INTERNATIONAL APPROACHES TO THE MANAGEMENT OF HUMAN
RESOURCES
A company's corporate management philosophy determines how it wishes
to manage its human resources across national borders and how it sees
the world in relation to itself, making it a crucial topic. An international HR
manager must choose workers who can blend in with the organization's
culture in addition to those with the necessary abilities. For instance,
General Electric looks to appoint workers whose values, views, and style
align with the company's rather than merely those who possess the
abilities needed for a certain position.
Corporate culture and management philosophy have a significant role in
determining how corporate and operational strategies are developed,
implemented, and how they progress through different phases of
internationalization. Based on their corporate philosophy and
management style, businesses engaged in international trade and
investment may be categorized into four categories:
• Culturally oriented
• Idiostrophic
• Area-focused
• Regional
Culturally Specific Organization
"This works in my country, therefore it must work in other countries also"
is their catchphrase. These are nationalistic organizations. For instance,
Japan is the home nation and Mexico is the host country when a Japanese
business invests in Mexico. If the Japanese Corporation has an
ethnocentric mindset, it will allow Mexicans to believe that Japan is
inherently better. There will be investments made in Japanese corporate
practices.
This strategy may be appropriate in the early stages of international
business, when firms are concerned with transplanting a part well in their
home country. For example, all key management positions in companies
such as Toyota, Matsushita, and Samsung are held by nationals of the
parent country. Ethnocentric businesses think that people from their own
country are more knowledgeable and trustworthy and more reliable than
those who are foreign. Initially, companies like Matsushita, Philips, and
Procter & Gamble adopted an ethnocentric strategy.
According to this strategy, PCNs occupy all significant roles in MNCs
during the first phases of internalization. In addition, for the following
reasons pertaining to business:
1.a belief that the units may not have access to competent HCNs;
2.to guarantee proper coordination and communication inside the
headquarters.
However, there are a few issues with implementing the strategy. A few of
them are listed below:
1.HCNs' prospects for advancement are restricted by an ethnocentric
personnel strategy, which might result in lower output and more turnover
in that population.
2.It often takes a while for foreign corporate managers to adjust to their
new environment, during which time they frequently make bad choices
and commit blunders.
3.HCN views the often significant income disparity favoring PCNs in
comparison to HCN remuneration packages as unfair.
4.A prominent worldwide job often translates into new prestige, power,
and a higher quality of life for expatriates. The sensitivity of expatriates to
the requirements and expectations of their host country subordinates may
be impacted by these developments.
Aside from this, maintaining foreigners comes at a significant expense.
This method is used not only in the staffing policy but also in all other
areas, such as performance reviews, where parent nationals create and
administer the assessment form and new product development is carried
out domestically. Numerous multinational corporations demonstrate this
ethnocentric mindset. They struggle to tolerate cultural differences and
communicate in various languages. However, strategic alternatives to
entrance modalities, such exporting, licensing, and then critical activities,
are constrained by ethnocentrism.
Organizations that are Primitive
"When in Rome, do as the Romans do" is this motto. Lives as they live
elsewhere while you are not. According to the polycentric staffing model,
citizens of the host country must be employed to oversee subsidiaries,
while nationals of the parent country must have important roles at the
corporate headquarters. While home-country employees often occupy
senior management positions, this isn't always the case. They see the
potential for profit in a foreign nation, but they struggle to comprehend
the foreign market.
"Local people know what is best for them," is the polycentric message. A
polycentric strategy is sometimes required due to governmental pressure
and international regulations. Let's give them some money and leave
them alone as long as they earn us a profit. One of the main clients may
be the local government, which would demand that local methods be
used. Because they operate in diverse contexts where product
preferences may be decisive considerations and tactics must be tailored
to each markets, many multinational corporations use this strategy. This
strategy has a number of benefits, which are listed below:
1.By hiring HCNs, expatriates and their families may avoid language
barriers, save money on pricey awareness training programs, and have a
significant portion of their transition issues resolved.
2.It benefits the MNCs to have a low profile in politically delicate
circumstances.
