between autonomy and control: expatriate managers and strategic ihrm in smes

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Between Autonomy and Control:Expatriate Managers and StrategicIHRM in SMEs

Hilary Harris � Len Holden

Executive Summary

Much research in the relatively new area of International HRM has concentrated onthe problems of expatriates and expatriation issues (Scullion, 1995; Brewster &Harris, 1999). These are often related to concerns that they face in working in a for-eign environment; particularly, such issues as cultural difficulties and other factorsassociated with assignment failure (Harzing, 1995; Forster, 1997). However, there isvery little research on what expatriates do as managers in a foreign context, and howthis relates to overall business and HRM strategy in the organization as a whole. Thisarticle is a small contribution to this growing debate, and examines the strategic rela-tionship between the HRM department at national HQ and how its strategy and pol-icy is translated by expatriates at subsidiary levels in a relatively small organizationoperating in 37 countries. The article focuses most particularly on the tensions betweenlocal autonomy of the organization’s various overseas units and the attempts by itsheadquarters to achieve control. We particularly examine the role of HRM inattempting to find this balance. © 2001 John Wiley & Sons, Inc.

INTRODUCTION

apid globalization of business has led to intense academic and practitioner inter-est in the ways in which multinational enterprises (MNEs) organize to achievecompetitive advantage across borders. A central theme of this literature is thechallenge faced by MNEs in their efforts to balance the needs of global coordi-nation (integration) and local responsiveness (differentiation) (Bartlett &Ghoshal, 1990; Doz & Prahalad, 1991; Ghoshal & Bartlett, 1990; Punnett &Ricks, 1992; Kobrin, 1994; Kamoche, 1996). Multiple factors influencing the

Hilary Harris is Director, Centre for Research into the Management of Expatriation, CranfieldSchool of Management, Cranfield, Bedford, UK. Len Holden is with Leicester Business School,De Montfort University, Leicester, UK.

Thunderbird International Business Review, Vol. 43(1) 77–100 • January–February 2001

© 2001 John Wiley & Sons, Inc.

choice of strategic fit between a global or local orientation have beenidentified, including business sector, technology, nature of competi-tors, political and economic considerations, size, and stage of inter-nationalization (Porter, 1986; Adler & Ghadar, 1990; Mendenhall,Punnett, & Ricks, 1995). Theoretically, the degree of control exert-ed by a headquarters over its international operations would matchits strategic positioning along the integration-differentiation contin-uum (Perlmutter & Heenan, 1974; Edstrom & Galbraith, 1977).Issues of control and coordination in complex and dispersed organi-zations, however, have been found to be highly problematic. Thetraditional focus on structure as a means of control and coordinationhas been seen to be inadequate to deliver the corporate “glue” forglobal organizations (Bartlett & Ghoshal, 1980; Ghoshal &Bartlett, 1990; Kobrin, 1994). Kobrin (1994) notes a shift in theinternational management literature from the “fit” between strategyand structure to a “process” perspective that assumes that the waysin which the organization’s members make sense of their organiza-tions and the global environment enhance or inhibit competitiveadvantage. Bartlett and Ghoshal (1989), for example, argue that cre-ating a transnational mindset in the minds of managers is the mostcritical factor in creating a truly global organization. The focus onan organization’s human resources has led to an extensive debateabout the role of strategic international human resource manage-ment (SIHRM) in achieving competitive advantage for MNEs(Laurent, 1986; Evans, Doz, & Laurent, 1989; Adler & Ghadar,1990; Schuler, Dowling, & De Cieri, 1993; Dowling, Schuler, &Welch, 1994; Boxall, 1992; Taylor, Beechler, & Napier, 1996). Keyissues arising from the debate are the role of headquarters’ HR func-tion in control and coordination of subsidiaries and the role of expa-triation in achieving and maintaining the appropriate strategicpositioning of the organization. While both of these areas havereceived substantial interest from researchers, the work that has beencarried out has focused primarily on MNEs in the private sector.Relatively little is known about the role of headquarters’ HR andexpatriate managers in the dynamics of control and coordination inSMEs, particularly those in the public sector. Evidence that a largeproportion of firms internationalizing will be small- and medium-sized enterprises (Mulhern, 1995), and that the public sector stillemploys one in five of the labor force in the United Kingdom(Pierson, 1994; NIESR, 1995) suggests that this is an area deserv-ing more detailed examination.

This article examines the case of a public sector SME operating in thefield of international tourism. It reviews theoretical perspectives on the


78 Thunderbird International Business Review • January–February 2001

critical determinants of international strategy for that type of organi-zation. It then proposes a series of hypotheses concerning the type ofstrategic orientation and the role of headquarters’ HR and expatriatemanagers in implementing an appropriate control and coordinationapproach. Findings from the study reveal a tension between autono-my and control in subsidiaries, with expatriates being the main (infor-mal) source of coordination and control. Headquarters’ HR functioncontinued to be viewed as a primarily administrative function despiteefforts to the contrary by the HQ HR team.

COMPANY BACKGROUND

Travel Co was established in 1969 under the Development of TourismAct with the aim of promoting Britain as travel and tourist destination.It is financed largely by government funding, receiving approximately£35 million annually, and is accountable to the Department of Culture,Media, and Sport (Travel Co, 1997a). By its structure and funding it ismore of a “quango”1 than a centrally run government department,although its pay master (central government) obviously can exerciseconsiderable control in terms of finance and accountability.

