Firm Bosses or Helpful Neighbours? The Ambiguity and Co‐Construction of MNE Regional Management Mandates

• Date: 01 December 2017
• DOI: http://doi.org/10.1111/joms.12287
• Published date: 01 December 2017
• Author: L. Jeremy Clegg,Eva A. Alfoldi,Sara L. McGaughey

Firm Bosses or Helpful Neighbours? The Ambiguity

and Co-Construction of MNE Regional Management

Mandates

Eva A. Alfoldi, Sara L. McGaughey and L. Jeremy Clegg

University of Bradford; Griffith University; University of Leeds

ABSTRACT As multinational enterprises (MNEs) increasingly disaggregate and disperse

corporate headquarters (CHQ) activities, the allocation of regional management mandates (RMMs)

to local operating subsidiaries is becoming more common. RMMs explicitly break with the

traditional assumption of a clear separation between centralised and local decision-making.

Yet we know little of how RMMs are enacted by the units involved, or how they evolve over

time. Based on a case study of Unilever, we find that RMMs are inherently ambiguous, and

identify circumstances under which ambiguity manifests and triggers cycles of sensemaking and

sensegiving about the meaning of the mandate. These cycles result in the co-construction of the

mandate by multiple units, with changes in RMM scope and governance over time. We also

find that sensemaking and sensegiving are most intense among boundary-spanning middle

managers. Our work challenges prevailing assumptions that mandates are largely

unambiguous when assigned and are unilateral or dyadic accomplishments; demonstrates the

importance of sub-unit level analysis in MNEs; and highlights the potential of structuration

theory to enrich our understanding of sensemaking and sensegiving in organisations.

Keywords: ambiguity, co-construction, regional management mandates, sensegiving,

sensemaking, structuration theory

INTRODUCTION

Recent years have seen a resurgence of interest in critically examining the role of corpo-

rate headquarters, or CHQ (e.g., Ciabuschi et al., 2012; Egelhoff, 2010; Menz et al.,

2015; Nell and Ambos, 2013). CHQ activities are progressively unbound from a single

unit and performed at various levels and locations within the multinational enterprise

(MNE). MNEs are, for example, disaggregating and dispersing core parts of CHQ

activities (e.g., Baaij and Slangen, 2013; Baaij et al., 2015; Birkinshaw et al., 2006);

Address for reprints:Eva A. Alfoldi, Faculty of Management and Law, University of Bradford, Emm Lane,

Bradford BD9 4JL, UK (E.A.Alfoldi@bradford.ac.uk).

V

C2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies

Journal of Management Studies 54:8 December 2017

doi: 10.1111/joms.12287

establishing regional headquarters (e.g., Chakravarty et al., 2017; Nell et al., 2011) or

intermediate parents (Goold and Campbell, 2002); and assigning regional management

mandates or creating similar ‘virtual’ setups (e.g., Alfoldi et al., 2012; Baaij and Slangen,

2013; Menz et al., 2015; Piekkari et al., 2010). As Menz and colleagues (2015, p. 668)

observe, however, there is a continuing need to ‘better understand how the CHQ deals with a

complex portfolio of heterogeneous business and international units [...] considering several organiza-

tional layers’.

In this paper, we examine how distributed HQ activities are enacted (i.e., interpreted

and ‘put into practice’) by local operating subsidiaries which are mandated to oversee

and manage subsidiaries in other countries. MNE subsidiaries that are assigned such

regional management mandates or RMMs (Alfoldi et al., 2012) are often local implementers

focused on primary value chain activities (such as sales and marketing) in their local

market (see Gupta and Govindarajan, 1991). Empirical evidence of widespread and

growing use of RMMs is accumulating (e.g., Chakravarty et al., 2017; Schotter et al.,

2017). However, unlike dedicated administrative regional headquarters (RHQs), subsid-

iaries with RMMs are required to perform headquarter-like activities in addition to their

local implementer roles. We argue that this is a crucial distinction. The use of RMMs

explicitly breaks with the traditional assumption of ‘clear separation between centralised

decision-making (the role of the corporate HQ and the RHQ) and local decision-making (the role of the

subsidiary)’ (Nell et al., 2011, p. 87). When embodied in a single unit, these two roles

create tensions and are potentially incommensurate.

