Why a multinational company introduces a competency-based...

Why a multinational company introduces a competency-basedleadership model: a two-theory approach

Maral Muratbekova-Touron*

Institut Superieur de Gestion (ISG), Paris, France

This paper studies the case of a Frenchmultinational company which doubled its size andgeographical spread of activities because of acquisitions of Anglo-Saxon multinationalcompanies. It analyses the rationale behind the introduction of a competency-basedleadership model in this multinational company through the frameworks of agency andneoinstitutional theories.The interpretation of the data through agency theory leads to the following conclusion:

globalization means strengthening agency problems and therefore an increase in agencycosts. It is argued that the multinational company introduced the competency-basedleadership model as a means of cultural control. A formalized and common referencefor leadership development and evaluation makes it possible to reduce informationasymmetry, diminish the possibility of opportunistic behaviour among managers andthereby reduce agency costs. While agency theory justifies the introduction of thecompetency-based leadership model, it does not explain the modalities of its choice. Thistheoretical perspective ignores the institutional context of HRM choices.The results obtained through the frameworks of neoinstitutional theory show that the

choice of the competency model was based on the mimetic mechanisms of institutionalisomorphism. Furthermore, the introduction of the competency-based leadership modelallows the multinational company to gain both internal and external organizationallegitimacy. Consequently, the paper suggests that agency theory has to be combined withinsights from the neoinstitutional theory in order to explain the introduction oforganizational practices. While agency theory provides the rationale of the model’sintroduction, neoinstitutional theory explicates the nature of the selected organizationalpractice.

Keywords: agency theory; competency-based leadership model; international humanresource management; multinational company; neoinstitutional theory

Introduction

The topic of this research is the introduction of a competency-based leadership model in a

multinational enterprise. Competency-based models for executives have attracted much

attention in recent years (Dalton 1997; Rothwell and Kazanas 1998; Briscoe and Hall

1999; Rothwell and Lindholm 1999; Emiliani 2003; Fulmer and Conger 2004). Despite

the increasing popularity of competency approaches, their conceptualization and

application vary considerably from one country to the other (Aubret, Gilbert and Pigeyre

2005). Competencies which are underlying personal characteristics related to superior

performance (Boyatzis 1982) are applied to the management population in Anglo-Saxon

countries. In France, competency models describing knowledge and specific know-how

are intended more for operators and technicians (Aubret et al. 2005).

ISSN 0958-5192 print/ISSN 1466-4399 online

q 2009 Taylor & Francis

DOI: 10.1080/09585190802707383

http://www.informaworld.com

*Email: [email protected]

The International Journal of Human Resource Management,

Vol. 20, No. 3, March 2009, 606–632

Thus, the understanding of why a multinational company with a culture deeply rooted

in French traditions introduced a competency model for its leaders appears as a challenge.

For the sake of confidentiality a pseudo-name of Lemma is chosen for this industrial

company which has undergone a process of radical restructuring and ‘internationalization’

because of acquisitions of Anglo-Saxon multinational companies. The group, a world

leader in its domain, doubled its size, workforce, sales, and net income as a result of these

acquisitions in the late 1990s and in the beginning of 2000s. It added 30 new countries to

its operating base. While almost half of the group’s employees (more than 75,000 in 2005)

were French 10 years ago, they now represent less than 15% of the company personnel.

The organization of the company by Divisions broke away from a highly centralized

approach to authority and established a decentralized structure headed by the Corporate

Centre.

The objective of this paper is to provide insight into the driving forces that induced

Lemma to introduce a competency-based leadership model by using a multi-focal

theoretical perspective. According to Paauwe and Boselie (2005), the single-lens

explanations of how organizations select, adapt and retain best practices are found to be

limited. Thus, to paraphrase Lewis and Grimes (1999), the present study is a

multiparadigm research where two theories are analyzed in parallel. Neoinstitutional and

agency theories are used to formulate some propositions likely to serve as the basis for

future research. The paper concludes with suggestions that none of the theories in use

provides a full answer to the question of a rationale behind the introduction of the

leadership model. However, their combination does. By incorporating the institutional

context, this article proposes to extend the agency theory perspective.

Theoretical background

Competency-based models

The systems of competency management are based on the various models and approaches

in different countries (Aubret et al. 2005). The widely accepted definition of the

competency model used by managers of Anglo-Saxon countries is the set of desired

competencies – skills, knowledge, attitudes, underlying characteristics or behaviour –

that differentiate effective performers from ineffective ones (Boyatzis 1982; McLagan

1996). In general, the competency models concern the management population in Anglo-

Saxon countries. In France, the targeted groups are employees of technical activities

(Aubret et al. 2005). The debates in the French context relate to changes in job

organization: management by competencies versus classification (e.g. Zarifian 1988).

Contrary to a priori conceptualization in North America, competency management in

France has emerged from a series of experimentations in enterprises (Bouteiller and Gilbert

2005). While some scholars distinguish French and American approaches to competency

management (Aubret et al. 2005; Bouteiller and Gilbert 2005), other researchers expand

American conceptualization to the Anglo-Saxon world. Thus, they compare the French

way of thinking to that of Anglo-Saxon countries (Defelix, Martin and Retour 2001).

Diffusion of common language is one of the most important advantages of competency

management (Briscoe and Hall 1999; Bouteiller and Gilbert 2005). According to the

scholars, it also enforces a certain standardization of the way in which employees describe

and evaluate themselves. Fulmer and Conger (2004, p. 11) provide an excellent summary

of the benefits of using competency leadership models. They argue that competency

models communicate clear expectations for roles and for levels of performance; provide

more valid planning data; link development activities to goals; provide guidelines for

The International Journal of Human Resource Management 607

development; protect the morale of people; quantify performance management; streamline

HR activities; provide a common framework; communicate leadership development

strategies. Briscoe and Hall (1999) argue that the currently existing competency

approaches could be classified into three approaches: a research-based approach, a

strategy-based approach, and a values-based approach.

The research-based approach is based on behavioural research. The interviews with

high performers nominated by the executives are conducted to identify behavioural

examples that demonstrate the key to their success. The aim of such ‘behavioural event

interviews’ is to distinguish superior performance from just good performance. This

approach is considered as the most legitimate approach because it involves executives in

the development process and therefore fosters acceptance of the competency framework.

While competencies developed using the research-based approach are driven by the

behaviour of high organizational performers in the past, the strategy-based competency

approach places strategic direction of the organization at the centre of the process.

Therefore, future orientations are more important in this case. The advantage of this

approach is its relevancy to organizational business.

If the competencies are based on cultural values of the organization, the approach is

values-based. Briscoe and Hall (1999) emphasize the potential effectiveness of this

approach, which can have a strong motivating power. One of the disadvantages of

the values-based approach is that it can be difficult to translate cultural values of the

organization into actual behaviour.

Three major approaches are the components of another classification of competency

modelling proposed by Rothwell and Kazanas (1998) and reformulated later by Rothwell

and Lindholm (1999). The borrowed approach is based on the borrowing of an existing

competency model from another organization. It is the least expensive approach and is

easy to conduct as it does not require any methodology. Its main disadvantage is that it

does not take into account the corporate culture of the organization.

The borrowed-and-tailored approach is the borrowing of an existing competency

model from another organization and modifying it to the corporate culture of the new

organization. This method requires a minimalist methodology as another organization has

already conducted the research to develop the model.

