In another example, Hewlett-Packard has decentralized authority for the design and production of many of its leading-edge ink-jet printers to its operation in Singapore.
Hewlett-Packard made this decision after employees in Singapore distinguished themselves
by finding ways to reduce production costs through better product design. HewlettPackard
now views its Singapore subsidiary as an important source for valuable new knowledge about production and product design that can be applied to other activities within the firm’s global network of operations.24 For the managers of the multinational enterprise, this phenomenon creates important new challenges. First, they must have the humility to recognize that valuable skills that lead to competencies can arise anywhere within the firm’s global network, not just at the corporate center. Second, they must establish an incentive system that encourages local
employees to acquire new skills. This is not as easy as it sounds. Creating new skills involves
a degree of risk. Not all new skills add value. For every valuable idea created by a McDonald’s subsidiary in a foreign country, there may be several failures. The management of the multinational must install incentives that encourage employees to take the necessary risks. The company must reward people for successes and not sanction them unnecessarily for taking risks that did not pan out. Third, managers must have a process for identifying when valuable new skills have been created in a subsidiary. And finally, they need to act as facilitators, helping to transfer valuable skills within the firm.
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