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Chapter 23 Organization Development in Global Settings
Organizational Development and Change Management (MGMT 416)
University of Oregon
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Change managementPreview text
23 Organization Development in Global Settings This chapter describes the practice of organization development in international settings. It presents the contingencies and practice issues associated with OD in organizations outside the United States, in worldwide organizations, and in global social change organizations. The applicability and effectiveness of OD in countries and cultures outside of the United States are the subject of intense debate, however. Because OD was developed predominantly by American and Western European practitioners, its practices and methods are heavily influenced by the values and assumptions of industrialized cultures. Thus, the traditional approaches to planned change may promote management practices that conflict with the values and assumptions of other societies. Will Chinese cultural values, for example, be preserved or defended as an increasing number of European and American organizations establish operations in that country? How should OD be conducted in an Indian firm operating in the United States? On the other hand, some practitioners believe that OD can result in organizational improvements in any culture Despite different points of view on this topic, the practice of OD in international settings can be expected to expand dramatically. The rapid development of foreign economies and firms, along with the evolution of the global marketplace, is creating organizational needs and opportunities for change. In designing and implementing planned change for organizations operating outside the United States, OD practice must account for two important contingencies: alignment between the cultural values of the host country and traditional OD values, and the host country’s level of economic development. Preliminary research suggests that failure to adapt OD interventions to these cultural and economic contingencies can produce disastrous results For example, several OD concepts, including dialogue, truthfulness, and performance management, do not always work in all countries Dialogue assumes that “all differences can be bridged if you get people together in the right context.” However, mediation, arbitration, or traditional negotiations are more acceptable in some cultures. Similarly, truthfulness, a very North American notion, is culturally relativistic and as a value depends on whether you are American, Asian, Middle Eastern, or from some other culture. Finally, the process and content of performance evaluation can also depend on culture In worldwide organizations, managers can use OD to help firms operate in multiple countries. Referred to as international, global, multinational, or transnational corporations, these firms must fit their organizational strategies, structures, and processes to different cultures. OD can help members gain the organizational skills and knowledge needed to operate across cultural boundaries, enhancing organizational effectiveness through better alignment of people and systems with international strategy. Finally, OD is playing an increasingly important role in global social change. Practitioners using highly participative approaches are influencing the development of evolving countries, providing a voice to underrepresented social classes, and bridging the gap between cultures facing similar social issues. The application of planned change processes in these settings represents one of the newest and most exciting areas of OD. CHAPTER 23 Organization Development in Global Settings ORGANIZATION DEVELOPMENT OUTSIDE THE UNITED STATES Organization development is being practiced increasingly in organizations outside of the United States Survey feedback interventions have been used at Air New Zealand and at the Air Emirates (United Arab Republic); work design interventions have been implemented in Gamesa (Mexico); large-group interventions have been used in Vitro (Mexico); structural interventions have been completed at Neusoft Corporation (China); and merger and acquisition integration interventions have been used at Akzo-Nobel (The Netherlands).6 This international diffusion of OD derives from three important trends: the rapid development of foreign economies, the increasing worldwide availability of technical and financial resources, and the emergence of a global economy The dramatic restructuring of socialist and communist economies and the rapid economic growth of developing countries are numbing in scope and impact. The U. government estimates that world gross domestic product will grow an average of about 3% between 2005 and 2017, from $36 trillion to $52 trillion. Projected growth rates in East Asia and Pacific and South Asia remain strong. The European Union continues its push for integration through fiscal policies, the admission of new countries, and the rationalizing of economic standards. Political transformations in the Middle East, China, Russia, and South Africa will produce both uncertainty and new growthoriented economies. Organizations operating in these rejuvenated or newly emerging economies are increasingly turning to OD practices to embrace opportunities and improve effectiveness. In China, for example, economic reforms are breaking up the “work units”— operational business units organized with housing, health care, education, food service, and other infrastructure organizations—that used to dominate the Chinese economy. As these work units are disbanded so that the operational unit can address “market facing” issues, the social fabric of China is severely shocked. A variety of nongovernmental organizations (NGOs) have formed to help China develop a “civil society.” Many of these organizations, such as Global Village of Beijing, Friends of the Earth, and the Green Earth Volunteers, are using appreciative inquiry interventions to identify best practices and capacity-building processes. Ways of working together are being developed and networks of these NGOs are coming together to assist the homeless, build environmental awareness, and deliver childcare. Other interventions, including work design, survey feedback, and leadership development, represent efforts to increase ownership, commitment, and productivity in Chinese organizations. The second trend contributing to OD applications in global settings is the unprecedented availability of technological and financial resources on a worldwide scale. The development of the Internet and e-commerce has increased foreign governments’ and organizations’ access to enormous information resources and fueled growth and development. The increased availability of capital and technology, for example, was cited as a primary reason for the rise of Chilean firms in the 1980s Information technology, in particular, is making the world “smaller” and more interdependent. As organizations outside the United States adopt new technology, the opportunity increases to apply techniques that facilitate planned change. OD interventions can smooth the transition to a new reporting structure, clarify roles and relationships, and reduce the uncertainty associated with implementing new techniques and practices. The final trend fueling international OD applications is the emergence of a global economy The continued growth of China’s economy, the spread of terrorism on a worldwide basis, and the impact of global warming aptly demonstrate how interdependent the world’s markets have become. Many foreign organizations are maturing and growing by entering the global business community. Lowered trade barriers, deregulation, and privatization aid this international expansion. The established relationships 615 CHAPTER 23 617 Organization Development in Global Settings [Table 23] Cultural Values and Organization Customs ORGANIZATION CUSTOMS WHEN THE VALUE IS AT ONE EXTREME REPRESENTATIVE COUNTRIES VALUE DEFINITION Context The extent to which Ceremony and routines are words carry the common. meaning of a message; Structure is less formal; fewer how time is viewed written policies exist. People are often late for appointments. High: Asian and Latin American countries Low: Scandinavian countries, United States Power distance The extent to which members of a society accept that power is distributed unequally in an organization Decision making is autocratic. Superiors consider subordinates as part of a different class. Subordinates are closely supervised. Employees are not likely to disagree. Powerful people are entitled to privileges. High: Latin American and Eastern European countries Low: Scandinavian countries Uncertainty avoidance The extent to which members of an organization tolerate the unfamiliar and unpredictable Experts have status/authority. High: Asian countries Clear roles are preferred. Low: European Conflict is undesirable. countries Change is resisted. Conservative practices are preferred. Achievement The extent to which orientation organization members value assertiveness and the acquisition of material goods Achievement is reflected in wealth and recognition. Decisiveness is valued. Larger and faster are better. Gender roles are clearly differentiated. High: Asian and Latin American countries, South Africa Low: Scandinavian countries Individualism The extent to which people believe they should be responsible for themselves and their immediate families Personal initiative is encouraged. Time is valuable to individuals. Competitiveness is accepted. Autonomy is highly valued. High: United States Low: Latin American and Eastern European countries Power Distance This value concerns the way people view authority, status differences, and influence patterns. People in high power-distance regions, such as Latin America and Eastern Europe, tend to accept unequal distributions of power and influence, and consequently autocratic and paternalistic decision-making practices are the norm. Organizations in high power-distance cultures tend to be centralized, with several hierarchical levels and a large proportion of supervisory personnel. Subordinates in these organizations represent a lower social class. They expect to be supervised closely and believe that power holders are entitled to special privileges. Such practices would be inappropriate in low power-distance regions, such as Scandinavia, where participative decision making and egalitarian methods prevail. 618 PART 7 Special Applications of Organization Development Uncertainty Avoidance This value reflects a preference for conservative practices and familiar and predictable situations. People in high uncertainty-avoidance regions, such as Asia, prefer stable routines over change and act to maintain the status quo. They do not like conflict and believe that company rules should not be broken. In regions where uncertainty avoidance is low, such as in many European countries, ambiguity is less threatening. Organizations in these cultures tend to favor fewer rules, higher levels of participation in decision making, more organic structures, and more risk taking. Achievement Orientation This value concerns the extent to which the culture favors the acquisition of power and resources. Employees from achievement-oriented cultures, such as Asia and Latin America, place a high value on career advancement, freedom, and salary growth. Organizations in these cultures pursue aggressive goals and can have high levels of stress and conflict. Organizational success is measured in terms of size, growth, and speed. On the other hand, workers in cultures where achievement is less of a driving value, such as those in Scandinavia, prize the social aspects of work, including working conditions and supervision, and typically favor opportunities to learn and grow at work. Individualism This value is concerned with looking out for oneself as opposed to one’s group or organization. In high-individualism cultures, such as the United States and Australia, personal initiative and competitiveness are valued strongly. Organizations in individualistic cultures often have high turnover rates and individual rather than group decision-making processes. Employee empowerment is supported when members