Organization structure is the framework that allows an MNC to carry out its strategy for international involvement. Classical organization theories hold that structure determines strategy. Consequently, managers spend considerable amounts of time and organizational resources designing elaborate organizational structures and equally sophisticated organizational development systems aimed at instilling the organizational behavior that will allow the MNC to accomplish its stated objectives.
The term "organization" refers to three key concepts: (1) a system's ability to perform useful work, (2) the process of becoming organized, and (3) the end result of the organization process-the institution. In this chapter, the process of becoming organized was treated as a two-phase task. In phase A the organizational skeleton-the structure-is created. In phase B the organizational behavior is established and the desired degree of centralization or decentralization of decision making is determined.
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What does management want the company or unit to do? What internal and external resources are available to accomplish the above mandate? What must be done to transform the resources into finished products or services? Which resources will be contained in which units? What are the critical tasks that the organization must do well in order to survive and prosper (for example, high-quality manufacturing, sales, technological development)? What kinds of management decisions are crucial to the success of the enterprise? How often must they be made, and at what organizational level? In what ways do the company's structure, policies and regulations enhance or impede the pursuit of its strategy as well as the work environment of individuals and groups? How does work move through the organization? As it flows through, who initiates a piece of work? Who is the decision-maker? To what extent can work, information flows, coordination and control systems, and the like be standardized? To what degree should the firm attempt to specialize? How adaptable can and should the organization be to the external environment? To what extent should operating units be "self-contained," with their own complete line and staff operations? What degree of decentralization is best? How much accountability for results is given to the managers of each unit? Which executives should be close to headquarters rather than scattered about in various regions or countries? What formal and informal mechanisms should be created for the purpose of feedforward control? (Examples include budgets, forecasts, plans and projections.) What formal and informal mechanisms should be created for the purpose of feedback control? (Examples include written reports, periodic meetings with senior management and special audits.) How should managers be motivated to work toward common objectives? What reward systems-such as compensation, promotion and commendation-are appropriate? What are the strengths/weaknesses of the key managers and what are their career goals? How will each fit into a new organization? What are the CEO's personal interests [and] goals? Which functions does [this person] want to supervise directly? What are the estimated costs of implementing and living with a new structure? What specific organizational alternatives can be developed from the foregoing analyses? Which of these should be adopted? Why? |
| SOURCE: Business International Corporation, New Directions in Multinational Corporate Organization, pp. 154-1 55. Reprinted with permission. |
There is no question that an MNC's style of organization matters. What preoccupies academics and practitioners alike is the nature of the ideal organization structure. Business International, a well-known consulting company, made a ten-year study of organization structures. In its report on the results of this study, the company suggested that "the ways in which companies organize to achieve the international business objectives are fundamental to their success." The report offered some recommendations to corporate planners:
Emphasize planning, evaluation, control, and integration system rather than an organization structure. Over the past decade these kinds of systems have evolved to a greater extent than has organizational design.
To preserve the strengths of the worldwide product or worldwide regional frameworks while overcoming their respective weaknesses, use a matrix structure, which places equal managerial emphasis on product, geographic, and functional elements.
For a time it appeared that corporations were moving toward matrix overlay or even pure matrix forms of organization structure. The difficulties associated with the matrix format, however, are such that some companies have rejected it. Many experts have speculated on what to expect in the "post-matrix" future. The following are some possible scenarios:
- A return to the worldwide product format, with strong mechanisms to assure country/regional inputs
- The establishment of more vigorous management controls from headquarters, achieved structurally through the addition of a multidivisional group or sector level, the creation of an office of the president, and/ or the strengthening of certain headquarters functions such as finance and strategic planning
- An overall decentralization of international operations (the reverse of scenario two ), alo g with more emphasis on nonequity business options, such as licensing nd management service contracts
- The use of temporary, flexible mechanisms (such as committees, task forces, and career pathing) to supplement the firm's basic structure, in order to address specific organizational problems
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