Donna L Zeller 1

Global Crisis Management: The Transnational Model of Multinational Organizations

The primary goal of this study is to recognize the organizational level challenges of crisis management for multinational organizations; specifically, with the transnational model. The transnational approach for multinational organizations, selected for this study, invites the transfer of practices to, from and within the affiliates; parent organization and subsidiaries are aware of their own role as well as the role of others (Bartlett & Ghoshal, 1989). The application of the Structural-Functional Systems Theory to Bartlett and Ghoshal’s Transnational Model reveals that the ‘interplay’ between dynamic and static structures; i.e. the ‘fit’ between an organization and its environment, has an impact on crises. Transnationals “are among the world’s biggest economic institutions”; thus, the study has socioeconomic, political, and legal relevance (Greer & Singh, 2000).

Complete Paper Uploaded to Academia.edu Keywords: crisis management, transnational, multinational.

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--Introduction--• The definition of a crisis, as it applies to this study of the corporate sector, is as follows:

• “An organizational crisis is a high impact event that threatens the viability of the organization and is characterized by ambiguity of cause, effect and means of resolution, as well as by a belief that decisions must be made swiftly” (Pearson & Clair, 1998, p. 60). • Davis (2005) and Coombs (2007) conceptualized a crisis as a sudden, unplanned

event. • Coombs (2007) concentrated on the threat to operations, finance, and reputation

of the organization. • Davis (2005) recognized the need for quick responses and decisions. • Experts in the area of crisis management, Pauchant and Mitroff (1992), view a

crisis as an opportunity to understand the underlying reason(s) and prevention thereof (Jaques, 2010).

• Crises are often seen from a traditional viewpoint as a single, unplanned event; though, a relatively new approach is to view crises as an ongoing process.

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--Introduction--• Bartlett and Ghoshal’s (1989) framework for a structure, based on the four models

for multinational organizations, include multidomestic, international, global, and transnational.

• The transnational approach, selected for this research, is described as:• High pressure for integration - High pressure for differentiation • Strategy tries to maximize both responsiveness and integration, where

knowledge and innovation is sought developed and dispersed within the entire network.

• The structure of the MNC is regarded as a network, and each subsidiary is given responsibility compared to its capabilities and strategic mission.

• The MNC is controlled by the movement of people within the MNC that may facilitate the mutual development and dispersion of innovation and knowledge.

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--Methodology--Research Method

• Historical events research approach• Event-structure analysis was applied in that it “is a qualitative approach that relies on systematic

coding of key events or national characteristics to identify the underlying structure of action in a chronology of events” (Schutt, 2009, p. 429).

• Qualitative method • Describes the characteristics of the population; specifically, the multinational organizations with

transnational models (Adams & Lawrence, 2015).Research Design

• Case study approach • To research the “the parts of the whole organizations in relation to each other and in the context of

the entire case” (Schutt, 2009, p. 428).

• The historical events research design, using a cross-sectional format, provided the basis for gathering data. • The cross-sectional format is not longitudinal; it has been selected as it allows the investigations of

past events that appear to have a critical impact on subsequent developments (Schutt, 2009).

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--Methodology--Research Population and Sampling Method

• Multinational organizations with a transnational approach • From the 2012 “Biggest Transnational Companies” from the Web site, The Economist (The

Economist Online, 2012). • Their resource is the United National Conference on Trade and Development (UNCTAD).

• The goal of this study is not to describe the entire population but to examine relationships; therefore, the nonprobability sampling method was used.

Instrumentation

• The case study approach was used to conduct an in-depth analysis of a specific problem.

Data Collection

• Archival data, including news releases, peer-reviewed articles, corporate information, and government agency reports

Operationalization of the Variables

• The Structural-Functional Systems theory is used to “describe the interrelatedness of all parts of the transnational organizations, interacting with the environment, and how one change in one area can affect multiple other parts” (Keep, n.d.). That description provides the basis for the operationalization of variables.

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--Limitations--Validity• The sample of the population of interest, the top transnational organizations of 2012,

was obtained from the UNCTAD data. The UNCTAD data is an established resource that has been used in prior research by governments, corporations, and international agencies.

• “Meanings and the operational definitions of variables may differ between nations or regions” is significant; therefore, while the measurements may be valid they will not be considered reliable (Schutt, 2009, p. 435).

Transferability• The study of a multinational organization will include an array of cultures and norms. • Thus, the transferability may also be effected by the meaning of the information “in

other languages or cultural contexts” (Schutt, 2009, p. 446). • In due course, repeated investigations will contribute to an increased understanding of

the causal connections; thereby, improving transferability (Schutt, 2009).

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--Expected Findings--Expected Findings• Based on prior research, the expected findings are that the multinational,

transnational model will have an influence on the perception of and actions taken during a crisis. • Researchers Lin and Carley (2001) found that, during a crisis, “38 out of 69” of

the organizations in their study altered either their authority structure, resource access structure, or both (p. 26).

• Chewning and Doerfel (2013) found that structures go through a transitional phase during the crisis; and that this transitional structure becomes the ‘new norm’ in the post-crisis phase.

• James (2007) categorizes five phases of a crisis; each phase “contains an obstacle that a leader must overcome to improve the structure and operations of an organization” (SakaRahmonOlawale, 2014, p.82).

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--Data Analysis and Results--Description of the Sample

• The sample of is based on the 2012 “Biggest Transnational Companies” from the Web site, The Economist (The Economist Online, 2012).

Research Methodology and Analysis

• Bartlett and Ghoshal (1989): the transnational model of the multinational organization is described by the following: • (1) strategy that tries to maximize both responsiveness and integration, where knowledge and

innovation is sought and dispersed within the entire network; • (2) a structure of the MNC is regarded as a network, and each subsidiary is given responsibility

compared to its capabilities and strategic mission; and • (3) is controlled by the movement of people within the MNC that may facilitate the mutual

development and dispersion of innovation and knowledge (Admin, 2009). During a crisis, the dispersion of knowledge, the responsibility of each subsidiary, and the movement of people that may influence the dispersion of knowledge are all factors that influence crisis management and decision-making.

• For this study, the emphasis is on the strategy; both responsiveness and integration, and knowledge and innovation.

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--Data Analysis and Results--Research Methodology and Analysis• In addition, the ‘fit’ between the organization and its environment continually evolve.

• The Structural-Functional Systems theory is particularly applicable to identify that ‘fit’. • The analysis of the system, internal and external to the organization, is used to

determine the effect of the array of environments (Fisher, 2010, 73).

• Gabriel Almond’s (1956; Almond & Coleman, 1960) classification of structures is applicable to this study as it is based on • (1) the degree of differentiation between structures; i.e. home office and subsidiaries; • (2) the extent to which the system is visible; i.e. shared throughout the organization; • (3) the stability of the functions of the various roles; i.e. stability in a crisis situation; and

(4) the distribution of power; i.e. the workforce is empowered to share information throughout the system, including with senior level managers (Fisher, 2010, p. 72).

• “A primary area of study of functionalism is the ‘interplay’ between the dynamic functions of a system and the more static structures it designs for itself”; i.e. the dynamic global market and the formal organizational structures and strategies (p. 75).

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--Data Analysis and Results--Summary of the Findings

• Based on Bartlett and Ghoshal’s (1989) model, the overall summary of the findings indicates that • Existing strategy was influenced by the crisis. • In several of the crises reviewed,

• existing strategy did not maximize both responsiveness and integration; • knowledge and innovation was not sought and dispersed within the entire network; • it did not give each subsidiary responsibility compared to its capabilities and strategic

mission; • and the movement of people within the MNC negatively controlled the mutual

development and dispersion of innovation and knowledge during the crisis.

• The application of the Structural-Functional Systems theory to the data also indicates that • the degree of differentiation between structures; i.e. home office and subsidiaries, may impede

responses time; • the lack of visibility of the system; i.e. shared throughout the organization, may have an adverse

effect on response; • the instability of the functions of the various roles during a crisis may cause delays in response;

and • the distribution of power; i.e. whether the workforce is empowered to share information

throughout the system, including with senior level managers, is also shown to contribute to industrial accidents and product recalls.

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--Data Analysis and Results-- (The codebook, tables, and supporting data can be viewed on the paper

uploaded to Academia.edu)Results• The fundamental causes of the crises included:

• Problems in the national and regional economies / marketplace; the global economic recession; political instability; foreign imports; industrial accidents; ethics violations; and product defects.

• When Bartlett and Ghoshal’s (1989) description of strategy is compared to the Structural-Functional Systems theory• The ‘interplay’ between the dynamic functions of a system and the more static

structures it designs for itself changes; there is an effect on responsiveness and integration to that responsiveness; and new knowledge and innovative approaches may not be readily distributed.

• Applying the Structural-Functional Systems Theory to Bartlett and Ghoshal’s Transnational Model reveals that • The ‘interplay’ between dynamic and static structures; i.e. the ‘fit’ between an

organization and its environment, has an impact on crises.

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--Discussion--Discussion of the Results

• Bartlett and Ghoshal (1989): Strategy in the transnational model of the multinational organization tries to maximize both responsiveness and integration; knowledge and innovation is sought and dispersed within the entire network. • Honda was aware of problems with the Takata airbags; however, senior level management did not respond.

Knowledge regarding the allegations was not sought; and that knowledge which was presented was not dispersed in the network.