believe that it improves the probability of personal gain. These cultures encourage personal initiative, competitiveness, and individual autonomy. Conversely, in low individualism countries, such as China, Japan, and Mexico, allegiance to one’s group is paramount. Organizations operating in these cultures tend to favor cooperation among employees and loyalty to the company. Economic Development In addition to cultural context, an important contingency affecting OD success internationally is a country’s level of industrial and economic development. For example, although long considered an industrial economy, Russia’s political and economic transformation, and the concomitant increases in uncertainties over infrastructure, corruption, cash flow, and exchange rates, has radically altered assumptions underlying business practices. Thus, economic development can be judged from social, economic, and political perspectives For example, it can be reflected in a country’s management capability as measured by information systems and skills; decision-making and action-taking capabilities; project planning and organizing abilities; evaluation and control technologies; leadership, motivational, and reward systems; and human selection, placement, and development levels. The United Nations’ Human Development Programme has created a Human Development Index that assesses a country’s economic development in terms of life expectancy, educational attainment, and adjusted real income. Subsistence Economies Countries such as Pakistan, Nepal, Nigeria, Uganda, and Rwanda have relatively low degrees of development and their economies are primarily agriculture-based. Their populations consume most of what they produce, and any surplus is used to barter for other needed goods and services. A large proportion of the population is unfamiliar with the concept of “employment.” Working for someone else in exchange for wages is not common or understood, and consequently few large organizations exist outside of the government. In subsistence economies, OD interventions emphasize global social change and focus on creating conditions for sustainable social and economic progress. These change methods are described in the last section of this chapter. PART 7 Special Applications of Organization Development [Figure 23] The Cultural and Economic Contexts of International OD Practice CULTURAL FIT WITH OD VALUES Low High Moderate South Pacific LEVEL OF ECONOMIC DEVELOPMENT 620 South America Middle East India South Africa Central America Eastern Europe United Kingdom High Asia Scandinavia USA Arab Republic; the South Pacific region, including Malaysia and the Philippines; and certain South American countries, such as Brazil, Ecuador, Guatemala, and Nicaragua. These regions are highly dependent on their natural resources and have a relatively small manufacturing base. They tend to be high-context cultures with values of high power distance and achievement orientation and of moderate uncertainty avoidance. They are not a bad fit with OD values because these cultures tend toward moderate or high levels of collectivism, especially in relation to family. These settings require change processes that fit local customs and that address business issues. As might be expected, little is written on applying OD in these countries, and there are even fewer reports of OD practice. Cultural values of high power distance and achievement are inconsistent with traditional OD activities emphasizing openness, collaboration, and empowerment. Moreover, executives in industrializing economies frequently equate OD with human process interventions, such as team building, training, and conflict management. They perceive OD as too soft to meet their business needs. For example, Egyptian and Filipino managers tend to be autocratic, engage in protracted decision making, and focus on economic and business problems. Consequently, organizational change is slow paced, centrally controlled, and aimed at achieving technical rationality and efficiency These contextual forces do not influence all organizations in the same way. A recent study of 20 large-group interventions in Mexico suggests that culture may not be as constraining as has been hypothesized Similarly, in an apparent exception to the rule, the president of Semco S/A (Brazil), Ricardo Semler, designed a highly participative organization Most Semco employees set their own working hours and approve hires and promotions. Information flows downward through a relatively flat hierarchy, and strategic decisions are made participatively by companywide vote. Brazil’s cultural values are not as strong on power distance and masculinity as in other Latin American countries, and that may explain the apparent success of this high-involvement organization. It suggests that OD interventions can be implemented within this cultural context when strongly supported by senior management. High Cultural Fit, Moderate Industrialization This international context includes industrializing economies with cultures that align with traditional OD values. Such CHAPTER 23 Organization Development in Global Settings settings support the kinds of OD processes described in this book, especially technostructural and strategic interventions that focus on business development. According to data on economic development and cultural values, relatively few countries fit this context. India’s industrial base and democratic society are growing rapidly and may fit this contingency. Similarly, South Africa’s recent political and cultural changes make it one of the most interesting settings in which to practice OD South Africa is an industrializing economy. Its major cities are the manufacturing hubs of the economy, although agriculture and mining still dominate in rural areas. The country’s values are in transition and may become more consistent with OD values. South Africans customarily have favored a low-context orientation; relatively high levels of power distance; and moderate levels of individualism, uncertainty avoidance, and achievement orientation. Organizations typically have been bureaucratic with authoritarian management, established