3.It may be necessary to provide high compensation in order to draw in
HCN candidates, yet hiring HCNs ultimately costs less for the business
than hiring PCNs.
4.Using HCNs may assist prevent the critical issue of turnover that arises
when using PCNs since they are more reliable and can support the
continuation of managing subsidiaries in a more effective manner.
Here are a few of the issues they have:
1.repairing the damage caused by HCN subsidiaries. One of the main
issues is the management at PCN headquarters, particularly when it
comes to language hurdles, competing national allegiances, and
variations in personal beliefs, business views, and other areas. A
multinational corporation may wind up as a "federation" of separate
national entities with shaky ties to the corporate headquarters as a
consequence of this.
2.The lack of career mobility among HCN managers as a result of their
stagnation in subsidiaries and the lack of exposure to international
assignments among PCN managers at headquarters will ultimately affect
their ability to make strategic decisions, lowering their market share and
customer base as well as their standing in the foreign nation relative to
their competitors.
Organization that is regional
These are organizations that focus on the local area. When sharing
functions across regions might provide synergistic advantages, a
corporation adopts a regional strategy. International employees are moved
within the same area in which they are employed. For instance, if a
multinational business has offices in the US, Europe, and Asia-Pacific, a
manager working in the Asia-Pacific region will only be moving within that
region. This is only possible if the corporation has a regiocentric strategy.
In addition to overseeing the regional plan, local R&D, executive hiring
and training, product innovation, cash management, brand policy, capital
spending, and public relations, regional head office also coordinates
cooperative efforts amongst local subsidiaries.
The global strategy, country analysis, foreign exchange, transfer pricing,
intercompany loans, long-term finance, top management selection,
technology transfer, and corporate culture establishment are all handled
by the headquarters manager. Using a regiocentric strategy has the
following benefits:
1.It permits communication between PCNs deployed to the regional
headquarters and executives who have been relocated from regional
subsidiaries to the regional headquarters.
2.Given that practically all of the employees of local subsidiaries are
HCNs, it shows some consideration for local circumstances.
3.A multinational corporation may be able to transition more gradually
from a strictly ethnocentric or polycentric strategy to a geocentric one
using this method.
Policy that is regiocentric has drawbacks.
1.It may result in regional federalism as opposed to national federalism
and prevent the organization from adopting a global posture.
2.Employees may progress to regional headquarters but seldom to
positions at parent headquarters; although this strategy may enhance
career opportunities at the national level, it just lowers the bar at the
regional level.
Organization that is Geocentric
Selecting the greatest candidate for a position, regardless of country, is
most compatible with the fundamental idea of a global firm. This staffing
strategy looks for the best individuals for critical roles within the
organization. The MNC is approaching its operations globally,
understanding that each component—subsidiaries and headquarters—
contributes uniquely with its own set of skills. It goes hand in hand with an
international integrated corporate model that prioritizes aptitude above
nationality. Its methodology has three primary benefits:
1.It helps a multinational company to build an international executive
team that supports the development of an internal labor pool for global
organization deployment and a global viewpoint.
2.It gets over the polycentric approach's federation flaw.
3.It encourages cross-unit collaboration and resource sharing. Geocentric
policies are not without their drawbacks.
1.A key issue is bridging the gap between the management of HCN
subsidiaries and the PCN managers at headquarters, particularly when it
comes to language hurdles, competing national loyalties, and variations in
personal values, business views, and other factors.
2.The host government seeks a high employment rate among its
population and may use immigration rules to compel HCNs to work if
sufficient labor and suitable skills are not available.
3.Hiring a foreign citizen instead of a local one requires a lot of paperwork
in many western nations, which may be costly, time-consuming, and often
pointless.
4.Implementing a geocentric approach may be costly due to higher
training and relocation expenses. The need for a pay system that, in many
cases, exceeds national norms is a related problem.
