Inside the Organizational Mind Stakeholders Strategies and Decision-making

Inside the Organizational Mind: Stakeholders, Strategies, and Decision-making Chapter 5

There are no universal solutions to organization and management problems. . Organizations are symbolic entities; they function according to implicit models in the minds of their members, and these are culturally determined. -- Geert Hofstede Maastricht University, The Netherlands (p. 126) 2

Globalization does not mean imposing homogeneous solutions in a pluralistic world. It means having a global vision and strategy, but it also means cultivating roots and individual identities. -- Gucharan Das Former CEO, Procter & Gamble-India (p. 126) 3

Opening question What is the relationship between strategy, structure, and organizational decision-making across national or regional boundaries? And why should global managers understand such relationships? 4

Consider: Strategy and structure at Wipro and Intel Both Wipro and Intel are successful technology firms, but how do they differ in their global approaches to strategy, structure, and people management? (pp. 127 -128) 5

Topic for today: Inside the organizational mind • • Stakeholders and strategic choice The strategy-structure nexus Organizational decision-making Decision strategies across cultures 6

The strategic management cycle • Cultural milieu • Stakeholders’ objectives • Geographic challenges Corporate mission and core values Corporate strategies and goals Management practices • Economic and financial conditions • Market opportunities and constraints Organization structure and processes • Management education, experience, and philosophy • Legal-political constraints • Resource availability (e. g. , HR, technology) (p. 130) 7

Culture and stakeholder power: Centralized vs. distributed stakeholder models Centralized stakeholder model (Narrow group of key stakeholders) Distributed stakeholder model (Broad group of key stakeholders) • Principal mission and goals: (example) • Profit or ROI • Customer satisfaction • Avoid legal or ethical challenges • Principal mission and goals: (example) • Profit or ROI • Customer satisfaction • Ethical and legal behavior • Social responsibility • Sustainable growth and development (p. 131) 8

Consider: Volkswagen 1. How did VW’s various stakeholders influence how the firm sought to improve its competitive position in the marketplace? 2. Would you see this same approach in the UK, US, or Japan? 3. In today’s highly competitive global environment, is it still realistic to seek the twin goals of being an sales leader while maintaining a “workers’ paradise” for employees? Why or why not? (p. 131) 9

Culture, business, and institutional support: Examples from Japan and the US Japan • USA • Culture: Largely individualistic, mastery-oriented, and rule-based. • Culture: Largely collectivistic, harmony-oriented, and relationship-based. Government: Adversarial business -government relations, including extensive government regulations, prohibitions against “noncompetitive” behavior, and less public financial support. • Government: Cooperative business-government relations, including joint industrial planning, shared R&D, and public investment capital. • Laws: Moderate legal constraints and low levels of litigation. • Laws: Extensive legal constraints and high levels of litigation. • Investments: Long-term public and private dual investment; stockholders expect long-term growth and market share. • Investments: Short-term private investment; stockholders expect short-term profits or increased equity. (p. 133) 10

Strategy-structure nexus: Culture and structural determinism Cultural environment (e. g. , USA) Employees largely considered a variable cost of production or services; employees often marginal stakeholders; social and legal leeway to hire, fire, and transfer employees at will to achieve corporate objectives. • Strategic determinism: • Strategy: Assess global environment and opportunities and develop new or revised corporate strategy to achieve objectives. • Structure: Developing corporate staffing plan that supports new or revised strategy, including new hires, transfers, and terminations where appropriate. • Structural determinism: Cultural environment (e. g. , • Structure: Assess current employee resources in terms Germany) of their abilities and skills; recognize limitations placed Employees largely considered a fixed on possible HR changes by stakeholders. cost of production or services; • Strategy: Develop corporate strategy that is consistent employees key stakeholders; with and supported by available employee resources; significant social and legal constraints reorganize largely existing resources, where possible. on HR policies. 11

Example: Management strategies of German Mittelstand firms 1. Focus on high-end markets where quality or innovation can command high price. 2. Manufacture superior products using advanced technologies. 3. Hire and train best workers, not cheapest. 4. Use extensive employee involvement. 5. Take long-term perspective to market development. (p. 136) 12

Consider: Germany’s Mittelstand firms 1. Why has this model been so successful for German enterprise? 2. In view of recent and significant changes in global competitive dynamics, what is the future of Germany’s Mittelstand firms? 13

Cultural influences on participation in decision making Culture 1: Manager’s normative beliefs about power distribution and social inclusion (e. g. , belief in hierarchies) Culturally compatible decision-making style (e. g. , preference for topdown control over decisions) Manager’s decision-making style (e. g. , use of autocratic decision-making) Other influences on decision-making style (e. g. , managerial and employee preparedness and experience in decision-making; mutual trust between parties; legal or contractual requirements; personal and situational differences; realities on the ground) Culture 2: Employees’ normative beliefs about power distribution and social inclusion (e. g. , belief in egalitarianism) Culturally compatible decision-making style (e. g. , preference for employee involvement in key decisions) Employees’ response (e. g. , resistance to autocratic decisionmaking; lack of employee buy-in; push for increased participation) (p. 139) 14

Participation and decision strategies Centralized decisionmaking Consultative decisionmaking Autocratic and exclusive Collaborative decisionmaking Participative and inclusive (p. 140) 15

Centralized decision-making (common in Australia, Canada, UK, USA) Problem identification (slow) • Often slow problem identification by supervisors or management, largely through production control system; notification up the line. Problem analysis and decision (rapid) • Rapid analysis and discussion of problem by management. • Announcement of decision to rank-and-file employees. Decision implementation (slow) • Slow acceptance and implementation by rank-and-file employees due to lack of involvement in decision process. (p. 141) 16

Centralized decision-making (common in China and overseas Chinese) Problem identification (rapid) • Rapid identification of problem by supervisors or ownermanagers, largely through production control systems; immediate knowledge up the line. Problem analysis and decision (rapid) • Rapid analysis and discussion of problem by ownermanagers in consultation with extended family or guanxi partners. • Rapid final decision. Decision implementation (rapid) • Rapid acceptance and implementation of decision by rank-and-file employees due to combination of loyalty and pressures for compliance. (p. 142) 17

Consider: Decision-making at General Motors 1. Why was GM’s CEO allowed make his decision about executive reorganization (and compensation) largely without input from other key organizational stakeholders? 2. In your view, is the GM example the exception or the norm for how decisions are made in U. S. corporations? 3. If decision-making in the U. S. and China both tend to be autocratic in nature, what is the difference between the ways in which they are implemented? (p. 141) 18

Consultative decision-making (common in Japan) Nemawashi (slow) Formal decision (rapid) Ringi-sho (slow) • Problem identified by supervisors or workers. • Lower-level workers work together to solve problems and reach informal consensus. • Supervisors meet informally to discuss and modify proposal. • Departmental consensus reached on plan of action. Decision implementati on (rapid) • When document makes it to top • Slow and formal written proposal management it is likely to be approved rapidly. drafted and passed up the chain for approval or rejection. • Relatively rapid implementation given widespread buy-in. • (p. 143) 19

Consider: Decision-making at Toshiba 1. How was the decision process at Toshiba different from the one at General Motors? 2. How was it different from typical decisionmaking patterns found in Chinese firms? 3. Would the use of concepts like nemawashi or ringi-sho lead to better decision-making in Western countries? Why or why not? (p. 144) 20

Collaborative decision-making (common in Germany, Netherlands, Sweden) Problem identification (moderate) Problem analysis, negotiations, and formal decision (moderate) Decision implementation (moderate) • Problem identified by supervisors and workers through on-the-job experience or production control processes. • Lower-level employees in a section or department work with supervisors to help identify problem cause and possible solutions. • Department heads, section chiefs, and supervisors meet to discuss and develop proposals. Technical experts consulted where needed to improve proposal. • Problem and possible solutions passed up management hierarchy. • Moderate pace of decision • Management discusses problem and possible solutions widely and then makes a formal decision, often in consultation and negotiation with works council and union (co-determination). implementation due to widespread employee buy-in. • Union resistance may still occur and slow decision process due to structural or contractual issues. (p. 146) 21

Consider: Decision-making at Volkswagen 1. Why has the codetermination system like the one at Volkswagen worked so effectively in several Western European countries (e. g. , Germany, Netherlands, Sweden, Denmark)? 2. Would this system work equally well in Canada, the UK, or the US? Why or why not? 3. In the face of increasing global competition, what is the future of the codetermination system in Europe? (p. 146) 22

MANAGER’S NOTEBOOK: Stakeholders, strategies, and structures 1. Global managers are well advised to focus on relationships, not individual issues, as they attempt to understand the organizational world. 2. Instead of just trying to identify the particular strategies used by various firms, work to understand the cultural and economic milieu in which such strategies are formulated and implemented. 3. Likewise, in efforts to understand why firms differ in their approaches to resource utilization—including human resources—begin with an understanding of the cultural bases of organizational behavior. 23

MANAGER’S NOTEBOOK: Operations and TQM 1. Successful technology transfer across nations and regions often depends on cultural factors (e. g. , risk orientation). 2. Trends in technological innovation and manufacturing can also differ across cultures (e. g. , reliance on technological complexity in Germany, but process simplification in Japan). 3. While managers around the globe tend to agree on what TQM is, their implementation strategies can differ markedly (e. g. , emphasis on product standards in Germany, accuracy and precision in Japan, and customer satisfaction in North America). 24

MANAGER’S NOTEBOOK: Organizational decision-making • Acceptable decision-making strategies can be heavily influenced by a society’s normative beliefs about power distribution and social inclusion. • Conflict and resistance arise when managers and employees hold different views. • There is probably no perfect decision-making strategy. All the models discussed here have advantages and disadvantages. • Perhaps the key challenge here is to develop a model of employee involvement and participation that works for all parties —not an easy challenge. • When this fails, what should managers do? 25

Application: Employee involvement 1. Is employee involvement in organizational decision-making an right to which all employees are entitled or is it a practical issue that should be determined on a case-by-case, culture-byculture basis? 2. What should determine who is (or is not) allowed to participate in key organizational decisions? 3. Should there be a difference in the degree of employee involvement between strategic and operational decisions? 4. When working overseas, how can/should managers determine how much employee involvement to allow in decisions that relate to the future of the firm? 26

Think about it: What is your decision-making style? 1. If you view, are you basically more of an autocratic or participative decision maker? Why? 2. How comfortable are you switching from one decision style to another depending upon circumstances? 3. What would you do if your company strongly supported employee involvement in decision-making, but you found yourself repeatedly disagreeing with the kinds of decisions that were emerging? 27