In the era of global competition, the role of managers who are sent abroad for temporary assignments has become increasingly important especially for multinational companies (MNC). With more and more companies assuming office in foreign countries, US managers are expected to fly down to a new office in a different country (Holstein, 2004). As more and more organizations adopt a glocalization strategy, it has become ever more important to adopt proper strategy to adjust the managerial conduct in the foreign country. In the new country, the managers are expected to act differently, think differently, and most importantly adjust to a completely different culture (Song, 2002). The primary role of an expatriate manager can be conceived as that of a catalyst who secures the continuity of the MNC’s organizational structure and philosophy in the local unit while ensuring the fit between MNC practices and local demands. The extent to which an expatriate accomplishes this mission depends not only on the expatriate manager’s competencies, but also on the way in which expatriation is handled by the MNC. Given the increasing trend of globalization, it has become necessity to adopt strategies to implement a glocalization human resource strategy. In order to understand this, a thorough understanding of the problems with American expatriate managers and local managers is necessary.
American expatriate mangers had a very high rate of return in the early phases of globalization during the 1980s (Menedelhall & Oddou, 1985). In the initial stages, the problem that expatriate managers faced to adjust to the host culture’s social and business environment was costly in terms of management performance, productivity in the overseas operations, client relations, and operational efficiency (Menedelhall & Oddou, 1985). Further, American expatriate managers are costlier than their local counterparts’ in-terms of their salary (Song, 2002). For companies operating in foreign lands, sending American managers to manage operations, especially to the exotic Asian locations, is exceedingly difficult. Aculturization becomes a major hindrance to these organizations. So what strategy should these companies adopt? Should they transfer their culture to the foreign office or they should adopt their culture? Both the options have been tested and it has been found that hiring local managers is more profitable for the company. Further, the reluctance of the American managers to go to foreign land creates resistance to the process of globalization.
First, it is necessary to know why expatriate managers were transferred. Research has shown that there are three reasons why international transfer of managers occurs (Edstro¨m & Galbraith, 1977). The first is to fill positions, which mainly concerns the transfer of technical knowledge to developing countries, where qualified local nationals are not available. The second major motive is management development. The transfer gives the manager international experience and develops him or her for future important tasks in subsidiaries abroad or with the parent company. For the third reason for international transfers, the final goal is not individual development but organization development. In this case, international transfers are used as coordination and control strategy. This strategy consists of two elements: socialization of both expatriate and local managers into the corporate culture and the creation of a verbal information network that provides links between subsidiaries and headquarters.
A study of German literature has shown that there is a great acceptance of the trend of sending expatriate managers to foreign countries to manage overseas business (Harzing, 2001). Research has shown that all found German MNCs to use more expatriates in their subsidiaries than other European and American MNCs (Harzing, 2001). This clearly shows that the German management culture believes in international transfer and direct type of expatriate control rather than on the informal type of control or coordination as practiced by the other European countries or America. They adopt this transferring of organizational strategy of the head office to the host country in order to ensure a uniform company policy. Thus, the role of international transfers as a control mechanism has to be seen in the light of headquarters-subsidiary relationships in general. Control is seen as having one basic function: “to help en sure the proper behaviors of people in the organization” (Merchant, 1985, p. 4). In MNCs this can be interpreted as the way headquarters make sure that subsidiaries behave in a way that is in concordance with headquarters polices. Control mechanisms are the various ways that headquarters has to ensure that this is the case. Further, expatriate transfers help in knowledge transfer and management development (Harzing, 2001). Expatriates are used to effectuate personal/cultural control, in both a direct (explicit) and an indirect (implicit) way. They can serve to replace or complement HQ centralization of decision-making and direct surveillance of subsidiaries by headquarters managers. This is the kind of control found in many of the German studies. But this case of international transfer is not always successful (Menedelhall & Oddou, 1985) and not even accepted by many American managers (Holstein, 2004). This leads to the other model which encourages globalization of culture of the business and organization.
Centralization of decision-making at headquarters and personal surveillance by headquarters managers if foreign office is an available option (Harzing, 2001). However, both alternatives would appear to be infeasible in large, diversified companies. International training program and international meetings and task forces and, however, might very well be used as a less costly substitute for the expatriate transfer. Training is recognized as an important means for socialization (Menedelhall & Oddou, 1985). International task forces or project groups of employees of different backgrounds and nationalities can be constructed to work on a company problem. The Philips Octagon program, in which a team of eight young high-potential managers of different backgrounds and nationalities are brought together to work on an actual company problem, is an excellent example (Harzing, 2001). Of course, this intensive co-operation also gives a very strong impetus to informal network building. Then there is the option of hiring local managers. In countries like India and China, this has become a norm (Song, 2002).
