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1. What are the strengths and weaknesses of the decentralised management

approach adopted by EBMC?

EBMC's decentralised management approach offers more control and autonomy to each
individual organisation within the MNE. This decentralised management approach is
fundamental to EBMC as it offers separate divisions the flexibility required to operate in the
locally based building materials industry. Through this local approach EBMC gain advantages of
local context sensitivity achieved through adapting to the system of employment relations
concerned in each specific region (Edwards and Zhang, 2008). Decentralised management also
facilitates development and retention of high calibre local employees, many of whom were
acquired through EBMC's international strategy of cross border acquisition. Their retention is
essential as any of these acquired businesses possess strong local staff who are sensitive to local
markets and cultural contexts. In terms of human relations this is highly advantageous. It is
commonly argued that HR issues are more effectively handled by local experts rather than their
counterparts in the HQ who may be discordant with cultural nuances of a particular region
(Edwards and Zhang, 2008). Perceptive local management with the ability to motivate and drive
performance may be the difference between success and failure in the growing emerging markets
in which EBMC wish to expand their operations. Effective management is essential in these
markets is paramount in order to retain high calibre employees as they are actively pursued by
MNE's and local organisations (Collings et al. 2007; Teagarden et al. 2008).

Despite the advantages of EBMC's decentralised approach weaknesses do exist. By focusing

on a decentralisation policy EBMC may run the risk of a narrow pool of managers bereft of
international experience. Increasing evidence highlights the significant benefits of using foreign
country nationals in staffing (Gong et al., 2006). (Collings et al., 2008) argue that third country
nationals provide an ideal opportunity for MNE's to enlarge their managerial pool with
experiences to undertake international assignments. Furthermore, Scullion and Starkey (2000)
suggest that the ability of the corporate HR function to influence management style or enforce
common personnel policies was weakened by the process of decentralization and diversification.
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This may prove troublesome for EBMC as they increase their investment in riskier emerging
markets. Operations in these risky markets will need to be carefully monitored by EBMC if they
are to be successful. A decentralised strategy may complicate this as employees will be less
likely to move within the organisation. This may hinder organisational development as
knowledge transfer within the MNE can be directly benefited by the use of expatriates (Edstrom
and Galbraith, 1977). In the future EBMC may look at alternative expatriate assignments in
order decrease their dependence on the decentralised approach. (Tahvanainen et al., 2005)
highlighted short term assignments as the most popular form of non standardised assignment.
(Scullion and Collings, 2006) highlight the growing importance of commuter and international
assignments in recent years. This would enable EBMC to gradually add a more centralised
approach by allowing managers and employees from their home country to another subsidiary on
a weekly or bi weekly basis (PricewaterhouseCoopers, 2005).

2. EBMC tend to favour a polycentric staffing approach with high utilisation

of HCNs What are the disadvantages of a polycentric approach? What
strategies could be used to overcome these?

Disadvantages of using a polycentric staffing approach:

A polycentric staffing approach can serve to restrict the upward mobility of employees, not only
with respect to foreign operations but also regarding staff at the parent company (Perlmutter,
1969). Research suggests that a purely local approach to appointing management in MNE’s is
unfavourable because employees career ambitions transcend their national boundaries, and desire
the possibility of cross national assignments (Reade, 2001b). The limitations imposed by such
staffing methods confer the risk of turnover both at the subsidiary and HQ level. The threat is
highest amongst high performing employees who will fulfil their aspirations at other
international firms. (Reiche, 2007).EBMC should be especially cognisant of this in its expansion
into emerging countries where turnover rates are particularly high e.g. 45% in India (McDonnell
& Scullion, 2011).
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‘Organisational identification’ issues can also arise as a result of the polycentric

approach, this is defined as ‘the degree to which a member defines him or herself by the same
attributes that he or she believes define the organisation’ (Dutton et al 1994). Through a
polycentric approach, organisational identification may be high with respect to the subsidiary,
but it will be low with regard to the global organization (Reiche, 2007). Likewise, Reade (2001a;
2001b) found that career advancement solely at the local level enhances local identification but
does little to enhance identification at a global level. (Reiche, 2007). This will serve to
accentuate the divide between the global firm and the local subsidiary.