5.The firms' ability to make strategic decisions, the quality of their
business decisions, and the allocation of their resources will all be
impacted by the lack of international assignment exposure for PCN
managers at headquarters and the lack of career mobility for HCN
managers as a result of their stagnation in subsidiaries. This will lower the
firms' market share, customer base, and position in the foreign country
relative to their competitors.
6.The worldwide team needed to support a geocentric staffing strategy
must be built and maintained by sending a large number of PCNs, TCNs,
and HCNs overseas. To put into practice
Therefore, a longer lead time and more centralized management over the
hiring process are necessary for the effective implementation of a
geocentric personnel strategy. This inevitably lessens the subsidiary
management's independence on these matters, and the subsidiary may
fight this loss of custom.
THEORY RELATING TO STAFFING
A multinational may choose to use one of many strategies for
international staffing, depending on the views of its senior management. It
could even go on in an ad hoc manner instead of methodically choosing
one of the four methods mentioned above. The techniques have the
following risks: "Instead of purposefully pursuing the best use of
management skills, the firm will choose a policy of using parent-country
nationals in foreign management positions by default, that is, simply as an
automatic extension of domestic policy."
Variations in Internationalization Stages
Despite variations in language, most authors recognize four phases of
internationalization:
Domestic: no travel beyond one's nation of residence
Multinational: manufacturing and other facilities housed in relatively
independent subsidiaries; International: an export sales and marketing
role
Global or Transnational: Location of functions and global sourcing. high
level of adaptability and coordination.
According to Bartlett and Ghoshal (1989), the transnational answer is less
of a structural and strategic reaction and more of an attitude or state of
mind. They call this a "new managerial mindset."
The classic work of Perlmutter (1969) reflects this emphasis on managers'
mindsets as a significant predictor of IHRM policy decision. Perlmutter
recognized four basic mindsets, which are as follows:
Ethnocentric: Strategic decisions are taken at headquarters; few
overseas operations have any autonomy. The management team at
headquarters has important roles at both the local and international
enterprises. In other words, foreign nationals living abroad (PCNs) oversee
subsidiaries.
Polycentric: The MNE views every subsidiary as an independent national
organization with some degree of autonomy over decision-making. Local
nationals (HCNs), who are seldom promoted to jobs at headquarters, often
oversee subsidiaries. Similarly, PCNs are not often moved to overseas
subsidiaries.
Regiocentric: Represents the multinational's regional strategy and
organizational structure. Employees are allowed to relocate outside of
their home nations, but only within a certain area. Although they may not
be given head office promotions, regional managers do have some
decision-making authority.
Geocentric: the MNE approaches its business with a global perspective,
understanding that every component contributes uniquely with its own set
of skills. It goes hand in hand with an international integrated corporation
where talent takes precedence over country. Anywhere in important roles,
including senior management at the corporate office and on the board of
directors, PCNs, HCNs, and TCNs may be found.
It is tempting to draw direct connections between these approaches and
the phases of internationalization; for example, the geocentric approach
closely resembles the transnational idea proposed by Bartlett and
Ghoshal. Things are not nearly so easy in real life. Many so-called global
organizations have an extremely ethnocentric perspective. The majority of
foreign managers report to Head Office, which also sets HR policy and
procedures. "Global" culture is more of an effort to spread the culture of
the parent nation to all of its affiliates. Stages of internationalization are
alluring; for example, the geocentric approach closely resembles the
transnational idea proposed by Bartlett and Ghoshal. Things are not nearly
so easy in real life. Many so-called global organizations have an extremely
ethnocentric perspective. The majority of foreign managers report to Head
Office, which also sets HR policy and procedures. "Global" culture is more
of an effort to spread the culture of the parent nation to all of its affiliates.
Example: A recently acquired French subsidiary of a multinational
corporation with headquarters in the United States was reassured that the
company recognized and integrated the variety of management styles
shown in its national subsidiaries and worked on a genuinely global basis.
A few months after the purchase, the French company's senior
management team was presented with an extensive amount of paperwork
detailing the new competence management plan, along with orders to
execute it in every subsidiary. Developed by US experts exclusively for the
US parent business, the competence framework was very thorough. A
large portion of the jargon was untranslatable into French. The American
management team's conceit in believing that they would care about a
foreign and enforced system stunned the French management team.
