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International Business Review Vol. 5, No. 2, pp. 137-150, 1996 Copyright © 1996 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0969-5931/96 $15.00 + 0.00

Control in Less-hierarchical Multinationals: the Role of Personal Networks and Informal Communication Rebecca Marschan,* Denise Welcht and Lawrence Welcht *Helsinki School of Economics and Business Administration, Runeberginkatu 14-16, 00100 Helsinki, Finland tNorwegian School of Management, Oslo, Norway Abstract - - The principal aim of this paper is to examine the presumption that a higher degree of decentralization, accompanied by a reduction in hierarchical levels, leads to intensified and effective horizontal communication across units and organization levels. It is argued that, in fact, personal networks and informal communication within the decentralized MNC can be distorted, even damaged by the structural changes, and the informal processes may actually work against the intended communication flows. The nature of both personal networks and informal communication makes control difficult yet, given the importance, MNCs inevitably utilize a variety of approaches in an attempt to influence their operation, sometimes in a counter-productive way. Copyright © 1996 Elsevier Science Ltd Key W o r d s - - Multinational Corporations, Less-hierarchical Structures, Control, Personal

Networks, Informal Communication.

Recent research on multinational corporations (MNCs) has revealed a movement away from more traditional organizational structures towards greater decentralization, accompanied by a reduction in hierarchical levels. This shift is facilitated by the d e v e l o p m e n t of "networks of personal relationships that work through informal, horizontal communication channels" (Bartlett and Ghoshal, 1990a, p. 137). The literature on such less-hierarchical MNCs suggests that horizontal communication will improve as boundaries are de-emphasized and practices that encourage closer inter-unit communication are implemented. The decentralizing momentum is further enhanced as the volume of horizontal communication increases between subsidiaries. Under such a decentralized structure, horizontal communication is regarded as one of the integrative mechanisms that keeps the organization from dissolving into anarchy (Hedlund, 1986; Bartlett and Ghoshal, 1989; Hagstr6m, 1992). H o w e v e r , it r e m a i n s an open q u e s t i o n as to w h e t h e r h o r i z o n t a l Rebecca Marschan is a Lecturer in International Business. Her research interests centre around MNC organizational structures and information flows. At the time of writing, Denice and Lawrence Welch were on sabbatical at the Helsinki School of Economics and Business Administration.

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communication flows will develop in a way which positively supports the structural change. The difficulty here is that, by its very nature, informal horizontal communication may take a contrary path. As well, the inevitable concern of companies to maintain control over information flows could result in potentially supportive informal flows being constrained. This article, therefore, addresses these issues through a critique and an extension of the literature on less-hierarchical MNCs. In so doing, we focus primarily on the development and maintenance of personal networks and control aspects in situations where a less-hierarchical structure is adopted. When charting the link between structural changes and horizontal communication patterns, we adopt S6dergren's (1992) position that decentralization comprises three interacting processes: formal restructuring of the organization, which is supported by changes in working roles at different levels and organizational attitudes. As SOdergren states, the most conscious and explicit part of the decentralization process is formal restructuring, which may involve the establishment of smaller units that operate as autonomous profit centers; reducing bureaucracy and the number of hierarchical levels; and delegating work, responsibility, authority and power to local business units.

Enhanced Horizontal Communication? At the outset, one could question the real extent of change that the move toward less-hierarchical structures actually produces. For example, a higher degree of decentralization does not necessarily lead to intensified communication across units, because of the constraints of what Bartlett and Ghoshal (1989) term the company's administrative heritage. Specified rules, policies and management processes tend to support existing organizational boundaries, and even though restructuring may alter these boundaries the administrative heritage remains influential, unless radical 'organizational surgery' is performed. As well, the m e c h a n i s m s and procedures accompanying the structural change may perversely inhibit rather than facilitate horizontal communication flows. That is, the formal systems introduced to control inter-unit communication may act as an unintended barrier (Marschan, 1994). Thus, it can be argued on both counts (administrative heritage and type of formalization) that a less-hierarchical structure does not necessarily lead to more effective horizontal communication. An important concern, therefore, for multinationals which adopt such a less-hierarchical structure is the design of appropriate control mechanisms: those that encourage rather than inhibit horizontal communication. The relevant literature suggests that formal, bureaucratic control mechanisms such as financial reporting systems is complemented by less formal mechanisms such as culture control and network systems (see, for example, White and Poynter, 1990). This is supported by Barnevik, CEO of the Swedish-Swiss conglomerate ABB, who is reported to have said: "Decentralization does not mean abdication. You still have to know what is going on" (Brown, 1994, p.

