Cultural and Bureaucratic Control in MNEs: The Role of Expatriate Performance Management.
Human capital (Management)
Management (International aspects)
Organizational change (Evaluation)
Interorganizational relations (Evaluation)
Fenwick, Marilyn S.
De Cieri, Helen L.
Welch, Denice E.
Pub Date:
Name: Management International Review Publisher: Gabler Verlag Audience: Trade Format: Magazine/Journal Subject: Business; Business, international Copyright: COPYRIGHT 1999 Gabler Verlag ISSN: 0938-8249
Date: Oct 15, 1999
Geographic Scope: United States Geographic Code: 1USA United States

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Organizational control is an important component of the managerial function: it is responsible for ensuring that the organization's strategic goals are met and that deviations from standards are corrected for effective performance outcomes (Jaeger/Baliga 1985). For managers in multinational enterprises (MNEs), control is a complicated balancing act. On the one hand, close monitoring from the centre is required to ensure minimum levels of duplication, wastage and ineffective processes. On the other hand, a degree of autonomy is necessary at the subsidiary level to allow for local market flexibility and customer responsiveness. The MNE control function must therefore cope with the tensions inherent in the simultaneous need for global integration and local sensitivity in an increasingly diverse and complex international business environment. (Bartlett/Ghoshal 1987, Doz/Prahalad 1984). How to achieve the required 'control mix' (that is, the level of centralization along with appropriate control mechanisms) remains a perennial MNE challenge.

It would seem that, in practice, MNEs attempt to achieve an optimal mix, with bureaucratic (formal) control supported by cultural (informal) control (Pucik/Katz 1986). Some authors suggest that the way control is achieved in practice appears to be changing from a bias towards direct mechanisms to reliance on more informal methods, such as staff transfers(1) (see, for example, Martinez/Jarillo 1991, Roth 1995, Torbiorn 1994). Given recent emphasis on devolution of responsibility, cultural control becomes an important supporting mechanism (see Marschan/Welch/Welch 1996). As the trend towards indirect methods become more widespread, issues surrounding MNE control over behavior and outcomes need to be re-examined. Of particular concern is the feasibility of corporate culture as an MNE control mechanism, given its reliance on members' internalization of shared values and the notion of self control (see for example, Ghoshal/Bartlett 1995). As Welch and Welch (1997, p. 680) argue, "despite what overt behavioral displays and verbal utterances might indicate, people are bound to differ in the extent to which they internalize the company's values and are thereby committed to upholding them". Indeed, a review of extant literature reveals that aspects related to MNE cultural control, such as the use of expatriate assignments, still rest on untested assumptions (Nasif/Al-Daeaj/Ebrahimi/Thibodeaux 1991, Redding 1994).

Further, it would seem that performance management, integrated with other management policies and practices is an essential, complementary bureaucratic control mechanism in a strategy of cultural control (Evans 1992, Gregersen/Hite/Black 1996, Harvey 1997). There has been substantial research on individual and organizational control and on organizational commitment (for example, Child 1973, Mathieu/Zajac 1990, Mowday/Porter/Steers 1982, Palich/Hom/Griffeth 1995). However, little has been done to explore the way in which the interaction between individual and organizational policies and practices occurs, and the desired performance outcomes are achieved. Nor has the role of performance management been discussed as part of the process of cultural control. Yet, to restate Jaeger and Baliga (1985, p. 118), "control systems do not exist in 'isolation' in the organization. Rather, they are embedded in an overall organizational system which fits with the control system being used." Given the pivotal role played by the human resource function in the overall control process, there is a need for fit with the HRM system(2), specifically in terms of the performance management activity. As expatriate assignments are assumed to play a key role in MNE cultural control, one could expect that how their performance is managed would be an important factor in terms of MNE outcomes.

Performance management in MNEs is recognized as a significant challenge for researchers and practitioners. In this article, we synthesize research from the fields of psychology, sociology and management in order to develop an integrated approach to performance management in MNEs. A theoretical framework depicting key dimensions of the control concept in the MNE performance management context guides our discussion as we attempt to clarify underlying assumptions, and identify relevant constructs. As we focus on the use of expatriate assignments as a key dimension of MNE cultural control, we also address related gaps in the expatriate management literature through an exploration of the contribution that an effective performance management system can make to the MNE's control balance dilemma. The article concludes with suggestions for future research.

