Impacts of Headquarter and Subsidiary Relationship on Motivation of Employees and Team Performance - Literature review Example

Table of Contents

Abstract3

Introduction4

Headquarter and Subsidiary Relationship5

Employee Motivation12

Team Performance16

Reference18

• • Abstract

This is a literature review on the impacts of headquarters to subsidiary relationships in a company/organisation. It majors on the effect of the relationships between the performances in an organisation, which is impacted by the motivation of employees. Therefore, different academic resources are used to display these diverse effects of the relationships between the performance and employee motivation. The factors which are affecting the relationship between the two parties are discussed, giving relevant setting from various views of different authors.

Literature Review

• Introduction

This section is intended to discuss the objectives of the overall investigation. The discussion will be tabled by the thorough examination of the central questions that motivated the research and the body of text. The noteworthy points will be highlighted from the present understanding; that exists in research findings and theoretical contributions to make achievements. All the evaluation will be in regards to the impact of headquarter and subsidiary relationship on employee motivation and team performance. First, the chapter will shed some light on employee motivation, giving a detailed and contextual definition. Also, the section will identify theoretical contribution to show that these building blocks link together.

Human resource management is an important and necessary component in the administration of the projects and companies, which has a tendency to determine the effectiveness of achieving the project and company's objectives, as well as obtaining the planned outcome. The successful implementation of the company's plan in the project is crucially useful. The professional, organisational and personal qualities of every team member – but primarily the project coordinator – produce an impact on the result of the project management.

In the contemporary conditions of the unstable external environment of the companies function, the formation of a competitive management team is critical; this is because the impact of global competition, the proliferation of e-business on the Internet and the economic crisis made it necessary to find new ways to organise business activities. Therefore, since the 1970s, the growth of the value of intellectual work, in particular, the ability of workers in different organisational structures intensified to adapt to changes in environmental factors.

Given that, team-building began to spread actively in the management of organisations; this resulted in the selection of self-direction in the management – team management. This approach involves the search for shared values, public access to information, promoting teamwork, cooperation, and partnership, collective responsibility for the work, the development of the creative group and individual potential, adapting organisations to sudden changes in the environment. Therefore, the core aim of this paper is to the theoretical framework literature of the impacts of headquarter and subsidiary relationship on the motivation of employee and team performance.

• Headquarter and Subsidiary Relationship

According to Cullen and Parboteeah (2005), as global economies become more borderless and interconnected many organisations develop a desire to expand their area of operation to reach foreign countries. Delio (2012) argue that in an attempt to enhance their competitiveness, many organisations internationalise their operations. Cullen and Parboteeah (2005) suggest that important globalisation trends such as sophisticated information technology, falling borders, increasing cross-border business as well as investment compel organisations to become multinationals to grow and survive. Geppert, Matten and Williams (2003) argue that globalisation strengthens the view of multinational organisations as uniform companies in the world, which increases global convergence and standardization of business practices and procedures. Nevertheless, at the same time globalisation strengthens the perception of multinational companies that adapt to national and local specifications, drawing attention to the existing difference in national institutions and cultures. Thus, many multinational organisations have headquarters and dispersed subsidiaries in foreign countries. It is important to have a good relationship between headquarter and subsidiary in order to manage better the relations with subsidiaries. In the current business settings, there are numerous forms of organisations. However, the relationship between the headquarters and subsidiary is still the main channel through which an organisation is managed. This relation enhances control, strategy and coordination as well as smoothes all kinds of the development of inter-department commodities, factor, personnel and knowledge flows. Thus, the main issue is how to manage and structure the association between the headquarters and its subsidiaries in foreign countries.

Scholars have in the past argued that attention is of the essence and most crucial after inputs in any institution. Haas and Hansen (2001) argue that current organisations or corporations purpose to combine a system of distinguished and dispersed subsidiaries; the channelling of focus from corporations’ headquarters to these sections is critical issues. Ocasio (1997) believe that headquarters and the subsidiary relationship is limited and subjective in its aim. In light of this, Haas and Hansen (2001) explain the recent evolution of internal and external clients for headquarters' attention in some subsidiaries.