In terms of many MNEs, Travel Co is small, employing a total of 441people. Of these, 190 are located at the London headquarters, andthe remaining 251, including locally engaged employees, areemployed in a network of 44 offices in 37 countries. Of the 251employees based abroad there are 26 expatriate managers (6%), 191(43%) permanent or fixed contract employees, while the remaining34 (8%) are classed as representatives. A considerable number of theLondon-based managers have been expatriate managers working inand running a number of overseas offices.

Until recently, Travel Co was structured into three global regions.The Americas, covering mainly the United States and Canada, hasrepresentative offices in five south and central American countries.The HQ for the Americas region was based in New York, andemploys 44 people, including four expatriate managers. TheEuropean region covered all of Western Europe and many countriesin Eastern Europe until recently. The HQ is based in Paris, andemploys a total of 22 staff including two expatriate managers. The

Between Autonomy and Control: Expatriate Managers and Strategic IHRM in SMEs

79Thunderbird International Business Review • January–February 2001

1A “quango” is a term commonly used in the United Kingdom to refer to a government-elected body ofpeople who would be responsible for running a public initiative, such as the Training and Enterprise Council.

Asia Pacific, Middle Eastern, and Africa region has offices in Tokyo,Sydney, Auckland, Johannesburg, and Dubai, with representatives ineight other countries. Its headquarters is in Singapore, employing 11people, of which two are expatriate managers (Travel Co, 1997b).

Expatriates were employed to run the larger offices in the moreimportant locations, defined as where most potential tourists couldbe generated. Obviously, this would tend to be toward the wealthiercountries, and the United States, Germany, Japan, and WesternEurope in general, as well as Canada, and to a lesser degreeAustralasia, formed the most important markets. By the early 1990s,expansion had taken place in the Asia Pacific rim, and to a lesserdegree in central and Eastern Europe, although the financial crises inthese two areas meant the closing of a number of offices and main-taining only a skeleton presence.

The mission statement of Travel Co sums up pithily its main remit—“to maximize the visitor spend generated by investments of itsresources world wide while beating European average growth rates”(Travel Co, 1997b:4).

Travel Co has undergone a number of changes in recent years, hav-ing become more commercial in orientation. This is signaling a movefrom a civil service style culture to a more market sensitive culture. Asa result, it has become more responsive to market changes. The bank-ing and finance crisis in the Asia Pacific Rim area has led to a numberof offices being closed. Similarly, the Russian crisis has resulted in theclosure of operations in Eastern Europe.

Given that the aim of Travel Co is to sell Britain, and England in par-ticular, to potential tourists, it is now having to concentrate its ener-gies on parts of the world where markets will provide the greatestnumber of potential customers. The slant of the organization is,therefore, towards marketing, and senior managers at both HQ andoverseas branch levels naturally tend to give this part of the businessmost attention.

INFLUENCES ON TRAVEL CO’S STRATEGIC INTERNATION-AL POSITIONING

Three key factors were seen to influence the nature of Travel Co’sstrategic international positioning. These were: size, sector, and stageof internationalization.



Expatriateswere employedto run the largeroffices in themore importantlocations,defined aswhere mostpotentialtourists could begenerated.

SizeThere has been some discussion in the management literature as tothe importance of organizational size and management structuresand mechanisms. The view taken by the majority of observers is thata large size leads to more formalization and less centralization(Hickson et al., 1974; Hedlund, 1981; Garnier, 1982; Yunker,1983). Later,writers have attempted more precise correlations byconsidering size and management in relation to sector, country oforigin, and consideration of financial, product/service, and market-ing strategies. The results are very mixed, with Hickson et al. (1974)and Horvath et al. (1981) finding no correlation in the UnitedKingdom, but a high degree in Swedish and Japanese companies.Seror (1989) also found a negative correlation between size and cen-tralization in the United States. Harzing’s (1999:90) review of thisliterature concludes that “in general MNC’s size will not be system-atically related to the level of centralization in decision making.”There have been few previous studies of size and control by social-ization. The obvious conclusion being that the smaller the operation,the more likelihood that interpersonal relationships will flourishthroughout the organizations as a whole, bringing into play a moredirect and personalized system of management (Duberly & Walley,1995).

Hypothesis 1: The method of control and coordination in internationalpublic sector SMEs will be based more on informal, interpersonal rela-tionships between managers than on centralized, formal systems.

Public SectorAnother obvious correlation is between management style and sec-tor—the assumption being that the public sector civil service ethoswould have a considerable influence on policy making and imple-mentation. A key feature of employment relations in the publicsector in the United Kingdom after World War II was centraliza-tion. The role of most local personnel departments was to act asmonitors of national policy, with little or no authority to interpretpolicies at a local level (Farnham, Horton, & Giles, 1994; Fogarty& Brooks, 1986). Increasing disruption caused by public sectordisputes in the 1970s, together with adverse economic conditionsfor the viability of large-scale state investment, led to a radicalrestructuring of the public sector. Tight financial controls wereimplemented, numerous state industries were privatized, and forthose that remained within the state sector, elements of competi-tion were introduced. This has resulted in a fragmented picturetoday, with real tensions between devolution and centralization.