The MNE Performance Control Context

in the control process, according to Ouchi (1977), there are two phenomena that can be monitored and evaluated: behavior and output. In other words, it is possible to design and implement control mechanisms that measure and monitor performance. This is particularly pertinent for the MNE, in its quest for coordination, consistency and compliance of behavior and outcomes throughout its global operations: at headquarters and at each subsidiary level. As mentioned earlier, the challenge is how to do this in an effective way. Pucik (1985) suggests five major features summarize the MNE performance control challenge. First, MNE management must focus simultaneously on global performance (the 'whole' of the MNE) and subsidiary or regional performance (the 'parts'). Second, performance data obtained from one subsidiary/region may not be comparable with that obtained from another due to local differences. The third feature is that separation by time and distance further complicates judgments about the degree of fit between subsidiary performance and the long-term strategy of the MNE. Fourth, success may be defined differently according to the economic or political volatility of the system in which the subsidiaries operate. Finally, the level of market maturity may vary between each subsidiary and the parent organization and more time may be required to generate results in some subsidiaries. Obviously, as illustrated in Figure 1, how the MNE responds to these interrelated features of its performance control context will be partly determined by its control mechanisms and the way in which these are utilized in the quest for desired outcomes: consistent individual and subsidiary performance.

The MNE Control Mix

It is generally accepted that the object of control is to measure and monitor performance so that behaviors and outputs are aligned with the organization's goals. The MNE management issue is the balance between cultural and 'bureaucratic' control mechanisms, as shown in Figure 1. The attraction to MNEs of cultural control as a mechanism is that direct supervision can be tempered with self-management, as the desired behavior and output is guided and controlled by shared values regarding performance. It is still necessary, though, to have some level of bureaucratic control in the form of rules, regulations and procedures, budgets, reporting systems, and formal structure. The issue is "how much". For example, formal, regular reporting requirements may be perceived by subsidiary staff as onerous, even unnecessary, in a climate of espoused self-management. However, despite the body of literature on MNE control, little has been said about how the two forms of control interact in the management of individual and organizational performance. In this section, we attempt to delineate cultural and bureaucratic control in order to explore this interface, and the likely outcomes in terms of individual and subsidiary performance.

Cultural Control Via Expatriate Assignments

As mentioned previously, a common approach for MNE management to achieve its desired level of organizational and individual performance is through increasing emphasis on cultural control, defined as a combination of personal control and control by socialization (Baliga/Jaeger 1984). Proponents of this view argue that self-managed performance will contribute to overall MNE performance by mitigating the control problems of coordination, consistency and compliance inherent in MNEs. For example, Bartlett and Ghoshal (1987, 1992) identified a clear, shared understanding of the company's mission and objectives; the visible behavior and public actions of senior management; and the organization's personnel policies, practices, and systems as three important tools affecting the culture of the organization. In their concept of a "differentiated network structure", network relationships are characterized by a shared superordinate vision, individual self-control, and the capacity to negotiate individual differences.

MNE staff transfers have long been recognized to serve as a control mechanism in MNEs(3). For example, Edstrom and Galbraith (1977) hypothesized that managers in some organizations are transferred in order to develop a control process based on socialization: "the process by which an individual comes to appreciate the values, abilities, expected behaviors, and social knowledge for assuming an organizational role and for participating as an organization member" (Lois, in McDonald/Gantz 1991, p. 72). Socialization of staff provides what Bartlett and Ghoshal (1987) termed the "coordination glue" that binds the organization together.

