Academic journal article Management International Review

Cultural and Bureaucratic Control in MNEs: The Role of Expatriate Performance Management

Academic journal article Management International Review

Cultural and Bureaucratic Control in MNEs: The Role of Expatriate Performance Management

Article excerpt

Introduction

Organizational control is an important component of the managerial function: it is responsible for ensuring that the organization's strategic goals are met and that deviations from standards are corrected for effective performance outcomes (Jaeger/Baliga 1985). For managers in multinational enterprises (MNEs), control is a complicated balancing act. On the one hand, close monitoring from the centre is required to ensure minimum levels of duplication, wastage and ineffective processes. On the other hand, a degree of autonomy is necessary at the subsidiary level to allow for local market flexibility and customer responsiveness. The MNE control function must therefore cope with the tensions inherent in the simultaneous need for global integration and local sensitivity in an increasingly diverse and complex international business environment. (Bartlett/Ghoshal 1987, Doz/Prahalad 1984). How to achieve the required 'control mix' (that is, the level of centralization along with appropriate control mechanisms) remains a perennial MNE challenge.

It would seem that, in practice, MNEs attempt to achieve an optimal mix, with bureaucratic (formal) control supported by cultural (informal) control (Pucik/Katz 1986). Some authors suggest that the way control is achieved in practice appears to be changing from a bias towards direct mechanisms to reliance on more informal methods, such as staff transfers(1) (see, for example, Martinez/Jarillo 1991, Roth 1995, Torbiorn 1994). Given recent emphasis on devolution of responsibility, cultural control becomes an important supporting mechanism (see Marschan/Welch/Welch 1996). As the trend towards indirect methods become more widespread, issues surrounding MNE control over behavior and outcomes need to be re-examined. Of particular concern is the feasibility of corporate culture as an MNE control mechanism, given its reliance on members' internalization of shared values and the notion of self control (see for example, Ghoshal/Bartlett 1995). As Welch and Welch (1997, p. 680) argue, "despite what overt behavioral displays and verbal utterances might indicate, people are bound to differ in the extent to which they internalize the company's values and are thereby committed to upholding them". Indeed, a review of extant literature reveals that aspects related to MNE cultural control, such as the use of expatriate assignments, still rest on untested assumptions (Nasif/Al-Daeaj/Ebrahimi/Thibodeaux 1991, Redding 1994).

Further, it would seem that performance management, integrated with other management policies and practices is an essential, complementary bureaucratic control mechanism in a strategy of cultural control (Evans 1992, Gregersen/Hite/Black 1996, Harvey 1997). There has been substantial research on individual and organizational control and on organizational commitment (for example, Child 1973, Mathieu/Zajac 1990, Mowday/Porter/Steers 1982, Palich/Hom/Griffeth 1995). However, little has been done to explore the way in which the interaction between individual and organizational policies and practices occurs, and the desired performance outcomes are achieved. Nor has the role of performance management been discussed as part of the process of cultural control. Yet, to restate Jaeger and Baliga (1985, p. 118), "control systems do not exist in 'isolation' in the organization. Rather, they are embedded in an overall organizational system which fits with the control system being used." Given the pivotal role played by the human resource function in the overall control process, there is a need for fit with the HRM system(2), specifically in terms of the performance management activity. As expatriate assignments are assumed to play a key role in MNE cultural control, one could expect that how their performance is managed would be an important factor in terms of MNE outcomes.

Performance management in MNEs is recognized as a significant challenge for researchers and practitioners. …

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