The basis of the tailored approach is developing a competency model appropriate to

the organization. Evidently, it is the method that requires the most significant research in

comparison to previous approaches. This approach serves to ‘ensure legal defensibility’

(Rothwell and Lindholm 1999, p. 97).

National context

According to the scholars (Schuler, Budwhar and Florkowski 2002; Sparrow, Brewster

and Harris 2004), in order to comprehend the International Human Resources

Management (IHRM), one should avoid its contextual isolation. IHRM policies and

practices are influenced by the company’s structure and strategy; its institutional

and cultural environments (Ngo, Turban, Lau and Lui 1998; Schuler and Rogovsky 1998;

Schuler et al. 2002; Sparrow et al. 2004). National culture and the country of origin of the

MNE influence HRM policies and practices (Ngo et al. 1998).

Under the assumption of a strong link between national and organizational cultures

developed by different scholars (Laurent 1983; Hofstede 1991; Adler and Bartholomew

1992; Ferner and Quintanilla 1998; and others), the propositions regarding the

organizational culture of Lemma are formulated taking into account dimensions proper

M. Muratbekova-Touron608

to the French business culture. The choice of cultural dimensions which is more

appropriate for national culture than for the organizational culture is intentional. It makes

it possible to analyze the way that national characteristics influence the organizational

culture of Lemma before and after acquisitions.

The main features of the French business culture, which are examined and confirmed

by different scholars, are:

. high respect for authority (Laurent 1986; Hall and Hall 1990; Barsoux and

Lawrence 1991; Hofstede 1991);

. particularism (D’Iribarne 1989; Hall and Hall 1990; Roussillon and Bournois 2002);

. high context (Hall and Hall 1990; D’Iribarne 1991).

Before the acquisition of two Anglo-Saxon companies, the organizational culture of

Lemma, which was strongly influenced by the French national culture, could be described

as particularistic and high context, with a high respect for authority. In this perspective, the

following research propositions are formulated:

Proposition 1a: The Lemma organizational culture is characterized by a high respect for

authority.

Proposition 1b: The Lemma organizational culture is a particularistic culture.

Proposition 1c: The Lemma organizational culture is a high-context culture.

Setting up the context of the organizational culture of Lemma makes it possible to develop

the research propositions regarding the theoretical rationale for the introduction of the

competency-based leadership model at Lemma.

Agency theory

Agency relationships take place when the principal delegates work with the agent who

performs that work. The theory describes these principal–agent relationships and the

conflicts that can arise because of two parties having different interests and preferences,

while being tied by the contract (Jensen and Meckling 1976; Eisenhardt 1989). The heart

of agency theory is the assumption that the goal conflict between two parties, the principal

and the agent, is inherent in these relationships (Eisenhardt 1989). The principal assumes

that the agent will behave opportunistically in pursuit of his/her personal interests, which

are in conflict with those of the principal.

Human nature (self-interest, bounded rationality, risk aversion), as well as goal conflict

among organizational members and information asymmetry, results in the agency problem

(Lubatkin, Lane and Schultz 2001). This problem arises from the conflicting goals of the

principal and the agent even before the contract is concluded and from the difficulties

related to the verification of the agent’s behaviour (Eisenhardt 1989). One of the central

points of agency theory is agency costs that come from information asymmetry: it is

difficult for the principal to verify the behaviour of the agent (Eisenhardt 1989).

Agency relationships in a multinational enterprise

Researchers have already looked at the relationships between headquarters and

subsidiaries in multinational enterprises (MNEs) through the agency theory perspective

(Gong 2003; Roth and O’Donnell 1996; Chang and Taylor 1999; O’Donnell 2000;

Harvey, Speier and Novecevic 2001). Managers at the head of the subsidiaries might have

different values and work attitudes from those of the corporate managers. Therefore, their


interests diverge from the interests of the corporate managers. Thus, agency costs are more

likely in the relationships of headquarters and the foreign subsidiaries (Chang and Taylor

1999). The less accurate and complete information about the performance of the

subsidiaries is available, the higher the agency costs. The cultural and geographical

distance between headquarters and the subsidiaries is one of the factors that increase

information asymmetry and therefore agency costs (Roth and O’Donnell 1996; Chang and

Taylor 1999). Thus, agency costs increase as a function of cultural distance.

Brown Johnson and Droege (2004) hypothesize that the fundamental assumptions of

the agency theory may be moderated by cultural differences. The scholars oppose Western

and non-Western cultures, arguing that cultural dimensions specific to non-Western

cultures may attenuate agency problems. According to Brown Johnson and Droege (2004),

agency relationships, having emerged in Western societies, are intrinsic in individualistic

and masculine cultures with moderate uncertainty avoidance and low power distance.

Collectivist and feminine cultures with high power distance consider relationships

differently: social affiliation is more important than market-based interactions (Brown

Johnson and Droege 2004). Thus, the cultural context and social and hierarchical relations

are important factors – formerly underestimated in the literature – to be taken into

consideration in the agency theory (Brown Johnson and Droege 2004). French and Anglo-

Saxon cultures, while both a part of Western societies, are significantly different,

especially in the dimension ‘attitudes to hierarchy’ (Laurent 1986; Hall and Hall 1990;

Barsoux and Lawrence 1991; Hofstede 1991).

Thus, taking into account the propositions concerning the cultural dimensions of

Lemma, one can argue that the high-context and particularistic nature of Lemma together

with a high respect of authority attenuated the agency problems. In this case, the acquisitions

of Anglo-Saxon multinational companies may lead to the intensification of the agency

problems. This discussion leads to the formulation of the following proposition:

Proposition 2a: The acquisitions of Anglo-Saxon multinational companies led to the

intensification of the agency problems at Lemma.

Control mechanisms

In order to resolve the agency problem, the principal may introduce appropriate incentive

schemes for the agent and/or use different control mechanisms (Jensen and Meckling

1976, Jensen 1998). Three mechanisms of control could be used by the principal in order

to make the agent behave in his interests: outcome control; behavioural control; and

cultural control (Eisenhardt 1989).

Individual commitment or psychological alignment is highly important in the principal–

agent relationships (Ouchi 1979; Eisenhardt 1989; Roth and O’Donnell 1996). The

researchers state that an agent accepting and working towards organizational goals

contributes to the reduction of the goal conflict between the principal and the agent. It is this

commitment to the organization at the individual level that is of particular interest in

this work. In the context of globalization, it is highly important to have top managers in an

MNEwho are committed to the values of the parent company. In the case of such attachment

to the parent company’s values and itsmanagementmethods, the agency costs decrease as the

goal conflict between headquarters and subsidiaries ismoderated (Roth andO’Donnell 1996).

How can an MNE achieve such commitment to the corporation’s values and culture?

Through cultural control says Ouchi (1979), through globalizing people through

international assignments say Black, Gregersen, Mendenhal and Stroh (1999), and


through socialization say Evans, Pucik and Barsoux (2002). The idea is to attain the

commitment of key individuals in central and expatriate leadership positions to the parent

company. Socialization often involves the extensive use of international and inter-functional

mobility (Evans et al. 2002). Through such geographical and functional transfers, managers

learn about the corporate culture and its nuances. Transfers of managers strongly contribute

to the development of the managers’ network (Edstrom and Galbraith 1977).

