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How can a social relationship be considered a control?

How can a social relationship be considered a control?

Your response should be at least 200 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

Dowling, P., Festing, M., & Engle, Sr., A. (2013). International human resource management (6th ed., pp. 69-71). Andover: Cengage Learning.

internationalization: four had foreign sales offices, three had sales offices and subsidiaries, and three were considered global in terms of number of foreign subsidiaries (either w h o l l y owned or international joint ventures). Global area divisional or global functional structures were utilized. As w i t h China, there is a similar relative paucity of information regarding Indian iVINEs and their internationalization.

Some researchers have gone so far as to question the existence of a truly global f i r m . Dore-mus et al.y’^ find empirical support for their contention that institutional infrastructures (the cultural heritage codified into legislation and values related to banking and financial markets, research and development capabilities and patterns of technological change, as well as govern-mental and managerial preferences and strategic propensities), combine to l i m i t the abilit)’ of firms to move too far beyond their regional homes. Three regional blocks are presented for mul-tinational firms: N o r t h America, Europe (largely German-based multinationals) and Asia (largely Japanese-based multinationals) . The authors reporr economic data to support their contention that while each of these regional powers have some impact outside of their o w n regions, practically no firms operate significantly in a balanced manner across all three regions of the w o r l d . Deep-seated differences in financial institurions, h o w technology is acquired and developed, and h o w products and services are consumed are all too divergent from each firm’s region of origin for complete global cross-seeding to occur. According to Rugman, centers of regional competitive advantage may be created w i t h some limited interventions outside of the regional core.

Fashion or fit?

The above discussion has traced the evolution of the f i r m f r o m domestic-oriented into a global – oriented f i r m . A note of caution should be added. G r o w t h in the firm’s international business activity does tequire structural responses, but the evolutionary process w i l l differ across multi – nationals. A p a r t f r o m the i m p o r t a n t country of o r i g i n aspect (especially w i t h countries that had colonies for a relatively long period of time), other variables – size of organization, pattern of inrernationalization, management policies and so on – also play a part. As our discussion indi-cates, firms undergo stages of restructuring as they attempt to grapple w i t h environment changes that require strategic responses.


As indicated in Figure 3.1 at the beginning of this chapter, international operations place addi-tional stresses on control mechanisms. There is also additional stress on the firm’s ability to coordinate resources and activities. As the chairman and chief executive officer of the French hotel and travel company, Accor, explained in a newspaper i n t e r v i e w : ” ”

Accor has to be a global company, in view of the revolution in the service sector which is taking place

… National [hotel chains] cannot optimize their operations. They cannot invest enough money …

Globaiization brings considerable challenges which are often under-estimated. The principal difficulty Is getting our local management to adhere to the values of the group … Every morning when i wake i think about the challenges of coordinating our operations in many different countries.

Figure 3 . 11 below presents t w o strategies for global control . It is i m p o r t a n t to note these t w o strategies are not independent or divorced f r o m each other. Rather they present a difference in emphasis.

T r a d i t i o n a l l y , M N E s have emphasized more f o r m a l , structural forms of c o n t r o l . As presented earlier in the chapter, strategy is implemented via the factoring of w o r k flows, the articulation



FIGURE 3,11 Control strategies for multinational


Structural-formal focus

Cultural – informal focus

(primary controls)







Network processes and

activities-social capital

Hierarchy and

Mind matrix




Job analysis



HRM processes


HRM processes

feSecondary controls

Secondary controls

Personal networks

‘ Job authority

Source: Adapted from A. Engle and Y. Stedham, ‘Von Nebenrolle zu Hautptrolle, von Statist ins Rampenllcht: Multinational and Transnational Strategies – Implications for Human Resource Practices’, Conference Proceedings of theSixth Conference on International Human Resource Management, Paderborn, Germany: University of Paderborn, 1998; and A. Engle, M. Mendenhall, R. Powers and Y. Stedham, ‘Conceptualizing the Global Competency Cube; A Transnational Model of Human Resource’, Journal of European Industrial Training, Vol. 25, No, 7, pp. 15-23.

of control by some combinacion of specialization characterized by functional, global producr di-vision, national, regional (area) divisions, or matrix structures. Structure results in hierarchies, functional authority and increasingly prescribed ]ob descriptions, selection criteria, training standards and compensable factors. H u m a n resource activities acr to implement existing struc-tural systems of control . Communication and relationships are formalized and prescribed and budgetary targers and ‘rational’, explicit, quantitative criteria dominate performance manage-ment s y s t e m s . C o m p l e m e n t a r y yet definitely secondary control is developed and maintained via more i n f o r m a l personal and social networks – the informal organization .