INTERNATIONALIZATION'S IMPACT
Organizations need to reconsider their conventional approaches to
personnel management as we transition to a more globalized economy. In
many countries, customs and practices that are considered typical may be
considered criminal. For example, routine choices about career growth
might become quite complicated in a company that operates in thirty
different countries. How do we choose our top candidates for employment,
who makes the choices, and what sort of leadership are we aiming to
cultivate inside our multinational organization?
Making the best possible use of an organization's human resources is the
main goal of the human resource management (HRM) function. HR
specialists engage in a variety of tasks related to hiring, training,
performance and incentive management, HR planning, employee
engagement, and communications in order to accomplish this. These
initiatives will assist and guide organizational strategy if the company has
a strategic HR department. Initiatives aimed at organizational growth and
transformation also make considerable use of HR specialists. These HR
initiatives must be coordinated by multinational corporations between
their home nation and many national subsidiaries, taking into
consideration the requirements of nationals of the host country (HCNs),
parent country (PCNs), and third country (TCNs).
In light of this wider viewpoint, how can managers determine what IHRM
policy options are appropriate? Finding the optimal match between the
conflicting needs of local responsiveness and global integration and
coordination—the so-called "global versus local" debate—is a crucial task
for all international organizations. Operational needs, strategic
coordination, and international clientele are some of the commercial
factors driving global integration. On the other hand, factors that promote
local responsiveness include a wide range of customer demands,
customized means of distribution, and more extensive social and political
barriers to market entrance. From an HR standpoint, a variety of issues,
such as various national business systems, labor laws, national HR
practices, education systems, and country cultural norms, impede the use
of standardized HR procedures. Nonetheless, companies can still choose
to deploy standardized HR systems around the world. Their decision is
largely influenced by their level of internationalization and global
perspective.
From an HR viewpoint, a variety of issues, such as various national
business systems, labor laws, national HR practices, education systems,
and country cultural norms, limit the use of standardized HR methods.
Nonetheless, companies can still choose to deploy standardized HR
systems around the world. Their decision is largely influenced by their
level of internationalization and global perspective.
OVERSEAS DEPARTMENT
Globalization has resulted in the creation of the new international division
of labor (NIDL) in economics. The phrase was created by theorists who
were attempting to explain the continuous geographic rearrangement of
production that was sparked by concepts of a global division of labor and
which included the geographical migration of manufacturing industries
from developed to developing nations. It's a geographical division of labor
that happens when production isn't restricted to national economies. Up
until around 1970, impoverished regions were integrated into the global
economy primarily as providers of agricultural and mineral commodities
under the terms of the "old" international division of labor. On the other
hand, when emerging countries get more integrated into the global
economy, they produce more.
Transference, commonly referred to as the "global industrial shift," is the
result of this, wherein manufacturing processes are moving from
established nations (the USA, Europe, and Japan) to emerging nations in
Asia (such as China, Vietnam, and India) and Latin America. This is a result
of businesses looking for the lowest prices to assemble and produce parts;
as a result, labor-intensive, low-cost portions of the manufacturing process
are moved to developing nations where expenses are much cheaper.
Businesses do this by using the technologies of communications and
transportation, together with the fragmentation and locational flexibility of
production. The industrialized nations' share of global manufacturing
production fell from 95% to 77% between 1953 and the late 1990s, while
the proportion of emerging economies more than tripled from 5% to 23%.
The ensuing division of labor across continents closely mirrors the socio-
economic and political North-South divide, in which the North, home to
25% of the world's population, controls 45% of the world's income, while
the South, home to 75% of it, can only access 5%.