A highly localised approach can lead to problems like language barriers, irreconcilable
national loyalties and cultural variations which can alienate HQ management and subsidiary
staff. This results in poor levels of interaction, isolation and an inevitable divide between HQ &
its subsidiaries (Reiche, 2007). As EBMC shifts from ‘a portfolio or conglomerate approach
towards a more complex, integrated global organisation’, any fragmentation of the firm would be
highly damaging to a successfully coordinated global strategy. (McDonnell & Scullion, 2011)

Strategies to overcome these issues:

The uses of temporary but frequent international assignments are an ideal tool for the socialising
of local employees with global firm values. This will reduce the influence of national cultural
influences and introduce a more integrated corporate culture. This will result in identification
with the host country subsidiary being increasingly complemented by identification with the
global firm (Reiche 2007). This approach would serve to fulfil eager managers’ career
aspirations and reduce employer turnover.

Inpatriation assignments would also be beneficial as they would enhance understanding of

cultural differences and attitudes, especially turnover cognitions, thereby aiding the successful
implementation of effective retention strategies. Inpatriation is especially rewarding for
subsidiaries in developing countries which tend to display a higher cultural and institutional
distance (Reiche 2007). A staffing practice that combines a polycentric approach to subsidiary
management with international assignment opportunities for the HCN’s will increase the
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likelihood of employee retention but also bridge the gap between EBMC’s HQ and its
subsidiaries, ensuring that the firm’s global strategy is universally adopted.

3. What are the benefit and weaknesses of the ‘one-way ticket’ approach to
the use of PCNs?

Benefits:

1) Agency Issues: Utilisation of employees personally known and socialised into the
organisation reduces agency problems concerned with managing spatially diverse
organisations. These costs are reduced due to greater levels of trust between the manager
and his/her superiors and also the likelihood that the manager will act in the organisations
best interest. This would not be guaranteed using local managers who are largely
unknown. (Collings et al, 2007)
2) Supply- side Issues: The shortage of international managers has frequently constrained
successful implementation of many firms’ global strategies This problem is especially
acute in emerging markets (Collings et al, 2007). Having a permanent manager in place
with the requisite skills would dispose of this issue.
3) Repatriation Issues: Repatriation is widely accepted to be the most difficult and important
step in the assignment cycle (Feldman & Thomas 1992).Around twenty percent of
repatriates leave their employers within six months upon returning from assignment, with
many demoralised due to the lack of career advancement. (Forster 1997) Having a
permanent manager in place without unrealistic expectations would dispose of these
repatriation problems.

Weaknesses:

1) Performance: Performance is the penultimate challenge encountered by MNC’s utilising

long term expatriate assignments. This is because the expatriate must deal with
conflicting expectations of HQ management and subsidiary colleagues. Performance is
also affected by family issues, environmental factors such as political and labour force
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stability, and cultural distance, which are all intensified with a ‘one way ticket’ approach.
(Collings et al, 2007)

2) Availability: Research indicates that demand for expatriate assignees outweighs the
supply (Collings et al, 2007), and due to increasing security fears worldwide- less are
willing to travel and relocate on overseas assignments, especially in emerging markets
(Konopaske & Werner, 2005) Also ,the increasing prevalence of dual career couples and
the unwillingness of families to uproot makes it difficult to attract appropriate talent for
this type of assignment.(Collings et al, 2007)

3) Retention: Due to the shortage of international managers with distinctive competences

and knowledge, firms can find it difficult to retain assignees in the long term, as they are
often headhunted by rival organisations.(Collings et al, 2007)

4) Cost: The likelihood of failure increases with the length of the assignment due to;
homesickness, incompatibility with the host country, or the ‘out of sight, out of mind
syndrome’. Failure is very costly to the firm both directly i.e. salary(typically three to
five times higher), training costs, travel and relocation expenses, and indirectly i.e.
damaged relations with the host country and the possible loss of market share, which
damage the company’s reputation abroad.(Collings et al, 2007)

5) Relations: Local employees may feel undermined by being passed up for management
positions and being treated with second-class status which could strain relations, reduce
company loyalty, and increase staff turnover. (Reiche, 2007)

6) Loss of Knowledge: The parent company may lose valuable knowledge and expertise by
transferring one of their own skilled and valued members of staff to an overseas
assignment.