Different players, specifically subsidiaries and headquarter managers, have an opposing opinion on the way to handle subsidiaries and channel optimal energy and resources creating a bond of contentions of resource seekers in the institution. Headquarters may need to aid subsidiaries' activities, limit unconventional behavior, ensure efficiency and coordination, or transfer knowledge.

Subsidiaries, alternatively, are struggling for headquarters' attention to scarce interference, boost their bargaining power, or compete for headquarters' resources. In the process of gaining comparative advantage between headquarters and subsidiaries, there exists employee motivation to attract attention. It is, however, farfetched whether subsidiaries benefit from headquaters' attention but the underlying factor is that the impact of Headquarter and subsidiary relationship boosts employee motivation and team performance.It has become a common exercise to conceptualise subsidiaries as a web of micro-units, which drives differentiated stocks of inputs (Ghoshal 1989). Accordingly, Ghoshal (1989) posts that subsidiary-headquarters relationship is a two-channel traffic where both players are striving to make gains while benefitting the organisation.

Headquarters handle the corporations’ limited resources (Foss and Pedersen 2002). In addition to this, they seek help from subsidiaries in matters opinion and strategic insights. Rugman and Verbeke (2001) thus suggest the need to motivate employees. For instance, many global companies empower workers to their operations in the East, especially India and China as they can survive in this contemporary market. An example is Cisco, recently situated its headquarters to India and had to convince its employees to shift with them. Some had to leave their families and background behind. It required convincing and lovely offers by management to the workers (Gupta, 2009).

Past literature and scholarly work focus on the formal administrative program (Martinez & Jarillo, 1991). For instance, performance evaluation systems are assumed to take a significant role in subsidiaries management (Gupta & Govindarajan, 1991). More often, headquarters use PMS to oversee local performance outcomes and impact subsidiaries' decisions, rewarding excellence and encouraging underperforming sectors (Roth, 1988).

Subsidiaries and headquarters' structures play an important role in the corporation advancement. They represent a legally independent company, the decisions of which, is crucially affected by the holding company by its majority interest in the capital of the subsidiary or of the contract concluded between them. Headquarters as an independent economic entity performs several essential functions, which are both necessary for the employees' motivation and the company's success. First is production, that is, the organisation of production processes for the manufacture of goods and provision of services. Second is commercial, which is logistics, sales of finished products, as well as marketing and advertising then financial which attracts investment and credit, as well as calculations within the headquarter and subsidiaries and with partners, the issue of securities, the payment of taxes. The fourth is counting which means drawing up a business plan, balance sheets, and budgets, conducting inventory reports to the bodies of state statistics and tax and then administrative which presupposes the direct management activities, including organisation, planning, and control. Finally, legal aspect, which focuses on compliance with laws, regulations, and standards, the implementation of measures for the protection of the factors of production (Harzing, 2002).

Harzing (2002) indicates that the motivation of employees in headquarters and subsidiaries leads to the harmonization of economic relations of the company and subsidiaries during the reproduction of fixed capital.

In light of this, the mutual satisfaction of the agreed requirements for the reproduction of the economic and industrial potential for the production objectives' solution is vital. Thus, Harzing (2002) argues that it is necessary to create an environment in which their interests are fully aligned to achieve harmonization of the headquarter company and its subsidiaries. Key indicators in the formation of a balanced relationship of participants are holding margins. They determine the amount of profit, which a particular party will get and the result of the economic operation(s). The change in gain depends on each participant.

More analytical literature presented by Harzing (2013) and Ambos, Andersson & Birkinshaw (2010) think that it is significant to be attentive to professional experience of headquarters' management system representatives. Thus, consequently, the essence of the work experience, as the author's note, is defined as the employees' desire to meet their needs in specific benefits through work, while aiming at achieving the organisation's objectives. These requirements are expected, as Harzing & Pudelko (2013) believe, to be implemented by the motivational tools, which act in the direction from the headquarters to their subsidiaries. Thus, as Gammelgaard et al. (2012) note, it is possible to make an interim conclusion that the “motivation” is an intuitive tool for a person (an employee) to perform the active work that occurs in the course of employment to meet their needs. Next, Gammelgaard et al. (2012) propose to consider the concept of “stimulus” which the majority of headquarters lack in motivating the subsidiaries.