Financial and political decisions from government continue to have amajor influence on the management of public sector organizations,although there is increasing autonomy and flexibility in the nature ofthe employment relationship (Colling, 1997). There has, however,been little research on the influence of a public sector context oninternational management practice. The bulk of research in this area iscomparative, looking at the effects of recent changes towards marketand performance influences on the public sector in various countriesover the past decade (Hegewisch & Brewster, 1994; Colling, 1997).

Hypothesis 2: Policy making will remain centralized at internationalpublic sector SMEs, with significant room for interpretation by countrymanagers.

Stage of InternationalizationAdler and Ghadar (1990) suggest that organizations will need to fol-low very different IHRM policies and practices according to the rel-evant stage of international corporate evolution, which they identifyas domestic, international, multinational, and global. This is linked toPerlmutter and Heenan’s (1974) classification of values and attitudesof top management at headquarters (ethnocentric, polycentric, andgeocentric). Several possible forms of IHRM policies and practicesare derived as a result.

Travel Co is hard to position according to the Adler and Ghadar(1990) classifications, as these are intended more for manufactur-ing organizations. However, the presence of a highly dispersedmarketing operation selling a core concept implies a mix of cate-gorizations between international and global. Under the interna-tional orientation, Travel Co’s worldwide strategy is to increasemarket internationally. Expatriates are used extensively to sell andcontrol operations overseas to achieve this aim. Cross-culturaladaptability and sensitivity are seen to be vitally important forexpatriates in this stage of internationalization. Adler and Ghadar(1990) argue that organizations at this stage will adopt a polycen-tric orientation. There will be distinct national markets and opera-tions that are only minimally integrated beyond the regional level.Travel Co is structured on a regional basis; however, the market-ing brand implies a need for all staff worldwide to “be British.” Toachieve this, Travel Co has to create and maintain a strong com-mon corporate culture so that all overseas offices are delivering thesame message. This implies a positioning and IHRM strategy thatis more akin to the global stage of internationalization in Adler andGhadar’s (1990) typology. In this phase, organizations select their



Financial andpolitical deci-sions from gov-ernment contin-ue to have amajor influenceon the manage-ment of publicsector organiza-tions, althoughthere is increas-ing autonomyand flexibility inthe nature of theemploymentrelationship.

best people for global assignments and responsibility. These inter-national managers are continually trained in the skills necessary fornational responsiveness and culturally synergistic integration.International human resource management is no longer marginal,but becomes central to organizational success. The tension here isthat the corporate culture for Travel Co is overwhelmingly ethno-centric in content.

Hypothesis 3: Headquarters’ HR function will use expatriates to devel-op a strong, central marketing approach, incorporating a consistentBritish culture.

The extent to which a coherent SIHRM approach is evident in aninternational organization is not just a feature of the contextual exi-gencies facing it. The ability to create and implement an SIHRM pol-icy will depend on the status of the headquarters’ HR function. Forthe IHR function to have a strategic role, policies and practices needto be perceived to be critical in creating and sustaining organization-al success. This implies the ability to create policies and practices thatalign with strategic business goals. The degree to which these policiesand practices are implemented throughout overseas operations is anindicator of the perceived value of the HR function.

Status of HR FunctionFor HR to take on a strategic role, it must be involved in the deter-mination and implementation of organizational strategy. The ramifi-cations of this on the role of HR managers have been widelydiscussed in the domestic HR literature (Legge, 1989; Hendry &Pettigrew, 1990; Boxall, 1992).

Both Spencer (1995) and Ulrich (1997) discuss the added value ofthe HR function. Spencer clearly sees HR’s main added value in thestrategic domain, with HR services such as staffing, performancemanagement, compensation, etc.; and administration coming secondand third (see Figure 1). He points out that the costs spent on thesethree domains, that is to say their importance in terms of expenditurein time and money, are often reversed.

Ulrich (1997) distinguishes four key roles for the HR professionaland stresses that HR has to deliver results in each of these domains,because the four are equally important (see Figure 2). The two axeson the model represent the focus and activities of the HR profes-sional. In terms of focus, the orientation is either long term (strate-gic) or short term (operational). In terms of activities, the orientation



is either managing processes (HR tools and systems) or managingpeople.

Four main roles are derived from the model:

1. Management of strategic human resources: this role is focusedon the synchronization of HR strategies and practices to thebusiness strategy. The HR professional acts as a strategic partnerby translating business strategy into concrete HR practices.

2. Management of transformation and change: in this role,HR professionals assist in the identification and implementa-tion of change processes, being catalysts as well as enforcers ofcultural transformations.

3. Management of the employees: stimulating employees’ con-tribution to the success of the company by understanding theirspecific needs and ensuring these are met is a key dimension ofthis role.

4. Management of the administration of the organization:Ulrich (1997) underlines the importance of this role at a timewhen most of the emphasis is placed on HR’s strategic contri-bution. Without effective administrative processes in terms ofhiring, compensation, evaluation, etc., the HR function willlose much of its added value.



Figure 1. Costs and Added Value of Three Activity Domains of HRM(Source: Spencer, 1995)

Long term

Management Managementof strategic of transformation

human resources and change

Processes People

Managementof the Management

administration of of employeesthe organization

Short term

Neither model specifies the degree to which these categorizationsmay be affected by the size or sector of the organization. However,Ulrich’s (1997) model in particular is a helpful tool to allowresearchers to plot current contributions of headquarters’ HR func-tions in a domestic or international context, and to assess the extentto which the function could be seen to operate at a strategic level.