Staffing control, which is the appointment of managers – nationals of the home

country – to the top positions of the subsidiaries, is a type of cultural control exercised by

headquarters (Chang and Taylor 1999, Gong 2003). O’Donnell (2000) calls it headquarters

supervision: monitoring the subsidiaries’ activities through expatriation. The parent

nation’s expatriates are supposed to be more committed to the organization than foreign

managers. Their presence allows a decrease of information asymmetry and the prevention

of opportunistic behaviour among subsidiary managers (O’Donnell 2000).

The cultural distance between the parent’s and the subsidiaries’ cultures may affect the

choice of certain human resource practices (Rosenzweig and Singh 1991). Rosenzweig

and Singh (1991) postulate about the positive correlation between the reliance on formal

mechanisms of control and the cultural distance between the MNE headquarters and MNE

subsidiaries.

According to Bartlett and Ghoshal (1989), the Anglo-Saxon enterprises prefer

formalization as a process to manage global integration – the local adaptation dilemma.

The formal systems and policies play the role of the common language shared by all

managers. The scholars argue also that European companies favour socialization as a way

of coordination (Bartlett and Ghoshal 1989). Socialization is based on the managers’

understanding of the company’s objectives and solid personal relationships. It was

assumed above that Lemma has particularistic and high context culture, which is in

concordance with the arguments of Bartlett and Ghoshal (1989).

It is postulated that Lemma introduced the competency model in order to develop

leaders who share its organizational values. The leadership model, which contributes to

the building of a common and formalized language regarding leadership requirements,

helps to develop organizational leaders committed to Lemma, in other words trustworthy

agents.

Proposition 2b: Lemma introduced a competency-based leadership model to develop its

leaders as trustworthy agents and thus reduce agency costs.

Neoinstitutional Theory

A fundamental principle of the neoinstitutional theory is based on the homogenization

process or isomorphism – a process that forces organizations that face the same set of

environmental conditions to use similar practices (DiMaggio and Powell 1983). DiMaggio

and Powell (1983) distinguish three types of isomorphism: coercive – when practices are

imposed by a more powerful authority; mimetic – as a result of response to uncertainty by

a standard solution already successfully used by other organizations; normative – when

practices are considered ‘normal’ (accepted) in the environment. Thus, these mechanisms –

coercive, mimetic, and normative – are associated with political influence, imitation of

strategies and practices of competitors and professionalization respectively.

Applying new institutionalism to the field of HRM, coercive mechanisms involve ‘the

influence of the social partners (trade unions and the work councils), the labour legislation

and the government’ (Paauwe and Boselie 2003, p. 60).


Imitation of HR strategies and practices as a result of uncertainty or management fads

relates to mimetic mechanisms (Paauwe and Boselie 2003). The inter-organizational

comparison can be also considered through the ‘fad perspective’ defined by Abrahamson

(1991). Abrahamson (1991) explains that under conditions of uncertainty, the

organizations tend to replicate models advanced by ‘fashion-setting organizations’ such

as consulting firms or business schools. According to Paauwe and Boselie (2003, p. 62),

consultancy firms develop and propose new models and practices – ‘blueprints – which,

at least in principle, are designed to solve the management problems of their potential

clients and bear the promise of making them more competitive’. Organizations may use

outside consultants to develop expertise possessed by competitors (Oliver 1997).

‘Normative mechanisms refer to the relation between management policies and the

background of employees in terms of educational level, job experience and networks of

professional identification’ (Paauwe and Boselie 2005, p. 990).

For neoinstitutional researchers, external institutions and cultural environments shape

the organization. Organizations are subject to pressure from the institutional environment

to adjust their structure and behaviours to gain and maintain their legitimacy and,

therefore, their chances of survival (Meyer and Rowan 1977; DiMaggio and Powell 1983).

According to Suchman (1995), legitimacy and institutionalization are almost synonymous

within the framework of neoinstitutional theory.

Kostova and Zaheer (1999) argue that the organizational complexity of multinational

enterprises is an important factor influencing their legitimacy. For these scholars, the

organizational legitimacy of an MNE resides both at the level of the MNE as a whole and

its sub-units in different countries. MNE subsidiaries face two institutional environments:

the external host country environment and the internal environment of the MNE (Kostova

and Zaheer 1999). On the one hand, it is difficult for an MNE to achieve and maintain

internal legitimacy within the organization. The internal legitimacy of an MNE sub-unit is

defined as its acceptance and approval by other units within the company and by the parent

company (Kostova and Zaheer 1999). On the other hand, the MNE has to establish and

maintain its legitimacy as a whole. External legitimacy is defined as ‘the acceptance

and/or approval of the MNE (not necessarily of any particular subunit) by its legitimating

environment’ (Kostova and Zaheer 1999, p. 67).

The internal and external legitimacy may have conflicting requirements: for example,

adaptation to external institutional requirements by the MNE may lead to internal

inconsistency (Rosenzweig and Singh 1991; Kostova and Zaheer 1999).

‘However, the trade off between internal and external legitimacy may not necessarily

cause illegitimacy, since certain characteristics of the MNE may, themselves, moderate

the problem’ state Kostova and Zaheer (1999, p. 74). According to the scholars, if an MNE

has a geocentric orientation, using the classification of Heenan and Perlmutter (1979), it

puts in place practices which are ‘legitimate worldwide’ and ‘not tied to any particular

national identity’ (Kostova and Zaheer 1999, 74). Therefore, the adoption of such global

practices guarantees external legitimacy and maintains the internal consistency of the

organization at the same time.

One of the criticisms which may be made of the work of Kostova and Zaheer (1999)

concerns the existence of ‘global’ or ‘supranational’ practices. Do these universal

practices exist? Or are they imposed by the Anglo-Saxon environment where they were

conceived and developed in an ethnocentric way, without taking into account the values,

contexts, and models existing in other parts of the world?

Ferner, Quintanilla and Varul (2001) state that the Anglo-Saxonization of HR

management is obvious in the case of many multinational companies. According to the


researchers, the identification of high potentials and the introduction of global performance

management systems, which emphasize the relationships between performance and reward,

are the examples of international policies of HRM practised by American and British

companies.

Interest in competency-based models is growing not only in the USA, where they were

conceived and developed, but all over the world (Rothwell and Lindholm 1999). Even

medium-sized and small organizations are beginning to pay great attention to competency

approaches. The increasing interest in competency-based models is linked to ‘hard-to-

define’ characteristics of the ‘feeling’ domain, which is becoming more and more

important to the success of work (Rothwell and Kazanas 1998). It would be relevant to

argue that competency models provide a formalization of intangibles needed for work

success. This is one of the reasons why the competency models are so popular in the

Anglo-Saxon cultures that look for explicit communication.

It is postulated that Lemma introduced the competency-based model, which may be

defined as a management fad, as a result of mimetic mechanisms of institutional

isomorphism. Therefore, by introducing the model, the company looks to gain external

organizational legitimacy. At the same time, the search for internal legitimacy is dictated

by integration pressures of newcomers, Anglo-Saxon managers of acquired companies.

Thus, the introduction of the model allows Lemma to gain both internal and external

organizational legitimacy.

This discussion leads to the elaboration of the following propositions:

Proposition 3a: Lemma introduced a competency-based leadership model as a result of

mimetic mechanisms of institutional isomorphism.