career paths, and job security primarily for Caucasian employees. These values and organizational conditions are changing, however, as the nation’s political and governance structures are transformed. Formerly, apartheid policies reduced uncertainty and defined power differences among citizens. Today, free elections and the abolishment of apartheid have increased uncertainty drastically and established legal equality among the races. These changes are likely to move South Africa’s values closer to those underlying OD. If so, OD interventions should become increasingly relevant to that nation’s organizations. A study of large South African corporations suggests the directions that OD is likely to take in that setting The study interviewed internal OD practitioners about key organizational responses to the political changes in the country, such as the free election of Nelson Mandela, abolishment of apartheid, and the Reconstruction and Development Program. Change initiatives at Spoornet, Eskom, and Telkom, for example, centered around two strategic and organizational issues. First, the political changes opened up new international markets, provided access to new technologies, and exposed these organizations to global competition. Consequently, these firms initiated planned change efforts to create corporate visions and identify strategies for entering new markets and acquiring new technologies. Second, the political changes forced corporations to modify specific human resources and organizational practices. The most compelling change was mandated affirmative action quotas. At Spoornet, Eskom, and Telkom, apartheid was thoroughly embedded in the organizations’ structures, policies, and physical arrangements. Thus, planned change focused on revising human resources policies and practices. Similarly, organizational structures that had fit well within the stable environment of apartheid were outmoded and too rigid to meet the competitive challenges of international markets. Planned changes for restructuring these firms were implemented as part of longer-term strategies to change corporate culture toward more egalitarian and market-driven values. Low Cultural Fit, High Industrialization This international setting includes industrialized countries with cultures that fit poorly with traditional OD values. Many countries in Central America, Eastern Asia, and Eastern Europe fit this description. Reviews of OD practice in those regions suggest that planned change includes all four types of interventions described in this book, although the change process itself is adapted to local conditions For example, Mexico, Venezuela, China, Japan, and Korea are high-context cultures where knowledge of local mannerisms, customs, and rituals is required to understand the meaning of communicated information. To function in such settings, OD practitioners must know not only the language but the social customs as well. Similarly, cultural values emphasizing high levels of power distance, uncertainty avoidance, and achievement orientation foster organizations where roles, status differences, and working conditions are clear; where autocratic and paternalistic decisions are expected; and where the acquisition of wealth and influence by the powerful is 621 The economic, political, and cultural changes sweeping through the People’s Republic of China (PRC) are complex in both scope and breadth. China has evolved from an isolated and underdeveloped country to an economic growth engine. Since 1979, China’s GDP has more than quadrupled as a result of its transition to a “market-facing” economy. Despite clear intentions to conduct the transition in ways that honor, support, and reinforce the Chinese culture, balancing these changes has not been easy. For example, the 70,000 state-owned enterprises have been forced to reinvent themselves through financial restructuring, massive downsizings, and upgrading the competencies of their employees. In the mid-1990s, the capability to manage the human resource consequences of breaking up the old work units, downsizing various parts of the organization, and developing managers just didn’t exist inside the country. China’s training and human resource development departments were ill prepared to respond to these demands. As a context for OD, China represents a set of cultural values that are very different from Europe and North America. in bringing about the institutional development of their respective organizations. In designing the program, the Chinese and Swiss partners had to ensure that the skills and knowledge of human resource and organization development would be transferred not only to the participants but also to the administrative systems and training institutions involved in the program. Based on observations and interviews with Chinese government officials, communist party members, faculty members at different Chinese educational institutions, and training and human resource managers in Chinese organizations, the OD practitioners recommended a combination of action learning (AL) and action research (AR) methods. AR and AL were seen as appropriate techniques because they had not been tried before in China, offered viable tools for developing internal capacity for continuous improvement and for systemwide multilevel intervention, and were centrally concerned with transferring capacity to the client system. These action-based approaches constituted a pioneering attempt of international know-how transfer. In an effort to assist in the development of China’s human resource development capacity, OD practitioners from the Center for Socio-Eco-Nomic Development (CSEND) in Switzerland were called in to act as technical advisors to a unit of the Chinese Communist Party’s (CCP) Organization Department. A separate training institute called the China Training Centre for Senior Personnel Management Officials (CTCSPMO) was established and initial institution building efforts were financed by the United Nations Development Program (UNDP). During the initial preparatory phase between September 1993 and March 1994, the 60 selected participants were given intensive English-language courses. Then, beginning in March 1994, the program began with a series of “programmed learning” workshops followed by a “workplace application” experience. The cycle of programmed learning and workplace application was then repeated. Following each workplace application period, a conference was organized to review the project work and its findings, to exchange experiences, and to reflect on the learnings generated. The two cycles were completed in December 1996. One output of the CTCSPMO was the Sino-Swiss bilateral project (SSBP), a program designed to increase the institutional capacity of Chinese public administrators to manage change. The strategy was to work with a small group of experienced training managers and trainers to apply the concepts and techniques of modern management training and organization development. The Chinese participants were to form the vanguard of a new generation of Chinese public management trainers and HRD managers and to act as a catalyst The programmed learning workshops covered 10 different topic areas, such as comparative public administration, human resource management, organizational theory and development, adult learning theories and methods, and training management. These topics were taught in the classrooms by foreign experts in Beijing. The workplace application projects involved creating groups of participants from similar provincial areas or functional responsibilities to address actual human resource, training and application 23 Modernizing China’s Human Resource Development and Training Functions 624 PART 7 Special Applications of Organization Development development, or organizational change issues. The project organization consulted with the Chinese partner organization, CTCSPMO, to approve a variety of learning projects, including the redesign of a management development program for senior party officials in Beijing, developing a training program for managers guiding large infrastructure projects, and research on human resources and motivation practices in state-owned enterprises. In addition to the project work, the workplace application groups were instructed to meet every two weeks either face-to-face or by phone. Practically, most of the meetings were by phone due to physical distance. The purpose of these meetings was to reflect on the project’s progress, review how topics from the learning workshop were being applied, and to capture personal learnings. The participants were also asked to keep a journal and the group was assigned a facilitator to work with them. In reviewing the first two rounds of learning and action, several observations were made. First, the Chinese participants learned: • to participate actively in the learning process and take responsibility for the relevance of their learning; • to redefine the role of a “good” trainer/teacher; • to question each other and the trainer/teacher’s statements as “facts,” “opinion,” or “truth”; • to challenge the widely held belief that “the bird who raise its head will be shot first”; and • to perceive the social process and group dynamics of learning as beneficial, not chaotic or lacking discipline. In addition, the OD practitioners learned: • to question and to reflect on their own assumptions concerning Chinese culture, organizations, human relations, and management theories; • to confront their own cultural biases in a foreign environment that had its own logic in getting things done; • to find ways to work as a team with the Chinese facilitators, who had different ways of relating; • to refrain from assuming responsibility for the Chinese partners; • to facilitate rather than dominate; and • to sustain the interest and commitment of the CTCSPMO and facilitators to the action research and action learning approach. Reactions from different stakeholders, including the Deputy Directors of the provincial organization department of the CCP, the Deputy Commissioner of the State Commission of the Nationalities, the Academic Dean of the Central Party School, and the Directors of Training of the Ministry of Personnel and the State Economic and Trade Commission, were in general positive. They found the results of the action research informative and the recommended solutions helpful. A reportedly high rate of project recommendation implementation was later verified by a team of international independent reviewers, and a final project evaluation conducted in October 1997 confirmed the initial positive assessment. The SSBP program allowed the Chinese government and the CCP to acquire cutting edge know-how in management development and training. At the same time, they were able to review the various training programs being provided for senior government officials, enterprise executives, and party officials in China. Based on the findings from action learning projects, the training department of the CCP revised their training requirements, adjusted their training approach, and added more skill-based topics to the curriculum. Finland, and Denmark—and countries with a strong British heritage, such as Great Britain, Northern Ireland, Australia, and New Zealand. Scandinavians enjoy a high standard of living and strong economic development. Because their cultural values most closely match those traditionally espoused in OD, organizational practices are highly participative and egalitarian. OD practice tends to mirror these values. Multiple stakeholders, such as managers, unionists, and staff 626 PART 7 Special Applications of Organization Development locations, and under diverse governmental and environmental requirements. They must be able to adapt corporate policies and procedures to a range of local conditions. Moreover, the tasks of controlling and coordinating operations in different nations place heavy demands on information and control systems and on managerial skills and knowledge. Worldwide organization development applies to organizations that are operating across multiple geographic and cultural boundaries. This contrasts with OD in organizations that operate outside the United States but within a single cultural and economic context. This section describes the emerging practice of OD in worldwide