Challenges for European Management in a Global Context — Experiences from Britain and Germany

The fate of national approaches to management in the global economy is contested (Whitley, 1999; Geppert et al. in this volume). As we shall see, the arguments are complex, the stakes high. Nevertheless, the key question may, initially at least, be put quite simply: arc previously diverse national forms of business organization and management practice converging on common patterns and processes? For a long line of commentators (Rostow, 1960; Ohmae, 1990, 1995; Yip, 1992; Reich, 1993) the answer is a clear yes. They believe that economic processes will ultimately lead to the erosion of any notable national distinctiveness, a ‘wilting away of the idea of a cohesive and sequestered national economy and society’ (Amin and Thrift, 1994: 1). For advocates of the convergence thesis there is, ultimately, one best way of organizing, one best way of managing, which firms must adopt if they wish to succeed In the global economy. Such views have been strongly opposed by those who suggest that national cultures and unique societal and institutional structures will continue to support different, yet sustainable, patterns of economic organization and management practice (Whitley, 1994; Zysman, 1994; Hollingsworth and Boyer, 1997; Thomas and Waring, 1999).

The discourse on globalization has been a field of research in international business for quite some time. Within the large body of literature there seems to be a rather strong, if not dominating, school of thought, which argues that globalization will ultimately result in the worldwide convergence of organizational patterns. There is talk of the ‘stateless’ enterprise (Parker, 1998) and the ‘transnational’ organization (Bartlett and Ghoshal, 1989), to name just two examples. The general argument is that the proliferation of worldwide, homogeneous economic and technological rationales is leading to a more or less worldwide standardization of organizational structures and processes. This view coincides with, and has been strongly encouraged by, a considerable bias on evolutionary concepts, which have clearly dominated theory building in the field of the multinational business organization over the last two decades. The most prominent example of this is the ‘transnational solution’ proposed by Bartlett and Ghoshal (1989: 66–71).

Current management and organizational research seems to agree in one respect: that management faces new challenges resulting mainly from globalization, whether it is real or perceived. Clearly, national corporations as much as MNCs feel the need to respond to new market conditions by reorganizing their businesses on a permanent basis. These changes concern structural configurations as much as flows of all kinds of resources including products, people and capital. However, in our empirical research we looked more closely at such reorganizations and found that even MNCs operating in the same industry were by no means responding to the challenges of globalization in a uniform or convergent way. Despite some similar trends, the types of reorganization, as well as the way the reorganization process developed, diverged from one company to the other. Searching for answers, we found that different dominant control mechanisms were key factors in explaining the divergent patterns of reorganization. Although our research topic is only indirectly linked to the general convergence—divergence debate in the context of globalization (see Ohmae, 1990; Maurice and Sorge, 2000; Morgan et al., 2001), we may nevertheless contribute to it. As will be outlined in our chapter, our findings on the connection between control mechanisms and patterns of reorganization indicate that there is as much convergence as divergence.

One of the recurrent themes in international organization studies is what happens to organizational practices as enterprises are increasingly exposed to internationalizing influences. Such influences can be divided into two main areas: This debate continues, partly under new auspices, along a well-established track, which focuses on the extent of and explanations for convergence and divergence. The literature has used these concepts in different ways. An authoritative definition by reputed scholars states that: ‘The subject of organizational convergence is concerned with how far organizations in different countries have traveled along a path to global convergence in operations and management and, conversely, how far the influence of specific cultural factors must be understood and planned for if the manager is to be effective in cross-cultural situations’ (Pugh and Hickson 1996: 3899; see also the overview in Geppert et al. this volume, based on Child, 2000).

Multinational corporations (MNCs) are in a division of labour with small and medium-sized enterprises (SMEs): on the one hand, globalizing SMEs are increasingly becoming competitors of the MNCs, and on the other hand, they are also network partners for MNCs. For a better understanding of the strategies of MNCs, a closer look on their relationship with globalizing SMEs is required; this is the focus of our paper. Our investigation pertains to the German national business system with its consensual style of capitalism, but some of the results might well serve as hypotheses for other varieties of capitalism as well.