Further, structure of the MNC has an influence on its international operations, the headquarters’ value orientation, and organizational life-cycle affect the organization’s international human resource management practices and policies (Aycan, 1997). In the expatriation context, these factors are expected to determine not only the strategic goal of the assignment but also the extent to which cultural-sensitivity training is provided and the expatriate’s assignment is treated as a career-development opportunity.
On the basis of its structure, value orientation, and stage in the organizational lifecycle, an MNC decides how much control should be exerted on the local unit and how much sensitivity to the local environment is needed (Aycan, 1997). For example, an MNC requires the local unit to mirror the headquarters with minimal autonomy and high centralization if their structure of international operation is based on an international division design, if headquarters’ value orientation is towards ‘ethnocentricism’ (Menedelhall & Oddou, 1985; Milliman, von Glinow, & Nathan, 1991), and/or the organizational life-cycle is at the first stage of ‘organizational initiation’. Consequently, the expatriate manager is expected to control the local operation and transfer the company culture and policies overseas. Because demands of the local socio-cultural, political, legal, and economic environment are paid little attention to by these companies, cultural-sensitivity training is expected to be minimally emphasized in the preparation of the expatriate. Inadequate cultural training leads to more adjustment problems upon arrival to the new culture. Similarly, the expatriate’s assignment is not likely to be treated as a part of his/her long-term career planning by such organizations which, in turn, decreases the expatriate’s performance, satisfaction, and intent to stay (Aycan, 1997; Harzing, 2001; Milliman, von Glinow, & Nathan, 1991).
In contrast, if the international structure is more towards a ‘multinational design’ with a ‘polycentric’ value orientation, and/or if the company is at the ‘strategic integration’ stage, sensitivity to local demands is increased and each local unit is given autonomy within a decentralized operation (Aycan, 1997). In this context, the mission of the expatriate is mainly to provide support, training and developmental opportunities for local-unit employees who dominate the operation with optimum sensitivity to local market needs. A true integration and co-operation with the local work-force is expected from the expatriate. Therefore, cultural sensitivity training is recognized as an integral part of the preparation phase. Milliman et al. (1991) assert that such organizations are also more concerned with expatriates’ long-term career issues and cross-cultural training needs which, eventually, will lead to increased effectiveness and commitment.
The above discussion shows that globalization has to be effectively managed in order to attain global prominence. There are need for both establishing the culture of the organization in the foreign office along with imbibing some of the local cultures. This is necessary to provide a proper blend of the organization in the local office. This is primarily because host nations provide the major pool of talent. So acculturization of the organization is necessary. So the emergence of international managers who are tolerant of the local language and social and business culture is a necessity. So all managers, whether they are expatriate or local managers need to go through an acculturization process.
Works Cited
Aycan, Z. (1997). Expatriate adjustment as a multifaceted phenomenon: individual and organizational level predictors. The International Journal of Human Resource Management 8(4), 434-457.
Edstro¨m, A., & Galbraith, J. R. (1977). Transfer of managers as a coordination and control strategy in multinational organizations. Administrative Science Quarterly 22, 248–263.
Harzing, A.-W. (2001). Of Bears, Bumble-Bees, and Spiders: The Role of Expatriates in Controlling Foreign Subsidiaries. Journal of World Business 36(4) , 366–379.
Holstein, W. J. (2004). Making the Executive Suite A Mirror of Global Markets. New York Times (Late Edition East Coast) , pp. 3-8.
Menedelhall, M., & Oddou, G. (1985). The Dimensions of Expatriate Acculturization: A Review. Academy of Mnagaement Review 10(1) , 39-47.
Merchant, K. A. (1985). Control in business organizations. Cambridge, MA: Balinger.
Milliman, J., von Glinow, M., & Nathan, M. (1991). Organizational Life Cycle and Strategic International Human Resource Management in Multinational Companies: Implications for Congruence Theory. Academy of Management Review 16(2) , 318–39.
Song, J. (2002). Transcending borders. Malaysian Business (Kuala Lumpur), p. 51.