139 28). As indicated in Fig. 1, managers not only use formal reporting systems but also rely on a range of informal control mechanisms. While less visible than the structure, informal mechanisms can still be used as an important means of centralizing control. For example, MNCs can be centralized through the use of expatriates who have internalized corporate norms and values (EdstrSm and Galbraith, 1977; Borg, 1988; Welch et al., 1994)• Transferring such expatriates, who may be trusted to implement corporate policies and procedures, thus becomes a de facto centralizing control mechanism• At a more general level B r o o k e and R e m m e r s (1978, p. 68) argue that a decentralizing ideology might well mask a centralizing reality. In other words, in order to decentralize, MNCs centralize some control mechanisms even more strongly, which may include formalizing processes that were previously informal (Melin, 1992). The literature on less-hierarchical MNC structures emphasizes the way in which horizontal communication is facilitated by informal exchanges of information which may be developed through the use of teams, networks and other interactions across functional boundaries (White and Poynter, 1990;

CONTROL

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F O R M A L

reporting systems • procedures

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Figure 1. Formal and Informal Control

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H e d l u n d and R o l a n d e r , 1990; E g e l h o f f , 1993). H o w e v e r , even if decentralization involves an increased use of cross-functional teams and project groups, it does not necessarily ensure that the relationships developed between team members are maintained to the extent required for effective horizontal communication. For instance, one of the basic conditions for horizontal communication between units is a common language which in many cases is English. Consequently, insufficient language skills in English may operate as a barrier to communication across borders and prevent particularly middle and lower level personnel in non-English speaking units from participating actively in international training courses and team work. Bartlett and Ghoshal (1990a, p. 143) also point out that the contacts made in these, often temporary, teams and project groups seem to be a by-product of the main activity rather than a result of a deliberate program for relationshipbuilding. These authors, however, cite Unilever as an example of an MNC that uses training and development schemes to build relationships. According to the authors, Unilever indoctrines "managers into a Unilever club where personal relationships and informal contacts are much more powerful than the formal systems and structures". The focus of research on such relationship-building, though, has been on top management interaction and there has been limited exploration of how the personal networks at this level evolve, how they work and ultimately how effective they are in e n c o u r a g i n g the desired informal, horizontal communication between decentralized MNC units. It may also be argued that the effect of structural changes upon those below top management, particularly on middle and lower level personnel and their networks, has been relatively ignored. During the process of moving toward a less-hierarchical form, interunit communication is likely to be most affected at levels lower down in the organization (Marschan, 1994). Structural changes frequently alter the lines of operative communication flows. Furthermore, personal communication networks may be distorted to the detriment of the horizontal communication on which the new structure is presumed to be dependent. Middle management and operating level staff may suffer a change in both the quantity and quality of their personal communication networks with other units. For example, Kone Elevators, the Finnish multinational, recently decentralized its leading functions. Operating as a single product firm the administrative locus of global control for the lift business was moved from Finland to Belgium. Furthermore, the subsidiary managers in Italy were given the worldwide responsibility for developing low-end elevators and conducting research in the field. The decentralization process also involved reorganizing the manufacturing function with the purpose of concentrating global production of each lift component to a specific location. These structural changes identified in Kone Elevators show a consistent move toward a lesshierarchical structure (Hedlund, 1986; Bartlett and Ghoshal, 1989), which commenced with the changes in the Northern European region. In addition to the transfer of the divisional headquarters Kone top management also relocated part of the global component manufacturing from Sweden to Italy.

141 Simultaneously, the aim was to strengthen the resources and expertise of the local sales units by establishing regional engineering centers which they could e m p l o y . In a study f o c u s i n g on structural c h a n g e s and h o r i z o n t a l communication patterns, interviews with 27 top managers, seven middle managers and 24 operative personnel in the twelve Northern European units revealed differences in the impact of the structural changes on inter-unit communication. At middle management and operating levels, the structural change resulted in reduced communication between subsidiaries, and through associated formalisation measures, many existing personal relationships were officially severed. However, top managers reported that they experienced improvements in communication at their level as they participated more frequently than earlier in regional meetings and projects (Marschan, 1994). This case demonstrates that a dichotomy may result despite the genuine intention of top management to decentralize and facilitate communication across units. In fact, such a structural change may be perceived in the rest of the organization as an attempt to control and centralize. This perception is not necessarily false, and clearly the interpretation depends on the hierarchical position that the person communicating across units occupies within the MNC.

Structural Change and Empowerment In order to work as intended, the move to a less-hierarchical structure requires organizational members to adopt new work behaviours: to accept the responsibility and accountability that accompany the greater autonomy and more discretionary decision-making power devolved to them under the auspices of empowerment. Clearly though, the response of middle and lower level personnel to the empowerment aspect becomes an important issue in determining the outcomes. Again, one cannot presume that all staff will readily embrace the changes. They may, in fact, resent empowerment and what it means for them (Holden, 1994). In a recent study of 200 UK-based organizations, the attitude of the majority of staff towards delayering was negative: it was seen as a cost-cutting exercise, producing lower morale, more work, and fewer promotion prospects, with little real empowerment. "There seem to be strong correlations between employees' interpretation of the reasons for delayering and its effects" (Holbeche, 1994, p. 1). It is also questionable as to how willing managers are to relinquish some of their power. Those at the middle level may regard empowerment as a threat to their own power and prerogative, particularly when it is accompanied by a delayering of the organization structure which removes managerial positions (Donkin, 1994). Employees in many organizations can readily refer to past management fads and their implementation failures and know that management will always resort to the use of their legitimate power to maintain overall direction. Many employees are likely to be sceptical about the reality of empowerment. There have been many examples during the recent worldwide recession of so-called enlightened companies outplacing staff in such a way that empowerment

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came to be perceived more as a managerial euphemism for sacking workers. In one case known to the authors, a newly appointed department manager, who had been given extended powers as part of an overall company program of devolution of authority (decentralization), seriously announced to his assembled staff that they were now participating in an empowerment program and that as part of this program about half of them would 'have to go'. Not surprisingly, the staff did not enthusiastically embrace their new freedom: they saw it as ushering in a new era of coercion. Like so m a n y other management concepts and techniques, empowerment has been misunderstood and misused (Holden, 1994, p. 584). Of course, when considering the MNC, concepts such as empowerment, coming mainly out o f the US situation, have been suggested as being 'culturally bound'. In different cultures, e m p o w e r m e n t may be seen as threatening and negative, and in fact there is a preference for hierarchy and its associated top-down decision-making (Hofstede, 1980; Hoppe, 1993). Thus, empowerment may not be universally regarded as an important, desirable attribute, both within and across cultural borders.

Personal Networks As mentioned earlier, researchers in the field argue that the effectiveness of less-hierarchical structural forms will depend in part on the extent and character of horizontal communication processes, with personal relationships and networks playing a critical role (Bartlett and Ghoshal, 1990b). What is not specified, though, is whether the relationships and networks referred to are the broader personal networks or if it is solely the company-based personal networks (refer Fig. 2). There is also an implicit presumption that the networks which organization members employ in carrying out their assigned roles in the organization will in fact be used for the purposes of facilitating horizontal communication. While much of the networking activity of individuals within a company is task-related, it is not exclusively so. Individuals develop and maintain their own personal networks, which may or may not be activated for task-related activities, even though the networks may have developed in the first place through task-related contacts - - that is, network relationships may develop a life of their own, in a way which takes them beyond the purvue of the company and its interests. As the chairman of a large Swedish industrial firm has commented: One must keep in mind that personal contact nets do not only serve the company but also the individual himself - - they may be a tool for the development of his own trajectory (Hallen, 1992, p. 90). At the same time, both c o m p a n y - b a s e d and individual-based personal networks can be used for either company or individual purposes, as Fig. 2 illustrates. There is an acknowledgement in much of the literature on network theory (Ford, 1990; Forsgren and Johanson, 1992) that networking activity is

143

PERSONAL NETWORKS

Control in Lesshierarchical Multinationals

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used for

Figure 2. PersonalNetworks

primarily about the relationships between individuals, a large part of which occurs at an informal level. However, the implications of networking activity for personnel management in the MNC, and the broader link to structural and control considerations, have been relatively ignored (Welch and Welch, 1993; Hendry, 1994). For example, what is not often recognized, though common in practice, is that especially at top management level, a prospective recruit may be hired as much for the value of that individual's contact network as for the person's technical and managerial competence (who you know as well as what you know). The effectiveness of that 'acquisition', though, will depend on the company's ability to match these contacts with the needs of the organization. As reported by Hallen (1992), the viability of this newly acquired network will partly depend on the compatibility of the various personalities involved as the networks interact. A matching of network systems is not always feasible because of the people involved. People may be introduced to each other, but not form the type of relationship on which productive networks are built. Also, a person may not be willing to activate all of his/her contacts for task-related purposes. Individuals have a capacity to evaluate the value and purpose of different contacts, and if a relationship is considered to be of such personal importance that to use it for task-related purposes would be seen by the contact as opportunistic, then that relationship may well be protected at

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the expense of company interests. In other words, the long-term personal value of the network would be given greater importance over the needs of the company (Macdonald, 1995, forthcoming). On the other side of the selection coin, a person may be hired (with or without overt recognition of the person's existing network) who over time, because of personality incompatibility, damages or even destroys part of existing company networks. This adds a different perspective to selection. It suggests that an important criterion is the person's network and networking skills - - that is, going beyond the more traditional view of matching the skills of the person with the position. These selection issues, though, are difficult enough for companies to deal with domestically without adding the complexity of cross-cultural operations. Related to this is the transfer and promotion of individuals to other parts of the MNC. Removing key actors from both internal and external networks can cause serious dislocation to a company's foreign operations in the short-term and even produce longer-term damage to key company networks (Welch and Welch, 1993). It is not only the time taken to reestablish key relationshipsthat is of issue here, but also whether the company has been able to adequately rematch the transferee (and his/her accompanying networks) with the foreign network systems. This matching process can be complex if the position is to be filled by a parent country national whose appointment is instigated by headquarters staff without adequate consultation with the recipient subsidiary. Headquarters staffing decisions can also inadvertently affect subsidiary-tosubsidary networks. For example, the Australian subsidiary of Digital, a US multinational, has participated in a government scheme for the information technology sector which involves providing assistance in developing exports by Australian firms, using Digital's global network of subsidiaries. For this activity to succeed, the Australian manager of the Digital scheme has to rely on other Digital subsidiaries to take Australian non-Digital products and onsell them in their local markets (Muffett, 1994). Because this activity is outside Digital's normal operations, it has to be marketed to relevant staff in other subsidiaries and depends heavily on the quality of personal relationships which have been developed with these key staff over time. Due to the restructuring and downsizing of Digital globally in the early 1990s, many of the key connections were broken as staff were outplaced or transferred. As a result, the continuation of the Australian program required the Australian manager to identify the new critical people and establish relationships with them. The disruption of inter-subsidiary personal networks put at risk Digital's ability to fulfill its agreed obligations to the host government. Of course, people can be transferred and even dismissed because of the threat they represent to key company networks. Expatriate failures are a good illustration in that inappropriate behaviour (such as cultural insensitivity) can threaten or damage relationships with the host government, key clients, alliance partners, and subsidiary employees (Dowling et al., 1994). However, companies may damage networks when they dismiss e m p l o y e e s ('outplacement'). For example, during restructuring and 'downsizing'

145 activities, there is a danger that key people leave the company (either voluntarily because of perceived loss of job security or involuntarily because the department or division no longer exists, or because they become caught up in job-shedding exercises), including those hired primarily on the basis of perceived important personal contacts and networks membership. Such persons can use their networks to exit from the organization into a better position with another, sometimes competing, company, or exploit the expanded network (combined individual and company) to start up their own company. In this way, the personal network is a strength to the individual - both in creating an attraction for initial hiring but also potentially opening up exit possibilities. The consideration of human resource activities, such as recruitment and staff transfers, serves to illustrate some of the difficulties organizations confront in trying to harness the potential of personal networks. Actions taken by both parties - - the company and the individual - - can enhance and/or threaten the company's network development interests. This contributes to a situation of continual change, which makes it difficult for management to direct or control network development in a way that facilitates horizontal communication.