For a long time, proponents of a structuralist approach have assumed that the division of economic actors within firms into the groups of owners, managers and workers allows an explanation of their actions and behaviour. Roles, according to this approach, are, above all, contingent on economic categories such as ownership or the control of means of production, which are assumed not to differ between cultural settings (that is, the culture-free thesis). Members within each of these three groups are believed to act in a similar way, no matter where the firm is located. Interaction between members within each of these groups should therefore pose no obstacles for conducting business internationally: there would seem to be no need to think about peculiarities within specific countries.

This chapter is based on a comparative case study which examines the employee relations practices of the American multinational the McDonald’s Corporation in several European countries. It focuses on the problems of union organization in the European fast-food industry and the implications of these trends for employee rights to representation, pay and conditions of employment.

Do governments matter anymore? Given the rhetoric on the globalization of business practices, the apparently unstoppable growth of multinational enterprises following transnational mergers and acquisitions and claims by some that state power has been eroded so much as to make centralized decision-making, especially by smaller states, irrelevant, one might think not. When one examines the international spread of financial markets, the interpenetration of industries across borders, the spatial reorganization of production and the growth of supranational trade associations, it is perhaps easy to assume that globalization is ubiquitous and its impact has emasculated the state. Even amongst those who question the one-way causality implicit in many popularizers of global trends (Mittelman, 2000), there is a tendency to adduce a powerful logic to the dynamics of globalization. With technology given primacy in the almost instantaneous spread of information, the communications revolution has eroded many of the cultural barriers in societies and transformed many aspects of civil society (Hutton and Giddens, 2000). In doing so, states are assumed to have lost much of their potency as arbiters of change and defenders of last resort. Having domesticated the harsher aspects of the market economy (Kuttner, 2000), they have been relegated to the sidelines of a self-regulated global economy of the type that Adam Smith might easily have envisioned.

Both ‘globalization’ and ‘managing diversity’ have become central themes in academic and popular business discourses. Of the two, globalization is the older concept and is signified by such terms as ‘the global village’ (McCraken, 1988), ‘the global market place’ (Paliwoda, 1993) and ‘the global economy’ (Hirst and Thompson, 1994). It presents a view of the world and its people, whether as organizational managers, employees or customers, as being increasingly ‘connected’. More recently, globalization has been coupled with the younger concept of diversity management, which originated in the US and, as Litvin (1997) observes, has been quickly leapt upon by scholars and practitioners as an important tool in harnessing the energies of organizations in the global battle for economic success. While there are many different interpretations and understandings of diversity management (see Kirton and Greene, 2000; Lorbiecki and Jack, 1999 for overviews of the literature), it is underpinned by the central belief that organizations with highly diverse workforces — in terms of gender, age, ethnicity, able-bodiedness, religion, sexual orientation and other differences — perform better in today’s ‘global’ economy than corporations that are monocultural or homogeneous. It is argued by leading advocates, such as Thomas and Ely (1996) and Dass and Parker (1999), that it makes good business sense to increase the number of different affinity groups on corporate payrolls, because their members are more in tune with the varied needs and tastes of people within our increasingly diverse and multicultural societies.

This paper investigates the particular challenges facing German management as they seek to adjust to the global economy by increasingly internationalizing their business operations. Although globalization is a challenge to all national economies, the German economy, as an example of what Taplin describes in this volume as ‘consensual capitalism’ based on an activist state, is finding the adjustments especially difficult as they question the fundamental structure and characteristics of the national business system. In this paper, we focus on the ongoing debate about whether the ‘German model’, previously seen by many, not only in Germany, as a highly successful social welfare state, is now a liability in terms of Germany’s attractiveness as a location for business investment. We investigate German managers’ views on the issue, which are ambiguous since they want to retain what they see as the advantages of the model whilst introducing some Anglo-Saxon-style reforms. It is an open question whether they will be able to ‘have their cake and eat it’. No one knows as yet what the next phase of the German model will look like, although this paper makes some tentative suggestions about this. In conclusion, we question the longstanding attachment to national models as champions in management thinking.