The locus of human resource decision making in MNC’s

The competing pressures produced by global supply chains

Harry Katz, Cornell University, ILR School

The expansion of global supply chains and the increased role of multi-national corporations (MNC’s) has produced competing pressures within those MNC’s regarding where decisions are made concerning human resource (HR) matters, including the working conditions, in the factories producing the goods marketed by the MNC’s. On the one hand, the increased role of independently owned factories who manufacture the products marketed by MNC’s has eliminated direct control of HR matters including how factory workers work, are compensated and managed by MNC’s and has put those decisions under the direct control of the supplier factory owners and managers. Yet, negative publicity regarding the labor conditions in those supplier factories has led many MNC’s to (re)establish various mechanisms to influence, albeit often indirectly, work conditions and terms in the supplier factories. Meanwhile, many of those MNC’s that retained direct control of the production of particular goods have chosen to shift from the traditional local control of HR matters in their factories to more regional and global control, in part to ensure effective coordination of their global supply chains and in part, like the MNC’s who no longer directly control any supply production, because of labor rights concerns related to the labor conditions in supplier factories. We illustrate those competing pressures in this paper by describing the evolving locus of control of HR matters in the global supply chains of Nike and Colgate-Palmolive.