Hypothesis 4: The ability of HQ HR function to implement IHRM poli-cies and practices will be dependent on its being recognized as operatingat a strategic level by line managers.

Expatriate ManagersExpatriate managers have a considerable role as interpreters andimplementers of HR and business strategy. Expatriate managers ema-nating from the country of origin of an organization’s headquarters[referred to as “parent country nationals” (PCNs)] are used in a vari-ety of ways to coordinate and control worldwide operations. PCNsare often sent to manage or staff foreign subsidiaries because they areexpert in how the parent company works and can pass this knowledgeon to local workers (Mendenhall et al., 1995). They are also used asconduits of information and advice and provide inputs to headquar-ters about strategy and policy considerations as well as controllinglocal operations (Boyacigiller, 1990). PCNs often play an interpreta-tive role between the host-country culture and the headquartersoffices in countries with different cultural values, business systems,



Figure 2. HR Roles (Source: Ulrich, 1997)

Costs Added value

10% Strategic planning 60%

Services30% 30%

60% 60%

Org. & Job Staffing Perf. Develop Comp. Org.Design Destaffing mgt. dev.

PCNs often playan interpretativerole between thehost-country cul-

ture and theheadquarters

offices in coun-tries with differ-ent cultural val-

ues, businesssystems, and

societal normsthan those of the

home country.

and societal norms than those of the home country (Boyacigiller,1990). Traditionally, expatriates have taken on the roles of controller,expert, and trainer—coming from the center and telling people whatto do. This is still the case in many organizations, particularly thosewith a strong ethnocentric orientation. Different forms of interna-tional organizations also impact on the nature of the form of controlexerted by expatriate managers. Expatriates from headquarters, forexample, are often used as a means of exercising managerial controlin joint venture operations (Glaister, 1995). In organizations withdifferent control structures, expatriates still have a role as communi-cators of organizational culture, although this may be more informal.There has been little research into the role of expatriates in organiza-tions with highly dispersed, but small, international offices. Previouswork already quoted into the nature of control in small organizationssuggests that expatriates in this type of organization will play a pow-erful, but more informal, role in creating a consistent corporate cul-ture (Hypothesis 3). They may, however, try to operate in moreautonomous ways than expatriates in larger organizations(Hypotheses 1 and 2).

THE RESEARCH

A case study approach was used adopting qualitative methodologies.Primarily, these included in-depth interviews that were carried outwithin the Travel Co HQ in London and at overseas offices in NewYork, Sydney, Madrid, and Paris. These interviews included bothexpatriate management staff and local staff. Searches of both theorganization’s Web site and archives also furnished considerable doc-umentary evidence. Twenty-one interviews were undertaken com-prising: one director, two senior managers (including the Head ofHuman Resources), seven expatriate managers all at present based inLondon, the head of the Paris office and two French nationals at localsenior management level, the head of the Madrid office, the head ofthe Sydney office and five local managers, and finally, the head of theNew York Office and three local employees. The interview popula-tion was comprised of 12 men and 9 women. The levels of thoseinterviewed were made up of three senior managers based at HQ,eight British expatriate managers based at both HQ and in overseasoffices, and 10 local employees (non-British) based in overseasoffices. The interviews were conducted between November 1998 andJanuary 1999. In addition, a Leicester Business School master’s stu-dent was employed at Travel Co for 6 months work experience, outof which emerged his master’s dissertation. His insights and knowl-



edge of the organization as an employee were also an invaluable aidto our researches.

THE FINDINGS

Control versus AutonomyThe interviews revealed that the two posited outcomes in terms ofcontrol and coordination processes linked to size and sector weremainly correct. There were, however, real tensions between theintentions of headquarters to impose centralized controls throughfinancial budgets and information technology and the desire of theoverseas managers to work autonomously.

In terms of size, the influence of informal, interpersonal relationshipsbetween managers was evident. This partly confirms Hypothesis 1.Data from the interviews revealed that the small size of overseasoffices allowed for greater response and flexibility and easier consul-tation and communication. As one expatriate manager explained “theadvantage overseas is that you have a much more compact team andif you want to do something you just go and do it. It doesn’t happenlike that in London.” Size also allows for a great deal of intimacy,which has the effect of motivating to pull as a team. This is not onlytrue of the overseas offices but between offices and HQ. The expa-triate group of managers know each other very well, particularlywithin their regions, and have built up a network of informal rela-tionships which, due to the long tenure of many staff, have affordedthem to build up strong bonds within the context and culture ofTravel Co. As a London-based director described it, “there are dis-cussions about how Flossie’s getting on, how Phil’s getting and soon. It’s a very collegiate and a very caring organization. When youtravel around the world you get to know them and their families.There is thus a sense of concern.”

Its civil service character has also created a value system based in ser-vice to the country and community, which is very strong. Its pay-master, central government, and its links with embassies and othergovernment agencies overseas also strengthen these features. As oneexpatriate manager stated, “the grapevine is still extensively used bothinside and outside the organisation.”

The interviews, however, revealed that centralization played a keyrole in Travel Co’s worldwide operations. This was seen to resultfrom two factors. First, the historic influence of government inter-



Size also allowsfor a great deal

of intimacy,which has theeffect of moti-

vating to pull asa team. This isnot only true of

the overseasoffices but

between officesand HQ.

vention. Second, the acknowledgement by senior managers at theLondon HQ that a greater degree of coordination and control wasneeded if the organization was to improve its efficiency in the moreglobally competitive markets of the early 21st century.