organizations, a relatively new but important area of planned change. Worldwide Strategic Orientations Worldwide organizations can be defined in terms of three key facets First, they offer products or services in more than one country and actively manage substantial direct investments in those countries. Consequently, they must relate to a variety of demands, such as unique product requirements, tariffs, value-added taxes, governmental regulations, transportation laws, and trade agreements. Second, worldwide firms must balance product and functional concerns with geographic issues of distance, time, and culture. American tobacco companies, for example, face technological, moral, and organizational issues in determining whether to market cigarettes in less-developed countries, and if they do, they must decide how to integrate manufacturing and distribution operations on a global scale. Third, worldwide companies must carry out coordinated activities across cultural boundaries using a wide variety of personnel, including expatriates, short-term and extended business travelers, and local employees. Workers with different cultural backgrounds must be managed in ways that support the overall goals and image of the organization The company must therefore adapt its human resources policies and procedures to fit the culture and accomplish operational objectives. From a managerial perspective, selecting executives to head foreign operations is an important decision in worldwide organizations. How these three facets of products/services, organization, and personnel are arranged enable firms to compete in the global marketplace Worldwide organizations can offer certain products or services in some countries and not in others; they can centralize or decentralize operations; and they can determine how to work with people from different cultures. Despite the many possible combinations of characteristics, researchers have found that two dimensions are useful in guiding decisions about choices of strategic orientation. As shown in Figure 23, managers need to assess two key success factors: the degrees to which there is a need for global integration or for local responsiveness. Global integration refers to whether or not business success requires tight coordination of people, plants, equipment, products, or service delivery on a worldwide basis. For example, Intel’s “global factory” designs chips in multiple countries, manufactures the chips in a variety of locations around the world, assembles and tests the finished products in different countries, and then ships the chips to customers. All of this activity must be coordinated carefully. Local responsiveness, on the other hand, is the extent to which business success is dependent on customizing products, services, support, packaging, and other aspects of operations to local conditions. Based on that information, worldwide organizations generally implement one of four types of strategic orientations: international, global, multinational, or transnational. Table 23 presents these orientations in terms of the diagnostic framework described in Chapter 5. Each strategic orientation is geared to specific market, technological, and organizational requirements. OD interventions that support each orientation are also included in Table 23. CHAPTER 23 627 Organization Development in Global Settings [Figure 23] The Integration-Responsiveness Framework High Global Orientation Transnational Orientation International Orientation Multinational Orientation Need for Global Integration Low Low Need for Local Responsiveness High The International Strategic Orientation The international orientation exists when the key success factors of global integration and local responsiveness are low. This is the most common label given to organizations making their first attempts at operating outside their own country’s markets. Success requires coordination between the parent company and the small number of foreign sales and marketing offices in chosen countries. Similarly, local responsiveness is low because the organization exports the same products and services offered domestically. When an organization has decided to expand internationally, it has most often determined that: • other country-markets appear to offer specific advantages large enough to exceed the tangible and intangible costs of implementing a new strategy, • the organization’s products, services, and value propositions are sufficiently powerful to counteract the initial disadvantages of operating in a foreign location, and • the organizational capabilities exist to extract value from the foreign operations in excess of simpler contracting or licensing of the organization’s technology, products, or services in the foreign location Characteristics of the International Design The goal of the international orientation is to increase total sales by adding revenues from non-domestic markets. By using existing products/services, domestic operating capacity is extended and leveraged. As a result, most domestic companies will enter international markets by extending their product lines first into nearby countries and then expanding to more remote areas. For example, most U.-based companies first offer their products in Canada or Mexico. After a certain period of time, they begin to set up operations in other countries. To support this goal and operations strategy, an “international division” is given responsibility for marketing, sales, and distribution, although it may be able to set up joint ventures, licensing agreements, distribution territories/franchises, and in some cases, manufacturing plants. The organization basically retains its original structure CHAPTER 23 Organization Development in Global Settings Implementing the International Orientation Changing from a domestic to an international organization represents an incremental shift in scope for most firms, and is typically handled as a simple extension of the existing strategy into new markets. Despite the logic of such thinking, the shift is neither incremental nor simple and OD can play an important role in making the transition smoother and more