Discretion & Autonomyin MNCs in Ireland

Michael MorleyOn behalf of

Patrick Gunnigle, Jonathan Lavelle & Anthony McDonnell

LRC SymposiumCroke Park, June 19th 2008

2

Background

Standardisation versus Localisation Debate

Substantive HR Areas and Configurational Areas explored in thesurvey

Discretion Afforded to Local Management from Higher Levelsamong Foreign-owned Subsidiaries Operating in Ireland

Discretion Granted to Local Management in the OverseasSubsidiaries of Irish-owned MNCs

Conclusions on Discretion and Autonomy in MNCs

3

Standardisation V Localisation

• MNC HRM policy and practice and that which is practiced inrespective subsidiaries may be a balance between “localisation”(conforming to the norms of the host environment) or more“standardisation” (implementing distinctive HQ practices at locallevel

• Balancing the choice here may be important for the success of thesubsidiary and the overall competitiveness of the MNC

• Argument made that MNCs may make different choices, dependingon the country of origin and the nature of the host environmentregulatory regime

4

Standardisation V Localisation

• Important role played by the societal context in explainingdifferences in the extent to which MNCs can pursue standardisedHRM practices

• Within HRM, generally accepted that there are a range of societalbased institutional factors that significantly influence thepolicies/postures that organisations adopt

• Important here are the national industrial relations system, thehistorical pattern of industrialisation, the political system/the role ofthe state and the traning and qualifications infrastructure

5

HR Domain and Configurational Areas Explored

• Investigating the Extent of Management Discretion in HRDomian Areas

– Pay & Performance Management

– Employee Representation & Consultation

– Employee Involvement

– Training and Development

• Investigating Configurational Issues & TMT Staffing

– Monitoring by Higher Level International Management

– The Use of Shared Service Centres

– International HR Networking

– Staffing the Top Management Team

6

Pay & Performance Management

Discretion to Decide Financial Rewards (Foreign MNCs)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

R ela ting pa y to

m ar ke t

c om par a t o r s

S har e

ow ner s h ip

P er fo r m anc e

appr a is a l

m a nag er s

P er fo r m anc e

appr a is a l LO G

V ar iab le pa y

m a nag e r s

V ar iab le pa y

LO G

T her e is no d is c r e tio n

T he r e is a l i ttle d is c r e tio n

T he r e is s om e d is c r e tion

T he r e is q u i te a l o t o f d is c r e tion

T he r e is f u l l d is c r e tio n

7

Pay & Performance ManagementDiscretion to Decide Financial Rewards (Irish MNCs)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Relating pay

to market

comparators

Share

ownership

Performance

appraisal

managers

Performance

appraisal LOG

Variable pay

managers

Variable pay

LOG

There is no discretion

There is a little discretion

There is some discretion

There is quite a lot of discretion

There is full discretion

8

Pay & Performance Management• Foreign MNCs tend to have considerable discretion in the area

of pay

• 61 per cent have either full or a lot of discretion

• In relation to variable pay, 59 per cent report full/a lot ofdiscretion

• In performance appraisal some 56 per cent report full/a lot ofdiscretion for the largest group of employees

• Irish MNCs afford relatively low levels of discretion to theirforeign operations

• This is particularly pronounced with regard to share ownershipwhere 86 per cent of Irish MNCs afford no discretion to itsforeign operations over this issue

9

Employee Representation and ConsultationDiscretion of Foreign-owned Subsidiaries

0%

10%

20%

30%

40%

50%

60%

Trade union

recognition

Union involvement

Decision

Employee

Consultation

There is no discretion

There is a little discretion

There is some discretion

There is quite a lot of discretion

There is full discretion

There is no typical situation

10

Employee Representation and ConsultationDiscretion Afforded to Foreign Subsidiaries of Irish-owned MNCs

0%

5%

10%

15%

20%

25%

30%

35%

Trade union

recognition

Union involvement

Decision

Employee

Consultation

There is no discretion

There is a little discretion

There is some discretion

There is quite a lot of discretion

There is full discretion

There is no typical situation

11

Employee Representation and ConsultationEmployee Representation and Consultation

• Looking at management discretion in employment relations, wefind an interesting contrast between subsidiary and headquarterperspectives.

• Among subsidiaries of foreign-owned MNCs in Ireland,respondents reported high levels of discretion/autonomy overemployee representation and consultation.

• In contrast, the headquarter perspective provided byrespondent in Irish-owned MNCs suggests that their foreignoperations are afforded lower levels of discretion/autonomy.