Proposition 3b: Lemma introduced a competency-based leadership model to gain both

internal and external organizational legitimacy.

Methodology

Thanks to a research agreement between the HEC School of Management (Paris) and the

Group Lemma, I have been a part-time employee of Lemma for three years. The intense and

prolonged contact with the everyday life of the Group allowed me to gain a systemic

overview of the organizational culture. Collecting data in their ‘natural settings’ (Miles and

Huberman 1994) makes it possible to take into account the context and therefore to

understand the underlying issues of the whole situation better. Informal conversations,

participation at organizational events, reading internal documents, and simply exercising

work duties within human resources departments of the Group permitted capture of an

‘inside’ perception of the organizational and cultural changes by the company’s employees.

‘When “how” or “why” questions are being posed, when the investigator has little

control over events, and when the focus is on a contemporary phenomenon within

some real-life context’, case studies are the preferred strategy of performing research

(Yin 1994: 1). Thus, the research design used in this paper has adopted the exploratory and

descriptive single case study approach (Yin 1993). Multiple sources of evidence of this study

are: direct participation and observation; formal interviews; and archival data.

Direct participation and observation

The most important source of evidence for this research is direct participation and

observation. The close proximity to the organizational life of the company could be

considered as a shortcoming or a bias for the researcher; however, it allowed me to have


a deeper understanding of the processes occurring in the organization. I had several

opportunities to develop a non-official version of what was going on. Lemma employees

spokemore frankly as they consideredmeas their colleague, and not as an external researcher.

Working for Lemma also allowed me to follow its rituals, traditions, and everyday

habits. Participating in informal organizational events and talking to employees is the

informal aspect of direct observation. Regular meetings with the CEO and HR Director of

the Group are organized within the organization. Attendance at these organizational

meetings and other kinds of organizational events helps one to understand the life of the

organization in a more profound way.

The most important part is the job itself. Participation in the development of

the competency-based leadership model allowed me to meet Lemma managers and

consultants who contributed to its development. I conducted interviews with some of these

managers for the creation of the ‘success stories’ that have been included in the Lemma

Development Guide later. The consultants’ external view of the organization and the

possibility that they have to compare it to other multinational groups helped in conducting

the research.

Interviews

In total 24 formal semi-structured interviews were conducted with top management of

Lemma. In addition, one formal interview was conducted with an external consultant who

contributed to the development of the model. Interviews lasted from 40 minutes to 2 hours.

The interviews were conducted in French and in English. The managers were chosen from

the list of 700 top managers.

I have tried to provide diversity regarding the functional positions and nationalities of

managers taking into account geographical constraints that reduced the possibility

of speaking to managers located in countries other than France and who could not come to

Paris for the interviews. Nevertheless, three interviews were conducted by telephone with

the managers working for business units located in Turkey, Chile and Greece.

Unsurprisingly, ten of the interviewed managers are French, as Lemma preferred to

send French expatriates to foreign business units until recently. Other interviewed

managers are from European countries (Belgium, Germany, Italy, and England), Canada,

and the United States. Concerning the seniority, sixteen of the interviewees have worked

more than 10 years for Lemma, three of them have an experience between five and

10 years, two of them have worked between three and five years, and the last three are new

arrivals with experience of less than three years. Half of the interviewed managers are

from Human Resources Departments; other departments include General Management,

Strategy, Finance, and Performance departments.

For the sake of confidentiality and managers’ protection, the anonymity of all

interviews is ensured. Only the interview with the Human Resource Director of the Group

was tape-recorded. The tape-recorder was not used for other interviews to facilitate the

interview procedure and thereby obtain richer data. While quoting interviewed managers,

only their function is mentioned in order to preserve anonymity. The consultancy company

is not named for the same reasons. Divisions and corporate bodies were referenced as

divisions followed by their numbers.

The data gathered from the interviews were coded. Different types of codes are

defined in this study. The first type concerns the description of the organizational culture

of Lemma. Codes are attached to sentences or phrases which describe characteristics of

the Lemma organizational culture considered as typical or fundamental by the interviewed


managers. In other words, codes take form of the categories which are the cultural

dimensions developed by Adler (1986), Hall and Hall (1990), Hofstede (1991),

Trompenaars and Hampden-Turner (1998) and others. The coding is summarized in a

table. Reading the table allows one to see the cultural dimensions considered as significant

for each interviewed manager. Reading the columns makes it possible to see the frequency

of each dimension. Thus, the frequency of each dimension is the number of interviewed

managers who consider this dimension as important in the description of the Lemma’

organizational culture. By defining the largest categories the method allows determining

the key cultural dimensions of Lemma. However, the corroboration of the propositions is

not based only on the results of the formal interviews; it must be confirmed by the data

gathered from the direct observation and participation.

The second type of codes concerns the rationale behind the introduction of the

competency-based leadership model at Lemma. It is the reasons given by the interviewed

managers to explain the introduction of the model that are coded in this case.

Results

Change focus: organizational culture

The characteristics of the Lemma organizational culture prior to acquisitions considered as

typical or fundamental by the interviewed managers are summarized in Table 1.

With the size of categories (the level of frequency emerging) exceeding 50% it

confirms the propositions concerning the dimensions of the Lemma organizational culture

prior to acquisitions. The Lemma organizational culture is a high-context and

particularistic culture characterized by a high respect for authority. Another proposition

concerning the femininity/masculinity dimension can be developed due to a high size of

this category.

Proposition 1d: The Lemma organizational culture is a feminine (human) culture.

These findings are in concordance with the data obtained from the direct observation and

participation. The following quotations briefly illustrate these cultural dimensions of

Lemma prior to acquisitions:

Respect for people is still a reality at Lemma. The quality of relationships is exceptional (HRManager, Division 5)

It is an autocratic culture . . . . There is a high respect for authority. People dispute authoritymore in North America. Somebody who comes from North America has a cultural shock inFrance. For example, if you do not understand or do not agree with a decision taken by yourboss, you question it. In France, you follow . . . . (General Manager, Division 2)

It is a personal culture. Interpersonal relations are more important than organization. Theylook for personal arrangements; problems are solved only through direct contacts (StrategyManager, Division 2)

At Lemma, we do not like formal procedures, formal organization. It is difficult to understandthe organization. We need to simplify things; we should not read between lines. We shouldclarify a lot (Strategy Manager, Division 2)

I spent hours in meetings without any agenda. I know from others that it was frustrating forthem also . . . . In American companies, it is quick to understand organization: who decideswhat. Lemma has a confusing structure, unnecessarily complicated and slow decision making(HR Manager, Division 3)

However, two important acquisitions of Anglo-Saxon multinational companies have

significantly influenced Lemma. First, the increase in size as a consequence of acquisitions


Table 1. Dimensions of the Lemma organizational culture prior to acquisitions: coding.

N. allocated tomanager/Culturaldimension

Uncertaintyavoidance Ascription

Natureof realityand truth

Humannature Particularism Femininity

High respectfor authority Individualism

Specific/Diffuse

Highcontext

1 x x x2 x x x x3 x x4 x x x5 x6 x x x x7 x x x8 x x x x9 x x10 x x x x11 x x x x12 x x x13 x x x14 x x x15 x16 x x x17 x x18 x x19 x x x x20 x x x x x x21 x x x22 x x23 x x x24 x x25 x x xFrequency 0 6 0 0 15 22 14 4 0 13% 0 24 0 0 60 88 56 16 0 52Level of frequency Low High Very high High Low High

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induced changes in the organizational culture of Lemma. This is an important point for

56% of the interviewed managers.

