Organizational structure is the company's basic objective. Structure of a company, establishes decision making and line of control that describes where employees from various functional groups are situated within the company. Organizational structure of a multinational company has an added complexity due to its dealings in international business. This complexity also extends since employees come from different cultures and perform different tasks, all in the same organization (Kepner, 1965).
Control involves setting standards, identifying deviations and correcting them and monitoring performance to ensure that organizations goals and objectives are achieved. In Multinational Company, which has many business units across countries, the principal company should have control on the operations of its agent companies to ensure that objectives are made.
Factors to consider when choosing an organizational structure for an MNC
Decision making authority
Business structures that are international should take into account the level of decision making authority given to managers in foreign markets. The first phase of decision-making is the oriental stage. Here, members meet for the first tie and familiarize with each other. Once the members of a group have known each other, arguments, fights and disputes can occur. The group begins to clear ambiguity in the talked about opinions. Here, members make a final decision by justifying themselves whether they made a right decision.
A Multinational company therefore should consider that the decision-making authority is well developed. The company should ensure that it has outlined its goals and objectives. This will make the decision-makers in the subsidiary companies know what is expected of them. This will make them work hard to accomplish what is required by keeping on a path (Triantaphyllou, 2000). The company should also gather enough data regarding its business activity and how it plans to go about it. They should also factor in the competitor activities and come up with a strategy to ensure that it is not bundled out of the market. Executives at home office should ensure that the decisions they make affect all foreign subsidiaries and departments. Locally made decisions will constitute a custom tailored structure attached to workplace and culture of the consumer of that country. The company should also use brainstorming so as to develop various alternatives. Coming up with several alternatives enables one to choose which one works best. The company should also consider the advantages and disadvantages of each alternative. With the list of advantages and disadvantages of each alternative, one is likely going to choose an alternative that has more advantages than disadvantages.
The decision to group employees basing on their function is complex in international operations. This decision is highly influenced by the work being performed in a certain area. Work units can also be functionally structured so that tasks can only be performed in one area. This enables the Multinational Company ensure that efficiency is achieved in rendering of its services. For example, the company might decide to locate the phone support team in Pakistan. Units can be formed around regions or products. For example, the company can group representatives from accounting, marketing, supply chain management and human resources functions in Pakistani branch to handle business there. Placing the above functional groups in the departmental units ensures that efficiency is achieved. The accountants will ensure that money is spent wisely within the departments. They also give feedback to the parent company. The human resources department recruits employees that offer services to the company. The marketing department ensures that sales of the company move smoothly. They also do research to ascertain the need of developing an improvement on the product.
Layers of management
The Multinational Company should consider the number of executive management required. This ensures that each region benefits from responsive and effective leadership. International businesses that are small may still remain competitive under the management of one Chief Executive Officer, Chief Operations Officer and Chief Financial officer. In large international organizations, it can have one Chief Executive Officer for one continent with titles such as CEO Africa, CEO Asia and CEO North America. Executives from foreign regions can either act autonomously or report to their counterparts in the home country. If regional executives are entrusted with power to act independent of their counterparts, it must be ensured that all executives are on board have similar set of strategic goals (Kepner, 1965). Experienced and active board of directors ensures that the counterparts do not deviate from what they are required to do. For a Multinational Company to be successful therefore, it should ensure that the executive officers it appoints are in line with its layers of management. This ensures a good regional representation and achievement of the organization's goals.
When an international business disperses its operational functions geographically, it should consider structuring each unit according to its regional culture and specific function. For example, a technical support team located in India may benefit from a decentralized organizational structure in which employees are free to make decisions, contribute to group's strategic management and trying new things. A production department in Japan, on the other hand can benefit from a rigid structure with its decisions coming from top management. It will also have well defined job roles for workers in frontline.
For a Multinational company to be successful, the above should be considered. This will ensure that the company does not run out of business. It ensures that it always remain competitive throughout.