Tensions in International Business
Working in an international context means dealing with a much higher degree in complexity and higher risk exposure than operating in a single domestic market. This is mainly due to the dilemma to accomodate local country specifics and realize synergies on a global level at the same time. The practical consequences affect the relationship between Headquarter (HQ) and subsidiaries substantially. During their first course day, the 20 course participants of the CAS International HR Management got familiar with these issues and identified the potentials for HR contribution.
The Archetypes of Multinational Organizations
„Practice without theory is blind“ as the saying goes, and so the course participants delved into the influencial and widely-used framework of global integration and local responsiveness by Bartlett&Goshal: The pressure for global integration forces the company to drastic cost reduction by exploiting cheaper locations as resource pipelines, centralization and standardization help to sharpen and strengthen a global brand. In this context, the role of the subsidiaries is reduced to mere implementers. „Global organizations“ produce goods that satisfy convergent consumer tastes such as electronic devices or cars.
Multidomestic oriented companies on the other hand serve regions or countries with very specific consumer needs such as retail or food, which requires a more locally responsive orientation. In this case, the subsidiaries fulfill the roles of local innovators, being practically independent from the HQ and may even follow their own strategies.
Finally, many organisations are forced to consider local and cultural differences as well as competing in a globally integrated market to a very high degree: The transnational organization. Those companies function as a set of informal and formal networks where information, competencies and goods flow between HQ and subsidiaries but also between the subsidiaries themselves. The subsidiaries often act as centers of competence.
Role of International HR
When digging into these concepts, the CAS-students soon realized that HR plays an important role in these various settings: An appropriate set-up of the HR function(s), a good rapport between HQ and subsidiaries, clear expectations and an understanding which HR processes are working well on a global scale and which one need more adaptation to local specifics are the basis of effective international HR management.
Let’s look at staffing key talents for instance: In a global organization it makes perfectly sense to fill the post of a host country management position with a HQ-representative. The virtual team head (expatriation being in decline due to high costs) bears the role of controller, inspirer and ambassador of the HQ processes and corporate culture. However, imposing policies will likely meet resistance from the subsidiary staff. HR can act as a mediator assessing the degree of adaption required due to local constraints (e.g. legally or culturally).
Yet, when staffing for a company with a transnational orientation the post would more likely be filled with the person most qualified for it – whatever cultural origin. This talent brings in ideas and concepts from her own culture which may meet less opposition than an imposed HQ-follow-though-order. In this context HR plays a very active role by fostering the developmental aspects of people mobility, like training the „global mind set“, enabling knowledge sharing across the company and support the company in leveraging the benefits of diversity.
Application of framework?
Research shows that both over-centralization and over-decentralization is not effective. By exploring the framework, the participants managed to spot the downsides of each concept and intuitively initiated propositions for remedies: A Code of Conduct may require some local refinements in terms of translation and legislation. However, when it comes to ethical standards compromises are a clear no go. This shows that international HR is ready and has the right mind set to tackle the difficulties that rise from the tension of local responsiveness and global integration in a professional and systematic manner.