The influence of government was apparent in responses from manymanagers. The influence was felt both at headquarters and overseas.In London, the acting Director of Finance explained: “not knowingyour budget from one year to the next places serious restraints onlong term planning.”

Another London-based senior manager echoed this feeling: “Unlikecommercial organisations like Marks & Spencer, don’t know whetherwe are making a profit or loss. Everything we do we have absolutelyno control over.”

The Finance Director further claimed that the government could alsobe as specific as to lay down what they wanted the organization toconcentrate on. “We are also controlled by the strategy we haveagreed within the government department. We’ve done an annualbusiness plan, and also when they have declared how much money weare going to get which is usually next week. We get a letter from theminister who says that this year we want you to concentrate on thisand that. They are usually fairly firm directions and we can’t ignorethem.”

These approaches in the past have helped create a certain attitudewithin the organization. “I think we are trying to be commercial andnot succeeding very well. We are all still working from the base ofguaranteed government money. The commerciality tends to be anadd-on at the end. We also tend not to have commercial people in theorganisation, because it was structured to be slow moving, fairly stat-ic and dependable.”

Senior Managers at the London HQ felt that a greater degree ofcoordination and control was needed if the organization was toimprove its efficiency in the more globally competitive markets of the1990s. The most obvious mechanism to initially achieve this wasthrough budget allocation. This was not a new concept as one man-ager stated: “In the old days you would be given a sum of money bro-ken down as to how you should spend it. So much for advertising. Somuch for PR. That was prescribed although some leeway could beused to juggle parts of these sums. Now you are told your budget forthe year is X amount and it’s up to you to allocate it between head-



ings for accounting purposes . . . but there would be eyebrows raisedif you took too much out of marketing. And you couldn’t actuallyincrease staff numbers without having to justify to London.”

The Director of Marketing Services who had been only with TravelCo for three years and had come from the commercial sector had adifferent perspective of the organization. When he arrived he said:“The finance system was just appalling. How the National Auditoffice allowed us to get away with it I just don’t know. So once weset up the network computer system it has improved communicationsimmensely in terms of disseminating information. A lot of emphasishas gone into what I call business infrastructure. Not just IT linkingeverybody up, but in setting up a finance system which serves thepurpose. This means saying to people ‘what money do you want?How are you going to spend it? How have you spent it?’ And reporton the use of it. Many people would see this as intrusive and bureau-cratic. I regard it as perfectly good line management.”

When asked how control was achieved, he replied that it was largelythrough financial mechanisms. Interestingly, he continued, “themore you develop international systems through computers etc., themore you develop systems of control.”

The acting finance director supported this point and stated that “noweverybody has a PC on his desk and virtually everybody is linked tothe main bank where all the figures are recorded.” However, he didindicate that only HQ had access to all information. “Locals can onlyaccess their own information and not the whole organisation.”

Another important central control mechanism included a manualthat laid down guidelines for local managers. According to the ActingFinance Director a manual is issued “in which every overseas manag-er knows what’s expected of them in terms of internal controls.Reviewing the pay roll, checking cash balances etc. Its largely finan-cial. There are some things which concern human resources but onlythe financial aspects of it.”

However, interviewees in local offices gave the impression that it wasnot used much. The head of the Paris office stated: “What we like isflexibility but what we would like is a template to operate within cer-tain parameters. I think you can get too much template. This is theoverseas procedures manual. (Laughter at its size. Reads a section oflengthy regulations.) That’s fine but . . . but when there’s only oneperson dealing with it and then that person’s away and someone else



is dealing with the decision or it has to be done by tomorrow or itnever gets done! What worries me is that if I was to adhere to everyfinancial control they put down there I would do nothing else butthat. Equally if we there was a human relations policy (training) weneed all the training by 1st January . . . if we had to do it to the timescales set by above then we never get things done. That’s the prob-lem . . . this is a small office by UK standards, there needs to be somesort of policy which needs to evolving.”

A more recent control mechanism, although not originally perceivedin this way, is the use of new technology particularly desk computersusing e-mail and the Internet. Travel Co also had created an intranetsystem with which all overseas offices were connected.

E-mail was viewed in two ways: first, as an efficient means of com-munication, and second, as a control mechanism. The Head of theParis office commented that since computerization “there is a sub-stantial amount of communication that goes on. E-mail overload is abig problem. There’s very little filtering out of the trivial. Peoplethink that they can put on to you their own deadlines, and that’s aproblem for us. Fax we used a great deal and generally had less a senseof urgency than an e-mail. I think it has the air of other peopleputting THEIR deadlines on you. Can you give me response byFriday. You end up doing the same to them. It impinges on yourthoughts, on your work schedule, other forms of communication,and with other people.”

A manager from the Asia Pacific Rim offices echoed these views: “Inthe last year or so since everybody has been connected up with e-mailcertainly there are more things being squirted down everybody’s line.Whereas before they were a totally detached department. In terms ofhow this organisation is being run now e-mail has had an enormousimpact. We now have instant access around the world not only by e-mail but by the World Wide Web. That does have serious implicationsbecause we can put a load of stuff on the Internet. And it’s going tohave more and more of an impact.”

