In order to understand why multinational companies are inconsistent with their industrial relations policies we must first understand what they are. They cannot be defined simply as a company that trades between international borders but as company that owns and controls subsidiaries in more than one country (Hollinshead & Leat, Human resource management : an international and comparative perspective on the employment relationship, 1995). However, multinationals are not homogeneous in nature.
They vary in terms of technology, size, management style and their industrial relations and human resource management policies (Bartlett & Ghoshal, 1998). Their choices depend on many factors including host country factors such as legislation, trade unions activity and scale of activity by the multinational the country in question. Another factor is what is known as country of origin effect which focuses on the level by which the multinational has retained its country of origins’ policies (Ti?? selmann, Allen, Barrett, ; McDonald, 2008).
Shareholder influence is another factor which could determine multinationals’ policies within a global and local perspective (Almond, Edwards, & Clark, 2003). Multinationals activity within Europe is of great importance due to its unique single market and relatively uniform legislation (Almond, Edwards, & Clark, 2003). Multinationals, unlike national companies, have the unique property of acting within several industrial relations systems or economies at once (Bean, 1985). Another major influence is the management style of the parent company or simply the management attitude.
This could be anything from an ethnocentric or geocentric view or simply a preference for a more centralised management style (Bartlett & Ghoshal, 1998). The attitudes of management would have a strong influence on the industrial relations policies of a multinational company. As aforementioned multinational companies are not homogeneous in nature and vary in many ways. Perlmutter classified multinationals into four typologies. Each of these would have an effect on how a multinational would choose its policies towards trade unions.
The first of these is the ethnocentric view; this means that a multinationals subsidiary would be influenced mainly by its parent company (Hollinshead, Nichols, & Tailby, Employee Relations, 1999). This means that its industrial relations policies would be relatively similar in whichever country it operates in due to the lack of autonomy granted by its parent (Hollinshead, Nichols, & Tailby, Employee Relations, 1999). These types of multinationals tend to be highly centralised and consistent in all its policies including industrial relations policies (Perlmutter, 1969).
The idea that “this works at home, therefore it must work in your country” perpetuates through this type of organisation (Perlmutter, 1969). An example of this would be Volkswagen when it acquired Lamborghini and shifted its production focus from performance to consistent quality. This would mean that, other things being equal, multinationals could use blanket policies throughout their subsidiaries which could influence aspects of their industrial relations frameworks. Another typology put forward by Perlmutter was that of a Polycentric Multinational.
This type of organisation would treat each subsidiary as an autonomous business unit which would be controlled and managed by local managers (Hollinshead, Nichols, & Tailby, Employee Relations, 1999). However this type of organisation resembles a more paternalistic style of international business unit management. The final decision still lies with its parent (Perlmutter, 1969). This view assumes that local managers have adequate knowledge of the local regulatory systems which would ultimately determine its industrial relations policies (Perlmutter, 1969).
This would point to the incidence of inconsistency in a multinationals industrial relations policy. For example in the case of France where there is a high incidence of union militancy local managers would identify this and be more cautious with its decisions regarding wages (Bamber, Lansbury, & Wailes, 2004). A variation of this typology would be the Regiocentric view (Perlmutter, 1969). This is different from Polycentric in that instead of local managers being answerable to the parent company directly they are answerable to regional managers (Hollinshead, Nichols, & Tailby, Employee Relations, 1999).
An example of this would be the bank HSBC which has adopted the catchphrase “the worlds local bank” which could identify it as a potentially Regiocentric multinational. The most adaptive of Perlmutters typologies is that of a Geocentric multinational. It combines the previous three according to what stage the subsidiary is in (Hollinshead, Nichols, & Tailby, Employee Relations, 1999). Geocentric firms might initially implement a more generic global strategy until its managers have obtained enough experience and information regarding the host countries industrial relations climate (Hollinshead, Nichols, & Tailby, Employee Relations, 1999).
It is not overly influenced more by its home country or host country but rather a mixture of the two (Hollinshead, Nichols, & Tailby, Employee Relations, 1999). This would enable it to be particularly adaptive to its surroundings and hence the multinational as a whole would tend to be more inconsistent with its industrial relations policies. This typology would tend to be more consistent with multinationals which are entering a new market (Perlmutter, 1969). It must be taken into account though that each of these typologies cannot be considered as mutually exclusive (Hollinshead, Nichols, & Tailby, Employee Relations, 1999).
Each one is often seen in multinationals as operating on such a global scale requires a high level of adaptability and therefore inconsistency in industrial relations policies. Bartlett and Ghoshal put forward another set of typologies that could classify multinationals. The first of these was the multinational; these types of organisations tend to be more decentralised and do not tend to rely on its parent (Bartlett & Ghoshal, 1998). These are also sometimes known as ‘multidomestic’ organisations as they tend to be more ad hoc in nature (Bartlett & Ghoshal, 1998).
This could lead to the organisation as a whole being inconsistent with its industrial relations policies due to local autonomy. The second typology is that of the Global organisation. These tend to resemble the Ethnocentric view mentioned earlier as they tend to have a more centralised and global approach to markets (Bartlett & Ghoshal, 1998). This would mean there would be a more generic view of industrial relations. The third typology is the International form of organisation.
These tend to be more federal in structure and resemble Perlmutter’s Polycentric typology (Bartlett ; Ghoshal, 1998). The parent simply coordinates rather than forcing policies on its subsidiary meaning that there would be some room for change. This would lead to a more adaptive organisation that could change in accordance with its surroundings. The fourth and final typology put forward would be that of a Transnational organisation which resembles Perlmutter’s Geocentric view of a multinational which is a combination and the most adaptive out of the four.