12

Employee InvolvementDiscretion to Local Management in Ireland over Employee Involvement Issues -

Foreign MNCs

Full Discretion Quite a lot ofdiscretion

Some discretion Little/nodiscretion

Employee involvement in workprocesses

61% 26% 9% 4%

Provision of information to employees 50% 31% 15% 4%

Suggestion schemes[1] 57% 32% 7% 5%

Attitude /opinion surveys[2] 27% 19% 14% 40%

[1] Only asked of those with such schemes.

[2] Ibid

13

Employee InvolvementDiscretion Irish MNCs Afford Foreign Subsidiaries in Employee Involvement Issues

Full Discretion Quite a lot ofdiscretion

Some discretion Little/nodiscretion

Employee involvement in workprocesses

39% 27% 12% 22%

Provision of information to employees 32.5% 27.5% 17.5% 22.5%

Suggestion schemes[1] 41% 18% 12% 29%

Attitude/opinion surveys[2] 21% 36% 7% 36%

[1] Only asked of those with such schemes.[2] Ibid

14

Employee Involvement• MNCs generally appear to have a high degree of discretion over

most forms of direct communication mechanisms, with theexception of attitude and opinion surveys

• This high degree of discretion may reflect the fact that suchdirect forms of communication and involvement are withinmanagement control and are largely non-controversial

• Irish MNCs were reported as affording somewhat lower(although still quite high) levels of discretion to their foreignaffiliates

15

Training & DevelopmentDiscretion of Foreign Subsidiaries over T&D Policy

0%

20%

40%

60%

80%

100%

UK US Europe Rest

Full discretion

Quite a lot discretion

Some discretion

Little discretion

No discretion

16

Training & DevelopmentDiscretion Afforded to Foreign Subsidiaries of Irish-owned MNCs

0%

20%

40%

60%

80%

100%

T&D Policy Succession planning Organisation

Learning

Full discretion

Quite a lot discretion

Some discretion

Little discretion

No discretion

17

Monitoring by Higher LevelInternational Management

Monitoring by Higher-level Management (%)

0 %

2 0 %

4 0 %

6 0 %

8 0 %

1 0 0 %

Pay(m

gt)

Care

er progre

ssion

(mgt)

Labour costs

Headcount

Sta

fftu

rnove

r

Absentee ism

Productiv

ity

Divers

ity

Emplo

yeeopin

ion

Foreign Iris h

18

Monitoring by Higher LevelInternational Management

The findings indicate a high level of monitoring by seniorinternational level management among both foreign-owned andIrish-owned firms

The most monitored areas were employment numbers, labourcosts, and issues relating to managerial grades (pay and careerprogression)

The level on monitoring was lowest in relation to absenteeismand workforce diversity

19

Monitoring by Higher LevelInternational Management

• A theme arising from the questions on discretion and autonomywas that of higher levels withdrawing some of the autonomyafforded to its subsidiaries, one catalyst for this phenomenonbeing 9/11 and its aftermath

• Our level of autonomy has definitely shifted over the past fewyears. Really since 9/11 the corporate HQ has more influence overwhat we do (HR Manager, US manufacturing MNC)

• Since September 11th the financial situation has been muchtougher and subsequently the parent headquarters has taken morecontrol back in areas particularly where money is most at stake

(HR Manager, US services MNC)

20

The Use of Shared Service Centres

Use of Shared Services Centres by Nationality (%)

05

1 01 52 02 53 03 54 04 55 0

A ll

M N C s

F o re ig n

M N C s

Ir is h

M N C s

U S U K R e s t

E U R

R e s t

W o rld

21

International HR NetworkingInternational Networking of HR Managers by Nationality (%)

0

20

40

60

80

100

UK USA Rest Europe Rest World Ireland All MNCs

Regular meetings

International

Conferences

Task Forces

Virtual Groups e.g.

conference calls

22

International HR Networking

In terms of networking between HR managers in different countries,MNCs are using a number of different mechanisms. The mostpopular mechanism is regular face-to-face meetings (78 per cent),followed by virtual networks (74 per cent).

The figures differ slightly amongst foreign and Irish-ownedcompanies, with foreign MNCs more likely to engage with thesemethods

23

Top Management Team StaffingSenior Management Staffing (%)

0

10

20

30

40

50

60

1 2 3+ None

We came across a number of cases where necessity forexperience of the home country environment as a requisiteto securing a senior management appointment waschanging:

Senior management here used to all be staffed by corporatepeople but over the last few years this has changed.

(HR Director, German services MNC)

We currently have no expatriates working here althoughthis is a recent change as from start-up until relativelyrecently there were five expatriates here in managementpositions.

(HR Director, US services MNC)