8/13/2019 CCHRM C 14

1/11

8/13/2019 CCHRM C 14

2/11

9-2

Salient Points

Risk for a multinational

Control mechanisms

Strategic HRM in a multinational

8/13/2019 CCHRM C 14

3/11

9-3

Risk for a Multinational

Options Options like licensing / franchising , turnkey arrangement, JV ,

Acquisition , Subsidiary

Right option to be in line with perceived risk v/s envisages gains

Risks

Environmental risk .. Biggest of risks

Operational riskCulture risk

8/13/2019 CCHRM C 14

4/11

9-4

Environmental Risks

Competitive risk Change in technology / obsolescence

New strong entries

Change in supply / demand structure Political risk

War / conflicts , terrorism , instability

Restrictive / protectionist policies

Economic risk Unsatisfactory economic condition

Local resources , infrastructure

Taxation , tariffs can be discriminatory

Restriction on repatriation

8/13/2019 CCHRM C 14

5/11

9-5

Operational Risks

Industry type

Banking , securities , technology driven /

telecom

Subsidiary operations

Young , inexperienced operation

UnderperformingOperating in volatile , unstable environment

8/13/2019 CCHRM C 14

6/11

9-6

Culture Risks

HQ need for high uncertainty avoidance

High culture distance

Tendency towards centralised control

accentuated for an un established

operation

8/13/2019 CCHRM C 14

7/11

9-7

Control

Control costs Insufficient control loss of profits

Over control forgoing new opportunities , high people turnover

Nature / extent of control will vary for differentsubsidiaries

Mechanisms of control Structural relationship

Organisational culture

Budgetary control Technology ( transfer )

Staffing policy ( Ethno/ Geo / Poly )

8/13/2019 CCHRM C 14

8/11

9-8

Structural control

Griffin , Pustay study :

Multi domestic

Each country market is different , independence encouraged

Global

The world is one market place . All processes including

production , marketing are standardised

Transnational

Combines global scale with local responsiveness . Aims atflexibility & integration

HO decisions on R& D , production , investments

Greater independence on functions like Marketing , HR

8/13/2019 CCHRM C 14

9/11

9-9

Control Mechanisms

Organisational culture

Philosophy : Ethno / Poly / Geo

Informal control via values , beliefsExtent of control depends on trust relationship

Budgetary control

Annual budgets , strategic plansPre approval on resources , authority limits

Regular reporting

8/13/2019 CCHRM C 14

10/11

9-10

Empowerment A function of management philosophy

Knowledge based , customer oriented businesses needgreater decentralisation

Depends on Skills at Subsidiary level

HO confidence in local operations

Impact of empowerment on employee morale , efficiency

Cost / benefit of empowering subsidiary

Empowerment is localisation of control

may not meanlocal staffing

Empowerment is two ways : Earned , given

May not be 100 % . HO will need some control

8/13/2019 CCHRM C 14

11/11

9-11

Strategic HRM in Multinational

HR management should contribute to strategy

especially on people

Advise on skill, knowledge gaps & need to

supplement

HR management to build capacity to prepare

organisation for :

Knowledge transfer / leveraging across operations Flexible , culture sensitive , mobile managers

Managers capable of handling empowerment with maturity &

efficacy