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Part 2 • The diffusion of international HRM in multinational companies
The division has a number of structures capable of transferring expertise and knowledge across borders, many of which the HR function has played a key role in creating. One key aspect of this is the management of overseas assignments. At any one time, the division has around 60 people from various functions on long-term assignments of over a year in countries that are not their own. Spending time on an international assignment has become a key criterion in deciding whom to promote to senior positions within the firm. In addition to these long-term assignments, there are a number of other individuals on short-term visits of a few weeks or months, some of whom travel to learn about a practice operating elsewhere and others who travel to ‘spread the word’ about something developed in their unit. The division also has a number of mechanisms designed to bring together specialists from different functions: the Manufacturing Councils facilitate exchange of information between manufacturing managers and engineers; the International College of Engineering runs training courses on practices and technologies favoured by the HQ; while the HR function convenes regular meetings (at least twice a year) to discuss developments in HR practice and the scope for harmonizing these across countries.
There is little evidence that the centre has used these mechanisms to exercise ‘direct’
control: there are few formal guidelines on HR practice across their international
assignments and respondents at both plant and HQ level were keen to emphasize that the degree of central intervention in decision making is limited. However, there is compelling evidence that the mechanisms identified above were used by those at the centre of the division to exercise unobtrusive control in order to bring about the flow of practices across the firm’s plants. There are a number of instances of this diffusion. First, the US operations pioneered a set of ‘key competencies’ that engineers across the firm should possess.
Managers in the USA were given the task of devising a training programme that would deliver these competencies, to be implemented by the International College of Engineering. Second, the French plant developed a form of organizing the factory floor that involved dividing it into a series of small production units, each with its own support services. The aim was to develop a stronger focus among the workforce on serving an
‘internal customer’: the next unit in the production process. This practice was diffused through the chief executive of the French plant being accorded the status of ‘internal consultant’, roaming from one subsidiary to another advising plant managers on the implementation of this system. Third, a form of cellular assembly was developed in the Spanish plant involving the reorganization of the assembly line into a series of U-shaped cells. Within these cells workers are required to perform a range of tasks and responsibility for quality and output levels is shared among team members. A team of Spanish engineers who had developed this practice was sent on a string of short-term assignments to the other plants, while the Spanish plant built and installed the U-shaped cells.
What tactics was the centre able to use to ensure that the sites engaged in the cross-national transfer of practices? A two-pronged approach was evident. The primary way in which the HQ created an imperative on actors at plant level to adopt practices favoured by the centre was to exercise ‘coercive comparisons’. In recent years, the firm’s customers had moved away from a system whereby their own plants commissioned components from suppliers in their own country towards their HQ placing orders with the HQs of a select band of suppliers who are themselves multinationals. In effect, this strengthened the hand IHRM_C05.QXD 11/10/05 4:08 pm Page 106
It appears that in many MNCs diffusion occurs through networking between plants, underpinned by the HQ retaining control over investment decisions and the prospects of plant managers. This is the process that we have referred to as ‘network-ing within hierarchy’ in earlier parts of the book (Edwards et al., 1999).
Conclusion
This chapter has considered several issues relating to the transfer of practices across bor-ders: the extent to which practices can be transferred and can operate in a new environment; the key patterns in terms of the direction of transfer; the types of MNC most likely to engage in diffusion; and the processes through which diffusion takes place. In dealing with these issues, we have integrated into the analysis the role of both nationally distinct business systems and the internal politics of multinationals. Indeed, the inter-dependence between these two sets of factors has been, and will continue to be, a theme of the book; groups of actors within MNCs derive some of their power and influence from their familiarity with their local or national context, while the actions of large MNCs have the potential to shape the evolution of national systems. This approach comes even more to the fore in our analysis of cross-border mergers and acquisitions in Chapter 6.
of senior managers in their dealings with the plants since they were able to allocate production to those sites that produce the best-quality products at the lowest cost. This source of power created an imperative on plants whose performance was poor to adopt practices favoured by the centre. One respondent at the divisional HQ described the way in which this pressure had led to the ‘greater coordination of manufacturing processes to make sure that the world’s best practices are shared and adopted across the organisation’.
He went on to state that if, in a hypothetical case, one of the subsidiaries refused to accept that a practice favoured by the HQ should be implemented, the centre would initially try to
‘persuade them and then instruct them and eventually fire the chief executive’.
However, while this pressure may be effective in ensuring that plants adopt practices diffused from elsewhere, it might make actors at plant level reluctant to share innovations with those in other plants for fear of undermining their own competitive position. Thus the second element of central influence was to give individuals at plant level an incentive to provide practices for the rest of the group by making it clear that doing so would enhance their own prospects for pay rises and promotion. Instances of this are the French and Spanish managers who had identified the improvements in work organization: not only were they given short-term international assignments as a ‘reward’ but it was also evident that this would count in their favour if they were to apply for positions outside their own plant.
For further details, see:
Edwards, T. (1998) ‘Multinationals, Labour Management and the Process of Diffusion’, International Journal of Human Resource Management, 9(4), 696–709.
Case study question:Why do you think that the HQ relied primarily on competition between sites and control over managerial careers as opposed to more direct forms of control?
Part 2 • The diffusion of international HRM in multinational companies
Further reading
Edwards, T., Rees, C. and Coller, X. (1999) ‘Structure, Politics and the Diffusion of Practices in Multinational Companies’, European Journal of Industrial Relations, 5(3), 286–306.
This article discusses ‘structural’ and ‘political’ approaches to the diffusion of employ-ment practices across borders within MNCs and argues that the two approaches can be integrated.
Ferner, A. (2000) ‘The Underpinning of Bureaucratic Control Systems: HRM in European Multinationals’, Journal of Management Studies, 37(4), 521–39.
This paper tackles the nature of formalized, ‘bureaucratic’ forms of control in MNCs and argues that their efficacy is dependent on the informal workings of firms.
Smith, C. and Meiksins, P. (1995) ‘System, Society and Dominance Effects in Cross-National Organisational Analysis’, Work, Employment and Society, 9(2), 241–67.
The term ‘dominance’ effects was first articulated in this paper. It provides an interest-ing discussion of dominance in the context of other influences on firms operatinterest-ing across borders.
Wilkinson, B., Gamble, J., Humphrey, J., Morris, J. and Anthony, D. (2001) ‘The New International Division of Labour in Asian Electronics: Work Organization and Human Resources in Japan and Malaysia’, Journal of Management Studies, 38(5), 675–95.
The way in which Japanese MNCs ‘segment’ their international operations so that the various parts to the production process take place in different countries is elaborated upon. The authors argue that this segmentation (though they do not use this term) is a key driver of the nature of HR practices in place at each site.
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1 Why are some HR practices more diffusible than others?
2 What are the limitations to the concept of ‘dominance’ effects in shaping the transfer of practices across borders?
3 What are the different ways in which production or service provision can be integrated in MNCs and what are the implications for the transfer of practices?
4 Do you think that MNCs will look to engage in transfer of practices to an ever-increasing extent in the future?
Review questions
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