Size says . . . it cannot allow informal relations of such a scale. It is impossible to follow morethan a thousand people personally (HR Manager, North American activities)

Geometry of the Group is increasing. It is not easy to develop network. And if you have nonetwork, you are stuck (Country Manager, Division 1)

Second, according to 60% of the interviewees, the Anglo-Saxon origin of the acquired

companies plays a significant role in the choice of the company’s approach to its IHRM.

Lemma, which had a high context and particularistic culture before acquisitions, is under

the obligation to choose more formalized methods of management and announce

efficiency values fitting the preferences of Anglo-Saxon companies.

Now, Lemma is changing . . . . It is more performance-oriented culture . . . the traditionalculture has to change from just being nice and intelligent: it is not enough to run the business(HR Manager, North American activities)

In order for new arrivals to understand Lemma, we need to make explicit our way offunctioning. The leadership model stems from it . . . We move our cursor toward explicit. It isthe way of progress (HR Director of the Group)

Third, the percentage of frequency of ‘time’ category (44%) is judged significant for

Lemma managers.

Lemma was always excellent in the development of its leaders through international andfunctional mobility. As we know people learn 80% of what they know on the job. Movingmanagers from one position to another was an ideal means of their career development. Butnow, in the actual world, we need to develop more formal training that allows faster learning.Of course, we will keep our traditional methods as well. New arrivals do not have the samenotion of time as we . . . . We do not have 5 or 10 years to integrate people (Human ResourcesDirector of the Group)

All these change factors necessitate more formalized and standardized practices regarding

leadership development, global recruitment, and uniform selection. Before going deeper

into the discussion of the rationale of the model’s introduction, it is indispensable to briefly

describe the competency model introduced at Lemma and the way of its development.

Competency-based leadership model

Lemma launched the development of the competency-based leadership model in 2000.

The objectives were to create a common and formalized reference for leadership develop-

ment and evaluation. The competencies considered as crucial for successful operation of

the Group were the competencies to manage people and change, with high priorities given

to customers and obtaining results.

Developing competencies on the basis of internal documents, validation interviews

with 32 exemplary Lemma leaders, willingness to keep traditional organizational values,

all these characteristics of the process of the model’s development indicate that the

combination of two methods was used in order to identify the competencies: the research-

based and values-based approaches (Briscoe and Hall 1999). Scientific rigour of

interviews gave the air of legitimacy to the model and allowed involving top managers in

the development process. Using traditional Lemma values contributed to the

reinforcement of the culture.

Using another classification of competency modelling approaches, one could state that

the tailored method (Rothwell and Kazanas 1998; Rothwell and Lindholm 1999) was used

for the development of the model.


The Lemma competency-based leadership model, which was developed at the

beginning of 2001, contains six competencies regarding the vision, leadership qualities,

change management, result and customer orientations, and Lemma values. The final

document contains detailed definitions of each of the six competencies, a description of

foundation level, two stages (levels of expertise) and the target level which represents the

highest level of mastering leadership capabilities. Each stage is illustrated by three day-to-

day business situation examples. An accompanying document clarifies the objectives of

the tool development, its use, advantages, etc.

As an example, the definitions of stages of the competency regarding ‘result

orientation’ are presented in Table 2.

Initially, this competency-based model was designed for the 700 top managers of

Lemma. It was adapted for lower management level (about 1,700 managers) as an

orientation tool. Human Resource managers of the corporate headquarters later proposed a

tailored model for all corporate managers.

The leadership competencies of the model are discussed in an annual appraisal

interview. The questions of 360-degree-feedback are constructed on the basis of the

competencies. The model is also used in the guide for leadership development. A website

devoted to the leadership competencies was created in order to provide an access to recent

publications in the area of management, strategy, cross-cultural studies, etc. The

leadership competency model is linked to all main HR policies and practices such as

recruitment, performance management, staffing, and development of Lemma leaders.

Rationale behind the introduction of the model: agency theory

It was demonstrated that Lemma had a feminine, high-context and particularistic culture

with a high respect for authority. Lemma managers were committed to the organization as

a whole at the time preceding the acquisitions. The Lemma ‘humanistic’ culture with its

‘exceptional quality of relationships’ encouraged its members to build their career in the

company, which is known for its low staff turnover. It confirms the proposition of Brown

Johnson and Droege (2004) stating that employees in feminine cultures tend to work

toward higher levels of goal alignment with management than they do in masculine

cultures. The particularistic and high-context nature of the Lemma culture contributed to

the creation of a ‘consanguine’ network where the managers ‘win if they work together’.

Lemma could rely heavily on its expatriates. The organizational characteristics of Lemma

mitigated the self-interest assumption of agency theory. In order to prepare successors for

top positions of the Group, two principles of functional and geographical mobility are

applied by Lemma to those who wish to rise to leading or key positions. By moving

managers across different business units, countries and functions, the organization tries to

reach several objectives: expand future leaders’ experience and perspectives; ease the

information flow within the Group; and reinforce the corporate culture. In other words,

the construction of a management career path in such a way contributes to the creation of a

‘glue technology’ or ‘global glue’ (Bartlett and Ghoshal 1989; Evans 1992). Using the

terms of the agency theory, one can state that the ‘pre-acquisition’ Lemma managers were

trustworthy agents in culturally distant subsidiaries in the past (see Figure 1).

However, it is becoming more difficult to have trustworthy agents at the present time.

Intensification of agency problems at Lemma are linked to three factors related to the

acquisitions of the Anglo-Saxon groups by Lemma: the changed size of the organization,

the influence of Anglo-Saxon values, and the time issue concerning the integration

of newcomers. First, agency costs increase with the expanding size of the organization.


Table 2. Stages of the competency result orientation.

Competency / Level Foundation Level Stage One Stage Two Target

Definition:X Sets and works towards ambitiousgoals.

X Takes decisive action guaranteeing thatgoals are met.

Capitalizes on the best useof resources to achievegoals.

Sets ambitious objectivesand work with teams inorder to optimizeresources.

Enables teams to tracktheir own performanceand to adapt if necessary.

Creates a performance-oriented culture.

X Manages poor performance.X Ensures the organization learns fromexperience.

X Shares objectives and results openly,enabling transparency and financialcredibility.

Source: Internal document of Lemma (2003).

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This fast organizational growth leads to the fact that even managers highly committed to

the company in the past feel frustrated by the organizational changes.

With the changes in size, the way in which the Group functions is becoming more distant. Theway in which people commit to the Group is also changing. For me . . .Lemma is now thedivision I work for. Beyond it, it is alien. It was easy to know people in the past; it is nowbecoming more compartmentalized. (General Manager, Division 2)

The reality of Lemma with regard to the new organizational size brings the problems of

information asymmetry.