DIVISIONS FOR GLOBAL PRODUCTS
When the main division of the company's activity is based on product (or
service) categories, global product divisions are a component of the
organizational structure of the multinational. For instance, a car
A major professional service organization may be separated into divisions
for audit, business advising, information technology, and taxation, while a
manufacturing corporation may be largely divided into divisions for trucks,
passenger cars, and SUVs. Subdividing each of these "global product
divisions" into many geographic (Americas, Africa-Middle East, Asia-
Pacific, Europe) and/or market segments (business, government, and
private customers) is another possibility. The need to focus resources at
the product (or product group) level is the strategic basis for the global
product division.
In light of this, the company may believe that, in the aforementioned car
example, these three markets are quite autonomous from one another
and that giving each division its own management team would help it
concentrate on its own market and grow its company while competing
more successfully. Additionally, C.
Proponents of the resource-based perspective of the company, such as K.
Prahalad and Gary Hamel, believe that the organization of the firm should
be centered on the essential resources that provide it with a sustainable
competitive edge. As a result, a global product division makes sense as a
structure to house various resources and goods. For instance, a particular
collection of products may be built on certain technologies and skills. A
worldwide product division used to have authority over the majority of the
value chain that was pertinent to its market.
worldwide Beauty, Global Household Care, and Global Health and Well-
Being, for instance, are the three worldwide product divisions of Procter &
Gamble (P and G), which also includes a global operations section. The
Global Beauty segment would thus have its own network of distribution,
production facilities, suppliers, brands, and service department. But for
two reasons, modern organizational and management theories have
downplayed the wisdom of this form of control. First off, total autonomy
isn't always the best scenario, as Stephen Young and Ana Teresa Tavares
have shown.
In this vein, writers such as Julian Birkin Shaw have proposed that the
global company as a whole benefits more from coordinating processes
across its international divisions in order to identify economies of scale,
economies of scope, and other efficiencies and synergies. With P&G's
Global Operations division tasked with facilitating many of these
synergies, sharing information systems, manufacturing, facilities, and
services throughout its product divisions would be the normative trend.
"Outsourcing" (also known as "offshoring") portions of the value chain to
an outside service provider, such as producing different components or
operating a contact center, is another well-liked modern strategy. For
instance, according to Stanley Holmes, Boeing is outsourcing over 70% of
the 787's airframe, enabling significant fuselage and wing components to
be designed and manufactured by Italian, Japanese, and Russian technical
firms. These programs' advantages include lowering expenses and
developing connections with potential customers. For example, offshoring
initiatives raise the chance of survival for Belgian manufacturing
companies, according to a recent research reported by Kristien Coucke
and Leo Sleuwaegen.
Multinational corporations do, however, generally recognize and use
global product divisions. This is particularly true for companies that are
moving away from international division structures; over time, the
domestic and foreign businesses merge and are then divided into
structures based on products, markets, or geography. But along the same
developmental Eventually, these systems often continue to develop into a
matrix-like structure in which management power is delegated to the
company in two or even three dimensions.
For instance, one dimension can be regional, while the other might be
similar to the global product structure in charge of different products.
What Chris Bartlett and Sumantra Ghoshal refer to as the "transnational"
structure is a more developed stage of growth, in which the company
acquires dual ability to handle both local (national) and global situations.
The Organizational Structure of a Multinational Firm
A "global structure" is the organizational structure of a multinational
company that embodies the "global" philosophy, according to which the
world is essentially one homogeneous market. For instance, many large
electronics and consulting firms, with the exception of small local
language and packaging changes, essentially project the same kinds of
goods and services globally. There are, nonetheless, a number of
philosophies and terminologies used differently in this discipline.
First, seeing the whole globe as a single, essentially homogeneous market
with shared interests and preferences is a hallmark of a "global" mentality.
This is the antithesis of the "multi-domestic" (also known as multi-
national, multi-local, or multi-national) ideology, which holds that there
are several, essentially separate marketplaces in the globe, each with its
own preferences and tastes. A place in between The belief that the globe
is composed of a limited number of relatively homogeneous areas is
known as regionalism, and it lies between these two extremes. These
concepts are applicable to businesses, organizations, and industries; it is
useful to know how they function at the strategic and industry levels of
global thinking.