The assumption here is that expatriates, highly committed to headquarters' way of doing things, will inculcate subsidiary staff with the required organizational values and practices. There are qualifications to this assumption. Naturally, expatriates themselves must first be socialized before they can socialize others. Therefore, one could assume that a MNE pursuing a cultural control strategy must have available a pool of suitably socialized staff, though Welch and Welch (1997) question the degree to which a person needs to be socialized in order to be effective in ensuring the compliant behavior of others. As well, socialization is a time-consuming process of transforming newcomers to insiders (Louis 1980). A further limitation is that socialization must be ongoing as MNE management adapts strategies and practices in anticipation of, or response to, changes in their exogenous and endogenous environments (Schuler et al. 1993), as indicated in Figure 1 by the use of bi-directional arrows between the boxes 'cultural control', 'control mix' and 'MNE performance control context'.

Our review of relevant literature also indicates that the role played by expatriate assignments has yet to be rigorously tested, especially in mature, geographically dispersed MNEs (see, for example, Kamoche 1997). Therefore, in order to understand how and to what extent expatriate assignments contribute to the control mix, it is necessary to articulate and synthesize several previously unstated assumptions. As shown in Figure 1, the use of expatriate assignments as a mechanism for enhancing cultural control implies reliance, first, upon the development of shared values and organizational knowledge through the socialization of the expatriate. Second, it relies upon a high level of expatriate commitment to the MNE. Third, it relies upon the expatriate's ability and willingness to diffuse the requisite values to others in the organization. These underlying assumptions are discussed below.

Shared Values

Given the increased diversity of values inherent in international operations, an examination of the literature focusing on the extent to which individuals can and do adopt and share values is fundamental to any discussion of cultural control. A value has been defined as a lasting belief that "a specific mode of conduct or end-state of existence is personally or sociably preferable to an opposite or converse mode of conduct or end-state of existence" (Rokeach 1973, p. 5). Strong organizational value systems have often been linked with higher levels of employee commitment through internalization and identification (Schein 1992, Zeffane 1994). At the same time, inconsistencies in values are allowed for, and these may not necessarily undermine or prevent cultural control (Schultz 1990, cited in Stahlberg 1992).

Unstated assumptions concerning the sharing of values are that this aspect of organizational culture can be managed, and that individuals can be infused with organizational values. The extent to which the value-sharing aspect of organizational culture can be managed is related to whether culture is viewed as something an organization is or something it has. Practices may be seen as one aspect of the 'culture' Gestalt - something that an organizational culture has - and therefore, as somewhat manageable (Hofstede 1992). We suggest this implies that behavior can be controlled through socialization in the workplace, provided that the requirement to engage in appropriate organizational practices falls within members' zones of indifference. The zone of indifference is the range of contributions an individual is willing to make without subjecting these to critical evaluation - that is, to which the person is indifferent. Practices falling into the zone are agreed to, those falling outside the zone may or may not be agreed to, or may precipitate exit from the organization (Barnard 1936). The distinction between shared values and shared practices is therefore an important one, as it influences the members' zone of indifference. For example, a commitment to shared values may require a broader zone of indifference, as it effectively requires agreement to more than work practices.

The issue here is whether expatriates must adopt the MNE's values in order to facilitate cultural control. It may be that shared perceptions of daily practices may suffice, provided that observable behavior is consistent with corporate values (such as ethical behavior), and at a consistent level and standard of activity. The key word here is observable. Behavior can be observed, whereas shared values are not directly observable by outsiders and are, therefore, uncontrollable (Hofstede 1992). Contemporary performance management systems, with their focus on behaviorally-based approaches, perhaps are an indication that organizations are cognizant of this difficulty.

Organizational Commitment and the Psychological Contract

Organizational commitment has been defined as: "the relative strength of an individual's identification with and involvement in a particular organization" (Mowday/Porter/Steers 1982, p. 27). A widely held view in international HRM literature has been that expatriate managers are more committed to the MNE than host country nationals. In a sense, this is a logical belief given the role that expatriate assignments are assumed to play in MNE cultural control. However, a review of extant literature indicates a paucity of studies that examine expatriate commitment. One of the few studies in this area investigated loyalty of expatriate managers compared with that of HCNs and found no significant difference between the two groups (Banai/Reisel 1993). However, the concern here is again the degree to which expatriates need to be committed to the MNE in order to perform as a tool for cultural control. In addition, we question how effective expatriates are, or need to be, in generating commitment to the MNE within the subsidiary? From a research perspective, what complicates the issue of organizational commitment in the MNE context is that the constructs 'commitment' and 'loyalty' may be culturally determined and thus have different behavioral outcomes across cultures (see, for example, Baligh 1994, Mathieu/Zajac 1990, Palich et al. 1995, Randall 1993, Rokeach 1973).