Harzing (2013), Gammelgaard et al. (2012), Huang, Chiu & Lu (2013) and Lee et al. (2011) believe that stimulus in the relation between headquarters and subsidiaries is, above all, an external motive. In other words, the stimulus is a cause of the behavior, interest in the commission of any act by anyone. Stimulation involves, as the authors consider, the financial incentives (which is a reward) and is a means to meet the additional needs of the worker(s). Incentives (rewards), Huang, Chiu & Lu (2013) suppose, are working to encourage people to work efficiently.

Regarding the concept of motivation, which is expected to come from the headquarters to their subsidiaries, Van Kleef et al. (2009) believe that in conjunction with the term “motivation,” the name of “compensation” (“award”) has a broader meaning than just money. The award is all that an employee considers valuable (or helpful) for themselves. The value (utility) is the ability to meet any needs. The usefulness and benefits are believed to be both identical and have different meanings. Value expresses not so much the physical properties or goods, but the consumer's attitude towards them, i.e., as Van Kleef et al. (2009) notes a subjective perception of products.

The essential problem, why the headquarters do not provide their subsidiaries with enough motivation consists in the fact that they perceive the subsidiaries as the completed teams. However, in reality, the group of people who are challenged by a task cannot be recognized as a team. In this regard, Judge et al. (2007) note that the creation of a team must be in the process of solving the two principal problems in functioning of the organisation. These two principals are to address the urgent problems (overcoming the crisis, creating a new product, etc.) and to implement the regular monitoring of the organisational situation to deal with strategic decisions in case of an unstable situation. Judge et al. (2007) argue that the organisation requires the team as a powerful new resource for its development in problem situations with responsibility for results.

Concerning the essence of competitive team management, it is important to comprehend the very concept of competition to the position of the organisation's team. In related literature presented by Chen et al. (2010), competition is a necessary condition for market-based relationships. In other words, competition is the collision of two or more entities; it provokes a contest between individuals, teams, companies, organisations, areas for achieving the best results in any activity to obtain certain rewards (consumers, benefits, privilege). Moreover, competition is the driving force behind the development of the subjects and objects of management, and as Chen et al. (2010) were keen to point it out, competition is the engine of progress and the guarantor of the existence of the business.

In summary, past literature shows that attention is an important aspect of the headquarter-subsidiary relationship (Haas and Hansen 2001; Ocasio1997). Headquarter-subsidiary relationship has different players, particularly managers, who have opposite views regarding how to deal with subsidiaries and direct maximum focus and resources, which creates disagreements in an organisation. Subsidiaries strive for the attention of the headquarters for several reasons. The effect of headquarter-subsidiary relationship enhances motivation of workers and performance of teams (Gammelgaard et al. 2012; Ghoshal 1989; Gupta 2009; Harzing 2013; Huang, Chiu & Lu 2013; Lee et al. 2011; Rugman &Verbeke 2001; Van Kleef et al. 2009). Past studies focus on formal programs of administration, such as PMS, as techniques used by headquarters to oversee performance outcomes of its subsidiaries and affect their decisions (Gupta & Govindarajan 1991; Martinez and Jarillo 1991; Roth 1988).In this relationship, structure and a balanced relationship are vital elements in enhancing coordination and promoting harmonization (Harzing 2002). Another significant thing is to pay attention to the professional experience of the management system officials from the headquarters (Ambos, Andersson & Birkinshaw 2010; Harzing 2013; Harzing & Pudelko 2013). Creation of teams will help the organisation to deal with various issues regarding the association between the headquarters and the subsidiaries (Judge et al. 2007). Such teams ought to compete with each other to enhance the relationship between the headquarters and the subsidiaries (Chen et al. 2010). Most of these studies relating to the relationship between the headquarter and its subsidiaries explore issues such as management of foreign subsidiaries, cross-cultural teams, and motivation of employees and paying attention to subsidiaries.

