Q) Explain different
approaches adopted by managers in building multinational organizations.
Elaborate on control mechanism in international human resource management
citing suitable examples.
Approaches to Building
Multinational Organizations and Control Mechanisms in International Human
Resource Management
1. Approaches Adopted by
Managers in Building Multinational Organizations
Multinational
organizations (MNCs) operate in multiple countries and require effective
management approaches to balance global efficiency with local responsiveness.
Different managerial strategies help organizations expand globally while
maintaining operational consistency and cultural adaptability. The major
approaches include:
In the
ethnocentric approach, key positions in the multinational organization are
filled with employees from the home country. This approach ensures alignment
with headquarters' strategies, maintaining strong control over subsidiaries.
For example, a U.S.-based company expanding into India may send American
executives to oversee Indian operations. While this approach ensures
consistency, it may face challenges related to cultural insensitivity and
employee dissatisfaction in host countries.
b. Polycentric Approach
The polycentric
approach prioritizes hiring local talent for managerial positions in
subsidiaries while headquarters retains overall strategic control. This method
allows companies to leverage local expertise and cultural knowledge, improving
market penetration. For example, McDonald's hires local managers in different
countries to customize menus and marketing strategies according to regional
preferences. The challenge is maintaining consistency across global operations
while allowing local decision-making autonomy.
c. Regiocentric Approach
The regiocentric
approach involves regional control, where managerial decisions are tailored to
specific geographical regions rather than individual countries. This method
balances global standardization and regional flexibility. For example, Unilever
organizes its business based on regions such as Europe, North America, and Asia
to tailor its products and marketing strategies according to regional consumer
behaviors.
d. Geocentric Approach
The geocentric
approach selects the best talent globally, regardless of nationality, for key
positions in the organization. This method fosters a truly global perspective
and helps organizations build a diverse leadership team. Companies like Google
and IBM implement geocentric hiring to create multicultural and innovative work
environments. However, managing a globally diverse workforce requires strong
integration efforts and effective cross-cultural communication.
2. Control Mechanisms in
International Human Resource Management (IHRM)
Managing human
resources in multinational organizations requires effective control mechanisms
to ensure alignment with corporate goals while allowing flexibility for local
operations. These mechanisms include:
a. Direct Control
Mechanisms
Direct control
mechanisms involve direct supervision, expatriate assignments, and performance
monitoring to ensure subsidiary alignment with headquarters. Examples include:
·
Expatriate
Managers: Companies deploy
home-country managers to oversee international operations. For example, Toyota
often sends Japanese executives to key global subsidiaries to maintain company
culture and operational consistency.
·
Regular
Reporting: Subsidiaries must
submit detailed financial and operational reports to headquarters for
performance assessment. This ensures transparency and alignment with corporate
objectives.
b. Bureaucratic Control
Bureaucratic
control relies on formal policies, procedures, and standardized regulations to
maintain consistency. Examples include:
·
Policy
Manuals and Standard Operating Procedures (SOPs): Many MNCs, such as Coca-Cola, develop global policies
covering HR functions, compliance, and operational guidelines.
·
Performance
Appraisals: Companies implement
uniform evaluation criteria for employees across subsidiaries, ensuring
fairness and consistency in promotions and compensation.
Cultural control
focuses on embedding corporate values and shared beliefs to influence employee
behavior. Examples include:
·
Corporate
Training Programs: Multinational
firms like Google and Microsoft provide cultural and ethical training to align
employees with company values.
·
Global
Leadership Development:
Companies invest in leadership programs that promote a unified corporate
culture, encouraging collaboration among employees from different backgrounds.
d. Output Control
Output control
measures performance based on results rather than processes. Examples include:
·
Sales
Targets and Key Performance Indicators (KPIs): Global corporations like Amazon assess employee and
subsidiary performance using clear numerical benchmarks.
·
Incentive
Programs: Companies introduce
global incentive schemes to reward high-performing employees and align
subsidiary goals with corporate objectives.
Conclusion
Building multinational organizations requires strategic management approaches such as ethnocentric, polycentric, regiocentric, and geocentric methods, each offering unique advantages and challenges. Control mechanisms in IHRM, including direct supervision, bureaucratic control, cultural control, and output control, ensure operational consistency while allowing subsidiaries the flexibility to adapt to local markets. Successful multinational organizations integrate these approaches and mechanisms to balance global efficiency with local responsiveness, fostering sustainable international growth.
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