The development of organizational commitment is related to the notion of a psychological contract. This term is used to describe an employee's belief regarding the terms and conditions of a reciprocal exchange agreement between that employee and the employer (Robinson/Rousseau 1994). Psychological contracts may be transactional (based on economic exchange theory) or relational (based on social exchange theory). The latter form has been linked to organizational commitment (Rousseau 1989, 1995).

Psychological contracts recognize that most people seek to balance their contributions (what they put into an organization) and their inducements (what they get from the organization in return). "Within the boundaries of the psychological contract therefore, employees will agree to do many things in and for the organization because they think they should" (Schermerhorn/Hunt/Osborn 1982, p. 480). This implies that adherence to organizational practices, an essential outcome of cultural control, requires the individual to operate within a relatively narrow zone of indifference (Baliga/Jaeger 1984). Interestingly, while psychological contracts are by definition subjective and therefore different for each individual, employers may reflect organizational values, goals and objectives during the negotiation process. Thus, a certain degree of standardization can often be found (Shore/Tetrick 1994). However, the subjective nature of the psychological contract makes it highly susceptible to perceived violation, and may act as a moderator between expatriates and commitment to their organizations (Guzzo/Noonan/Elfron 1994). Yet, while the concept of the psychological contract is widely known in organizational psychology and HRM fields, there has been little investigation of its role in terms of cultural control, particularly in relation to the MNE. One of the unanswered questions is, what are the control implications of perceived violations of the psychological contract between the expatriate and the MNE?

The above discussion highlights the potential of, and limitations to, cultural control via expatriate assignments. On balance, it would appear that socialization is the motif for cultural control in MNEs, representing the individual-organizational interface. In Figure l, we indicate this through a shaded box depicting socialization as part of the MNE's internal environment. We consider it as both the outflow of the control mix and a key driver of expatriate and subsidiary performance, as it is the process by which expatriates, themselves socialized to the organization's ways of doing things, facilitate control throughout the MNE. It is recognized that consistent performance across cultural and functional boundaries might be difficult to achieve in organizations opting for cultural control (Meyer/Allen/Gellatly 1990). Further research into the nature of MNE organizational commitment, how it is formed, and its relationship with performance is indicated.

Performance Management as a Bureaucratic Control Mechanism

Considering the complexity surrounding the use of cultural control, the MNE is likely to find that expatriate socialization prior to the international assignment may not be sufficient to maintain the necessary level of commitment. In practice, some MNEs limit the duration of an expatriate assignment to three years to minimize the risk of the expatriate losing 'attachment' to headquarters concerns. Others use home visits as a way of giving the expatriate a "culture fix" (Welch/Fenwick/De Cieri 1994, p. 485). A more formal strategic alternative would be to introduce bureaucratic control that reinforces socialization and commitment.

Over the last decade, there has been growth in the number of scholars and practitioners who advocate the incorporation of human resources into the strategic formulation process. This view has been extended to the international arena, so that there is now a body of literature emerging around the theme of strategic international human resource management (SIHRM), defined as MNE strategies and practices that are parallel to the relationship between HRM and strategy in domestic (single-country) organizations (Schuler et al. 1993). In the context of MNE control, it is expected that the development of high commitment levels would be influenced by senior management's acknowledgement of organizational commitment as a critical variable in terms of global strategy. We further argue that the implementation of human resource management practices that consider individual employees' different needs and preferences would be worthwhile, given recent HRM research exploring the notion of fit between strategy, HRM and organizational outcomes (Becker/Gerhart 1996, Wright/Sherman 1998). A systematic and pervasive HRM program, rather than the addition of random interventions such as a new benefit or a new training program, can best influence commitment levels (Ogilvie 1986).