The impact of more efficient communication was viewed as a threatto the autonomy of local offices. This was partly due to less commu-nication between central and local offices. As a long-serving opera-tions manager in Europe put it: “In the old snail mail days it tookthree or four days for a message to get there (overseas office) and youhad three or four days to think about it, and they would give you adate at the end of the month to draft a reply.” He continued, “I think



The impact ofmore efficientcommunicationwas viewed as athreat to theautonomy oflocal offices. Thiswas partly dueto less commu-nication betweencentral and localoffices.

we were quite lucky working overseas as we had a fair amount ofautonomy. As long as one can formulate a sensible kind of businessplan or market plan and carry it out, then you are given enough free-dom to do so.”

As his last sentence indicates, “freedom” to act still exists, but thechanging needs of the organization is impinging on that autonomy.This challenge to their autonomy rankled. However, as the long-serving operations manager indicates, there was some need for amore strategic approach. “In the past we tended to make up policyon the hoof as it were and there was a little bit of anarchy. They(expatriate managers) were initiating policies which were totally con-tradictory to what someone in London was doing, so that had to bereined in a bit.”

Evidence from the case study reveals a tension between the desire forefficient control and coordination systems emanating from head-quarters and the tendency of country managers to operate in anautonomous fashion. It is interesting to note that the reason behindthe need for control and coordination has shifted somewhat from thedemands of central government, to the need to become more com-mercial. The case study also reveals that imposing formal control pro-cesses such as financial budgeting systems and IT does not necessarilyresult in less autonomy for country managers.

The case data, therefore, appear to support Hypotheses 1 and 2. It isnoted, however, that in the case of Travel Co the situation was verydynamic, with long-serving country managers finding it hard toadapt to a more commercial orientation, which brought with it itsown kind of centralized control.

Role of HQ HR FunctionMost of the managers interviewed agreed that until relatively recent-ly the Human Resource management department played a relativelyservile role in comparison to the finance and marketing departments.Up until the mid-1980s the HR department was perceived as havingan administrative role in the organization, carrying out payroll andpension duties, giving advice on labor law, recruitment, and selection,and providing a raft of training courses (this would fit category 4 ofUlrich’s model). Most of these activities were uncoordinated in aholistic strategic sense.

In line with other strategic initiatives linked to the change to a morecommercial orientation, headquarters HR department also attempt-



ed to raise its profile and create a strategy fully supportive of the cul-ture shift. Training had always been strong within the organization,and Investors in People status was achieved in 1998 (Travel Co,1998b). There were moves to improve the long-standing appraisalsystem and relate it to performance and ultimately to compensation.A handbook of HR policy and practices was produced and sent toevery overseas office, and more recently, was put on the organiza-tion’s Web page. From the mid-1990s, the overall HR policy was todecentralize the managerial system, giving more autonomy to localoffices. These policy initiatives were not, however, part of a formal-ized IHR strategy.

Devolvement of certain HR functions meant that overseas managerswere largely responsible for recruitment and selection, appraisals,training and development, communications within the office,including employee involvement, and with London and other over-seas offices, and general management issues of an operational nature.Industrial relations issues were generally governed by local labormarket circumstances, national labor laws, and advice and directivesfrom London. However, there have been few disputes within theorganization.

HR policies controlled by London included stating limits on payrises and rewards, staffing levels (the numbers to recruit having tobe cleared by London), and to some degree performance and tar-get setting. As one senior HR manager in London put it, HR atHQ was to “set standards, monitor standards, collate feedback,results and so on.”

Appraisal and PerformanceThe most obvious monitoring mechanism under the purview of theHR department was the appraisal, which had been introduced intothe organization in the 1980s. It was originally implemented as adevelopmental measure, but in the past five years has been linked toperformance, and ultimately to pay. There was a considerable criti-cism of this linkage, especially from long-serving managers bothBritish and non-British. One French manager in the Paris office,where she had worked for nearly 35 years, commented: “I do fiveappraisals a year. It’s something I don’t really like . . . I don’t thinkthey should be linked to reward.”

A marketing manager from the same office noted that, while being infavor of the principle of appraisal, for developmental reasons she alsofelt that it was not working as a performance indicator. “To be sar-



castic it’s sometimes done just to do it! I think it’s a waste of time inlots of cases if the managers do not believe in it. So this year I didn’tdo it! I didn’t take it seriously. If the management team take it seri-ously the staff will take it seriously.”

The British Head of Tourism in Spain commented: “Of course every-one does one (appraisal) once a year although some are pretty desul-tory about that and have to be cajoled into doing them.”

A former marketing manager at the New York office and now basedin London claimed that “performance-related pay is just a joke!”

It is clear from these statements that the appraisal system had lostmuch of its momentum and was seen by many staff as an unnecessarychore. This is hardly surprising if senior managers and HR staff atLondon HQ neglect the operation of the system and appear not toattach a great degree of importance to its links to performance. Localmanagers tended to hurriedly fill in the feedback forms to London togain approval for various merit and performance payments to theirlocal staff.

Training and DevelopmentThe HR policy receiving most support and praise within Travel Co wastraining and development. There was virtually unanimous agreementfrom all interviewees that the profile in this area had been considerablyraised in the past 10 years, and, in particular, within the past three yearson working towards and gaining Investors in People status.