productive. Strategic planning, technostructural, and human resource interventions can help to implement an international orientation. Managers can use integrated strategic change or an organization redesign process to design and manage the transition from the old strategic orientation to the new one. Environmental scans, competitor analyses, and market studies can be done to calibrate expectations about revenue goals and determine the levels of investment necessary to support the division. Team building and large-group interventions, such as search conferences, can aid the process through which senior executives gather appropriate information about international markets, distinctive competencies, and culture, and then choose a strategic orientation. Similarly, managers can apply technostructural interventions to design an appropriate organization structure, to define new tasks and work roles, and to clarify reporting relationships between corporate headquarters and foreign-based units. Based on these decisions, OD interventions can help the organization to implement the change. Managers and staff can also apply human resources management interventions to train and prepare managers and their families for international assignments and to develop selection methods and reward systems relevant to operating internationally Since these are the organization’s first experiences with international business, OD practitioners can alert key managers and potential candidates for the international assignments to the need for cultural training. Candidates can be directed to outsourced offerings on cross-cultural skills, local country customs, and legal/regulatory conditions. OD practitioners can also assist the human resource organization to design or modify existing compensation and benefits packages, or set up policies around housing, schooling, and other expenses associated with the relocation. This initial movement into the international arena enables domestic organizations to learn about the demands of the global marketplace, thus providing important knowledge and experience with the requirements for success in more sophisticated strategies. OD practitioners should help the organization set up learning practices and communication systems so that information about international experiences are shared with others, especially senior managers. The Global Strategic Orientation This orientation exists when the need for global integration is high but the need for local responsiveness is low. The global orientation is characterized by a strategy of marketing standardized products in different countries. It is an appropriate orientation when there is little economic reason to offer products or services with special features or locally available options. Manufacturers of office equipment, consumer goods, computers and semiconductors, tires, and containers, for example, can offer the same basic product in almost any country. Characteristics of the Global Design The goal of efficiency dominates this orientation. Production efficiency is gained through volume sales and a small number of large manufacturing plants, and managerial efficiency is achieved by centralizing product design, manufacturing, distribution, and marketing decisions. Global integration is supported by the close physical proximity of major functional groups and formal control systems that balance inputs, production, and distribution with worldwide demand. Many Japanese firms, such as Honda, Sony, NEC, and Matsushita, used this strategy in the 1970s and early 1980s to grow in the international economy. In Europe, Nestlé exploits economies of scale in marketing by advertising well-known brand names around the world. The 629 630 PART 7 Special Applications of Organization Development increased number of microwave and two-income families, for example, allowed Nestlé to push its Nescafé coffee and Lean Cuisine low-calorie frozen dinners to dominant market-share positions in Europe, North America, Latin America, and Asia. Similarly, a Korean noodle maker, Nong Shim Company, avoided the 1999 financial crisis by staying focused on efficiency. Yoo Jong Suk, Nong Shim’s head of strategy, went against recommendations to diversify and stated, “All we want is to be globally recognized as a ramyon maker.”39 In the global orientation, the organization tends to be centralized with a global product structure. Presidents of each major product group report to the CEO and form the line organization. Each of these product groups is responsible for worldwide operations. Information systems in global orientations tend to be quite formal with local units reporting sales, costs, and other data directly to the product president. The predominant human resources policy integrates people into the organization through ethnocentric selection and staffing practices. These methods seek to fill key foreign positions with personnel from the home country where the corporation headquarters is located Key managerial jobs at Volvo, Siemens, Nissan, and Michelin, for example, are often occupied by Swedish, German, Japanese, and French citizens, respectively. Ethnocentric policies support the global orientation because expatriate managers are more likely than host-country nationals to recognize and comply with the need to centralize decision making and to standardize processes, decisions, and relationships with the parent company. Although many Japanese automobile manufacturers have decentralized production, Nissan’s global strategy has been to retain tight, centralized control of design and manufacturing, ensure that almost all of its senior foreign managers are Japanese, and have even low-level decisions emerge from face-to-face meetings in Tokyo. Implementing the Global Orientation OD interventions can be used to refine and support the global strategic orientation as well as assist in the transition from an international orientation. 