Considering that EBMC are pushing for a more globally integrated operation, a more diversified
staffing approach might serve them better combining PCN’s with HCN’s in management
positions.
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4. A key part of EBMC’s international business strategy is acquiring high

performing subsidiaries with high calibre employees. What systems and
practices should EBMC consider putting in place to ensure its key
employees are motivated and retained?

EBMC currently operate a highly decentralised operation with a very small HR department in the
home office. This allows management to develop localised HR Policies and practices that
support each separate business unit which enables retention of high calibre employees. EBMC
senior management realise that their competitive advantage emanates from managers and
employees rich in local knowledge. These employees can therefore respond effectively to
changing localised conditions at each individual business unit.

Despite the obvious success of this strategy, change may be essential to survive in the current
volatile economic climate. (Scullion and Starkey, 2000) note that decentralised international
businesses like EBMC have found the co-ordination of international transfers of managers more
problematic than international organisations operating a centralised system. This is particularly
troubling for EBMC as they endeavour to seek a balance between global integration and local
responsiveness. (Stahl et al, 2007) also note the increasing difficulty of acquiring and retaining
high quality managerial talent in order to build a sustainable talent pipeline. To combat this,
EBMC operate three different leadership programmes, aimed at employees at different levels, to
ensure there is a talent pipeline which will deliver the leadership capability to run an
international business for the following 5 to 10 years. To supplement this EBMC must recruit
managers that posses a distinct ability and desire to manage operations in emerging markets that
are both geographically and culturally distant. (Van de Vijver, 2008) highlights the recruitment of
managers with the ability to operate in an inter cultural context as one of the key challenges for
global companies.
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Selecting the correct managers is particularly important for EBMC as they expand their
investments in emerging markets. This expansion may require increased use of expatriates as
EBMC seek to establish businesses in more challenging environments that require experienced
managerial talent which can operate effectively in these risky environments. Therefore they must
ensure recruitment systems attract applicants with effective cross cultural management skills
combined with a strong motivation and desire to work in these emerging markets. This is highly
important as expatriates play a key role in facilitating the transfer of technological knowledge
from a parent firm to its subsidiaries, particularly in the early stages of establishing a new foreign
subsidiary (Fang et al, 2008) Systems must ensure employees are motivated to undertake lateral
moves within the organisation to broaden their understanding of the entire business in order to
position them better for a range of roles within the company. By doing this they will eliminate
the current difficulty in getting people to undertake expatriate assignments. A more culturally
diverse management will also ensure a decreasing influence of ethnocentric management
practices even in the mature markets of Europe and North America.

Once key employees are identified, EBMC could use Employee share ownership plans to
further their motivation and increase retention. (Johnson , 2009) notes that ESOP's are
particularly attractive in industries where specialized skills or knowledge are essential. Johnson
also notes ESOP effectiveness in aligning employee interests with that of the business owners.
These two advantages could be effectively utilised by EBMC as they can reward their key
employees for growing the company’s investments in emerging markets.

5. How may EBMC look to diffuse key knowledge from their foreign
subsidiaries to other operations and to HQ to ensure a more
encompassing global perspective?
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World markets have become so competitive in today’s world that any bit of competitive
advantage that can be found is utilized to its maximum ability. A common source of competitive
advantage in today’s globalized world has been the efficient transfer of knowledge within
companies. Henderson & Cockburn, (1994) and Kogut & Zander, (1992) both noted that firms
need to transfer and acquire new knowledge as they seek to develop competitive advantage and
survive selection pressures. In the case of EBMC, they have an acquisition strategy which
involves specifically targeting high performing companies with high quality local management.
With this strategy the company ends up with a large workforce that is well educated and has a
high level of knowledge in their area. A key challenge to this strategy is diffusing key knowledge
from a company’s foreign subsidiaries to other operations and HQ.

A large part of the knowledge transferred across MNE units is highly contextual and tacit in
nature (Riusala & Suutari, 2004). Contextual and tacit knowledge cannot be codified in written
documents but requires personal interaction to achieve context-specific adaptation and convey
meaning to its recipients (Argote & Ingram, 2000). The reality being that in order for effective
knowledge transfer within a MNE to its subsidiaries, it is essential for companies to look at
PCN’s, HCN’s and TCN’s, but in the case of transferring knowledge back to HQ and to other
subsidiaries the company has to look closely at the topic of Inpatriation. MNEs have begun to
complement the traditional expatriation of PCNs with the temporary transfer of host-country
nationals (HCNs). The transfer of HCNs can occur both vertically in the form of inpatriation
from the foreign subsidiary to the HQ and horizontally between peer subsidiary units (Adler,
2002; Harvey, Speier, & Novicevic, 2001).

