HRM structures and subsidiary discretion in foreign multinationals in the UK

Abstract

This article uses a large-scale representative survey to examine a key aspect of control in multinational companies (MNCs): the extent of central influence over human resource (HR) policy formation in subsidiaries. This is a crucial aspect of behaviour, relevant for example for the cross-border diffusion of policies and practices and for the institutional distinctiveness of practice within a given host environment. The article assesses how far policy is determined by corporate headquarters or some other higher-level organizational structure. Its novelty lies primarily in its exploration of the influence of the structure of the HR management (HRM) function on subsidiary discretion. It finds, first, that the degree of central control is influenced for different HR issues by nationality of ownership and by international product/service standardization. Second, there is some variability in the antecedents associated with discretion on different HR issues. Finally, aspects of the structure of the HRM function significantly affect discretion, notably the networking of HR managers across borders and the direct reporting relationships within the function between the UK and higher organizational levels.

Keywords:

• headquarters control
• international HRM
• multinational companies
• subsidiary autonomy

Acknowledgements

This article draws on data from a large-scale survey on ‘Employment Practices in Multinationals in Organizational Context’. The study was funded by the UK Economic and Social Research Council (award number RES-000-23-0305). The authors acknowledge the invaluable help with data analysis from Duncan Adam and Michael Meyer, the research assistants on the project. Useful comments were received from participants in the 2007 IIRA European Congress, at which an earlier version of this article was presented. We are very grateful to an anonymous IJHRM reviewer for detailed and constructive comments on a previous draft.

Notes

 1. Rosenzweig and Nohria (1994) make the important point that degree of similarity to the local practice does not equate straightforwardly to subsidiary discretion. Thus implications for control must be drawn with caution. For example, in Japanese firms, subsidiary discretion is likely to be high, but similarity of practices to parent company practices is also high (pp. 247–248).

 2. This is part of a wider project, with a consortium of partners in different countries, examining MNC behaviour in a variety of host business systems.

 3. Discretion data were collected for 17 variables in all. Seven of these were excluded on the grounds of relatively low number of responses, or because they were not centrally related to HR/IR (e.g. ‘organizational learning’).

 4. The contrast between US and CME companies is sharpened once other countries are filtered out of the analysis (N = 149). The β value is 0.244, significant at p < 0.01 level). Overall adjusted R ² (on the subset of US and CME11 companies) is 0.35.

 5. The creation of a large integrated data set composed of several parallel national surveys using comparable instruments should allow such further exploration of the interaction of nationality and HR variables.

 6. Unsurprisingly, policies relating issues of performance, and the management of managerial staff, have lower discretion than issues of employee involvement or representation. For example, the means for succession planning and for managerial variable pay are 3.1 and 3.2, respectively; the means for union recognition and for employee involvement in decision making are 4.2 and 4.5, respectively.