1. Planned Change in the Global Orientation. Several OD interventions support the implementation of this orientation. Career planning, role clarification, employee involvement, conflict management, and senior management team building help the organization achieve improved operational efficiency. For example, role clarification interventions, such as job enrichment or goal setting, and conflict management can formalize and standardize organizational activities. This ensures that each individual knows specific details about how, when, and why a job needs to be done. As a result, necessary activities are described and efficient transactions and relationships are created. Similarly, Intel has used training interventions to ensure consistent implementation of a variety of company-standard business practices, such as meeting protocols, performance management processes, and reporting accountability. Senior management team building can improve the quality of strategic decisions. Centralized policies make the organization highly dependent on this group and can exaggerate decision-making errors. In addition, interpersonal conflict can increase the cost of coordination or cause significant coordination mistakes. Process interventions at this level can help to improve the speed and quality of decision making and improve interpersonal relationships. Career planning can help home-country personnel develop a path to senior management by including foreign subsidiary experiences and cross-functional assignments as necessary qualifications for advancement. At the country level, career planning can emphasize that advancement beyond regional operations is limited for host-country nationals. OD can help here by developing appropriate application 23 Implementing the Global Strategy: Changing the Culture of Work in Western China China has a strong culture, but one that allows it, paradoxically, to assimilate other ideas and philosophies. For example, Buddhism was added to Confucianism during the heydays of the Silk Road and China has adapted to globalization quickly since it began market reforms in the early 1990s. For many firms entering China, the question is, Will China assimilate Western cultural ways from the multinational corporations that enter, or will they insist on a Chinese cultural process of doing business? This application describes the process one American technology company utilizing a global worldwide strategy used in opening a manufacturing plant in a western Chinese province. The story is told from the perspective of the internal OD consultant who was charged with plant start-up support. In 2003, a major U. multinational broke ground for a new set of factories in the “second tier” Chinese city of Chengdu. A city of more than ten million people in Western China, Chengdu is correctly considered the heartland of Chinese culture with a strong tradition of Taoism and a relaxed, friendly culture. In contrast, the multinational technology company came to western China with a strong business-centered, “just get results,” U. culture. While the organization had facilities all over the world, and several in China, it had not started-up a true greenfield plant as the first MNC in a city in more than ten years. In keeping with the firm’s global strategy, the corporate headquarters expected each plant to integrate seamlessly with other plants in the supply chain. Low costs and meeting the technical specifications of the product were the key measures of performance. The first time I saw the factory site in Chengdu it was bare dirt with the wind blowing dust over what had been a farmer’s field. Even as the buildings came out of the ground—an office building, one factory and then another, a large warehouse, and a training center—the local culture of Chengdu was being challenged in the way it thought about safety. In China, construction projects have a traditional algorithm for safety: the millions of Yuan (the local currency) spent in construction was proportionate to the number of deaths resulting from it. This project was different. Not only were there no deaths, there were no injuries more serious than cut fingers. Subcontractors were required to wear hard hats, steel-toed shoes, goggles, and the like, and not everyone liked it. One subcontractor walked off the job believing the safety equipment was too burdensome. About 30 expatriates were brought in to manage the site. They were experienced company employees from four different cultures: Malaysia, Philippines, Costa Rica, and the United States. Most were Malaysian; very few were American. The first local employees hired were support personnel in human resources, accounting, and purchasing. They were trained in their jobs in the way that the company expected them to work. The first Chinese factory workers were part of the Early Involvement Team (EIT), and they were sent to another of the company’s factories to learn the correct processes and behaviors necessary to run the production lines. When the EIT returned, they were to teach the next generation of employees. While this training could be considered just learning the job, it was also a culture change for people who had never worked in a Western high-tech factory. Ramping up this factory to production required that we hire and integrate 100 to 200 people per month; 70% of those hired were recent college graduates. As the OD manager, my job was to set up systems to transmit the culture and develop leaders, managers, and teams. I began with the site’s Vision, Mission, and Guiding Principles. To help the team begin the process, I defined the Vision as “the best we could be,” the Mission as “our marching orders—what the corporation expected of us” and Guiding Principles as “how we make decisions and treat each other.” We utilized two off-site sessions with the “whole system in the room.” Inclusive processes employing exercises and conversations about what was important to people were used to formulate beginning statements. After we had a set of draft statements, I formed small teams of Chinese leaders who debated the elements of Vision, Mission, and Guiding Principles. The teams came to consensus for each statement to ensure that both the English and
Chapter 23 Organization Development in Global Settings
Course: Organizational Development and Change Management (MGMT 416)
University: University of Oregon
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