• The application of the Structural-Functional Systems theory provides additional insight, as follows: • (1) the degree of differentiation between structures; i.e. home office and subsidiaries, was not acknowledged:

In the Honda crisis, the home office did not overtly acknowledge the differentiation with the subsidiaries, particularly in the United States;

• (2) the system was not visible; i.e. shared throughout the organization: Again citing the Honda crisis, Honda and Takata had been aware of the defect since 2004 (Tabuchi, 2016);

• (3) the stability of the functions of the various roles proved to be a negative; i.e. stability in a crisis situation: In this case, the stability of Honda and Takata senior level managers contributed to the crisis in that their positions were used to ignore the warning signs; and

• (4) the distribution of power; i.e. the workforce was not empowered to share information throughout the system, including with senior level managers: Early on, the Takata engineers were aware of “a range of problems” (Bernstein, Klayman, & Kubota, 2014).

• In summary, Honda and its business partner, Takata, did not practice the transnational model in that it did not utilize differentiation and visibility to maximize responsiveness and integration; and it did not use the stability of roles and distribution of power to seek and disperse knowledge and innovation.

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--Discussion--Implications of the Results• While there are challenges to managing crises in a globalized setting, those challenges can

be met. • The challenge is to acknowledge the differences from a variety of viewpoints, and then

approach the situation with action-based practices that rely on the benefits of understanding differentiation and using visibility to maximize responsiveness and integration.

• However, this requires stabilizing roles and distributing power to seek and disperse knowledge and innovation; before a crisis even exists, as well as during and after the crisis.

• According to Bartlett and Ghoshal’s (1989) model, the transnational approach does provide a framework for doing so; however, • The ‘interplay’ between the dynamic functions of a system in a crisis and the more

static organizational structures it designs for itself have an adverse effect on responsiveness and integration to that responsiveness.

• Furthermore, new knowledge and innovative approaches that may have been used to avoid the crisis altogether may not be readily distributed.

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--Recommendations for Further Research--• Other types of multinational approaches, such as international and global, need to

be researched, compared, and contrasted. • Some organizations, described as following the transnational model, actually

follow more of a global approach. • Furthermore, Lin and Carley (2001) found that the organizational structures which

work well during a crisis may not be appropriate during normal operations. • A comparative analysis of structures before and after a crisis may have multiple

results• Additional research could apply the Social Network Analysis (SNA) Theory,

• To research “types and patterns from social relations” to identify the “organization structure appropriate to business processes” (Hong, Yonghyuk, Jinwoo, & Choi, 2012, p. 5412).

• A prime example for applying the SNA Theory is the bribery scandal at Siemens, where the social relations, business processes, and organizational structure quickly fell apart as the investigation evolved (Schubert & Miller, 2008).

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--Conclusion--• Bartlett, Ghoshal, and Beamish (2008) recognize several difficulties in managing integration,

responsiveness and flexibility in a multinational organization with a transnational approach. • For one, much attention in research and in organizational management has concentrated on finding

“which formal structure provided the right ‘fit’ in various conditions” (Bartlett, Ghoshal & Beamish, 2008, p. 333).

• In the pre-crisis mode, particularly for the situations where profitability and market changes were key factors, the ‘fit’ for the changing conditions were not fully considered or ignored altogether.

• In the crisis mode, the organizational managers struggled to react to the conditions with multiple changes to critical areas including strategy, products, and / or markets.

• In post-crisis mode, for the immediate changes, organizations replaced people, pushed upgraded safety features, and replenished the tarnished corporate image.

• The application of the Structural-Functional Systems Theory to the issues provides additional insight regarding the influence of differentiation between structures; system visibility; role stability and function; and the distribution of power. • Particularly in a dynamic crisis situation, ignoring differentiation, visibility, roles, and power are the

foundation of the basic problem in that the structural fit focuses on only one organizational variable—formal structure (Bartlett, Ghoshal, and Beamish, 2008, p. 335).

• The formal structure is challenged when an organizational crisis threatens the viability of the organization with ambiguity of cause, effect and means of resolution, as well as by a belief that decisions must be made swiftly (Pearson & Clair, 1998).

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--Conclusion--• To summarize….

• Overall, the requirements of the “complexity of the strategic tasks” in normal and especially in crisis global operations are not satisfied with a structure that ignores the ‘interplay’ between the dynamic functions of a system in a crisis and the more static organizational structures it designs for itself (Bartlett, Ghoshal & Beamish, 2008, p. 335).

• That is, to benefit from the characteristics of a transnational organization; including “developing and legitimizing multiple diverse internal perspectives, the physical assets and management capabilities that are distributed internationally but are interdependent, and a robust and flexible internal integrative process”; • Requires actions that identify the interplay between differentiation and integration

with system visibility; acting on role stability and functions; and distributing power throughout the organization.

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