Sample Chapter
CHAPTER 1
The Challenges of International Human Resource Management
Global Challenges at ABB n 1988, a merger between ASEA of Sweden and Swiss firm Brown Boveri created one of the world’s largest engineering firms, ABB. Both companies already had extensive international operations, Brown Boveri having begun to establish subsidiaries around the world immediately after World War II, and ASEA having started foreign operations during the 1960s. The newly merged company had sales of over US$15 billion and 160,000 employees. Under the leadership of its Swedish CEO, Percy Barnevik, ABB went through a rapid transformation. In Western Europe, plants were closed and the number of employees was reduced, while the firm grew its operations in Asia, Eastern Europe, and North America. Over the next 10 years, ABB bought a large number of companies as it expanded geographically and diversified into new business areas, including engineering contracting and financial services. The company set up numerous joint ventures with local companies in China and other emerging markets, and established a 50–50 joint venture in power generation with the French firm Alstom. Barnevik’s vision was to create an international company that was able to deal effectively with three internal contradictions: being global and local, big and small, and radically decentralized with centralized reporting and control.1 The key principle was local entrepreneurship, so most of the decision making was to be done at the lowest possible level, in the 5,000 independent profit centers, the business units (BUs) that became the foundation of the ABB organization. Beyond the BUs, the firm was structured as a matrix of business segments and regions. Operations within a country were controlled by influential country managers.
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CHAPTER 1: The Challenges of International Human Resource Management
ABB also established business steering committees and functional councils to coordinate the different
The Challenges of International Human Resource Management
Global Challenges at ABB n 1988, a merger between ASEA of Sweden and Swiss firm Brown Boveri created one of the world’s largest engineering firms, ABB. Both companies already had extensive international operations, Brown Boveri having begun to establish subsidiaries around the world immediately after World War II, and ASEA having started foreign operations during the 1960s. The newly merged company had sales of over US$15 billion and 160,000 employees. Under the leadership of its Swedish CEO, Percy Barnevik, ABB went through a rapid transformation. In Western Europe, plants were closed and the number of employees was reduced, while the firm grew its operations in Asia, Eastern Europe, and North America. Over the next 10 years, ABB bought a large number of companies as it expanded geographically and diversified into new business areas, including engineering contracting and financial services. The company set up numerous joint ventures with local companies in China and other emerging markets, and established a 50–50 joint venture in power generation with the French firm Alstom. Barnevik’s vision was to create an international company that was able to deal effectively with three internal contradictions: being global and local, big and small, and radically decentralized with centralized reporting and control.1 The key principle was local entrepreneurship, so most of the decision making was to be done at the lowest possible level, in the 5,000 independent profit centers, the business units (BUs) that became the foundation of the ABB organization. Beyond the BUs, the firm was structured as a matrix of business segments and regions. Operations within a country were controlled by influential country managers.
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CHAPTER 1: The Challenges of International Human Resource Management
ABB also established business steering committees and functional councils to coordinate the different
Cited: by Bartlett and Ghoshal (1992). 106. Even in the mid-1980s there was speculation about whether international HRM was “fact or fiction” (Morgan, 1986). 107. See, for example, De Cieri and Dowling (1999, p. 321). 108. Ghemawat, 2007.