Mindful that the control process is predominantly 'people treatment' (that is, screening through selection; training staff in values as well as skills, and monitoring behavior and output - Ouchi 1977), we suggest the use of performance management as a viable component of bureaucratic control (as [ILLUSTRATION FOR FIGURE 1 OMITTED] shows). Performance management, as an element of SIHRM, is the process of transforming strategic objectives into action, monitoring progress, and rewarding results (Fenwick/De Cieri 1995, Hitchcock 1992). Definitions of performance management as a holistic, or integrated, strategic approach, thus extending the concept beyond performance appraisal, are now in common use. For example,

a process for establishing shared understanding about what is to be achieved, and approach to managing and developing people in a way which increases the probability that it will be achieved in the short and longer term (Armstrong 1994, p. 23).

Performance management reflects several aspects of socialization. As Louis argues (1980, p. 231): "Ideally, during socialization, especially during the encounter stage, the newcomer's role-relevant abilities are identified, others' expectations are conveyed and negotiated, and incentives and sanctions are clarified, with the aim of enhancing motivation to perform". Such content areas are contained in a performance management system.

The characteristics of an HRM performance management system are: links to the organizational strategy; setting individual performance goals; providing feedback on progress towards goal achievement; providing opportunities for improvement through appraisal feedback and training and development; and, links between results and rewards (Armstrong 1994, Bevan/Thompson 1991, Hitchcock 1992). Each of these characteristics, and attendant dilemmas concerning implementation in MNEs, is briefly outlined below.

Links with MNE Strategy

The necessity for strategy to be clearly articulated and communicated throughout the organization as an ongoing activity has been emphasized in management literature (see for example, Mintzberg 1994, Wright/McMahan 1992). It is regarded as a critical aspect in developing the shared vision of the organization's objectives. Communicating strategy in MNEs is more complicated due to their competitive arena and the latitude, inherent in their strategies, to respond to competition differently, both strategically and organizationally (Bartlett/Ghoshal 1992, Schuler et al. 1993). Even with recent advances in information technology, face-to-face communication is still necessary to assure and monitor understanding of HRM strategy as part of the MNE strategy. Language is an important dimension. The ability to diffuse values depends on communication skills, including the ability to communicate in the language of the subsidiary and the common company language (Marschan/Welch/Welch 1997).

Setting Individual Performance Goals

This process should occur with extensive employee involvement and in the context of both the immediate position and the whole organization (Bevan/Thompson 1991, Hitchcock 1992). The identification of relevant, practical and reliable performance criteria upon which performance goals are based is difficult enough in domestic organizations. Therefore, performance criteria in MNEs must recognize the constraints on strategy-level performance appraisal and management, as shown in Figure 1. The emerging literature in SIHRM stresses the need for both quantitative and qualitative criteria, and a behaviorally-based approach is widely supported (see Kaplan/Norton 1992, Schuler et al. 1991). We reiterate that such a technique reinforces behaviors rather than values.

Providing Feedback on Progress Towards Goal Achievement

Feedback provided through the performance appraisal activity is central to performance management and to socialization. It has two distinct purposes, evaluation and development (Cascio 1991). In addition to generating a consistent set of performance standards, better performance appraisal systems can enhance productivity by giving ongoing feedback (Day 1989) and by assessing performance and not personal characteristics (Fox 1987). The extent to which the process is interpreted with distrust or as an insult differs across cultures (Dowling et al. 1999, Imada/Van Slyke/Hendrick 1985).

In addition to the international environment and performance criteria that have been discussed above, great physical distance, which often exists between subsidiaries and the parent organization, can result in lack of meaningful, effective observation, support and supervision of expatriates. Opportunities for thorough headquarters performance reviews may also be minimal due to both distance and time-zone differentials (Dowling et al. 1999, Harvey 1997). Failure to provide such feedback might violate the psychological contract between the expatriate and the MNE, in addition to preventing corrective action in the event of ineffective performance. These problems highlight the difference between domestic and international performance management in terms of being able to deliver timely, relevant, and therefore effective, feedback (Cascio 1991, Harvey 1997). Issues of who conducts the appraisals, how and based on what data, remain high on the research agenda, reflected in recent developments such as 360-degree feedback and competency-based appraisal techniques (see for example, Albright/Levy 1995, London/Smither 1995, Murphy/Cleveland 1995). Again, the emphasis is on behavior, not values.

