Global Issues in Management
Although the potentially lower costs of offshoring parts of an organization's operations can be an attractive proposition, such a venture has associated risks, as well as opportunities. Management is the key to managing the risks and leveraging the opportunities in offshore operations. In addition to expatriate managers who oversee the day-to-day functioning of offshore operation, it is also important to hire global managers who operate across national lines. These individuals can help smooth the entry of the organization into the new culture and help the organization accommodate the needs of the host country. Working in a foreign culture under a different set of laws and regulations brings with it new concerns in the host county. Offshore operations can also exacerbate existing management concerns such as security issues and quality control, or even bring new domestic concerns including problems with public opinion. All such considerations need to be taken into account as part of a cost/benefit tradeoff analysis before making the decision to globalize the organization.
Keywords Comparative Management; Culture; Culture Shock; Management by Walking Around (MBWA); Management Style; Market Share; Organizational Culture; Risk
International Business: Global Issues in Management
It is the goal of most businesses not only to survive but to thrive. To support this goal, most businesses typically look for better ways to reduce costs and increase income. Sometimes, this may be through more efficient production processes and practices or even through reducing the size of the work force. At other times, it is through the practice of sustainable innovation; the process by which an organization systematically analyzes various indicators of customer needs and industry trends and leverages these into cutting edge products and services that allow them to maintain their competitive edge and become leaders in the industry. In other situations, reorganization may be the key to performance improvement, and employees may be arranged into teams that can produce synergy and develop products or services that they could not have done alone. Alternatively, the organization may emphasize quality as a way to pull its workforce together and earn repeat sales from its customer base. The solutions to this problem are as varied as the organizations that search for them.
Increasingly, among the solutions considered by many organizations are the options of outsourcing and offshoring. Outsourcing is the practice of contracting work that could be performed by the organization in-house to another company. This is typically done to reduce the costs related to putting in an infrastructure for the stated function or process; to reduce hiring, selection, training, and other human resources costs associated with having additional employees on the payroll to do the new job; or because production or personnel costs are lower in the contract organization. Sometimes, this practice means that the work takes place on foreign soil where costs can be significantly lower. When this is done, the practice is called offshoring, and refers to any of the organization's activities that take place in another country. This is a particularly attractive option when labor rates in a foreign country are one-tenth of domestic labor rates, and the concomitant employee credentials appear — at least on paper — to be the same as those of the domestic workforce.
The process of globalization, however, is not without its drawbacks. Even organizations whose operations are spread across a single nation have learned that managing under such circumstances can be more of a challenge than if all the employees were under one roof. Despite the proliferation of high tech methods of communication such as satellite videoconferencing, encrypted e-mail, and electronic white boards, communication flow in management at a distance is not nearly as good as in management by walking around. When the organization's workforce is global, however, this situation becomes even more complicated. Even if the employees in the foreign operation or branch speak the same language as those in the organization's home country, if it is not the primary language for the international workers, communication can be a tedious process. Nuances of idiom, dialect, and vocabulary can be easily missed, resulting in misunderstandings on a personal level and inefficient processes or even customer dissatisfaction on a higher level. In addition, differences in culture can color communications, subtly nuancing the text from the literal word. For example, in order to help others save face, Japanese business persons may say one thing (e.g., "I will give your proposal serious consideration") while displaying body language that says just the opposite. Without understanding these intricacies in cross-cultural communication, getting one's message across can become more difficult than usual.
Other differences in culture — including the basic shared assumptions, beliefs, norms, and values consciously or unconsciously held by the various national groups — can also affect communication. In addition, such differences often result in culture shock for expatriate managers (i.e., managers from the home country who work in the host country) as a result of their immersion in the foreign culture. This includes such symptoms as homesickness, irritability, hostility toward local nationals, and ineffectiveness at work, all of which can negatively impact not only the expatriate's effectiveness at work but his or her mental and physical health as well. Differences in the assumptions, values, and other aspects of culture also means that different management styles are often required in operations in host countries than are required at home. Not understanding the differences resulting from issues of comparative management can lead to managerial ineffectiveness, poor management-employee relations, and decreased organizational effectiveness.
Offshoring operations to different countries also means that one must deal with different legal, political, and economic systems. Any of these factors may restrict the way that the organization is allowed to conduct business in the host country, and management needs to understand these new parameters and learn how to work effectively within them. For example, in France, employees are legally allowed to work up to a restricted maximum number of hours per week. On the other hand, the ability of the employer to fire employees is severely restricted. In European Union (EU) countries, organizations are required to "inform and consult" employees on an ongoing basis on various actions that affect employees. Other issues such as minimum wage, maximum work hours per week, and minimum number of holidays can also vary from country to country.
Globalizing an organization, however, requires more than merely setup or contracting for cloned operations in another country. Global management needs to take into account the cultural, legal, and other constraints of the host country and develop or adapt a local management style so that the employees in the host country can be successfully led and become productive members of the larger organizational family while still recognizing the individual needs attendant with the cultural and legal requirements of the host country. To do this, special types of managers are required.
Although good expatriate managers are essential for keeping the international organization competitive within the global marketplace, another level of manager is also necessary: the global manager. These individuals are top managers who operate across national lines. Global managers need the ability to watch trends both at home and abroad in order to proactively deal with potential problems within the organization as well as to spot opportunities for the organization to increase its market share or take or maintain the leading edge in the industry. In addition, global managers need to be closely attuned to the needs of the customer, both in the home country and in the host country, so that the potential gains resulting from offshored work are not offset by losses caused by decreased customer satisfaction. This ability to think and act both locally and globally requires a special kind of manager.
The most common characteristic cited as a requirement for a good global manager is a "global mindset." This has been variously defined as the ability to conceptualize complex geopolitical and cultural forces and their impact on...
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