Effectiveness in the Global Organization - Essay Example

Effectiveness in the global organisation Introduction Global organisations have been emerging at a fast pace, owing to the benefits such as increased business profits, as well as challenges such as increasing competition, brought by globalization in social, political, business sectors. Daniel (2004) refers to globalization as one of the most emotionally charged terms in international business (p.3). Organisations have embraced globalization to their advantage and have adopted various mechanisms to establish themselves globally. Definition of management and its functions in general has undergone a paradigm shift due to globalization. This study evaluates fundamental functions and concepts of management and the challenges that global organisations face with respect to management function. Leadership as the essence of management has defined or determined the fate of many organisations, at local and global levels. However, leadership at global levels is greatly influenced by factors such as behaviour, perception, attitudes, and knowledge impacted by sociocultural aspects. An awareness of challenges to leadership through ground-breaking principles proposed by Hofstede and Trompenaars is necessary to understand how leadership can contribute to the success of global organisations. 2.1 Management and its functions Management has been defined in many ways by various people. Earlier, management was defined as ‘getting things done through other people’; currently, management is referred to as ‘working with and through other people to accomplish the objectives of both the organisation and its members’ (Montana & Charnov, 2000; p.2). Evolution of this concept is traced back to Frederick Taylor’s scientific management, also known as Taylorism; later refined by Henry Ford, known as Fordism. However, the foundation for management principles is said to have been laid by Henry Fayol in the form of five elements or functions of management: planning, organising, commanding, coordinating and controlling. Fayol also developed 14 management principles from these functions (see appendix 2.1). These management practices were framed to direct workers to follow specific steps that will help in achieving the larger organisational goal, driven through managers (Lucey, 2004). 2.2.1 Globalization Perspective The process of trans-migration of humans from one place to another for food, eventually trade and business solidified attributed to the huge monetary gains; this process further intensified with increasing needs, development of means of transportation, technology, communication; further reinforced by increasing population, demand for goods and services, increasing health issues, international crime and justice. Friedman describes globalization as the overarching international system shaping the domestic politics and foreign relations of virtually every country driven by free capitalism. In the process, it permeates into six dimensions of a nation, namely, politics, culture, technology, finance and trade, national security, and ecology; eventually leading to disappearance of boundaries between these dimensions between different nations (Wells, 2004; p.181). From a business perspective, all kinds of organisations have ventured into multiple markets outside native ones; however, based on the extent and functionality, these organisations have been classified as international, multinational, global and transnational organisations. To name a few, Coca-Cola, Sony, Nokia, Mercedes, Nestle etc have established their global brand value through enhanced public awareness and improved information access. Other business giants include those in electronic goods and automobile manufacturing, food and beverage industries, textile industries, sports accessories etc. Like, for example, information and technology services giants have been set up in various countries all over the world; back-end operations of giant banks and investment companies are now being carried out from other locations; banks have gone multinational; administrative work of giant companies have also been moved to other countries. These actions and initiatives taken up by growing companies have provided distinct advantages over a short span of time, thereby helping the organisations’ growth and development. In addition to increased profits and reduced costs, multinationals have gained access to unexplored markets; explored opportunities to create new product lines; and have adopted newer ways of doing business and production. 2.3 Challenges for management in global organisations The present study focuses on issues/challenges faced by global organisations, which Bartlett and Goshal (1989) identify as those that function through a centralized hub where most assets and decisions are centralized (cited Parker, 2005). Chowdhury (2003; p.27) refers to Nokia as one of the most successful global organisations and is known for developing global leaders, stating, ‘Nokia is known for its ability to turn from a provincial organisation with 60% of its business in Finland 10 years ago into a truly global organisation with only 4% of its activity in Finland; the organisation is flat and highly decentralized, with R&D centres in Japan, the U.K., and Finland, manufacturing in China and Texas, and design centre in California.’ Most of the global organisations invest significant time and effort in strategic planning and management processes; however, researchers contend that these strategies often fail due to their impracticality or inapplicability in certain situations. Lorange and Probst (1990) have argued that although global organisations adopt a tailor-made approach for strategic planning, yet they face challenges such as changing formality of organisation’s strategic planning process; changing executive roles in the strategic planning process; changing behavioural aspects of practicing strategic planning; and changing integrative requirements facing the strategic planning process. Global organisations adopt diverse processes, policies, and technologies besides few standardized policies; however, these firms combine mission, vision, education and training with an emphasis on processes of global corporate culture. These similarities are sufficient to create a global organisational culture (Parker, 2005). From a coordination perspective, Karimi and Konsynski (2003) argue that firms’ competitiveness is associated with coordination of activities within the industry’s worldwide organisational systems. Coordination involves the management of exchange of information, goods, expertise, technology and finances in different business functions such as logistics, order fulfillment, financial etc. The major requisite for coordination in global industry is development and management of a strong IT architecture. According to Bartlett (1988), global value chain activities are influenced by diversity in individual country markets and also coordination among activities in various countries. Diversity in individual markets requires distinctive strategies according to the national preferences, making regional or national coordination more important for multinationals to survive the competition. Strategic control of resources such as capital, technology and management by the parent organisation becomes extremely difficult; effective control demands new forms of administrative control mechanisms. Even changing environmental demands pose serious challenges to coordination function for global organisations in terms of decision making processes and organisational structures that may work in one country and not in others. With a rich experience in manufacturing and IT industry, Sussman (2006) suggests that new product and process development cannot be done in isolation, but with much broader team that extends beyond boundaries of the company (see appendix 2.2). Global organisations can be a rich source of new product/process innovations, and managers along with senior executive team can use the opportunity of operating in global environment to benefit the organisation’s overall competitiveness. New ideas and innovations from subsidiaries or other associated companies may be obtained for all management functions. Further, Lorange and Pbost (1990) suggest that MNCs may adopt specific strategic planning and control mechanisms to suit the environmental/economic influences on their businesses; like, for example, financial interventions that can intensify sales and marketing activities and/or strategic control through measurement of short-term and long-term performance and gains can help the organisation to achieve its goals in a global context. Secondly, behavioural interventions in strategic planning include facilitation of learning to assess effectiveness of strategies; look for warning signs; and learning through interaction. In addition, organisations must consciously avoid falling into one-sided approach or practice and embrace best practices. Thirdly, human resources can be banked upon as an effective way of global strategic planning through flexible management approaches, encouragement of creativity and innovation, and posses an ability to transfer knowledge, data as well as strategic insight. Most importantly, the strategic level plans/measures have to be integrated across different hierarchical levels including functional, business, corporate, industry, society etc. For example, promotion of learning has to be at all levels, and practices that facilitate learning such as training, workshops, leadership grooming etc have to be a part of corporate strategies. 3. Leadership Leadership and management are terms strongly interlinked and better understood in relation with each other. Leadership is not a phenomenon or a concept that can be precisely defined or theorized because, not only leadership has been explained and defined in different ways, the way leaders have been emerging in different situations has also been changing continuously with time. In contemporary times, we tend to understand and relate to ‘leadership’ in relation to management of people for attaining specific goals. 3.1 Role of leadership in global organisations Leadership forms the essence of all organisational functions as leaders drive organisational culture, performance and growth. Chowdhury (2003) identified a set of qualities that global leaders must possess in order to excel in global management (see appendix 3.1). Specific to the contemporary global organisations’ context, management philosophers advocate for global leadership competencies. However, competencies and skills possessed by existing leaders are greatly influenced by the region, culture and society. Beechler and Baltzley (2008; p.418) define global leadership as the process of influencing individuals, groups and organisations (inside and outside the boundaries of the global organisation) representing diverse cultural/political/institutional systems to contribute toward the achievement of global organisation’s goals. They have outlined a comprehensive set of qualities that make global leaders (see appendix 3.2). Dominated by information technology, numerous leaders have emerged in the past few decades and have successfully captured software and IT markets all over the world. Most of these renown leaders such as Larry Ellison of Oracle Corporation, Azim Premji of Wipro Technologies, Paul Otellini of Intel Corporation, and Narayana Murthy of Infosys Technologies have exemplified qualities of global leaders. For example, Narayana Murthy, the Chairman and co-founder of Infosys Technologies, is also a member of board of directors for many other manufacturing, banking and financial industries in different countries including Singapore, Japan, and India. He is also one of the chief consulting members of the Government body in India. In addition, he has also contributed significantly as a part of advisory boards in many management institutions including Harvard Business School, the Yale University, University of Tokyo’s President’s Council, Asian British Telecommunications plc, United Nation’s Foundation, Indian School of Business, and many more. He has also been conferred upon with many laurels such as one of the most admired global leaders, the most admired CEO for five consecutive years, Businessmen of the Year etc. Subsequent to this success with Infosys Technologies Limited, right from its inception to its expansion to more than 20 countries in the world, these titles and laurels provide substantial proof of his leadership abilities in the global context. He is known for his ethics, values and leadership style that includes people who possess passion towards relationships, knowledge, awareness, commitment to work and society; energy towards motivating others to achieve the goals; and aspiration to grow. His fundamental principle of leadership lies in bringing people together through empowerment of authority and accountability. Achieving success through inclusion and shared leadership requires leaders to face a multitude of challenges with respect to human relationships, strategy implementation, and human resource management. 3.2 Leadership Challenges in global organisations Usually, global organisations are comprised of employees from different nations, cultures and backgrounds, and hence cannot expect formally appointed leaders/managers to have qualities of global leadership. To understand impact of culture on management styles, Hofstede’s (1980) work on the relationship between national culture and organisational behaviour has provided ground-setting principles, in the form of six dimensions, to understand impact of culture on management. As stated by Hofstede (1980; p.42), ‘many of the differences in employee motivation, management styles, and organisational structures of companies throughout the world can be traced to differences in the collective mental programming of people in different national cultures.’ Hofstede’s power distance dimension explains the extent to which authoritative members in management and their subordinates are distanced, with the distance accepted from bottom to top. This distance is high in Latin, Asian and African countries and low in Germanic and Anglo-Saxon nations. Prevalence of hierarchical organisational structure in Asian and African organisations can be attributed to this dimension. Considering the individualistic-collectivistic dimension, organisational structuring based on teams and groups common in the Western and other developed countries can be explained. At the same time, management in these countries focuses more on motivation and team building than on short-term managerial functions and establishment of control systems as seen in most of the Eastern nations’ management styles (Connell, Cross & Parry, 2008). Applying Trompenaars’ findings to human resources management perspective, Universalist cultures emphasize rules, laws and generalizations whereas particularistic cultures consider extent of relationships. For instance, Universalist nations such as Germany when negotiating with particularistic nations such as China or India will have to rely on the depth of their relationship based on trust; signing mere contracts would mean nothing more than documentation. On the convergence-divergence perspective, studies in Asia-Pacific region show ‘soft convergence’ due to globalization. Evidences of implementation of global standardized HRM practices and policies with local adjustments due to pressures of globalization are also seen (Mead, 1998). Moreover, leaders also face challenges from other aspects such as characteristics of subordinates and nature of tasks; organisational policies may influence leaders’ capabilities and inhibit the leaders from making certain decisions or taking specific actions. Managers face such issues more often in cross-cultural and cross-national organisations (Hofstede, 2007). Secondly, physical distance between leaders and