Providing Opportunities for Improvement Through Appraisal Feedback and Training and Development

As previously mentioned, performance appraisal feedback has a developmental purpose. A great deal of training and development has focused on developing expatriates' ability to adjust to a new culture. Certainly, cross-cultural adjustment has been shown to influence performance (see for example, Black/Mendenhall 1991, Mendenhall/Oddou 1985, Tung 1982). However, providing opportunities for improvement through appraisal feedback and T/D is an ongoing performance management activity aimed at continuous improvement and socialization to desired organizational practices. In the context of socialization and support, ongoing access to training and development for expatriates appears necessary to manage performance both within headquarters and in the overseas location. This is particularly relevant when organizational development requires 're-socialization' as policies and practices change. Again, the role of such re-socialization is questioned by Welch and Welch (1997) who comment that it may be psychologically difficult for those who are 'true believers' to modify or alter value systems.

A significant control issue in international performance management is the issue of conflicting expatriate loyalty to the subsidiary and headquarters. While this may also be identified as an issue between divisions and headquarters of a large domestic organization, again the broader perspective, scope and activities required, and greater risk exposure in the international environment differentiate domestic training and development from that in MNEs. It has been suggested that training and development may also facilitate the development of dual allegiance in expatriates, thus ensuring balanced bonds with both headquarters and subsidiary (Black/Gregersen/Mendenhall 1992).

Links Between Results and Rewards

Linking expatriate rewards to performance has been problematic due to difficulties in establishing valid and reliable performance criteria, as outlined earlier. For MNEs, additional problems in rewarding expatriates have concerned internal and external equity; taxation and the cost of allowances; relocation; housing and education (De Cieri/Fenwick 1998, Harvey 1993). An important performance management requirement for MNEs which exemplifies the difference between intra- and inter-national performance management is the need to ensure that individuals are not financially disadvantaged by accepting an international assignment, moving to another location or re-entering headquarters (Crandall/Phelps 1991, Dowling et al. 1999). In terms of performance management, the major concern about this imperative is that there is often no link to expatriate performance.

The above discussion of performance management as a bureaucratic control in MNEs has highlighted particular examples of constraints on this activity. The inter-relationship between bureaucratic control and the MNE's performance control context is shown in Figure 1 by bi-directional arrows. Despite the constraints, we have been able to argue that an appropriate MNE control mix of cultural control, complemented by performance management as a bureaucratic control, is feasible. In relation to the individual-organizational interface shown in Figure 1, we have emphasized that performance management is a socialization mechanism within MNEs - a theme omitted from other expatriate management literature which largely focuses on the staffing and training and development functions, with regard to expatriate adjustment (see, for example, Katz/Seifer 1996).

Desired Outcomes of Individual and Subsidiary Performance

The view that positive organizational commitment of individuals tends to improve organizational effectiveness and efficiency has been one of the most contentious in this field (Zeffane 1994). However, Naumann has concluded that, at least, the contention that performance leads to satisfaction has generally been supported in research. "Therefore, an individual's performance level is generally thought to be positively associated with satisfaction, commitment and involvement" (1992, p. 512). In their discussion of the relationship between organizational commitment and organizational adaptability, Angle and Perry (1981) suggested that there is some ideal or optimal level of commitment required for effectiveness. That is, enough commitment to elicit necessary employee behaviors beyond explicit role requirements, but not so much as to provoke the hiatus of individual judgment in favor of organizational principles.

In terms of expatriate management, this optimal level has been identified as "dual allegiance"; a simultaneous, balanced commitment to both the headquarters and the subsidiary (Black et al. 1992). However, we believe that this raises the question of whether dual allegiance is desirable and or achievable in all circumstances. Black et al.'s (1992) view seems to conflict with the notion of cultural control that implies commitment to the headquarters as the priority; the tension typified as the 'think global - act local dilemma'. However, from a control perspective, the concept of dual allegiance does not preclude adherence to headquarters' policies and practices or sensitivity to local conditions. Rather, the critical issue is whether the expatriate can successfully generate commitment to organizational values and practices that will contribute to the desired subsidiary outcomes.

