Control Mechanisms for Multinational Enterprises

Controlling is tool for achieving organizational goals and activities. Control is management’s planning, implementation, evaluation, and correction of performance to ensure that the organization meets its objectives in the short, medium and long terms. In the case of Multinational Enterprises, the top management’s toughest challenge is to balance the company’s global needs with its need to adapt to country-level differences.

Read:  Control in Multinational Enterprises

Some of the mechanisms that Multinational Enterprises  use to help ensure that control is implemented are given below:

1. Corporate Culture

Every company has certain common values that its employees share, expect fellow members to follow. Corporate culture is a form of implicit control mechanism that helps enforce the company’s explicit control mechanisms. Employees conform to company traditions of work commitment, interactions with customers and so on. These are unwritten, informal, but more effective.

But MNEs have more difficulty relying on a corporate culture for control because cultural background of employees differs, exposure level varies, norms differ and so on. To overcome this MNEs promote worldwide corporate culture with the aim of conveying a shared understanding of global goals and norms for reaching those goals, along with the transference of “best practices” from one country to another. Nestle moves management trainees around Europe so that they learn to react like Europeans rather than like any specific nationality. Matsushita brings foreign employees to Japan, partly to train them in the company culture but primarily to get Japanese employees to evolve toward a more global culture. Corporate culture must be diffused throughout the organization through communications, interactions, transfers and commemorative events.

2. Coordinating Methods

The purpose of controls is ensuring that goals are optimally achieved. Any wanting in this regard may be due to non-coordinating attitude of some people, at some places. So, ensuring coordination ensures goal achievement, the goal of control mechanisms. Some of the mechanisms of coordination are:

  • Developing multi-culture teams for building scenarios on how the future may evolve
  • Developing the attitude to listen to different view-points among the corporate  personnel
  • Transferring and rotating organization people across nations and cultures
  • Keeping proximity between global and domestic personnel
  • Establishing liaisons among subsidiaries within the same country/region
  • Developing teams from different countries to work on cross national special projects
  • Placing foreign personnel on the board of directors and top-level committees
  • Giving credit to all concerned for business resulting from cooperative efforts
  • Linking reward systems to both global and local performance

3.  Reports

The basis of control is information. The source of information is reporting systems. Control needs timely, up-to-date and accurate reports. Reports must be frequent and purposeful to assure meeting the MNE’s objectives. Parent concern uses reports to evaluate the performance of subsidiary to reward and rectify, if need be.

Written reports are more important in a global setting than in a domestic context because personal contacts are few and far between. Reports with similar formats, for domestic and global, and for parent and subsidiary facilitates better comparison. The periodicity of reports counts much. These days many a reports on a single day is quite possible; yet at least one report a day is essential so that the headquarters knows the happenings with all subsidiaries. MNEs place more emphasis on evaluating the subsidiary rather than the subsidiary manager, although the subsidiary’s profitability is an important ingredient in the managerial evaluation.

4. Visits to Subsidiaries

Visits to subsidiaries by headquarters people make wonders for their motivational, directive, strategic and signaling effects. It is better members of the corporate staff spend much time visiting subsidiaries for on the spot assessment of ground realities which have great implications for control. However corporate personnel visits to subsidiaries must not be of the boondoggles type. Further, if visits result because of upsets over subsidiary’s performance, subsidiary’s managers may become concealing and/or defensive.

Leave a Reply

Your email address will not be published. Required fields are marked *