Shades of Gray: Organizing for International HR Management - Is there a "best" method, and if so what role does technology play in
guiding or facilitating this decision?"
Shades of Gray: Organizing for International HR Management
It seems like someone is always reorganizing. Hardly a month goes by at HRToolbox where we don’t hear from one of our clients or read in an article that a company is
centralizing the administration of international employees OR that it is now the responsibility of the regional headquarters to manage their own geographic areas OR that they’ve
decided that these tasks will now be performed at the local level. If this reorganization is the cure for the inefficiencies of international HR management, why are different
companies always moving in opposite directions on these decisions? Why do some individual companies oscillate among these models from year-to-year? Is there a "best" method
for organizing, and if so what role does technology play in guiding or facilitating this decision?
The answer, as with all complex questions, is “it depends". The choice of an organizational model for managing an international workforce is influenced by the culture of a
company and its leadership, its legacy systems and processes, its specific geographic reach, the type of business it conducts, and the need for control. Some specific examples
help illustrate this decision:
- A company that has
expanded into new geographic areas by opening new offices and staffing
them with executives from the headquarters’ country often favors a
centralized control structure that meshes well with leadership’s
objectives. When international expansion is achieved by purchasing an existing
successful local business, though, it may be more effective to allow it to
continue operating somewhat independently and integrate at the financial
and strategic levels.
- Investments in centralized
systems often lead companies to organize for central control to take
advantage of this legacy investment, while those with significant
capabilities on the local level usually manage their systems independently
and allow headquarters to pull the information together on an ad hoc
basis.
- Having offices in less-developed
locations may cause a company to lean towards centralized control, as
local talent and infrastructure may not be able to provide the level of
service necessary.
- A company with a
standardized product that must integrate with others is likely to want
strong headquarters guidance for it’s divisions, whereas one with
localized products produced specifically for that market may find the
local models more effective.
- A change at the top of a
company to a new executive who has had success at his former firm using a
different organizational model may decide that the new company will also
be successful operating in a similar manner.
Although often seen as an either/or decision, how to optimally manage an international workforce is best described along a continuum rather than as a black or white choice. At
the poles are the multinational and global models. The multinational model advocates a portfolio of mostly independent businesses organized at the local level. The key assets,
responsibilities, and decision-making are localized and significant autonomy and control is retained by these local organizations. The global model, in contrast, is highly centralized,
viewing the local entities as not much more than delivery "pipelines" for the headquarters company. Decision-making, responsibilities, and assets are centralized and specific
instructions are given to the local offices and are expected to be followed. These extremes are rarely seen in practice; instead, a hybrid is implemented that allows the local offices
to retain some autonomy while still receiving strong direction from a central leadership. At any given time, most companies do tend to adhere to one end of the continuum or the
other, so understanding the impact of these choices is very important. In recent years, there has been a rise in several organizational models that fall somewhere in the middle of
these two extremes. One popular option is the International model, where headquarters is relied on for those activities seen as core competencies of the company, while all other
periphery activities are managed at the local level. One of the newest ideas is that of a Transnational organization[1], where
dispersed regional offices that show an excellence for a specific function are thereby designated as the competency hub for the global firm and lead that aspect for all offices
around the world. Whatever choice a company makes, it must understand that both internal decisions and a dynamic environment make the optimal choice of a model fluid and
changing. For example, a company that always opened its own overseas offices may decide to purchase an existing firm, necessitating a move away from strict centralized
control to providing greater autonomy to the new business.
So what is the role of technology? As mentioned before, the legacy of systems and process choices can limit the options available for organizational design. A decision to go
with a centralized ERP system often necessitates a command-and-control organizational model to fit the confines of the systems’ data and interface constraints. Some companies
take advantage of a new system rollout as an "excuse" for an organizational redesign for which they otherwise would have had trouble gaining support without justifying the
investment in the enterprise system.
At HRToolbox, in contrast, we view technology as an enabler, rather than as a determinant. Our philosophy is that there are key business and customer-related reasons for the
strategic choices made by our clients. We view our solutions as enabling the achievement of those goals and objectives rather than guiding the decisions our clients must make due
to the constraints of our design and processes.
This philosophy is embedded within our solutions. Two of our four guiding pillars, Accessibility and Relevance, are based on this belief. Our Web-based application, powerful
security, workflow, and employee self-service functionality are the key components of our Accessibility pillar. They provide access to anyone with a browser and a Web
connection, while allowing our clients to determine the level of access granted to local offices and employees. Our flexible templates and custom report writer work together to
reinforce the commitment to our Relevance pillar, so that any level of the organization has access to the specific information needed to perform its role. This functionality is extended
through our commitment to flexibility, so that a transition to another organizational model will not require significant re-work within the HRToolbox system.
We know your company does not operate in a static environment, and we do not believe the choice of a specific global HR technology solution should commit you to a single
method of managing your workforce. Your decisions should be based on business and customer needs, and your technology should enable that decision and evolve as you
evolve, not constrain your options. Maybe the world would be easier if it was in black and white, but it isn’t – it is best viewed as shades of gray. HRToolbox is designed to be the
right choice for you in whatever shade your company currently resides.
For more information on our Pillars and how they are integral to the design of HRToolbox, please visit us at: www.hrtoolbox.com/intro/why_hrtoolbox_overview.html'
[1]
Christopher Bartlett and Sumantra Ghoshal, Managing Across Borders: The Transnational Solution, Second Edition, Harvard Business School Press: 1998.
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