A related point is that, in MNEs applying cultural control, the performance management concept might require broadening to include recruitment and selection. When hiring, an organization may select members on the basis of skills and existing personal work-related values - that is, buying values; or it may hire people and attempt to socialize them towards a set of required values - that is, making values (McDonald/Gandz 1992). In this way, HRM managers play a critical role as 'gatekeepers' for the organizational culture. They may consciously maintain hero models for the organization which are then reflected in HRM practices such as recruitment and selection. Selecting those with the 'right' values, or the potential to acquire those values, is a strategy for preserving the culture (Hofstede 1992). Again, the process is not unidirectional - an individual may also select an organization on the basis of its perceived 'right' values. Whether a 'make-values' or 'buy values' approach is adopted during the selection process, an organization requires some degree of socialization, and training programs may be used to achieve this. Recruitment and selection is only one aspect of the HR staffing role. Placement of staff is also a factor - that is, matching individuals, skills and job requirements - and this is critical when the organization has diverse operations in different countries.

Concluding Remarks and Implications for Future Research

The central argument of this article has stemmed from a suggestion in extant literature of a trend towards increasing emphasis on informal control mechanisms within MNEs, as a means of dealing with fluctuating external environments, movement into emerging markets, changing organizational forms and increasing diversity. The resultant realignment of the control mix, it seems, aims provide a more flexible way to achieve the desired outcomes throughout their global operations, in terms of consistency, coordination and compliance of behavior and outcomes. We conclude, however, that a reliance on cultural control, particularly one that places the use of expatriate assignments in a primary role, should be tempered with an integrated performance management system.

Throughout the article, we suggest a number of areas requiring attention in future research for two reasons. The first, in order to make clear previously unstated assumptions concerning the role of expatriates in the implementation of cultural control. The second reason is to propose one way in which SIHRM socializes organizational members in order to build commitment and control. Also, we are cognizant that the relationships between the dimensions and constructs presented in our framework, require further investigation. For example, research in progress aims to determine how, specifically, performance management might facilitate an appropriate mix of cultural and bureaucratic control in MNEs. It involves case studies of Australian MNEs which will generate data to exploring the following broad research questions:

1. To what extent is cultural control explicit in the control strategies of MNEs?

2. What is the role of IHRM policies and practices such as performance management in the control mix of MNEs?

3. How is cultural control achieved and maintained in MNEs?

Future research might also explore the implications for expatriates and their career development of meeting the performance management expectations of both headquarters and host country superiors. In addition, while management literature advocates the desirability of shared values, the definitions of socialization and performance management do not address this. Rather, all that seems necessary is a shared understanding or appreciation of the values related to successful performance in their roles as organization members. The distinction has important implications for empirical research into MNE cultural control as observable behaviors are more readily identified and measured than values. A further issue concerns the extent to which realignment of expatriate performance goals and objectives with the type of performance management system might be necessary to eliminate tension between a values-focused desired performance outcome and a behaviorally-based approach to observation and measurement.

In developing the conceptual framework presented in this article, we have tried to draw attention to the complex yet interrelated dimensions of the formal (bureaucratic) and informal (cultural) control mechanisms available to MNEs. Our articulation of hitherto unexplored assumptions upon which much of the MNE control literature rests is an important first step in examining the MNE control mix and its link to individual and subsidiary outcomes.


1 Following the bulk of the extant IHRM literature, we use 'staff transfers' as interchangeable with 'expatriate assignments'.

2 While we acknowledge its relevance, it is beyond the scope of this paper to further develop the somewhat contentious "HR-strategy fit" aspect of MNE control. For discussion of the issue, see for example, Lengnick-Hall/Lengnick-Hall (1988), Wright/Sherman (1998) and Wright/Snell (1998).

3 We recognize the range of expatriates to include parent country nationals, as well as host country nationals transferred to headquarters, and to other subsidiaries as third country nationals.


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