Therefore to improve understanding in this sphere it is important to consider aspects of knowledge creation and learning in the relationship by exploring the scope and coordination of the networks of subsidiaries of the organisation that are made of different social, economic, cultural and social settings and how they affect employee motivation and performance of teams.

• Employee Motivation

Due to the difficulties in the content of workforce in the conditions of technological and scientific progress, wide automation information and automation production, resulting in wide levels of workers' social and educational expectations, the value of motivation and catalyze has been increased. For many individuals, work has ceased to be the meaning of life and became a means of survival. Additional resources are required to establish the employees' zeal and stimulation.

Colakoglu, Tarique & Caligiuri (2009) have a firm conviction that it is crucial to encourage workers to a highly productive and efficient work. To create the required working conditions, the reward for the individual striving to improve qualification, intending to creating a high motivation to work. Currently, as the authors believe, the practical activity of the organisation requires responsible and enterprising employees, highly organised and eager to work for self-realization. Consequently, Klitmøller & Lauring (2013) supports the idea expressed by Colakoglu, Tarique & Caligiuri (2009) and state that it is imperative to ensure the quality of the employee by using the traditional forms of material incentives and strict external monitoring.

In hindsight, both Colakoglu, Tarique & Caligiuri (2009) and Klitmøller & Lauring (2013) conclude that it takes a mental and physical investment to achieve promising outcomes. Micheli & Manzoni (2010) argue that the development of new forms and methods of the employees' motivation and stimulation will hypothetically propel the workers' motivation of labor activity. This approach occupies a central place in personnel management, as it is the employees' process of motivation exercised to work actively to meet their needs and interests coupled with the achievement of organisational targets. Braun et al. (2013) and Popaitoon & Siengthai (2014) argues that to have proper ethics you need motivation, that is, the motivation of yourself and others in the activities for achieving personal targets and the organisation's objectives. In other words, a set of persistent motive determines the character of the individual, its value orientation, and activities. Both Braun et al. (2013) and Popaitoon & Siengthai (2014) state that motivation is called to advocate the immediate cause of the behavior of employees. Exposure of workers to attain the institutions’ set targets is known to be essentially the primary task of managing personnel process.

It is agreeable to conclude that the “motivation” (a motif) is an internal impulse of a person (a worker) prompting for action to achieve the target(s). Motivation, based on Schotter & Beamish (2011), is not contrary to the domestic installations (moral principles) of a person (an employee). Stimulus (reward) as stipulated by Noorderhaven & Harzing (2009) can sometimes be regarded as the external effects on human (an employee) to induce him to become more active (working) activity, which implies, first, the material (monetary) compensation.

However, the definition of “motivation” and “incentives” are often identical for managers of any organisation. Millar & Choi (2009) state that regarding personnel management to meet the process successfully it is important to develop and implement the motivational policies, to build the organisation's management based on information about the interests of workers.

Aguinis (2009) believes that stimulation of labor is always a set of measures that supplement the motivational policies and is the means of satisfying the specific needs of the person (the employee) and it is to be implied, first of all, in the format of the material (monetary) compensation. Thus, Aguinis (2009) argues that the management of processes of motivation and stimulation of employees represents the value of knowledge on how the organisation's leadership can come to an optimal handling of these processes depending on the selected target.

Chang, Gong & Peng (2012) postulate two concepts of motivation, consisting of content and process theories of motivation. It is significant to bear in mind that identification of the fact that the production environment and intrapersonal urges to this behavior are engaged in substantive theory. The most known theories, Chang, Gong & Peng (2012) believe, describe the motivation process. There are six stages in the process of motivation, but such an examination is conditional because in real life, there is no clear delineation of stages and there are no separate motivation methods.

Gilley, Gilley & McMillan (2009) think that the quantity and quality determine the economic efficiency of the organisation. The social efficiency is achievable only when the organisation is in a stable financial position and receives profit that allows solving social problems, to meet the interests and expectations of employees. Managing motivation and stimulation of labor activity within the workers' organisations, Gilley, Gilley & McMillan (2009) found, must be based on long-term and short-term prospects for cooperation between the employer and the employee.