Lemma was a relatively small company . . . There were no written formalities. For example,you could immediately see a person with high potential because he was like an elephant in thecorridor. Now, there is geographical and cultural diversity. You cannot know everybody. (HRManager, Division 1)

The decentralization of the Group by divisions has created compartmentalization. I, as acountry manager, feel that I belong to the Group, but my subordinates have nothing to do withthe Group. We have created compartmentalization even inside the division: separation byzone, geographical zone . . . Even HR managers are compartmentalized, they are responsiblefor zones. What do North America and Asia have in common? Nothing . . . the relationshipsare not personal anymore. (Country Manager, Division 1)

Thus, a rapid increase in size intensifies agency problems and therefore leads to probable

opportunistic behaviour on the part of managers and an increase in agency costs. Second,

Lemma faces an enormous challenge to integrate a different organizational culture. Many

of the newcomers are frustrated by the difficulties that they face in penetrating a strong

network of Lemma managers – ‘the circle of confidence’. They feel rejected or not

allowed to fully exercise their positions in an organizational environment that is new to

them. The culture of ‘non-dit’ (not said) and the high-context and particularistic culture of

Lemma are difficult to understand for managers who are used to working in an Anglo-

Saxon environment that is more explicit, low-context and universalistic.

Third, Lemma does not have the time to follow the integration process which was

practiced in the past. While cross-functional and geographical mobility made it possible to

create a strong network of managers in the past, the same methods of building the ‘global

glue’ are not sufficient because of the organization’s new dimensions and the lack of time.

Figure 1. Moderate agency problems at Lemma prior to acquisitions.


To staff leadership positions of the enlarged group, the organization needs managers

capable of commanding without delay. Lemma needs managers who will adhere to the

organizational values as rapidly as possible.

This discussion is schematized in Figure 2. The ‘integration time for newcomers’ is

framed by a dotted line because of a moderate level of frequency emerging for this

category (44%).

Thus, as a consequence of the acquisitions, the increased size of the organization, the

Anglo-Saxon influence, and the integration time issues make it difficult for Lemma to find

and develop trustworthy agents. In addition, a rapid increase in size and international

expansion lead to the difficulties of verifying agents’ behaviour. It increases the probability

that managers will opt for opportunistic behaviour. Thus, one can observe the intensifi-

cation of the agency problems at Lemma.

Lemma made wide use of staffing control in the past. The majority of the top

subsidiary positions were occupied by French expatriates whom the Group trusted more

than foreign managers. It was a typically ethnocentric approach to IHRM.

The appointment of a non-French manager at the head of a business unit outside France wasnot possible 10 years ago. (Country Director, Division 1)

It is an excellent means to develop our leaders. And we are going to keep it. However, to thismethod of career development that included a big part of implicit training and learning bynetwork we have to add another formal tool that would be used not so much for the evaluationas for the development of leaders . . . . We do not have the time we used to have to integratenewcomers. They have to understand our requirements as soon as possible. Our willingness toformalize stems from this. (HR Director of the Group)

Figure 2. Agency problems at Lemma.


Thus, the Lemma group needs other means to facilitate cultural learning at present because

of the lack of people and time. The competency-based leadership model provides a common

language regarding leadership development and formalizes the leadership requirements.

This common and formalized, and therefore explicit, reference is intended to reduce time

needed for newcomers to understand the corporate culture. It contributes to the socialization

process and decreases the information asymmetry existing between headquarters and the

subsidiaries. Thus, the leadership model provides a strong basis for cultural learning in

the constraints of the increased size of the Group, cultural diversity, and time issues.

Lichtenberger (2005) mentions the co-commitment role of competency formulation:

competencies serve to formulate a new contract between the individual and the

organization. Dietrich (2002), in the same vein, argues that competency models generate

individual commitment and implication. He emphasizes that this commitment is

established at the interpersonal level between direct superiors and their subordinates.

In the conditions of drastic organizational changes, there is a strong necessity to fill in

the gap regarding leadership development and evaluation at Lemma.

We have a complicated equation to resolve. The Lemma culture is humanistic. We have weakgrowth (if we do not take acquisitions into account). We also have a strong desire to keep ourpeople. For example, Jack Welsh fires 10% of the lowest performing managers every year.That is impossible at Lemma. Thus, if there is no growth and there is a desire to keep allmanagers, then there is no system to make leaders emerge. There is no selection mechanism. Itis meritocracy that works to promote managers. At Lemma, we have many managers whomake their career with a limited vision of the business. (General Manager, Division 1)

Is Lemma changing fast enough? Lemma today is clearly number one, a global leader. Itwould never have happened if there were no good managers and good procedures . . . but beinga leader is one thing, and remaining a leader is even more demanding. We have to workharder, adapt faster and develop global leaders and common understanding. (CountryManager, Division 1)

In order for leaders to emerge, trustworthy agents must be found in the perspective of the

agency theory. The leadership model, which contributes to the building of a common

language regarding leadership requirements, helps to establish organizational leaders

committed to Lemma, in other words trustworthy agents.

Rationale behind the introduction of the model: neoinstitutional theory

The results obtained through the framework of neoinstitutional theory show that the choice

of the competency model was based on the mimetic mechanisms of institutional

isomorphism which refers to the imitation of HR practice as a result of uncertainty in the

leadership development and the utilization of a management fad. Codes associated with

mimetic mechanisms are summarized in Table 3.

All characteristics of mimetic mechanisms of institutional isomorphism stated in the

table are discussed below. The first factor discussed is uncertainty in the leadership

development.

Uncertainty in the leadership development

As was discussed above, increase in the company’s size strongly influenced the

organizational culture of Lemma. Because of increase in size, the group is obliged to

change its ‘mode of management adapted to a small company’ (HRManager, Division 5).

The changes induced by acquisitions increase uncertainty.

We have to understand what we are today. We doubled sales, revenues, people, countries . . .The question is who will be leaders of tomorrow? If I quit today, who will come? Who would


you define as a competent person? The question is how to develop people?Who are able to runthe business? . . . Globalization, what does it mean? Competencies are one way to globalize.In North America we started to use leadership competencies a year before Corporate . . . Thenext generation of leaders look at the world differently. Some of them will stay at Lemma foronly five–six years. The challenge for Lemma is how to be global. We have to set standards,have common language, and still allow cultural differences. (HR Manager, North Americanactivities)

Taking into account tremendous changes experienced by Lemma, the company looks for

the future methods of leadership development.

I have learnt about the leadership model at the information meeting. A communicatedmessage was that the group asks itself questions about the generation of leaders: how todevelop them, how to recruit, how to evaluate . . . . (Country Manager, Division 1)

One of the HR managers of the Group, who followed the development of the leadership

model from its birth, explains the reasons of the model’s introduction.

We recognized that the way of accessing managers at Lemma was strange . . . very subjective,based on the opinion of the boss who likes you or not. There was no framework inexistence . . . . We needed something more objective, some sort of competencies . . . special orsomething off the shelf . . . . Among industrial groups, 80% of competencies are the same.Maybe about 20% is specific to Lemma . . . . Finally, we decided to reflect the specificity ofLemma and to develop our own leadership model. (HR Manager, Division 3)

Table 3. Coding: neoinstitutional theory.

Number allocated to manager Characteristics of mimetic mechanisms

1 Comparison to peers2 Comparison to peers3 Management fad

American tool4 Uncertainty in the leadership development

American tool5 American tool6 Uncertainty in the leadership development7 Uncertainty in the leadership development8 American tool9101112 Comparison to peers131415 Uncertainty in the leadership development161718 Management fad

American tool19 Comparison to peers

Management fadAmerican tool

20 Comparison to peers21 Comparison to peers222324 Management fad25 Consultant as a supplier of management fad


One can conclude that uncertainty forces Lemma to compare its own approach to

leadership development and evaluation to those utilized by other multinational companies.

