Management development and the international transfer of
employment practices
Case of Swedco
Swedco is a highly internationalised firm providing IT and communication services
and equipment for other firms. It has tens of thousands of employees, with
approximately 50 per cent based outside Sweden, while 95 per cent of the firm’s
sales are abroad. This case relates a study involving the Swedish, Belgian and
British subsidiaries that sought to investigate the influence of the Swedish business
system over employment relations of the firm and the extent to which transfer of
practices has reinforced or erode the home country effect.
The findings show that there is a distinctively Swedish element to the management
of the firm’s international workforce, something, which was evident in a number of
respects. First, in the international context, Swedish workers operate with relatively
little direct supervision; indeed, there is no direct translation in Swedish for the word
‘supervisor’ (Anderson, 1995: 72). Managers at the HQ of Swedco describe attempts
to spread a ‘democratic’ approach to decision making throughout the organisation.
As one put it: ‘I want to let my guys loose. I don’t want to control them and stand
behind their backs. This is typically Swedish, to be a coach’. Second, Hedlund
(1981) has argued that in Swedish firms, it is acceptable to ‘bypass the hierarchy’ in
that organisational actors do not feel constrained by formal authority relationships.
Accordingly, one of the British managers claimed that: ‘the company encourages a
Nordic approach to openness. Swedes think nothing of jumping the hierarchy to put
forward their ideas’.
Third, the tradition of seeking agreement through compromise and negotiation –
what Anderson (1995: 76) refers to as the ‘quest for accord’ – was also evident at
the international level in Swedco. One of the Belgian managers argued that this style
clashed with what he was used to: ‘You cannot always agree or compromise.
Sometimes you have to say no. In Belgium, we raise our voices; we explode
sometimes. But Sweden says this is something you must not do’. Fourth, the
distinctively Swedish element shows in the stability of ownership. Unlike most big
American and British firms which have fluid ownership structures involving a large
number of shareholders each holding a small proportion of the total stock, Swedco
has three large shareholders who control nearly three-quarters of the voting shares
and have done so for decades. Consequently, in an industry characterised by
significant restructuring in recent years, involving a number of ‘hostile’ take-overs,
Swedco has expanded internationally by ‘greenfield’ investment and through a series
of collaborative joint ventures and ‘friendly’ acquisitions.
This evidence of a ‘country of origin effect ‘ is very significant; even in a highly
internationalised MNC the nature of the domestic business system shapes the
management of the international workforce. However, the evidence also indicate that
the country of origin effect is being eroded as senior management seeks to draw
more actively on practices originating from other business systems. This process
was most apparent in compensation and management development practices. The
first of these is the development of ‘flexible’ or ‘variable’ compensation systems. An
international policy working group involving HR managers from across Swedco has
recently introduced bonus systems that are linked to individual and company
performance. In addition, for every senior manager, there is a ‘Short Term Incentive
Plan’’, which rewards the achievement of immediate goals. Moreover, four years
ago, all employees were given the right to subscribe to a convertible share
debenture scheme, something that about 40 per cent of staff worldwide has joined.
Perhaps most significantly, an individual performance-related pay scheme, in which
an employee’s performance is assessed against specific targets, affects all
employees across the group worldwide.
These variable forms of compensation
appear to have much in common with practices, which have become popular in
America and Britain during the last two decades.
A similar process of adopting ‘Anglo-American’ style practices was evident in relation
to management development. In recent years the HQ has made a concerted effort to
develop a cadre of managers from across the multinational. Subsidiaries have been
encouraged to submit nominations for individuals who should be considered for
promotion to position elsewhere in the firm, a group known as ‘high potentials’. The
identification of such ‘high potentials’ as part of an international cadre of managers
is, according to Ferner and Varul (1999), a common trait of British and America
MNCs. More generally, in Swedco the British operations appear to have been
particularly influential in the formation of policy on management development. The
manager of the firm’s ‘Management Institute’ indicated that: ‘When I am developing a
training programme for managers, I always include the UK. Firstly, it ensures I get
the language right but, secondly, there are lot of good training and management
development ideas in the UK that I would like to benefit from.
I always bring
someone from the UK site onto the team. We are also developing links with UK
universities such as Cranfield and LSE’.
Source: Edwards, T. (2011) in A. W. Harzing, and A. H. Pinnington (eds.) International
Human Resource Management, 3rd Edition Chapter 8 (pp. 283-285)
Exercise
After reading this case and drawing on relevant lectures and course material
address the following issues/questions:
1. Identify and discuss the four elements that make Swedo distinctly Swedish
and how these are evident in the management of Swedco’s international
workforce.
2. What are the main areas where Swedo wants to depart from the distinctively
Swedish management practices and why?
3. Briefly outline Swedco’s approach to international management development
(creating a cadre of international managers).
4. How did Swedco use management development strategies and practices to
reinforce and or erode the ‘home country effect’ in the management of its
international operations?