Similarly, Gertsen & Zølner (2012) and Gong & Chang (2008) found that the relationship between the boss (management of the institution) and the employee should be built by the organisation's targets, objectives, organisation, and administration of workers' targets. The optimum ratio between the employee and the employer is viewed as a relationship in which incentives are applied to staff and have their reasons. It means, Gertsen & Zølner (2012) and Gong & Chang (2008) make a conclusion, to ensure their work is not contrary to the domestic setting. Stimulation, regarding management of the organisation, is a tactic solution for the problems satisfying certain employee's motivation (mainly material, which is cash) and allowing it to work more efficiently.

Nohria, Groysberg & Lee (2008) and Pool & Pool (2007) suppose that the organisation's management generates two types of incentives for employees: short-term and long-term. For long-term incentive models have similar targets between the employee and the boss whereas short-term incentives encourage the laying down of production plans, etc. As for motivation, the long-term motivation in an employee leads them to a contribution to the professional or business purposes. Short-term motivation determines the quality of a particular work.

• Team Performance

It is crucial to consider the opinions of scientists and economists such as Shalley, Gilson & Blum (2009) and De Vries & de Ridder (2006) to analyse the content and features of the operating principle of a team and team performance. They pointed out that individual workers could undertake organisation’s tasks, and the employees are united, to enhance the success of the company. In these groups, the efforts of individuals are to complement each other. In such cases, as Fey et al. (2009) believe, when the efforts of workers are linked and dedicated to performing the professional tasks thus achieving1 a high level of interaction. The primary purpose of the team formation at the same time is to establish a Working Group to do a better job and to improve its effectiveness.

Millette & Gagné (2008) have a firm conviction that the basis of understanding of the team management concepts tends to incorporate the content of such categories as “a command” or “a team.” This concept is now quite common, but it is not the only definitions. According to the interpretation formulated by Milne (2007), the team in the organisational context is regarded as an association of like-minded people who are guided by a common target. For example, Politis (2006) remarked that the term a “team” describes the different values ​​of this type of economic operations, such as design, development, and sale of new products, reducing costs, etc. Sila (2007) believes that the team can be a group of workers: employees who are engaged in construction; students jointly fulfil the task, which had been set by the teacher; the designers of the new building, and so on.

However, the staff who just report to guidance on a variety of tasks is not a team. In the context of human resource management, Need (2006) considers the team as a group of people with a clearly defined structure and differentiation of roles between them. At the same time, it is essential that the team members possess the peculiar abilities that complement the skills of other team members. In the case, where any location (the role) is not of a particular person, it hinders the work of the team. Kuvaas (2006) has a conviction that each team takes place corresponding to their abilities and possibilities; everyone feels necessary and indispensable, as it is known to be essential for occupational satisfaction.

Liao et al. (2009) state that the competition has two aspects: on the one hand, it is the desire to win, and the other hand, this is an opportunity for people and organisations to change. Given this, Liao et al. (2009) as well as Mahlendorf et al. (2012) argue that the characteristic features of a competitive management team are as follows:

• Each member of the team is a competitive person;
• Each team member perceives competition as the impetus for the effective operation of the organisation and its development;
• All stakeholders of the team are expected to be like-minded people who are not indifferent to their work.
• All team members are focused on continuing professional and personal improvement;
• All members of the team try to maintain a high creative potential;
• Enables the team to identify new trends in the organisation's activities;
• It helps create a competitive product.

However, Ambos & Birkinshaw (2010) presuppose that the team can only be effective through its creation. An effective teamwork can damage the following factors: lack of stability of the team, the lack of team members' autonomy, the interdependence low level and lack of focus on a common cause. In this connection, Liao et al. (2009) state that among the factors affecting the high performance of the teamwork in headquarter and subsidiaries, there are the following aspects, the command structure, the motivation level of the team members, team relations (corporate culture).

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