InnovationCo was founded in the second half of the nineteenth century in Germany. It produces fast-moving consumer goods (FMCGs) and offers several thousand products in a variety of international markets. In the early twentieth century, the company founded its first foreign affiliate in Switzerland. In order to expand exports InnovationCo established operations in a further seven European countries before WWII. In the 1950s, production plants were founded in several countries in Europe, South America and Africa and the company started to sell in Asia. Over time, production was increasingly located abroad and the firm became more and more international in the sense of having two thirds of staff located outside Germany at the turn of the millennium.
In its production processes, InnovationCo uses a pragmatic balance of global integration and local responsiveness. Growth had mostly been achieved through the acquisition of foreign and domestic companies. This created a status quo of differentiation, which the firm wanted to shift towards more integration. The key driver to standardise production was seen to be in the increased scale effects and efficiency advantages. The diverse history of its acquired parts, their administrative heritage, different production technologies and customer insights, however, represented a chance to increase worldwide innovation. IHRM standardisation InnovationCo’s staff is widely spread geographically. InnovationCo’s HRM combines a pragmatic use of local advantages and a German approach. InnovationCo’s IHRM was described by its HRM board member as wishing to harmonise the philosophy while adapting to local methods. This integrated philosophy led to standardised international leadership guidelines, created and agreed by all European HR heads. Overall, IHRM principles and broad objectives were highly standardised. In contrast, InnovationCo chose only to cooperate in a few operational areas as these were deemed to be the methods that are best developed and applied locally (see Table 1).
Overall, the degree of integration depended on the perceived importance of the area, its contribution to the company’s success and the determination of the head office to shape worldwide policies according to its wishes. The motto was that it wanted to give local operations freedom. This led to locally idiosyncratic HRM approaches which were tolerated by the head office. IHRM knowledge networking There was tight consultation and cooperation between the German head office and its subsidiaries in terms of IHRM policies and practices. This was facilitated through a conference of all HRM heads and six working meetings of all European HR top executives per year. The aim was to elicit local ideas that may be further developed and then introduced globally. The direction of knowledge exchange was multilateral and IHRM suggestions were derived from any part of the company network. The open and intensive international communication made it hard to impose the head office view against joint resistance from foreign affiliates. In fact, a top HR manager from the head office argued that there was no intention to be the ‘Vatican’ – it was more seen as a heterarchical relationship that would lead to innovation on the road to transnationalism. But this had a disadvantage:
higher knowledge networking did not mean that IHRM cross-border control became easier or more efficient. In the absence of strong international control, more informal, sophisticated integration mechanisms were needed. At least in terms of IHRM, InnovationCo did not achieve the transnationalism it aimed for – instead it had become a cognofederate with some development of local solutions that some HR top managers disliked. For instance, they wanted to have a more integrated training and development policy but had encountered local resistance.
\
Questions
1 Why do you think InnovationCo used the specific standardisation and knowledge networking approach in IHRM? What other options did it have?
2 What are the advantages and disadvantages associated with their IHRM?
3 Considering a worldwide operating organisation that you know well: how does its approach to international HRM differ?
4 What are the possible effects on global careers for managers in InnovationCo? What would international HR careers look like?