With regard to inpatriation in particular, given their profound knowledge of the subsidiary
context and their ability to engage in cross-unit brokerage (Harvey & Novicevic, 2004; Kostova
& Roth, 2003), inpatriates may act as important information boundary spanners from the
subsidiary to the HQ. At the same time, inpatriates learn about the HQ corporate culture and
corporate routines during their HQ assignment (Bonache, Brewster, & Suutari, 2001) and may
transfer this newly acquired knowledge back to their home unit. The practice of knowledge
transfer is a learning process especially when it is applied inter-organizationally; it identifies
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various factors that influence the acquisition of knowledge from external partners (Inkpen, 2000;
Håkanson, 1995; Bresman et al., 1999; Simonin, 1999b; Makino and Delios, 1996) (Li, 2004).
There are 3 very important ways in which EBMC can promote this Knowledge transfer back
to the company. Firstly through normative integration, this is the development of an important
social mechanism facilitating creation of an intensive and cooperative HQ-subsidiary
relationship. Such a social control by shared values and norms may also be used through
inpatriate staffing (Goshall & Bartlett 1988). Secondly a lack of incentives is especially
problematic when considering the internal transfer of more tacit forms of local knowledge, trying
to promote the benefits of the knowledge transfer is important for the company’s success in this
process (Lord and Ranft 2000), we can see EBMC are counter acting this by the introduction of a
performance incentive scheme which seeks both to reward senior local managers and to retain
them as their knowhow, networks and knowledge would be attractive to other MNEs. Finally
output control through linking knowledge transfer to the evaluation of the subsidiary’s
performance is likely to be positively associated with the transfer of local market knowledge (Li
2004).

6. Discuss the talent management challenges which may arise from the shift
from a conglomerate to a more integrated regional or global operation.

In the case study the company operates a highly hands – off approach to senior subsidiary
management allowing local managers a very high degree of autonomy to develop the business
using their local knowledge and networks. However this autonomy may be lost to some extent
with EBMC moving towards being a more integrated global operation. A major challenge for
EBMC is going to be their ability to create an understanding and willingness from the varying
subsidiaries within the company to adhere to this loss of autonomy. In the short term EBMC may
see a move against this new strategy which could lead to the loss of talented management within
these subsidiaries.

Internal development will be a major talent management challenge for EBMC also. It is
important to try to get the right balance of retaining, developing and then recruiting people.
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Interpublic group which owns hundreds of advertising companies looked closely at this issue and
decided to establish a formal talent review process. The CEOs of each Interpublic company now
meet with Sompolski Chief HR officer and CEO Michael Roth to talk about the leaders within
their organizations. Since those first sessions, Interpublic has developed the talent reviews so
they go beyond "just taking inventory," Sompolski says. For example, today's reviews involve
more in-depth discussions about the talent within all of the international regions that a business
covers (Marquez, J. 2007). Much like EBMC more than half of their employees don’t work in
the home country so they extend this talent review internationally to help integrate the company
and insure that their subsidiaries are moving away from being a conglomerate company to a
globalised force. Setting up this kind of review with EBMC could be a major advantage to the
company providing a solution to carefully nurturing talent within the company as a whole and
ensuring the talent within the company is moving forward with a global and integrated view for
the company.

Finally I think the last major challenge will be integrating the varying types of talent
within the company as it moves from being a conglomerate to a more integrated global
operation. The company has a vast workforce of 80,000 employees covering 3 core businesses:
1) Primary Materials (e.g. cement, aggregates, asphalts), 2) Building Products (e.g. precast
concrete products, fencing), 3) Distribution (e.g. builder’s merchants and specialist distribution),
combining management from each background will be a major challenge as employees may
struggle working in unfamiliar surroundings, but in order for EBMC to move away from being a
conglomerate they must incorporate each core business with one another possibly through TCN’s
incentives on a short term basis.
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