As a New York marketing manager who had previously worked large-ly in the private sector commented: “Training is excellent. I’ve neverknown a company that trains so well. They spend a lot of money oncontinuing professional development.”

The Head of Business Tourism in Spain endorsed this view:“Training is very good. We have had a wide programme which is nowfocused more on business needs. Training is definitely part of the cul-ture. Technical training as well—financial, negotiations, and quite arange of managerial courses from beginners to advanced manage-ment development.”

Training and development also included local staff and some hadused it very much to their benefit. As a marketing manager in theParis office stated: “When I was first worked for (Travel Co) I waspushed by a manager who believed in motivation. Before then only



Local managerstended to hur-riedly fill in the

feedback formsto London to

gain approval forvarious merit

and performancepayments to

their local staff.

British people were trained, who were going to be expats. I think Iwas the first overseas non-British employee being sent to these cours-es. This was about 8 years ago, and now everybody is entitled totraining.”

In fact, this local manager had left school without going to a univer-sity, and this had restricted her from entering marketing at a man-agerial level in the French labor market. Her training within TravelCo had enhanced the possibility of her getting a job in a French com-pany in marketing at a managerial level.

Many local staff also were invited to attend training courses inBritain, partly to enhance their skills and partly to familiarize them-selves with changes in Britain that they would need to be familiarwith to update their knowledge and information.

Despite the existence of excellent training programs, and despite theachievement of IIP status, there was no human resource developmentstrategy, an area recognized as crucial in the literature of internation-al management, particularly for expatriates.

Staffing and RewardStaffing and Reward are aspects of HR operations that clearly showthe tension between HQ and local offices. A manager now based inthe London HQ who had worked in the Asia Pacific Region,Switzerland, and had set up and run the Dublin office, explained howthese processes worked: “The biggest problem is that once you areup and running, people quickly find out that you are there. Then allof a sudden you are overloaded with work. The biggest problem isthen getting whoever takes the decision here to get more staff in. Iremember in Dublin I started off with a secretary and then one per-son on information. Then I had a battle with London to get a secondperson, and then a third person. When I left I had four informationstaff, a secretary and an assistant simply because of the volume ofenquiries both from the trade and the general public coming in. Thattook five years to get to that stage. But the big battle was always thestaffing levels.”

Another tension could be caused by pay in which the expatriate man-ager was caught between the restrictions placed by London and locallabor market demands, including inflationary levels and local laborlaws. The once-Dublin-based manager explains: “As far as the law isconcerned you had to stick with the law there (local law). So if TravelCo said there will be a 2% pay increase this year but if the government



in Dublin said there would be a 5% you would have to increase it by5%. You operated to local conditions, local laws as far as local employ-ees were concerned. There was never really any problem. Every officeoverseas had a solicitor. So if there was any problem you would getan immediate ruling on that irrespective of what the system or policymay be in London. So when I had redundancies in Switzerland youjust go with local law.”

Thus, while London attempted to operate controls, they were oftennot able to get offices to adhere to them, although the delays theycreated could frustrate local managers considerably.

Attitudes toward Headquarters HROne issue fairly much to the forefront of expatriate managers’ mindswas that of trust. While degrees of autonomy had been given tothem, there was a perception that the HR department, while pur-porting to be actively encouraging the development of staff throughtraining, was seeking to reduce staff numbers and institute controlmechanisms. As an operations manager who has had extensive expa-triate experience in the Asia Pacific area stated: “In other organisa-tions if people have a problem they would go to human resources,but most people would never consider that here because they are nottrusted.”

He continued: “People don’t trust HR simply because they don’tbelieve what they are saying. They feel that there is a hidden agendasomewhere. There is this dinosaur called HR. Nobody quite knowswhat they do or why they do it.”

As an expatriate, he stated that “you didn’t really feel the influence ofHR that much.”

While there appears to be an apparent contradiction in these state-ments, what he was attempting to articulate was that HR was seen asthe executive hatchet brought in only to perform unpleasant taskssuch as redundancy.

Evidence from the case study suggests that the headquarters HRfunction at Travel Co is not acknowledged as operating in a trulystrategic fashion. This appears to be the result of both a lack of a com-prehensive SIHRM approach and a lack of effective communicationbetween head office and subsidiaries, resulting in a lack of trust ofHR by country managers. It is acknowledged that headquarters HRhas a difficult role to play in relation to its attempts to control pay



One issue fairlymuch to theforefront of

expatriate man-agers minds was

that of trust.

and staffing numbers, but this is exacerbated by the lack of recogni-tion of its centrality to business strategy. The case data would, there-fore, support Hypothesis 4 in that the ability of headquarters HRfunction to implement IRHM policies is constrained by line man-agers not perceiving it as having a strategic orientation.

Strategic Use of ExpatriatesThis case study highlights the pivotal position of expatriate managersin the operationalization of both business and human resource strat-egy in Travel Co. The management and development of this groupwithin Travel Co is, therefore, a central factor in ensuring commer-cial success. The evidence clearly shows that this was not happeningin Travel Co, and while there was an awareness of the importance ofsuccession planning, career development, and management develop-ment for expatriates, it was either piecemeal or nonexistent. As theHead of the Spanish office observed: “Career planning and succes-sion planning are being looked at but are not really understood yet.”

