Succeeding in process standardization: Explaining the fit with international management strategy

Purpose — This study explores the fit between process standardization and international management strategy of multinational corporations by assessing the compatibility between process standardization and corporate structural characteristics in terms of asset configuration and headquarters–subsidiary relationships. Design/methodology/approach — First, after a literature review on multinational corporations’ strategy and process standardization, the study suggests two propositions on the fit between corporate international management strategy and process standardization. Second, to empirically examine the propositions, the study investigates the outcome of process standardization in three cases with different strategic and structural contexts. Third, using the propositions and empirical findings, the study proposes a framework for aligning process standardization with MNCs’ structural characteristics. Findings — Process standardization has a higher degree of fit in multinational corporations pursuing global integration where process standardization parallels the need for coordinating interdependencies in the functional structure, and is consistent with the headquarters’ operational control over the subsidiaries. Process standardization has a lower degree of fit in multinational corporations seeking local responsiveness as process standardization disturbs the financial control relationship between the headquarters and subsidiaries and is less crucial for coordination as the subsidiaries contain the necessary coordination mechanisms. Originality/value — The study provides in-depth understanding of how the international management strategy and consequent structural characteristics of multinational corporations affects process standardization in the course of a global ERP implementation. The study proposes conditions of fit for aligning process standardization with asset configuration and headquarters–subsidiary relationships of an MNC. standardization, we argue that process standardization is a centralizing coordination mechanism and therefore its deployment in an MNC also needs to be in line with corporate strategic and structural contexts. This study suggests that while an MNC’s asset configuration indicates whether process standardization is essential for coordinating the interdependencies across an MNC, the nature of headquarters–subsidiary relationships determines whether process standardization disturbs the balance of power between the headquarters and subsidiaries. Therefore, aligning the decision for process standardization with the corporate asset configuration and headquarters–subsidiary relationships may resolve the conflicts caused by efficiency–flexibility and universality–individuality dilemmas. While these findings assist the managers to consciously decide about process standardization based on their corporate structural context, the study as well has two theoretical implications that pave the way for future research. First, our findings suggest that process standardization in the course of a global ERP implementation not only increases the level of centralization in an MNC (Mintzberg, 1993), but also that achieving common process standards requires central governance to be in place, especially for managing and designing business processes. Mintzberg (1993) suggests that when an organization relies on systems of standardization for coordination, some power passes out from line managers to the designers of those systems. Alpha and Gamma were missing such designers of process standards at the corporate level as they relied on performance systems to control the subsidiaries. This issue was not present in Beta where the business process management teams at the corporate level formally had responsibility for the design, control, and improvement of business processes across corporate subsidiaries. Process standardization in Gamma received momentum only after responsibility for management of business processes was assigned to the newly established corporate functions. Therefore,