Tuesday, December 17, 2013

Global, Local or Glocal

As we all know, corporations are not immune to occasional accounts of hype and exaggeration.  You are no doubt familiar with the inflated claims that some firms make about their products and services.  The FDA and other government agencies sometimes have to step in and dismiss firms’ claims about the supposed efficacy of their products.  Just recently, for example, the FDA has warned a genetic testing company, 23andMe (co-founded by the spouse of Google’s Sergey Brin), to stop sales of its genetic tests because the tests have not been clinically or analytically validated.

I have noticed that corporations in general make two additional questionable and sometimes exaggerated claims about their firms.  The first is that people are their most important assets, and the second is that they always operate ethically.  My point is not that these claims are always false, but that we should not be naive enough to accept these statements at face value.  What we have to do is look for the evidence, to ask ourselves what proof corporations have for making these statements.  At times, the rhetoric fails to catch up with reality.  Johnson & Johnson, as one example, is a firm that takes pride in its credo, a series of statements about its values.  I know many students and business colleagues who work for J&J, and who take these values very seriously.  Yet recently, J&J has been involved in a series of scandals that makes one question the extent to which these values are truly institutionalized. Professor Jeffrey Pfeffer raises similar concerns in his book “Hard Facts, Hard Truths and Total Nonsense:  Profiting from Evidence-Based Management.” 

The latest exaggerated claim that I have observed is with companies that say they are truly global.  After all, it is somewhat “in” to claim that you are a global company.  If in fact more than 50% of your sales are coming from outside of your home market, or if your strategy entails your opening up businesses in different markets around the world, it might make sense for companies to brand themselves as global.  Occasionally, these companies say that they “think global but act local.” 

Several years ago, Professors Bartlett and Ghoshal coined the term “transnational” to refer to a type of management strategy that tries to resolve and integrate the tensions that arise in global companies between responding to local pressures to customize (“localization”) and global pressures to standardize (“integration”). This is otherwise referred to as a “glocalization” strategy.

Let’s spell out a little more clearly what this means.  To be global, or transnational, is not just about having products and services sold outside of your home country.  Companies that simply export their products are not truly global.  Companies that have subsidiaries overseas in several countries, or where their overseas sales are approaching close to half their revenues, are not necessarily global companies. 

In my experience and observations of these companies, I propose a set of questions whose answers would indicate whether or not a company is truly global or transnational. 
1.     How culturally diverse are the executives in the C-suite?  Do they only come from the company’s home country, or are other countries represented?
2.     Do subsidiaries in the most important overseas markets have direct reporting relationships to the CEO or COO or do they tend to be buried in layers of reporting structures?
3.     Do executives in key subsidiaries have meaningful global roles (e.g., chairing a global task force) or is their role restricted to delivering profits for their country of responsibility?
4.     How frequently do headquarters executives meet with their subsidiary executives as a team?  Do they fly out to the regions for meetings or do they expect their subsidiary heads to come to home office all the time?
5.     How involved are subsidiary executives with key corporate initiatives?  Do they sit on important corporate councils?  And do headquarters executives seek their input on corporate initiatives before they are rolled out to their regions?
6.     Does the company have a global talent strategy which includes, among other things, the identification of high potentials globally and targeted development plans for these high potentials, no matter what their nationality or country of origin is?  Does its talent strategy also include rotation of individuals from country to country, and not just from headquarters to subsidiaries?
7.     When cross-functional teams are formed to tackle specific initiatives, to what extent are various subsidiaries represented?
8.     Does the company have global leadership programs that are offered worldwide, and to what extent does the curriculum include content on globalization, cross-cultural sensitivity and related subjects?
9.     Are there mechanisms and processes for sharing information and leveraging expertise across borders?  For example, if the company has centers of excellence, does it make sure that these centers have worldwide responsibility for sharing information?
10.  Is global mindset a competency that the company is actively developing, both for its employees and for the firm as a whole?

If a company can respond affirmatively to at least a majority of these questions, then it is well on its way to becoming a truly global or transnational company.  A company that can only answer three or fewer has a long way to go.

Bartlett, C. and Ghoshal, S. (1988).  Organizing for Global Effectiveness:  The Transnational Solution.  California Management Review.