Managing Change and Global Integration
Learning outcomes
• Gaining ability to diagnose the need, to implement and to evaluate change processes.
• Understanding HRM´s role in fostering coordination mechanisms within the international firm.
Seminar tasks
• Case-analysis
• Discussion on experienced change management processes.
• Exercise: Developing indicators to measure the effectiveness of HRM
Reading/activity for the week
• Evans, Paul and Pucik, Vladimir (2002): The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill, Chapter 5 & 6 & 7
Chapter 5, 6 and 7. Managing Change and Global Integration
CHAPTER 5 - SUMMARY
- Initially considered only a means of securing market access, alliances today are an integral part of global strategies in all aspects of the value chain. Using alliances to generate new knowledge is increasingly important.
- Alliances are mostly transitional entities; therefore longevity is poor measure of success. The aim is not to preserve the alliance at all costs but to contribute to the parent’s competitive position.
- Alliances are dynamic, migrating from one strategic orientation to another. Very few alliances remain complementary for long. Alliances among competitors are increasingly frequent, but they are also the most complex.
- The approach to HRM is largely driven by the strategic objectives of the partnership. This requires a focus both on managing the interfaces with the parent companies and on managing people inside the alliance itself.
- The firm’s HRM skills and reputation are an asset when exploring and negotiating alliances. Do not enter a complex alliance unless you have a good grasp of HRM basics, and avoid picking a partner who does not. The greater the expected value from the alliance, the more HR support is required.
- Equity control is a costly and relatively ineffective from of alliance control compared with investing in a carefully designed and implemented HRM strategy.
- Conflicting loyalties, complex relationships, boundary management issues, coupled with uncertainty and instability are characteristic of most alliances. Managers assigned to the alliance need high tolerance for ambiguity.
- Alliance learning is neither automatic nor free – there must be clear learning targets, sufficient investment in people, and a tight alignment of HRM practices with learning objectives.
- Alliances are full of tensions between competition and collaboration, between global and local interests, between leveraging and developing competencies. Mastering alliances helps firms learn to manage transnational pressures.
Appendix 5-1.
Appendix 5-2.
Appendix 5-3.
Appendix 5-4.
CHAPTER 6 – SUMMARY
- Most merger or acquisition failures are linked to problems in post-merger integration. Cultural and people issues consistently rank among the main difficulties in executing acquisitions. Do not underestimate the importance of cross-cultural differences, but on the other hand do not confuse culture with poor management.
- Probably the most consistent predictor of M&A success is past experience in acquisitions. The more the company merges, the better it gets at merging and the stronger the talent and experience for the next merger. Companies that have solid foundations in HRM and a good track record in managing change also tend to be good at managing acquisitions.
- There are various strategic logics behind mergers – stand-alone, absorption, reverse merger, “best of both”, and transformation. Each has different implications for the nature of the post-merger integration process. Think about the end-state before you start.
- HR should be involved early in the acquisition planning since the “soft” aspects of the due diligence process, such as the assessment of culture and people practices in the organization to be acquired, are just as important as the financial analyses
- The integration process starts with the creation of a vision and strategy for the combined organization. Clear communication of the vision and strategy is an essential foundation for success. The guideline for effective communication is “play it straight”.
- However, well the acquisition has been prepared, one cannot avoid the merger syndrome – the shock/stress cycle experienced by the “losers” and the victory cycle experienced by the “winners”. The “first hundred days” need to be carefully managed providing insight, information, involvement, and inspiration.
- Many acquisitions fail, because of the loss of key talent, so retention is a key priority, an effort that should begin during due diligence so that retention plans can be put in place from the first day of the acquisition. In the long term, retention requires commitment form senior management to building personal relationships with the acquired talent.
- It is important to move with speed. Key decisions about management structure senior appointments, and people’s careers should be made as soon as possible. Uncertainty and anxiety after the acquisition drain energy form the business, increasing the risk of loss of customers.
- Several steps in the post-merger integration are known to foster success:
- Appoint an integration manager to speed up the process
- Measure M&A outcomes
- Assign accountability
- Secure and celebrate quick wins.
- Some firms see their competence in making international acquisitions as one of their core capabilities. They are distinguished by their ability to learn from past acquisitions, including the mistakes.
Appendix 6-1.
Appendix 6-2.
Appendix 6-3.
Appendix 6-4.
Appendix 6-5.
Appendix 6-6.
Appendix 6-7.
The wheel of fortune at General Electric
CHAPTER 7 – SUMMARY
- Vertical and hierarchic means of coordination cannot cope with the complexity of demands facing the transnational firms. They must be complemented by worldwide horizontal coordination mechanisms – glue technology.
- The important tools of glue technology are largely the application of HRM:
- Cross-boundary teamwork
- Cross-boundary steering groups
- Know-how transfer leading to global knowledge management
- And global process management.
- Horizontal coordination takes place fundamentally through relationships and social ties. Electronic technologies leverage relationships but do not replace them, except for the transfer of simple codified knowledge.
- Unless there are sound HRM foundations that ensure basis job competence and performance, cross-border teamwork overstretches the organization.
- The generic lessons of project management apply to cross-boundary teams:
- On issues such as goal clarity
- The importance of staffing
- Sequencing complex projects
- Managing conflicts
- Paying careful attention to evaluation and to feedback/learning
- Through the risks of failure if they are not applied rigorously are greater.
- Cross-boundary steering groups in the shape of internal boards, functional councils, network leaders, and the like provide flexible and potent means of maintaining control while promoting empowerment and accountability at the lowest level possible.
- The ability of the transnational firm to transfer knowledge is a major source of competitive advantage. This can start by dissemination, creating social networks, focused initiatives, and innovation forums. But building systematic knowledge management capabilities involves:
- Focus,
- Technology,
- A leadership infrastructure
- And above all removing cultural barriers.
- Global processes in the transnational firm can be viewed as horizontal standardization that links together critical activities with clear deliverables in mind. Two basic processes of concern to HRM are global performance management and leadership development, though there are many other candidates.
- While global performance management is conceptually simple, the different stages in the process – going from upstream strategic / business planning to downstream appraisal and rewards – involve difficult decisions as to whether these sub processes should be applied worldwide or be subject to local adaptation. Some commonality in the process of global performance management is needed, though the local context will always influence the actual implementation.
- Network coordination always requires a certain degree of normative integration (shared concepts, norms, attitudes, and values) induced by socialization. But excessive socialization can lead to dangerous organizational rigidities.
Appendix 7-1.
Appendix 7-2.