Comparison to peers

Having experienced significant organizational changes, Lemma faces difficult questions

of further leadership development. A number of interviewed managers at Lemma are

conscious of imitation.

This kind of management practices does not come from nowhere. It was developed and usedin other Groups. It did not originate with Lemma even if it is adapted for our Group.(Marketing Manager, Division 5)

The leadership model is not sufficiently original. If we take away the logo of Lemma, we willhave nearly the same thing as other companies. Lemma has strong values. But this is notreflected in the model. (HR Manager, Division 5)

It is highly important to emphasize that the absolute majority of the interviewed managers

perceive the leadership model as ‘a natural need of the Group’, ‘the first attempt towards

formalization’ (HR Manager, Division 5), and ‘a good initiative to develop a common

reference’ (HRManager, Division 5). Managers understand the need to formalize what the

Group expects from its senior managers.

The Lemma Group chose to use an organizational practice that was already successfully

used by an extended network of other multinational companies. Guler, Guillen and

Macpherson (2002) emphasize the importance of identifying actors in the analysis of

institutional mimicry, the actors whom an organization tries to observe and imitate. They

argue that these actors are the organizations perceived as peers: ‘members sharing similar

traits or located similarly become aware of each other’s activities and use this information to

compare their practices with others’ (Guler et al. 2002, p. 215).

The fact of inter-organizational comparison can also be confirmed by my experience in

the company. While the Lemma leadership model was already in an advanced stage of its

development, I became aware of a competency-based leadership model developed by

another multinational company. The aim of the interview with the HR manager of

this company was to clarify the objectives of the competency model introduced into the

company, the composition of the model, and its application and adaptation issues. A report

of this interview was transmitted to my superior at Lemma. This action, which can be

indirectly classified as an act of comparison, could be considered as one of the attempts to

cope with uncertainty through information and experience sharing.

Management fads

The fad perspective ‘assumes that the diffusion of innovations occurs when organizations

within a group imitate other organizations within that group’ (Abrahamson 1991, p. 597).

Competency management is considered as a management fad by scholars. Paauwe and

Boselie (2005) describe it as a real fashion across organizations; Dalton (1997) writes

about a competency craze; Rothwell and Lindholm (1999) argue that competency models

have become extremely popular not only in the USA, but all over the world. It would be

worth noting that some Lemma managers expressed their sentiments of having another

faddish management practice.

The leadership model is a fad. (HR Manager, Division 5)

It is something nice to have.We do not need it. I think that a letter from theCEO stating ‘these areN aims – it is what we expect from you’ would be sufficient. (General Manager, Division 1)


My big reproach is that the leadership model is another layer of paper. How much did it cost?I work 60 hours per week and I have no time to open and read it. It is like a flavour of themonth. (General Manager, Division 2)

Huczynski (1993, p. 443), in his literature-based historical analysis of management ideas,

concludes that ‘the phenomenon of management fad successions is the result of conscious

and unconscious collusion between managers as consumers of management ideas and

consultants as suppliers of such ideas’.

This close association between organization as a consumer and consultant company as

a supplier is observed in the case of Lemma. A competency-based leadership model has

been perceived by Lemma as a solution to their problems regarding the leadership

development and evaluation taking into consideration the organizational changes

experienced by the group. As it will be demonstrated further, the consulting firm which

helped to conceive the leadership model had an important experience in the development

of such models and was a supplier of the practice.

Consulting firm

Responding to the question concerning the rationale of the intervention of the consulting

firm at Lemma, the Consultant clearly states that his company proposed a competency-

based leadership model as a solution to difficulties in the leadership development.

We were asked to think about an approach which allowed linking objectives of the Divisionsto individual objectives. We needed to take into account the organizational values . . . to baseon something fundamental, to redefine HR actions in order for them to be coherent . . . . Iproposed a competency-based leadership model. We have developed such models for many.(Consultant)

The choice of the consultant organization consolidates the argument of institutional

mimicry. The consultant group which helped to elaborate the leadership model had

previous experience in the development of similar competency-based leadership models in

other multinational groups.

Figure 3 proposes a graphical illustration of the interdependent relationships between

organizations as consumers and consultant companies as suppliers of management fads

described by Huczynski (1993) and applied to Lemma.

Acquisitions of Anglo-Saxon multinational companies by Lemma led to important

organizational changes which in their turn generated uncertainty in leadership development

and evaluation. In order to cope with this uncertainty, the company looks at the leadership

practices utilized by other multinational groups. This comparison makes possible the choice

Figure 3. Management fad: consumer and supplier.


of the competency-basedmodel as a practice widely used byAnglo-Saxon companies for the

managerial population. Thus, Lemma appears as a consumer of a management fad. The

consulting firm which has already developed competency-based leadership models for other

multinationals arrived on the scene as a supplier of this management fad.

However, a competency-based model applied to the population of managers cannot be

considered as a management fad in France, where it is utilized more for operators and

technicians (Aubret et al. 2005; Bouteiller and Gilbert 2005). Thus, all arguments

concerning the mimetic mechanisms of institutional isomorphism developed above are

valid only with regard to the utilization of this practice in the Anglo-Saxon world.

Organizational legitimacy

It is argued that the mimetic mechanisms of isomorphism were activated because of the

Anglo-Saxon origin of the acquired companies. Some Lemma managers are conscious of

the origins of a competency-based leadership model. And they understand the stakes

behind the model’s introduction.

Culturally, such a competency model is questioned, namely, by the French. Indeed,Americans do not understand how French may judge somebody without a competency model.French, for their part, do not understand how one can use such a simplistic tool as acompetency model consisting of competencies to judge something so extremely complex andunique as a human being. (HR Director, Division 2)

The leadership model is an American tool, a typical American product. The leadership modelis another push on the part of Lemma to be more open, to be more American. (GeneralManager, Division 1)

Many managers think of the leadership competency model as an American tool at firstglance . . . . The most important thing is that we cannot have an absolute weapon. It is notimportant for Americans. We need to adapt Latin culture to Anglo-Saxon culture. (HRDirector of the Group)

High context and particularistic nature of the Lemma’s culture complicates its being

understood by managers of the acquired companies. Newcomers feel frustrated because of

the difficulties of integration.

The Corporate here . . . is not made for foreigners. In general, there is no organization tofacilitate things . . . . It is extremely hierarchical here. They do it because I am their boss. But Iam not sure that they would do it for junior managers. People do not like to take unpopulardecisions in France. In UK, if there are rules, they are respected. If they are stupid, they arechanged. (General Manager, Division 1)

One can conclude that Lemma wishes to establish internal organizational legitimacy.

Integration pressures force Lemma to show its willingness to maintain fairness towards

new arrivals. By implementing the practice, Lemma tries to avoid cultural misfit and

frustration of managers of newly acquired entities.

