2Management Decision and Control Chapter 11Management Decision and Control
3Management Decision and Control The specific objectives of this chapter are toPROVIDE comparative examples of decision- making in different countries.PRESENT some of the major factors affecting the degree of decision-making authority given to overseas units.COMPARE and CONTRAST direct controls with indirect controls.DESCRIBE some of the major differences in the ways that MNCs control operations.DISCUSS some of the specific performance measures that are used to control international operations.
4Decision-Making Processes and Challenges Managerial decision-making processInvolves choosing a course of action among alternativesProcess is often linear.Looping back is common.Managerial involvement in procedure depends on structure of subsidiaries and locus of decision making.Centralized: decisions made at the topDecentralized: decisions delegated
5Factors Affecting Decision-Making Authority A number of factors will influence international managers' conclusions about retaining or delegating decision-making to a subsidiary.A major concerns for organizations: How efficient are the processes which are put in place?The protection of goods and services is also important to an MNC.The right degree of centralized or decentralized decision making can be critical to the success of the MNC.
7Factors That Influence Centralization or Decentralization of Decision Making in Subsidiary Operations
8Cultural Differences and Comparative Examples of Decision Making Decision-making philosophies and practices from country to country: Do international operations use similar decision-making norms?French and Danish managers used different approaches to decision-making; each more adept at different stages of the process.French do not value time as much as counterparts.Germans focus more on productivity and quality of goods/services than on managing subordinatesCo-determination: a legal system that requires workers and their managers to discuss major decisions
9Cultural Differences and Comparative Examples of Decision Making Japanese terms related to decision making:Ringisei: decision-making by consensusTatemae: doing the right thing according to normHonne: what one really wants to doOther cultural differences:How managers view time in the decision-making processLevel of team orientation
10Total Quality Management Decisions Total quality management (TQM)An organizational strategy and the accompanying techniques that result in the delivery of high-quality products or services to customersTQM is critical to achieve world-class competitivenessManufacturing is primary area.Concurrent engineering/interfunctional teamsDesigners, engineers, production specialists, and customers work together to develop new products.EmpowermentGive individuals and teams resources, information, and authority needed to develop ideas and implement them.Rewards and recognition: merit pay, discretionary bonuses, pay-for-skills and knowledge plans, plaques, and public recognition
11Total Quality Management Decisions ISO 9000 CertificationIndirectly related to TQMInternational Standards Organization (ISO) to ensure quality products and servicesAreas examined include design, process control, purchasing, service, inspection and testing, and training.Ongoing TrainingWide variety of forms such as statistical quality control and team meetings―designed to generate ideasObjective is to apply kaizenJapanese term for continuous improvement.
13Decision and Control Linkages Decision making and controlling are interlinked functionsThe process of evaluating results in relation to plans or objectives and deciding what, if any, action to take.MNCs use different methods to control overseas operationsMost combine direct and indirect controlsSome prefer heavily quantifiable methods; some prefer qualitative approachesSome prefer decentralized approaches; others greater centralization
14The Controlling Process MNCs may experience control problemsThe objectives of the overseas operation and the MNC may conflict.The objectives of joint venture partners and corporate management are not in accord.The degree of experience and competence in planning varies widely among managers running overseas units.Basic philosophic disagreements about objectives and polices of international operations exists, largely because of cultural differences.
18Types of Control Two common complementary types: Internal or external control in devising overall strategyLooking at ways organization uses direct and indirect controls
19Types of Control External and Internal Control Internal and external controlOne is often given more attention than the other.An external control focus is needed to find out what customers want and to be prepared to respond appropriatelyManagement wants to ensure market for goods and services exist
20The Impact of Internal- and External-Oriented Cultures on the Control Process
21Types of Control Direct Controls Involves the use of face-to-face personal meetings for purpose of monitoring operations.ExamplesCEO runs meetings to discuss problems, set goals, evaluate, decide on actionsTop executives visit overseas affiliates to learn of problems and challengesStaffing practices: Who will manage, etc.?Design structure that makes unit highly responsive to home-office requests and communications
22Types of Control Indirect Controls Involve the use of reports and other written forms of communication to control operations at subsidiaries.Financial statementsExamples: monthly operating reports; supplements to the operating report, include financial statements, such as balance sheets, income statements, cash budgets, and financial ratiosUsually required from subsidiaries:Financial statement prepared to meet national accounting standards prescribed by host countryStatements prepared to comply with accounting principles and standards required by home countryStatements prepared to meet financial consolidation requirements of home country
23The Controlling Process Approaches to Control Some major differences across countriesGreat BritainFinancial records are sophisticated and heavily emphasized.Top management tends to focus on major problem areas, and are not involved in specific matters of control.Control used for general guidance more than surveillance.Operating units have large amount of marketing autonomy.