Our early study of an RMM assigned to the Hungarian subsidiary of Unilever – one

of the world’s biggest fast-moving consumer goods (FMCG) manufacturers – identified

significant potential advantages of RMMs from the corporate HQ perspective (Alfoldi

et al., 2012). We also found heightened challenges of control and coordination for the

mandated subsidiary, attributable in part to the absence of a clear separation in the

decision-making roles described by Nell et al. (2011). Nonetheless, our early study fell

short of exploring what this meant for the implementation of the RMM. If we are to

fully appreciate how RMMs may contribute to the effective management of complex

MNEs and realise their potential benefits, we need to understand their nature and

dynamics – in particular, how they are interpreted and put into practice at the local

level.

In this article, we explore two fundamental research questions: (1) How are headquarters-

assigned regional management mandates enacted by the units involved within the MNE? and (2) How

do regional management mandates evolve over time? We address these questions through a rich

qualitative case study set in Unilever, where we trace the evolution of the RMM first

assigned to the Hungarian subsidiary in 1997 through to 2007, using both historical and

real-time data. In so doing, we contribute to multiple organisational literatures.

First is the literature on dispersed and disaggregated headquarters activities in MNEs.

Drawing on our data analysis, we present a conceptual framework – underpinned by a

set of novel assumptions and arguments – that depicts the process by which RMMs are

enacted and evolve. Our findings and theorisation challenge two dominant assumptions.

In international strategic management, a prevailing assumption is that mandates and

RHQ roles are unambiguous when assigned (see Rugman and Verbeke, 2001). In con-

trast, central to our framework is the inherent ambiguity of RMMs. We identify

1171Ambiguity and Co-Construction of Regional Management Mandates

V

C2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies

circumstances in which ambiguity may sufficiently manifest, such that it triggers iterative

cycles of sensemaking and sensegiving about the meaning of the mandate. Sensemaking is

the process through which individuals and organisations give meaning to complex,

novel, ambiguous or confusing issues/events, and develop active responses to them (see

Brown et al., 2015; Maitlis and Christianson, 2014; Mills et al., 2010; Weick, 1995).

Meanwhile, sensegiving is the process of attempting to influence the sensemaking and

meaning construction of other people (Gioia and Chittipeddi, 1991). We show how

these cycles of sensemaking and sensegiving lead to changes in the scope and governance

of the RMM.

Another assumption found in prior studies is that the assignment and dispersion of

HQ activities or subsidiary mandates is either a unilateral accomplishment (i.e., assigned

unambiguously by HQ, or initiated by the subsidiary) or a dyadic process of negotiation

(i.e., shaped in interaction between HQ and the mandated unit). In contrast, we found

that multiple units (subsidiaries and CHQ) are involved in sensemaking and sensegiving

about the RMM. That is, the RMM is co-constructed over time by multiple units and across

multiple levels within the MNE. Further, our work reveals that during this mandate co-

construction process, the most intense sensemaking and sensegiving occurs at the middle

management levels. By studying these levels, we explicitly respond to calls to consider

the sub-unit level of analysis (Geppert et al., 2016; Menz et al., 2015).

Second, we make a contribution to the literatures on sensemaking and sensegiving by

augmenting these lenses with sensitising concepts from structuration theory (Giddens, 1979,

1984, 1991) to enrich our analysis. Together, these perspectives helped us to better

understand the co-construction of the RMM. Although structuration perspectives are

increasingly applied in management (e.g., Jarzabkowski, 2008; Sillince et al., 2012) and

international management (Dutta et al., 2016; Tempel and Walgenbach, 2007), we

believe structuration theory complements sensemaking and sensegiving in ways that

have remained largely unexplored – especially in relation to advancing our understand-

ing of power and influence in organisations. Our study points to this potential of

structuration theory, thus making a more general contribution to management and

organisation studies.

In the next section, we provide a brief overview of the literature on distributed HQ

activities in the MNE, focusing on regional management mandates. We then describe

our research method and provide case study background. With a view to making our

theorising from this complex case more readily accessible to readers, we then present

our conceptual framework and use it to structure our findings. We conclude with a

discussion of our findings, and reflections on our main contributions and suggestions for

future research.

DISTRIBUTED HEADQUARTERS ACTIVITIES AND REGIONAL

MANAGEMENT MANDATES

MNE configurations that involve distributed HQ activities are frequently necessitated

by the growing size, complexity and international reach of modern MNEs. Such MNEs

often battle with simultaneous pressures for integration and responsiveness, as well as

pressures for ever greater cost efficiency. The most common way in which HQ activities

1172 E. A. Alfoldi et al.

V

C2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies