The influence of transverse CSR structure on headquarters/subsidiary integration.
| Autor | Cruz, Luciano Barin |
| Cargo | Report |
Introduction
Multinational Corporations [MNCs] develop coordination and control activities (Allaire, 1984; Baliga & Jaeger, 1984; Edstrom & Galbraith, 1977; Elis, 2000; Harzing, 2001; Jaeger, 1983; Kim & Mauborgne, 1991, 1993; Kranias, 2001; Martinez & Jarilo, 1989; Molm, Takahashi, & Peterson, 2003; Nohria & Ghoshal, 1994; Ouchi & Jaeger, 1978; Perlmuter, 1984; Taggart, 1997) in order to improve the integration of their headquarters with different subsidiaries. Considering local characteristics, this is not an easy task. Language, values and traditions are important aspects to consider.
The emergence of the sustainable development debate has introduced an additional concern about headquarters/subsidiary integration: the Corporate Social Responsibility [CSR] discussion. MNCs are required to have explicit CSR strategies not only at the headquarters level, but also at the subsidiary level; thus, the way that MNCs structure their CSR departments is an important element of the headquarters/subsidiary integration process.
In this article, we begin with the following question: What is the influence of the introduction of a centralized/decentralized structure on conducting a CSR strategy in a MNC? Our main objective was to identify the conditions through which the structure of the CSR department influences the CSR strategy of the MNC. As our main contribution, we argue that a transverse CSR structure favors consideration of global and local CSR demands by headquarters and subsidiaries. This process takes place through the mediation of three main elements: information exchange, awareness activities and definition of objectives. We define transverse CSR structure as: (a) the existence of a CSR directory at the Headquarters level and a CSR representative at the Subsidiary level, and (b) the existence of representatives from different areas who participate in meetings or committees to make decisions about CSR strategy.
The remainder of this article is structured as follows. In the first section, we discuss theoretical concepts related to headquarters/subsidiary integration and CSR strategies. In the second section, we present the method, and in the third section we present an analysis of two MNCs' case studies, highlighting the propositions and the framework. Finally, in the last section, we present the discussion and conclusions.
MNCS--Headquarters/Subsidiary Integration
Integration between headquarters and subsidiaries is one of the central topics in the MNC literature (expatriation and employee transfer--Edstrom & Galbraith, 1977; Harzing, 2001; formal and informal transference of information--Kranias, 2001; Martinez & Jarilo, 1989; organizational culture--Allaire, 1984; Baliga & Jaeger, 1984; Jaeger, 1983; Kranias, 2001; Nohria & Ghoshal, 1994; Ouchi & Jaeger, 1978, procedural justice--Elis, 2000; Kim & Mauborgne, 1991, 1993; Molm et al., 2003; Taggart, 1997, and definition of objectives--Elis, 2000; Perlmuter, 1984). Different factors that lead to better integrated relations have been proposed and analyzed, with various implications for the MNCs' strategies.
Considering these factors, Jaeger (1983) highlights some characteristics of the culture control structure. He states that interpersonal interactions are very important in this kind of structure. All of the members of the culture share expectations and performance, and commitments emerge from interpersonal relationships. Feedback is passed from individual to individual and can be very subtle. The culture becomes a rich behavioral guide. In organizations where control is directed by cultural structure, interpersonal relations are more informal (Jaeger, 1983; Kranias, 2000).
Procedural justice is also an important factor in the headquarters/subsidiary integration literature. Kim and Mauborgne (1993) define procedural justice as the extent to which the dynamics of a multinational corporation's strategy-making process are judged to be fair by the top managers of its subsidiaries. They propose five characteristics of procedural justice perceived by a subsidiary's managers: (a) head office management is knowledgeable about the local situation of subsidiary units, (b) two-way communication exists in the MNC's strategy-making process, (c) the head office is fairly consistent in making decisions across subsidiary units, (d) subsidiary units can legitimately challenge the strategic views of the head office, and (e) subsidiary units receive an account of the MNC's final strategic decisions.
The definition of objectives is highlighted by Elis (2000). He states that MNC managers should establish a decision process for strategic objectives. This process should stimulate bilateral communication, information exchange, reliability of information, autonomy and knowledge of local context. Such a decision process could improve the perception of procedural justice.
Expatriation is another important factor. Edstrom and Galbraith (1977) state that the expatriation process can create an international, interpersonal and verbal information network through the MNC. The main reasons provided by Edstrom and Galbraith (1977) include filling important positions in subsidiaries, the development of international managers and the maintenance of structure and decision making.
Martinez and Jarilo (1989) summarize these important factors when listing some formal and informal coordination mechanisms used by MNCs. The formal mechanisms are: departmentalization or grouping of organizational units, shaping the formal structure; centralization or decentralization of decision-making through the hierarchy or formal authority; formalization and standardization (written policies, rules, job descriptions and standard procedures) through instruments such as manuals, charts, etc.; planning (strategic planning, budgeting, functional plans, scheduling, etc.); and output and behavior control (financial performance, technical reports, sales and marketing data, etc.), as well as direct supervision.
The informal mechanisms are: lateral or cross-departmental relations (direct managerial contact, temporary or permanent teams, task forces, committees, integrators and integrative departments); informal communication (personal contacts among managers, management trips, meetings, conferences, transfer of managers, etc.); and socialization (building an organizational culture of known and shared strategic objectives and values by training, transfer of managers, career path management, measurement and reward systems, etc).
Although some authors (Dam & Scholtens, 2008; Levis, 2006) discuss CSR aspects in MNCs, the influence of the structure of a specific CSR department on the MNC CSR strategy and, as a consequence, on headquarters/subsidiary integration, has rarely been addressed. The adoption of a centralized/decentralized structure for the CSR department is one point that requires further investigation.
CSR STRATEGIES
The debate on sustainable development issues has become increasingly important in recent years. Since sustainable development was defined by the Brundtland Report as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (World Commission on Environment and Development, 1987, p. 43), it has gained attention in the agendas of public and private managers.
From this general concept emerged the debate on Corporate Social Responsibility [CSR], which reflects the incorporation of sustainable development into companies' strategies. As defined by the European Commission (2002, p. 5) and recalled by Steurer, Langer, Konrad and Martinuzzi (2005), CSR is "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis".
Many authors (Aguilera, Rupp, Williams, & Ganapathi, 2007; Bansal, 2005; Barin-Cruz, Pedrozo, Bacima, & Queiroz, 2007; Barnett, 2007; Basu & Palazzo, 2008; Mackey, Mackey, & Barney, 2007; Matten & Moon, 2008, among others) have developed arguments and propositions concerning the CSR issue.
Considering the way CSR is structured within firms, Husted (2003) lists three types of CSR governance: (1) outsourcing CSR through corporate charitable contributions, (2) internalizing CSR through in-house projects or (3) using a collaborative model. These types are directly related to the companies' relationships with their stakeholders and to the decision on whether to centralize or decentralize CSR projects within the MNC.
The different kinds of CSR governance can influence ecoinitiatives from the employees (Ramus & Steger, 2000) and the consequent improvement in companies' environmental performance. In this sense, Bansal and Roth (2000) and Bansal (2003) insist on individual action. The former affirms that one of the important aspects to consider with regard to corporate ecological responsibility is the salience and interest of ecological questions for the individuals who compose the company. In other words, to what extent does an ecological question make sense to these individuals, and to what extent will they act regarding to their possible ecological values? The latter affirms that individual interests can be stimulated through education, training and information availability, which allow the individuals to make connections between poverty and environmentally and socially unsustainable practices. The way CSR is structured in the MNC may have an impact on the behavior of individuals inside the firm.
There are other potential impacts of CSR structure. Sometimes, it makes companies change values and create new needs (Fergus & Rowney, 2005). Furthermore, it can encourage environmental matters to be viewed as opportunities rather than threats (Sharma, 2000). These different types of CSR governance...
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