MGMT3025 Chap.3 The Organisational Context of IHRM
The Organisational Context of IHRM
Where HR decisions are made depends on how the multinational is organised. This chapter separates organisational structure from organisational design and sets out the four factors that shape structure, then the core tension between standardising practice worldwide and localising it country by country.
It follows the usual path to global structure, from an export department and sales subsidiary through an international division and global product or area divisions to the global matrix, with the HR task each one creates and why the matrix is so hard to run.
It places international, multidomestic, global and transnational strategies on the two pressures of integration and responsiveness, and covers Farndale's four IHRM structures. The chapter ends with networked firms, virtual teams, and the people side of cross-border mergers, acquisitions, joint ventures and alliances, including why so many of these deals fall short and the four HR measures CRANET links to merger success.
Each topic is paired with the HR consequence a case answer should state.
What this chapter covers
- 01
Organisational structure versus organisational design
- 02
Standardisation against localisation in HR policy
- 03
The path from export department to global matrix
- 04
International, multidomestic, global and transnational strategies
- 05
Farndale's four IHRM structures and subsidiary dependence
- 06
Networks, power and best practice for virtual teams
- 07
HR challenges in cross-border mergers, joint ventures and alliances
Worked example · free
Which structure should a seed company adopt after its international division?
- +1Place the firm: export department, then sales subsidiary, then international division, the first three structures on the path.
- +1Read the trigger: several technically distinct product lines is the condition the lecture gives for a global product division.
- +1Recommend a global product division, giving each line worldwide responsibility for production, marketing and international sales.
- +1HR consequence: policies may now differ by division inside one country, so HR needs rules on which practices stay common.
- +1Note the alternative: if regional market differences became dominant instead, an area division or later a matrix would fit better.
Key terms
- Organisational design
- The process managers use to arrange an organisation's components, as distinct from the resulting formal structure.
- Transnational strategy
- An approach that seeks global efficiency and local adaptation at the same time, with knowledge flowing in several directions.
- Global matrix
- A structure in which each manager answers to a product-line boss and a regional boss at the same time.
- International joint venture
- A legally separate company jointly owned and controlled by two or more independent parents, at least one based outside its country.
- Integrating mechanisms
- The means by which an organisation coordinates its sub-units once it has divided into parts.
The Organisational Context of IHRM FAQ
What is the difference between standardisation and localisation?
Standardisation applies policies designed at headquarters in every location, which supports control, integration and economies of scale. Localisation adapts policies to each country's laws, culture and markets, which supports responsiveness.
In HR terms the choice shows up in centralised or decentralised decisions, common or country-specific KPIs, a global pay framework or local market rates, and standard or localised training.
Why is a global matrix structure so difficult to manage?
Managers report to both a product line and a region, so dual reporting breeds conflict and confusion. Many communication channels create information logjams, overlapping responsibilities produce turf battles, and distance, language and time zones make conflict harder to resolve.
Matrix managers need general business knowledge, strong interpersonal skills, comfort with unclear authority and training in presenting ideas to groups.
What are Farndale's four IHRM structures?
From a study of 16 multinationals in 19 countries, Farndale and colleagues sorted HR structures by how dependent subsidiaries are on headquarters. Standardisation has corporate HR set policy with no subsidiary input; localisation lets practice vary at local managers' discretion; an independent structure sets practice in each subsidiary; and a highly independent one has no shared IHRM strategy at all.
Why do cross-border mergers and acquisitions often fail on the people side?
Employee responses range from support to resistance depending on how similar the management styles are, how much efficiency the deal promises and how far integration must go. Birkinshaw and colleagues found that as many as one in five top executives commonly leave in the first year, and personnel issues are often neglected or delayed. CRANET names four HR measures that improve success.
What HR problems do international joint ventures create?
HR must manage relations at the interface between the venture and its parents, cope with dualities when each partner follows different rules, develop practices suited to the venture itself, and recruit, develop and retain its own staff. Many failures trace to issues within HR's reach, such as poor partner selection, unclear or conflicting goals and inexperienced negotiating teams.
Exam move
Draw the path to global structure from memory, and under each box write the HR task it creates and its typical risk; that single diagram answers most structure questions. Next learn the four strategies as a two-by-two grid on integration and responsiveness pressure, and practise placing an invented firm from a few market facts, then stating the HR consequence.
Keep a separate page for cross-border combinations, listing for mergers, joint ventures and alliances the definition, why firms choose it and two HR challenges. Quiz items in this week test precise terms, so learn the definitions word perfect in your own phrasing. Finally, write one paragraph explaining why the matrix is hard to run, since it links structure, conflict and the skills HR must develop in managers.
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