, mostly for senior mgmt. at corp. HQ:
mostly product- or regional-based structures
3. Transition HR firms
medium-sized corp. HR with small staff at HQ:
decentralized, product-based structure
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Different countries, different paths
 European MNEs: ‘mother-daughter’ 
global with product/area divisions or matrix structure
 Swedish MNEs: Tend to adopt mixture of
mother-daughter & product divisions
 Nordic MNEs: may prefer matrix structure
 United States MNEs: limited success with matrix
 Japanese MNEs: similar to US, but evolve more
slowly, possibly not changing structure
 Not much info yet on
Chinese & Indian MNEs
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Control mechanisms
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Figure 3.11
Control strategies for multinational firms
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Chapter 3

Chapter 3 Click on an item to

 Standardization & localization of HRM practices

 Factors driving standardization

of a geographically fragmented workforce

regarding HRM and work practices

 supported by corresponding org structures

 Institutional environment (country-of-origin & HC)

 Type of control exerted by the parent over

HR planning in matrix MNEs is more critical

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