Lemma has a chance to be a company that has ‘metier local’. Till now, Lemma was not aninternational organization. It was a multi-local, not a multinational organization. It was not sodangerous before. But now, we need a common language.We need to adapt simplified languageto integrate others who may not understand French subtleties. (Strategy Manager, Division 2)

Why was the leadership model introduced? There is a necessity to define specificcharacteristics of managers expected by Lemma. With acquisitions, we need strongerintegration of newcomers, stronger, more explicit and clear. Without living this document, itis not easy to integrate. Of course, it is not the same for the French managers working atCorporate . . . . When you join Lemma and you are far from France, you ask: what do theyexpect fromme? And you have a paper: the competency model. Even if you do not understandit well, it helps you. (Finance Manager, Division 5)


The manager who was in charge of the introduction and development of the leadership

model was different from the ‘former Lemma manager’ profile. His rather ‘Anglo-Saxon’

view of management and previous experience were highly appreciated by his superiors in

terms of coping with organizational changes.

We wanted to find competencies of an Anglo-Saxon nature in order to lead the Group’straining and development. We have hired a foreigner. His successor will also be a foreigner.(HR Director of the Group)

This willingness to have an Anglo-Saxon profile for the manager occupying a key position

in the Group emphasizes the need for the integration of newcomers, as felt by the larger

Group.

Thus, it is argued that the competency-based leadership model was introduced at

Lemma in order to facilitate the integration of newcomers who would readily accept an

Anglo-Saxon practice. It is internal organizational legitimacy that is sought by the Group.

The processes related to the mimetic mechanisms of institutional isomorphism provide

also the external organizational legitimacy for Lemma. As was illustrated above,

uncertainty in leadership development is one of the crucial factors of the institutional

isomorphism which pushes the organization to compare itself to its peers. This comparison

results in imitation but it also ensures an external legitimating process of Lemma as

a multinational company adopting a model widely applied and recognized by many

multinational companies.

Conclusion

The present study makes several contributions. First, it extends the literature on

competency-based leadership models by describing the case of the introduction of such a

model in a multinational company.

Second, the present study confirms the proposals of those scholars who claim to avoid

contextual isolation while studying human resource management (e.g. Wright and

McMahan 1992; Jackson and Schuler 1995; Paauwe and Boselie 2003). The case of the

Lemma group demonstrated that national culture influences the organizational culture of

the company. The organizational culture, in turn, determines the way in which

international human resource management is organized. Thus, the context of national and

organizational culture should be taken into account in order to comprehend better the

rationale behind the introduction of competency-based leadership models in particular and

organizational practices in general.

Third, this article contributes to our understanding of the rationale of a competency-

based leadership model introduction in an MNE. It illustrates the advantages of applying

two complementary theories – neoinstitutional and agency – to analyse IHRM. All my

research suggests that the arguments of agency and neoinstitutional theory contribute to

the explanatory potential of why multinational enterprises introduce competency-based

leadership models in the first place. Table 4 gives a comparative summary of the key

characteristics of the decision-making process at Lemma through the frameworks of

agency and neoinstitutional theories.

It is claimed that each theory taken alone does not provide a full answer to the question

of the rationale behind the introduction of the competency-based leadership model in

particular or an organizational practice in a more general way.

Agency theory provides the theoretical rationale for explaining how organizational

changes influence the human resource management of an MNE. It has been demonstrated

that the agency problems moderated by the organizational culture of Lemma prior to


Table 4. Comparison of decision-making characteristics through the perspectives of agency and neoinstitutional theories.

Characteristics ofdecisions Agency theory

Neoinstitutional theory: Mimetic mechanisms– External organizational legitimacy

Neoinstitutional theory:Internal organizational legitimacy

Nature of decision process Deliberate Proceeding in conformity with external courseof action

Embedded in norms and traditions oforganization

Key motivator for change Difficulties in staffing the leadershippositions, in leadership evaluation

Uncertainty in leadership development Integration difficulties of new arrivals

Goal Cultural control through sharedvalues

Reduce uncertainty in leadership development Restore legitimacy towards new arrivals

Find legitimate way to develop leadersExpected output Trustworthy agents: managers com-

mitted to organizational values‘Objective’ processes of the leadershipdevelopment and evaluation;

Integration of new arrivals: achievinginternal organizational legitimacy

achieving external organizational legitimacy

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acquisitions have been intensified after the acquisitions of the Anglo-Saxon companies.

This intensification led to the introduction an organizational practice playing the role of a

cultural control mechanism to develop trustworthy agents and thus reduce agency costs.

Consequently, the agency theory offered the justification of the introduction of a control

mechanism. However, it does not explain the choice of the particular practice.

Looking at the question of the leadership model’s introduction in the framework of

neoinstitutional theory allows us to state that the mimetic mechanisms of institutional

isomorphism were the forces that pushed the Group to develop this particular model. The

introduction of a competency model already tested and widely used by other multinational

groups was a response to uncertainty in the leadership development. It was also a response to

integration pressures from new arrivals. It has been concluded that the quest for legitimacy

has two dimensions in the case of Lemma: internal and external. Lemma needs to integrate

the Anglo-Saxon managers and to do so it imitates other multinationals considered as

legitimate.

Thus, in order to understand fully the rationale of the introduction of the competency-

based leadership model in a multinational company which has experienced important

organizational changes, we need to combine agency and neoinstitutional theories. Agency

theory explains the introduction of an organizational practice as a result of the

intensification of agency conflicts because of organizational changes. Neoinstitutional

theory elucidates the choice of the model to moderate these conflicts.

Figure 4 provides a graphical illustration of agency relationships in MNE. It takes into

account the moderators of agency problems such as cultural distance between

headquarters and the subsidiaries and cultural context in MNE (Rosenzweig and Singh

1991; Roth and O’Donnell 1996; Chang and Taylor 1999; Brown Johnson and Droege

Figure 4. Institutional context in agency theory.


2004). It is proposed to enrich the explanations provided by agency theory by integrating

the elements of neoinstitutional theory. Institutional environment explains the nature of the

chosen control mechanism to prevent the opportunistic behaviour of the agents.

In conclusion, it is stated that the process of the introduction of an organizational

practice in the context of important organizational changes cannot be explained only by

the intensification of the agency costs. It also depends on the institutional context. In

support of this argument, this paper has put forward the idea of combining both agency and

neoinstitutional theories. Combining agency and neoinstitutional perspectives is

consistent with Eisenhardt’s (1989) call for using agency theory with complementary

theories because ‘agency theory presents a partial view of the world that, although it is

valid, also ignores a good bit of the complexity of the organizations’ (Eisenhardt 1989,

p. 71). This combination also makes it possible to overcome the restrictions of the

neoinstitutional theory assumptions which consider organizations as submissive actors

accepting the prescriptions of the institutional environment.

How far can the findings of the present paper be generalized? Using a single case study

methodology does not allow us to avoid the limited external validity of the research. The

research propositions of this article constitute the frame of reference that serves as a point

of departure toward the aim of understanding the process and the rationale of

the leadership model introduction in multinational companies. The solution to the

transferability problem is to extend the universe of the study. To do this, Miles and

Huberman (2004) propose to increase the number of cases and to look for contrasting

cases. Future research can use the multiple cases sampling which may validate findings

and prove that the emerging theory could be generic.

The emerging theoretical perspective and findings of the present case study also

suggest a possibility for future research on the adoption of the competency-based

leadership model. Future research might examine whether the adoption of this model has

led to the reduction of the agency costs.

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