George Yip, for instance, believes that the degree to which the global
marketplace is fragmented, local consumer wants are unique, local
sourcing imperatives exist, prices are diverse, and trade restrictions are
important for cross-border commerce, all contribute to the phenomenon of
globalization. Thus, while retail, the food industry, and the majority of
services are regarded as largely multidomestic, Randall Schuler, Peter
Dowling, Helen De Cieri, and other academics refer to certain industries—
such as commercial aircraft, copiers, generic drugs, most electronics, and
computer hardware—as global industries.
Multinational corporations, as well as other large businesses, often have
many departments, divisions, or units that each represent a different facet
of their business strategy. Alfred DuPont Chandler's seminal work,
Strategy and Structure, established the renowned connection between
structure and strategy. For instance, a company with five product
categories may have been divided into five divisions, each of which would
have been responsible for overseeing a different category. Based on this
logic, Chris Bartlett and Sumantra Ghoshal describe four organizational
types (or mentalities) for the global organization that represent
organizational and strategic responses to various industry contingencies.
Their focus is on organizational responses to both local and global forces.
They explain, for instance, the global company that sees the entire world
as its market, presumes that national preferences are more alike than
different, and believes in standardized goods. These strategic approaches
necessitate the use of structural integrative mechanisms to coordinate
global operations, marketing, production, R&D, and planning.
Therefore, the phrase "global structure" implies various structural
processes. Mechanisms: Every major organization need some kind of
coordination and integration structure. There are three main components
to this kind of organization, however, since the global strategy depends on
them for execution. The strategic responsibility locus is the first. Secondly,
the way the structure divides the company and establishes reporting ties.
We might refer to this component of structure as structuring. The last
factor to consider is the various forms of integration and coordination
systems, often referred to as processes.
Locus of strategic responsibility: The degree to which decision-making
authority is transferred from corporate headquarters to various business
divisions is a critical component of organizational structure. Centralizing
key strategic decisions is a strategic need for multinational firms.
Examples of choices that are often taken at the corporate level as
opposed to subsidiary level are those on product range, R&D, branding,
and human resource management. Major company rules and standards
may even apply to customer service, the department most likely to be
placed closest to the consumer. Structuring: The global structure is
characterized by its relative blindness to physical distance, focusing
instead on one or more other strategic aspects, such as markets or goods,
that it deems more crucial to its ability to successfully execute a global
strategy than geography.
As a result, a global structure often consists of a significant top-level
divide into markets (referred to as a worldwide market structure), product
categories (referred to as a global product structure), or some kind of
matrix (global matrix structure). Procter & Gamble (P and G) has three
global product divisions: Global Beauty, Global Household Care, and
Global Health and Well-Being. These divisions provide as an example of a
global product structure. The line between product and market structures,
however, is likely to become more hazy. For instance, although Boeing's
business units—commercial airplanes, integrated defense systems, and
Boeing Capital Corporation—seem to be distinct product divisions, all
three actually aim to market different aircraft and aerospace products and
services to distinct market groups—commercial airlines, governments, and
financial intermediaries, in this case.
The global matrix structure makes an effort to group operations according
to two or more management factors, such as market, location, or product.
Take H. as an example. In addition to having distinct operations for retail
and food service channels, J. Heinz has multiple product categories,
including ketchup/condiments/sauces, meals and snacks (including frozen
foods), soups/beans and pasta, and infant feeding. Geographic divisions
include North America, Europe, Australia/New Zealand, and emerging
markets (selected countries in Asia and Eastern Europe). Although these
different departmental and corporate divisions in a global organization
may have critical local emphasis points, their primary function is to
collaborate in executing the company's global plan.