subordinates may impact the leaders’ efforts in bringing changes to performance as well as people’s way of thinking and working in a global perspective. Thirdly, nature of the organisational structure, for example, in bureaucratic and paternalistic organisations, employees at lower levels have least or no opportunity to propose changes or take initiatives; also career progression happens on a seniority basis. Also, organisational culture that does not promote doing the right thing will not help leaders to emerge, because they fall into trap between management and their self-concept that may be contradicting in nature. Decision making in global organisations that have native board members may not be effective because global organisations require decisions to be based on diverse perspectives. However, most of the organisations stick to selection of natives. Goshal and Bartlett (1995) emphasized that promotion of leadership in global organisations requires an organisational culture that emphasizes people’s abilities; an organisational structure that reduces reliance on formal controls and rules and lesser bureaucracy; and encouragement of creativity and innovation (cited by Parker, 2005). Under the influence of national culture, achievement of these management aspects is a challenge. Moreover, possibilities of strategy mismatch in global organisations are unavoidable if leaders fail to convey a clear vision or sense of organisational purpose. Parker (2005) quotes the example of Allianz’s integration with Dresdner Bank to achieve its vision of an integrated banking and insurance company, which failed when leadership failed to integrate cultural aspects of both these companies. 4. Conclusions and learning In conclusion, global organisations require a distinctive approach to management and leadership. The contemporary trend of globalization is further strengthening this outlook towards business performance. For global organisations to sustain, strategic management and approaches have to be aligned to management functions in such a way that they can meet the global challenges. For this, a thorough awareness as well as anticipation or foresight of market behaviour is of utmost importance. Strategic decisions taken by leaders who possess a strong global outlook can be successful. Hence, global organisations have to focus on developing leaders who, in addition to the general leadership competencies, posses qualities such as flexibility, cultural awareness, relational skills, travelling ability and inclination and a never-ending zeal for knowledge building. References Beechler, S and Baltzley, D. 2008. Identifying and developing Global Leaders. In Storey, J’s (ed.) The Routledge companion to strategic human resource management. OX: Taylor & Francis. (Ch. 24, p.410-432). Chowdhury, S. 2003. Organisation 21C: someday all organisations will lead this way. NJ: FT Press. (Ch.2.pp:20-32). Connell, J, Cross, B & Parry, K. 2008. Leadership in the 21st Century, where is it leading us? International Journal of Organisational Behaviour. 5(2). pp 139-149. Daniel, S.J. (2004). Challenges of globalization. Management International Review, Gabler Verlag. Hofstede, G. 1980. Motivaton, Leadership, and Organisation: Do American Theories Apply Abroad? Organisatonal Dynamics. 9(1) 43-63. Hofstede, G and Fink, G. (2007) ‘Culture: organisations, personalities and nations. Gerhard Fink interviews Geert Hofstede, European Journal International Management, Vol 1, No 1/2, pp 14-22. Karimi, J and Konsynski, B.R. (2003). The Information Technology and Management Infrastructrue Strategy. In Galliers, R and Leidner, D.E’s Strategic information management: challenges and strategies in managing information systems. Oxford: Butterworth-Heinemann. (Ch. 4; pp.89-112). Lucey, T. (2004). Management Information Systems. 9th ed. London: Cengage Learning EMEA Lorange, P and Probst, G. (1990). Effective strategic planning process in the multinational corporation. In Bartlett, C.A Doz, Y,L and Hedlund, G’s Managing the global firm. London: Routledge. (Ch.6; pp:144-163) Mead, R. 1998. International management: cross-cultural dimensions. (2nd Ed). U.K: Wiley- Blackwell Montana, P.J and Charnov, B.H. (2000). Management. 3rd ed. New York: Barrons Educational Series. Parker, B. (2005). Introduction to globalization and business: relationships and responsibilities. 2nd ed. London: SAGE. (Ch.4.pp:86-115) Sussman, R.A. (2006). Innovate Or Perish! : Seven-step Innovation Process to Meet the Challenges of Globalization. Toronto: Productive Publications. Wells, G.J. (2004). The Issue of Globalization: an overview. In Westerfield, R.E and Abbink, J’s (Ed. pp:179-202) Current issues in globalization. New York: Nova Publishers. Appendix 2.1 Fayol’s 14 Management Principles. Source adopted from : Lucey (2004;p.67) Management Information Systems Appendix 2.2 Adopted from Sussman (2006, p.6). Innovate Or Perish! : Seven-step Innovation Process to Meet the Challenges of Globalization. Appendix 3.1 Qualities of global leader: adopted from Chowdhury (2003; p.25). Organisation 21C: someday all organisations will lead this way Appendix 3.2 Source adopted from Beechler & Baltzley. (2008; p.421). Identifying and developing Global Leaders. In Storey, J’s (ed.) The Routledge companion to strategic human resource management. Read More