International Human Resource Management The organizational context IHRM Chapter 2 International Human Resource Management Managing people in a multinational context The organizational context

Chapter Objectives We learn: Structural responses to international growth Control and coordination mechanisms, including cultural control. Effect of responses on human resource management approaches and activities. IHRM Chapter 2

Terms M&A born global matrix structure heterarchy structure transnational structure multinational network chaebols greenfield building approach bamboo network firm clan control social capital corporate culture IHRM Chapter 2 3

Management demands of international growth Figure 2-1 Management demands of international growth IHRM Chapter 2 4

The path to global status Organizational structures change due to: Strain imposed by growth and geographical spread. The need for improved coordination and control across business units. The constraints imposed by host-government regulations on ownership and equity. IHRM Chapter 2 5

Stages of internationalization Figure 2-2 Stages of internationalization IHRM Chapter 2 6

Export department structure Figure 2-3 Export department structure IHRM Chapter 2 7

Sales subsidiary structure Figure 2-4 Sales subsidiary structure IHRM Chapter 2 8

International division structure Figure 2-5 International division structure IHRM Chapter 2 9

MNEs’ two major issues of structure The extent to which key decisions are to be made at the parent-country headquarters or at the subsidiary units (centralization versus decentralization). The type or form of control exerted by the parent over the subsidiary unit. IHRM Chapter 2 10

Global product division structure Figure 2-6a Global product division structure IHRM Chapter 2 11

Global area division structure Figure 2-6b Global area division structure IHRM Chapter 2 12

Global matrix structure Figure 2-7 Global matrix structure IHRM Chapter 2 13

International matrix structure is difficult Matrix is all but unmanageable because of: Dual reporting, which leads to conflict and confusion. The proliferation of communication channels which creates informational logjams. Overlapping responsibilities, which produce turf battles and a loss of accountability. The barriers of distance, language, time and culture, which often make it very difficult for managers to resolve conflicts and clarify confusion. IHRM Chapter 2 14

The networked organization Figure 2-8 The networked organization IHRM Chapter 2 15

The multi-centered networked organization Management involves less hierarchical structure and features 5 dimensions: Delegation of decision-making authority to appropriate units and levels. Geographical dispersal of key functions across units in different countries. Delayering of organizational levels. De-bureaucratization of formal procedures. Differentiation of work, responsibility and authority across the networked subsidiaries. IHRM Chapter 2 16

The role of MNE culture of origin Figure 2-9 The role of MNE culture of origin IHRM Chapter 2 17

Control strategies for multinational firms Figure 2-10 Control strategies for multinational firms IHRM Chapter 2 18

Discussion Questions What are the stages a firm typically goes through as it grows internationally and how does each stage affect the HR function? What are the specific HRM challenges in a networked firm? Country of origin influences the firm’s approach to organization structure. As MNEs from China and India internationalize, to what extent are they likely to differ from that observed for Japanese, European and US MNEs? IHRM Chapter 2 19