Structural Change and Control: Network Effects The above discussion reveals the complexity of networking issues and the difficulty of considering their implications when taking managerial decisions. Therefore, adopting a new structural form which involves removing layers of hierarchy and displacement of managers is bound to have a substantial impact on networks, especially at the personal level, as noted above, with important implications for the functioning of the new structure. Structural changes can disrupt networks in a variety of ways as the Finnish multinational Kone Elevators found when it decentralized its Northern European operations. To support the decentralization process the intention of top management was to streamline and improve information flows between subsidiaries by formally channelling communications through two newly created, regional resource centres. The unintended effect, though, was that the new centres created a barrier to horizontal communication flows as they made it more difficult for people within the sales subsidiaries in different countries to use their informal company-based individual relationships. However, some people persisted in using their personal networks to overcome the perceived barriers to inter-unit communication caused by the structural change. This was considered necessary because of delays in obtaining information from the resource centres. As one Swedish top manager commented: It is clear that when it has not been possible to receive an answer from [the resource centre] as has been the case people have turned in desperation here [subsidiary headquarters] so that one of our top managers would, in turn, put pressure on [the resource centre] and get an answer (Marschan, 1994, p. 63).

As well, Kone staff complained about not being allowed to deal directly with

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the person who had the relevant information - - that is, the formalized channel disrupted informal personal relationship's to the detriment of horizontal c o m m u n i c a t i o n . This e x a m p l e illustrates the i n e v i t a b l e c o n c e r n o f management to maintain control over information flows when decentralizing key activities and the difficulty of foreseeing the impact of structural changes on company-based networks. Also, despite company strictures to the contrary, people will still use their informal networks to find a more direct path to the information they need. Because of situations such as that described above, the emphasis on horizontal communication in less-hierarchical structures, facilitated through informal relationships and networks, places demands on management to develop new ways of managing. The basic question here is: can the MNC c o n t r o l at all the i n f o r m a l c o m m u n i c a t i o n p r o c e s s and is it e v e n desirable/worthwhile trying to do so? This leads to a range of issues such as what can be controlled, and how to accomplish this if it is feasible. In addition, in situations where direct control is not viable, what type of influence can the MNC indirectly exert? A further c h a l l e n g e lies in dealing with the d y n a m i c s o f informal communication processes and networks. As company operations evolve, networks are constantly on the move - - merging, conflicting, re-forming, expanding, and dying - - changing as actors enter and leave. This dynamism makes it difficult for management to have a clear idea of the current state of its own collective networks, and nigh on impossible for management to know about each employee's personal network and the way in which all these networks interact, change and ultimately affect the ability of the MNC to operate in diverse markets. It is even more difficult to keep track of what is occurring within the networks (company or individual) when one takes into consideration the fact that a large part of the important communication exchange in a network is on an informal basis, most of which is not recorded in any way and therefore is not readily accessible, particularly by members outside the relevant network. By the time management has developed its control mechanisms, the informal communication exchange patterns and networks may well have altered, with different components assuming greater or lesser importance to the MNC's overall competitive position. In fact, as Macdonald (1995) argues: Informal information flow is, by definition, beyond the control of the organization. The irony is that the firm which does not value informalinformationand which thereforemakes no attempt to organise it, may benefit more than the firm that appreciates its value and attempts its control. The c o m p a n y can p r o v i d e the a r e n a and the p a t h w a y for p e o p l e to communicate informally and develop relationships, but it cannot dictate or control the frequency of informal communication, or its pattern and content. In fact, MNC management may facilitate (through contextual activities such as social g a t h e r i n g s , r e w a r d s y s t e m s and o t h e r f o r m s o f e x p l i c i t encouragement); or impede (attempting to control informal gatherings,

147 monitoring pathway useage or even penalising the use of certain pathway facilities for informal purposes), but it cannot achieve absolute control. The instigation of company exchange forums (such as the management development programs used by Unilever described earlier in this paper) can be seen as explicit recognition of the role played by individuals in the establishment of informal information channels, their use, and the impact they have on outcomes. Also, through such schemes, management is trying to encourage, direct and channel the functioning of informal communication so that company objectives are met. In other words, management is attempting to control informal communication and network development, even if it is not always seen in those terms by personnel. As companies deliberately seek to control informal information flows, there may be a temptation to use prescriptive methods such as insisting that formal reporting lines be strictly followed. For example, in the Northern European area of Kone Elevators, the company directed that personnel in sales subsidiaries communicate with the two engineering resource centres through a predetermined contact person (Marschan, 1994). In extreme cases, companies may be prepared to utilize the increasingly sophisticated technology for monitoring staff communication via company telephones and electronic mail in order to enforce adherence to formal reporting lines. As a recent survey of British companies found, "Technological improvements would allow more control of subsidiaries thus requiring greater accountability" (3i Report, 1994; see also Hagstrrm, 1992). It can be a short step from guidance and direction to coercion as companies seek to control the unruly. The danger here is that in seeking to direct information flows and network development, the company can lose the benefits of informal communication. This is an important issue for companies: how to harness the power of informal communication and networks without damaging their effectiveness. Attempts to control may backfire if staff react negatively to what is perceived as management's blocking of personal interaction. Such control mechanisms may be counter-productive to the extent that structural changes are not supported or circumvented. In some instances, people may activate their networks to sabotage, or perhaps even forment opposition to the intended control effort (Krackhardt and Hanson, 1993). Individuals can 'go underground', still using their informal networks but shifting the medium from electronic to face-to-face, and use network contacts which are beyond the control of the company and activated outside of company time. It is a difficult balancing act to create a positive atmosphere which facilitates informal interaction yet does not degenerate into a negative control exercise. The use of socialization as an informal control mechanism has been identified as an accompanying managerial process response to structural changes which encourage decentralization. Key staff movements throughout the MNC have been proposed as a way in which the organization can achieve social control through the transfer of normative values and behaviours (see, for example, Edstrom and Galbraith, 1977; Ondrack, 1985; Bartlett and Ghoshal, 1989;

