Reference no: EM132940457

Read the CMM Industries Case Study

CMM Industries is a US-owned manufacturing company in the engineering sector. It is a diversified company, but its main European activities are in the manufacture and sale of engines and related products. Its major European operations are in the United Kingdom (UK), France, Germany, and Hungary. The company was historically family-owned and controlled, and generally allowed the managers of foreign subsidiaries a fairly large degree of autonomy in setting human resource management and industrial relations policies which fitted with the host country context. Consequently, there were substantial differences in policies in different European countries, particularly in the areas of industrial relations and the management of pay and performance, with practices broadly conforming to national norms in the engineering sector.

The founding family relinquished control of the corporation in the 1990s, following years of disappointing business performance. A new senior management team was put in place, largely recruited from outside the organisation with a new emphasis placed on shareholder value, performance management and on subsidiary accountability. In the human resources (HR) management arena, there was a new focus on more coherent, centrally driven policies in the areas of industrial relations and the management of pay and performance.

The American operations of CMM had long resisted independent union organisation, but this had not been part of a strategic international HR philosophy. Now, though, foreign subsidiaries were expected to avoid trade union influence "wherever possible," and subsidiary HR managers are monitored on their "achievements" in union avoidance.

This has posed difficulties for the major European operations. Outside the Hungarian operations, which had been established relatively recently on a greenfield site and had always been non-union. There was substantial union influence, at least for some groups of workers, in all of the European facilities. The German operations had long based the management of workplace industrial relations on the works council system, and German managers felt that challenging these arrangements would be counter-productive, not least in reducing workforce cooperation. Under pressure from an expatriate manager assigned to the German operations, the subsidiary left the metalworking sector collective agreement. This had little direct impact on pay and conditions, however, and most German managers saw the move as "pointless symbolism."

Union avoidance was not an option in France. Although very few CMM employees were union members, the subsidiary was legally obliged to negotiate with representatives of the five nationally representative unions. There was a long history of overtly conflictual industrial relations in the main French plant, but no path was available to a non-union model even if this were deemed desirable at the local level. As one senior French union official reflected, "The managers here need no encouragement to be against unions, but they cannot just hope that we will disappear. They can never satisfy the corporate managers of CMM."

The UK managers perhaps came under the most serious challenge here. This was because corporate managers could point to a number of successful large non-union establishments, often American-owned. The UK subsidiary had in fact derecognised unions for clerical workers and junior managers during the 1980s, at the height of Thatcherism, but even then, it had stopped short of challenging the manual workforce over union recognition. Although the union was not particularly active in the workplace, its high membership meant that under the current British industrial relations settlement, "successful" derecognition would be highly unlikely. The feeling among UK managers tended to be that union relations were "simply not a big issue" in the UK operations. Indeed, it would be counter-productive to launch a frontal attack against a trade union which showed little militancy outside pay rounds. They also saw some value from unions to the firm in dealing with discipline and related issues.

European managers were able largely to convince their American counterparts that strong challenges to the status quo with regard to industrial relations were either not possible or unwise. Like other large firms, though, where new workplaces have been established on greenfield sites, these have often been non-union from the outset.

A bigger challenge, which caused much greater disquiet within the company, was the new performance management regime. Performance-related pay had long been a feature of the employment relationship for managerial workers in all the European countries - and, in somewhat different form, for all the company's employees in France - but this was essentially treated by most workers as an annual bonus, with relatively little variation between "high" and "low" performers. The new corporate management team, however, had been inspired by the "General Electric" model of performance management. This uses a forced distribution: that is, each unit is asked to identify a pre-determined percentage of "high" performers and a pre-determined percentage of "low" performers. In CMM, the top ten percent of employees, as well as being financially rewarded, would be seen as candidates for promotion, but the bottom ten percent would be seen as candidates for dismissal. This caused problems in all the European operations.

Question 2

(i) Discuss the possible approaches to pay and compensation available to CMM Industries across their subsidiary countries; and

(ii) Evaluate the advantages and disadvantages of each of these approaches.

Question 3

(i) Analyse the leadership development challenges that need to be addressed if CMM decides to give more control over its subsidiary HR management policies to American expatriate managers, rather than domestic subsidiary managers.

(ii) Propose solutions as to how CMM could address these challenges you have identified. Justify these with evidence on how these solutions might resolve these challenges.