24The Controlling Process Approaches to Control GermanyManagers employed very detailed control and focused attention on all variances; they placed heavy control on production and stressed efficiency.FranceManagers employ control systems closer to that of German than British.Control is used more for surveillance than guidance.Process is centrally administered.Less systematic and sophisticated than in German companies
25The Controlling Process Approaches to Control U.S. vs. EuropeansU.S. firms rely much more on reports and other performance-related data.Americans make greater use of output control, while Europeans rely more heavily on behavioral control.Control in U.S. MNCs focuses more on quantifiable, objective aspects of foreign subsidiary, while control in European MNCs measures more qualitative aspects.Control in European MNCs requires more decentralization of decision making than in U.S.
26Performance Evaluation as a Mechanism of Control Three common performance measuresFinancial performanceTypically measured by profit and loss and return on investment.Quality performanceOften controlled through quality circles.Personnel performanceTypically judged through performance evaluation techniques.
27Performance Evaluation as a Mechanism of Control Financial Performance The most important part of ROI calculation is profit which is often manipulated by management.The amount of profit is directly related to how well or poorly a unit is judged to perform.Bottom line performance of subsidiaries can be affected by currency fluctuations.If a country devalues its currency, subsidiary export sales will increase.Price of goods will be lower for foreign buyers with currencies that have greater purchasing power.If a country revalues its currency, export sales will decline.Price of goods for foreign buyers rises since currencies now have less purchasing power in subsidiary’s country.
28Performance Evaluation as a Mechanism of Control Quality Performance Why are Japanese goods of higher quality than goods of many other countries?Quality control circle (QCC)Japanese firms train people carefullyStaying on technological cutting edgeFocus on developing and bringing to market competitively priced goodsDesign, engineer, and supply people to ensure product produced at prices customers can bear“Training overkill”Fostering continuous cost-reduction efforts (kaizen)Control
29Performance of Suppliers When Serving U. S Performance of Suppliers When Serving U.S.- and Japanese-Owned Auto Plants
30Performance Evaluation as a Mechanism of Control Personnel Performance Periodic appraisal of work performanceDifferences in performance appraisals across countriesRewards and employee monitoringJapanese use a more social or group orientation.Americans use a more individualistic approach.Assessment centers
31World’s Most Reputable Companies, 2012 continues
33Personnel Performance World’s Most Admired Firms Common ThemesTop managers at the most-admired companies take their mission statements seriously and expect everyone else to do the same.Success attracts the best people—and the best people sustain success.The top companies know precisely what they are looking for.These firms see career development as an investment, not a chore.Whenever possible, these companies promote from within.Performance is rewarded.The firms are genuinely interested in what their employees think, and they measure work satisfaction often and thoroughly.
34Review and DiscussA British computer firm is acquiring a smaller competitor located in Frankfurt. What are two likely differences in the way these two firms carry out the decision-making process? How could these differences create a problem for the acquiring firm? Give an example in each case.Which cultures are more likely to focus on external controls? Which cultures would consider direct controls more important than indirect controls?
35Review and DiscussHow would you explain a company’s decision to use centralized decision-making processes and decentralized control processes, considering the two are so interconnected? Provide an industry example of where this may occur.How are U.S. multinationals trying to introduce total quality management into their operations? Give two examples. Would a U.S. MNC doing business in Germany find it easier to introduce TQM concepts into German operations, or would there be more receptivity to them back in the United States? Why? What if the U.S. multinational were introducing these ideas into a Japanese subsidiary?
36Review and DiscussIn what ways could an accelerated decision-making process harm a company? Using Figure 11–1, which stage(s) do you think would be most in danger of being overlooked?A company practices personnel performance evaluation through reviewing financial decisions management has made, specifically focusing on ROI. How is this approach beneficial to the company? Which aspects could the company be neglecting? Which cultures are most likely to employ this method? Which cultures would avoid this tactic?