The inadequacy of bureaucratic, structural controls when dealing w i t h significant variations in distance and people experienced in the far – flung activities and operations of M N E s has been noted by researchers for decades. The unique cultural interactions and the contextual and physi-cal di.stances that characterized multinational operations may have outstripped the capabilities of solely structural and formal forms of control.^”^ As long ago as 198 J, W i l l i a m Ouchi termed the phrase ‘clan c o n t r o l ‘ to describe social control as a legitimate control system ro supplement or replace traditional structural, bureaucratic c o n t r o l . ‘ * ” A more cultural focus emphasizes the group level potential of corporate culture, informal social processes, personal w o r k networks and the investment in social capital to acr as sources of more complete and nimble control in a complex m u l t i – p r o d u c t , m u l t i c u l t u r a l environment . O n the individual level, an emphasis on per-sons (as opposed to jobs), their competencies and skills, and the investment in human capital become the focus of more customized human resource practices and processes.’*”^ F o r m a l , struc-tural controls still exist, bur rhev are not the primary source of control .



Results f r o m a survey of 390 Mexican subsidiaries of US M N E s by Gomez and Sanchez’ *” led them to conclude that predicting the preferred combination of formal and informal controls a M N E might choose is problematic. The complexities related co subsidiary mandate, reliance on local or corporate technologies and skills, as well as the cultural distance between the corpo-rate and host cultures need to be considered in determining the m i x of f o r m a l and i n f o r m a l con-t r o l . Clearly more research is called for in this topic area . ‘”‘ Returning to several of the elements in Figure 3 . 1 1 , we w i l l review informal control processes.

Control though personal relationships

A consistent theme in the descriptions of transnational and networked organization forms is the need to foster vital knowledge generation and diffusion through lateral communication via a network of w o r k i n g relationships. N e t w o r k s are considered as part of an individual’s or organi-zation’s social capital: contacts and ties, combined w i t h norms and trust, that facilitate k n o w l – edge sharing and information exchanges between individuals, groups and business units . “”* As n e t w o r k relationships are built and maintained through personal contact, organizations need processes and forums where staff f r o m various units can develop types of personal relationships that can be used for organizational purposes. For example, w o r k i n g m cross-functional and/or cross-border teams can assist in developing personal contacts. T r a i n i n g and development pro-grams, held in regional centers or at headquarters, become an important f o r u m for the develop-ment of personal networks that foster i n f o r m a l communication channels.

Control through corporate culture ,

Some advocates of more complex structural forms regard the use of cultural control as an effec-tive informal control mechanism. Corporate culture is variously defined, but essentially it refers to a process of socializing people so that they come co share a c o m m o n set of values and beliefs that then shape their behavior and perspectives. It is often expressed as ‘our way of doing things’. C u l t u r a l control may be a contentious issue for some – evidence of multinational imperi-alism where corporate culture is superimposed upon national cultures in subsidiary operations. Etowever, its proponents offer persuasive arguments as to its value as a management t o o l . ” ” The emphasis is on developing voluntary adherence to corporate behavioral norms and expecta-tions t h r o u g h a process of internalization of corporate values and beliefs.

The literature on corporate culture recognizes the role played by FfR activities in fostering corporate culture . For example, Alvesson and B e r g ‘ ” ” regard I T R M activities as i m p o r t a n t means of establishing corporate culture identity. The H R activities that build corporate culture include recruitment and selection practices, as firms hire or ‘buy’ people w h o appear to hold similar values. T r a i n i n g and development programs, reward sysreras and p r o m o t i o n are also activities that reinforce company value systems . “‘ Such reinforcement is considered to lead to more committed and productive employees w h o evince apptoptiiitc behaviot and thciefote teduce the need for f o r m a l control mechanisms. Placement of staff is another method . Some global firms have become even more systematic in their efforts to achieve control by w a y of shared corporate culture . As l E I R M shows, these efforts can become a central element in I H R M strategy.


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