Processes: Lastly, and maybe most significantly, structure involves
processes like information systems, integration, and coordination. These
procedures are often very prevalent in modern businesses and have a
tendency to be prominent in the global structure. Four generic integrating
mechanisms are identified by Kwangsoo Kim and Jong-Hun Park: (1)
people-based integrating mechanisms, which employ people to coordinate
business operations across borders through the transfer of managers,
meetings, teams, committees, and integrators; (2) information-based
integrating mechanisms, which use information systems like databases,
email, the Internet, intranet, and electronic data interchanges to integrate
business operations across borders; (3) formalization-based integrating
mechanisms, which depend on the application of uniform or standardized
work procedures, rules, policies, and manuals across units; and (4)
centralization-based integrating mechanisms, which maintain decision-
making authority at corporate headquarters—a notion akin to that in the
"locus of strategic responsibility."
The more these procedures are used by the company, the more global it
is. For instance, Intel uses a number of cross-functional teams, such as
those for information technology (IT), knowledge management, human
resources, finance, legal, change control, data warehousing, common
directory information management, and cost reduction teams, as well as a
relatively small number of formal structural mechanisms. These teams
enable Intel to quickly adapt to changing conditions. Additionally,
integrating methods may have unanticipated regulatory hurdles that
impede effective decision-making, tie local managers' hands, and impose
compliance costs in the form of time and other resources. For instance, a
research by David Brock and Ilene Siscovick discovered that integrative
variables often had detrimental impacts at the subsidiary level.
UPDATED INTERNATIONAL MNE STRUCTURE
A person with a sluggish, slow-moving stride usually strikes others as less
confident and authoritative than someone who walks with proper posture.
Similarly, the organisational structure of the firm might influence its future
development prospects.
The globe has undergone significant transformation. These days, the key
to success is being globally competitive. Many businesses have undergone
a continuum of transition as a result of the collapse of international trade
barriers and the emergence of a new global economy: from being
international, which emphasizes an export-import orientation, to being
multinational, which has significant operations abroad focused on
particular, relatively protected markets, to being global, which views the
entire world as a market. The era of the new, integrated global economy
has arrived.
Three organizational frameworks exist.
1.Multi-local: There is little intervention from the headquarters and
complete autonomy granted to the abroad affiliates. Organizations that
need to adapt quickly to market changes, have high levels of
customization, and flexibility should choose this structure. Retail, auditing,
consultancy, and other related sectors are a few examples of companies
that need these kinds of organizations. The drawbacks include poor cost
efficiency and needless duplications. However, speed and flexibility are
traded off for economies of scale and duplications in businesses that need
ground knowledge.
2.Global: Not much autonomy is granted to the affiliates abroad. All of
the important choices are made at headquarters. The heads of the finance
and sales departments of the subsidiaries report to the functional heads at
headquarters, and the organizational structure is based on functions.
Product lines and large customer accounts that report to the heads of the
respective product lines and multinational accounts are used in certain
organizations to organize activities. If global efficiency is needed, this
structure is better suited. Industries that need this kind of organization
include consumer electronics and electronic chips, among others. Due to
its highly centralized management, this organization has the drawback of
eroding local responsiveness.
3.Transnational: The transnational structure could be suitable in
particular situations when both local and global know-how are crucial. The
achievement of consensus serves as the primary motivator for the matrix-
based organizational structure, which is based on dual reporting.
Depending on your company's needs, you should choose an organizational
structure that will allow you to achieve your goals while also allowing for
future expansion and flexibility. The idea of "flat organization" unites the
three structures mentioned above. These days, the term "flat
organization" is overused and misinterpreted. It is a contradiction in
language, an oxymoron. Every organization with a goal must have a core
of decision-making responsibility. This holds true for cooperatives, public
institutions, private businesses, and volunteer groups.
A well-designed organizational structure has the ideal number of tiers of
leadership, each of which clearly enhances the output of the others. This
covers the creation and implementation of the mission and strategy. It
gives people the room and challenge they need to succeed, keep learning,
develop, and enjoy what they do while getting paid fairly for it.
The theory makes sense. The challenge for managers lies in the practical
design. What is the optimal number of vertebrae in this accountability
spine? Which are the main roles?
How are they recognized? What effect does this spine's loss of function
have? What effect will this have on the current employees' growth and
motivation? Surprisingly, at the beginning of the 21st century this is still
an area of guesswork and fashion in most organizations.