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Martinez and Jarillo, 1989). At the same time, staff transfers can assist in the development of informal communication networks and processes (Welch and Welch, 1993). As staff in the Norwegian sales subsidiary of Kone Elevators found, the transfer of a Swedish manager to Norway allowed them to benefit from his informal network of contacts back in his 'home unit' - - the Swedish sales subsidiary (Marschan, 1994). To some extent, the issues surrounding the control of informal communication and networks parallel the debate regarding corporate culture: whether it can be managed and utilized as a normative control mechanism to the extent suggested in the MNC literature (Meek, 1988; Willmott, 1993). A difference though, from a control perspective, is that measures to instil corporate values across the MNC are driven by top management whereas informal communication and networks are less receptive to top-down management control as the above discussion reveals. Furthermore, networks can be used to undermine attempts to inculcate corporate values and behaviours, despite displays of overt compliance. Because personal communication networks are multidirectional - - vertical, diagonal and lateral - - they can be activated to spread counter-culture influence across organizational levels and boundaries in the MNC (for example, parodying 'company-speak', slogans and the like: Willmott, 1993).

Conclusion The literature on less-hierarchical structural forms emphasises the role of informal, horizontal c o m m u n i c a t i o n and networks in assisting the decentralized decision-making and autonomy which results from the removal of hierarchical layers. Informal control mechanisms such as networks are considered important in supporting the structural changes, and ensuring that, despite decentralization, top management is able to maintain global cohesion. However, this raises a major question about the way in which informal communication and networks operate, and particularly whether they will work in support of the objectives of the less-hierarchical structure. In this respect our analysis has focused on the impact of structural changes on personal relationships and the operation of personal and company networks; and in reverse, how informal communication and networks affect the ability of new MNC structural forms to operate as designed. A number of examples have been advanced to illustrate how these informal processes can, in fact, work in perverse ways to inhibit or even negate the effective operation of new structural forms. One of the problems with much of the literature in this area would appear to be the concentration on the views of top management rather than broadening the examination to include the perspectives of middle and operating level management. Moves to delay and to decentralize decisionmaking affect middle level positions and much depends on the reaction of this group (Holbeche, 1994). The issue here has been somewhat clouded by the hype which has accompanied so-called 'empowerment' policies. Our discussion on the interface between structural changes, personal and

149 company networks, and informal communication flows has identified what could be best described as a tug-of-war between MNC management's need (sometimes compulsion) to control versus the need to create the type of environment that allows personal relationships to develop positively for company requirements. Clearly, companies are already using a variety of managerial techniques to promote informal exchanges between staff thereby facilitating horizontal communication, though these tend to be an incidental outcome of cultural control, training and development programs, and related activities. The difficult question for the MNC is how to have a positive influence (short of direction) on informal communication so that company goals are achieved. It is hardly feasible that MNC management will see informal c o m m u n i c a t i o n as beyond control and leave it at that. Even if top management accepted that there were limits on the MNC's ability to control, they would nevertheless seek to influence informal communication and networks. The more important management perceives informal communication to be, the more likely some attempt will be made to control it. In the final analysis, the MNC could be seen as facing an impossible task: controlling the uncontrollable (Macdonald, 1995, forthcoming). Acknowledgement - - The support of Professor Reijo Luostarinen, Vice-Rektor and Head of International Business Programs, is gratefully acknowledged.

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