The director of marketing in London also agreed that there was nocareer planning, and a European operations manager noted: “Therehasn’t been an awful lot of interchange. Once people get a taste forlife overseas they are rather reluctant to move and to move back home.You enjoy a higher standard of living. You are often better off than inLondon. So some people may dread the idea of coming back.”

Another long-serving manager from the Asian Pacific Rim is morecritical of the lack of career development and succession planning andthe age profile implications for the organization. “Overseas you havepeople who have been in the post too long and consequently go stale.You’ve got to have career development within this organisation,which there isn’t at the moment—absolutely none! Whether that’sHR’s fault or whether that’s top management’s fault I really would-n’t like to point the accusing finger. Somebody is to blame some-where along the line and unless they redress that then in a few years’time things will come to a halt, or we’re going to have months andmaybe years where we are having to put new people in who haven’tgot a bloody clue. That’s when the mistake will happen. You need abalance of the two.”

The human resource planning aspects are also clearly reflected in theopinions of these expatriate managers. There is concern about theincreasing average age and the difficulties of attracting younger peo-ple. A London-based director freely admitted: “It would be jollyinteresting to look at the average of the organisation. Even the sup-



port staff have a high average age. That’s partly because we can’t paygood money compared with other firms and those that stay are loyal.We should be trying to recruit staff of the younger age group in orderto try and liven the place up.”

The acting director of finance also commented, “we don’t have HRplanning in the same way we have financial planning.”

A young female marketing manager who had worked in the NewYork office and now worked in London gave a slightly different per-spective: “It’s a bit dead man’s shoes and narrow at the top. But peo-ple stay because they love the work.”

Obviously, the relatively low pay and salary rates laid down by thepublic sector have a strong influence on recruitment and, thus, ageprofile.

Another missing aspect of expatriate management are repatriationdifficulties. There is no readjustment program, and a number ofexpatriate managers now working in the London offices expressedhow difficult the transition had been as a result. Such factors as lossof autonomy and power, housing difficulties, and family readjust-ments in terms of children’s education and work for spouses. As onereturnee stated, “we had a culture shock altogether. People comingback to London find it pretty tough actually.”

Local StaffMany of the above issues affect local staff in terms of their develop-ment, promotion to management levels, and succession planning. Upuntil recently the loyalty of local staff had been taken for granted, andthey are advantageous in that they are cheaper to employ than expa-triate managers, and in certain locations are easier to get made redun-dant, for example, the Asia Pacific rim and Eastern Europe. Thisagain has age implications. As a long-serving manager in the AsiaPacific Rim notes: “In this day and age it is cheaper to have locallyemployed people, because you don’t have the associated cost of peo-ple like myself going over. As a consequence fewer and fewer oppor-tunities are available for the young. You are just left with older peoplelike me who are being thrown around all over the place. You knowabout the shutting offices as well. So as a consequence young peopleare being made redundant, so we are losing them. We should actual-ly be trying to hold on to them and feed them into the system so thatin 5 or 10 years time when it’s time for the present crop to go, it’s aquick fix without too much due concern given to the long term.”



…a number ofexpatriate man-

agers now work-ing in the Londonoffices expressed

how difficult thetransition had

been as a result.Such factors as

loss of autonomyand power, hous-

ing difficulties,and family read-

justments interms of chil-

dren’s educationand work for

spouses.

Given the relatively poor pay of local staff in many countries, partic-ularly North America and Northern Europe, why are staff so loyal?There are two explanations for this: first, the loyal staff tend to beolder, and, second, despite poor remuneration, many local staff likeworking for Travel Co. An Asia Pacific manager, generally critical ofmany Travel Co policies, puts it down to the fact that “we are a userfriendly organisation to work for.” A French marketing managerbased in Paris likes the organization because there are opportunitiesfor development and “the British like staff for what they are, not ifthey have exams.”

Results from the case study indicate that, although expatriates areused as a key mechanism to develop a consistent marketing approach,headquarters HR does not manage this group strategically. Much ofthe advantage of using expatriates is derived from their personal expe-rience and informal networks. Headquarters HR is not seen to addvalue in this process. The research findings would, therefore, notsupport Hypothesis 3, as there was no evidence that headquartersHR function was adopting a strategic approach to the deployment ofexpatriate managers to develop a strong central marketing approach.

CONCLUSION

This article has reported on features of expatriate management andcoordination and control in a public sector SME with internation-al operations. Several significant features of the role of expatriatesand headquarters HR function can be seen to be linked to size andsector.

The relatively small size of the organization, coupled with highly dis-persed subsidiaries has resulted in “mobiles” (expatriate managers)being the chief interpreters and operationalizers of strategy, includingthat of HR. Despite efforts by headquarters, expatriates are left tooperate independently in many respects, with the result that theyhave considerable local influence and control over their subsidiaryoperations. Although this should not necessarily be viewed negative-ly, nevertheless, there appears to be little coordination of the activi-ties of “mobiles” in a global and regional strategic sense.Paradoxically, subsidiaries do not feel greatly involved in the creationof organizational strategy and policy, including HRM.

Public sector influence can also be clearly seen in the case. The find-ings show that it is difficult for Travel Co to escape the constraints



of its ministerial masters who, by applying short-termist and impre-cise targets, have created difficulties for departments to opera-tionalize appropriate strategies. It cannot, therefore, respond tomarket force changes as a privately owned commercial organiza-tion. This we believe has considerable implications for HR strategyand its implementation.

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