Headquarters Versus Local Overseas Offices - Worlds Apart?

Here are some comments I have heard over the years from executives sitting in regional or headquarters locations about local managers in their subsidiaries:

·       They don’t seem to want anything to do with Corporate.

·       Why can’t they trust us?

·       Don’t they see that they have to follow corporate rules and that they are part of a bigger company?

·       Why do they think their problems are so unique?

At the same time, here are some comments I have heard from these local managers:

·       Doesn’t Corporate understand that you just can’t have a cookie-cutter, one-size-fits-all approach?

·       We understand the local markets much better than they do!

·       These corporate initiatives will not always work in every market.

·       Corporate always wants to have control; they don’t want us to be independent and think for ourselves.

And then there is that recent study of over 1000 Asia-based executives in various industries, organizations, and functions by the Corporate Executive Board and Russell Reynolds (as reported in the April 2015 issue of Harvard Business Review). The following are three of several statements with which these executives were asked to agree or disagree:

·       Headquarters understands the realities of doing business in Asia.

·       Headquarters makes decisions aligned with the regional context.

·       Headquarters consults local leaders before setting regional strategy.

In all three statements, the percentages of executives agreeing to this statement were in the low teens to twenties, regardless of whether these Asia-based leaders were in the local organization or whether they were in headquarters. The specific percentages were 12, 14, and 14 respectively for the local Asia-based leaders and 20, 21, and 28 for the Asia-based leaders in headquarters.

These different points of view between HQs and local executives suggest not only some gaps in understanding each other, but potential missed opportunities. For example, subsidiaries might not be taking advantage of resources and expertise from HQs or from other markets that might help them improve their subsidiary performance as well as fight competition in their markets. HQs might be missing opportunities to learn about local practices that might be fruitful to implement in other markets.

In my experience, the tension between headquarters and local offices seems to be getting bigger, especially as global companies continue to “globalize” some of their functions, such as Supply Chain, Finance, Marketing and HR. Furthermore, when subsidiaries do take initiative, as Birkinshaw et al. (1998) point out: “… initiative is often seen by parent managers as subversive, that is, evidence of subsidiary managers acting in their own or their country’s interests rather than in the interests of the MNC as a whole.” (p. 235)

I was recently in Singapore to teach a class, and my students (most of whom were executives of large global companies heading their subsidiary or region) echoed most of what I heav been hearing over the years about the perceived lack of understanding or flexibility from Headquarters.

We all know that it is in the nature of organizations to create divisions of labor and specialization for the purpose of clarifying roles and responsibilities and improving efficiencies. These days, organizations require functional experts and sophisticated organizational designs to adapt to complexities in the business environment. The unintended consequence of such differentiation, however, is the creation of separate identities and us-versus-them mindsets across the organization. We see Marketing and Sales at loggerheads at times, or Finance and HR, or R&D and Supply Chain. Some corporations have had pendulum swings from centralization to decentralization and vice versa. In one corporation that had traditionally allowed full autonomy in its subsidiaries as long as they delivered the results, the CEO was surprised to learn that country general managers had even gone so far as to change the look and feel of the company logo. This might have been a trivial matter for some, but the corporation was trying to establish a global brand image, and the inconsistency with which its brand name was being positioned in different countries did not help.

In his book about his transformation of IBM and its survival (Gerstner, 2002), former IBM CEO Lou Gerstner writes:

“One of the most surprising (and depressing) things I have learned about large organizations is the extent to which individual parts of an enterprise behave in an unsupportive and competitive way toward other parts of the organization. It is not isolated or aberrant behavior. It exists everywhere – in companies, universities, and certainly in governments. Individuals and departments (agencies, faculties, whatever they are called) jealously protect their prerogatives, their autonomy, and their turf.” (p. 249)

These structures and processes represent one set of factors that influences the nature of the relationship between headquarters and their subsidiaries and may account for the lack of mutual understanding of local and of corporate needs respectively. Geographical as well as cultural distance only exacerbates this. As functions have become globalized, defining what can be decided globally versus locally needs to be debated and clarified. For example, some years ago, one corporation decided to implement its business-casual dress policy worldwide. In its Tokyo headquarters, managers there simply ignored the corporate edict; in Tokyo’s business environment at that time, men and women tended to dress more formally and local managers considered it unthinkable to “dress down.”

More recently, rather than considering whether to “globalize” or not in general, many firms are making these determinations both as a whole (e.g., creating a global brand, establishing a global culture) as well as with specific value chain activities (e.g., establishing global relationships with a few advertising agencies, rather than having each subsidiary decide which advertising agency it wants to use). Rugman et al. (2011) have defined four such distinct value chain activity sets: innovation, production, sales and administrative.

Another set of factors has to do with the nature of the local environment as well as the nature of industry forces (Enright and Subramanian, 2007). This will influence whether the company adopts a one-size-fits-all approach or customized solutions by the local subsidiary. Companies in certain industries like technology (e.g., Microsoft) tend to define the corporate-subsidiary relationships differently than companies in other industries. A third set of factors lies with organizational capabilities in two specific competencies: global mindset, and skills in influencing without authority to produce win-win solutions.  In my experience, few organizations have made a determined effort to build these capabilities in their managerial work force, or to hire and promote individuals who demonstrate these skill sets. Furthermore, organizations, when assigning managers to global roles, don’t always consider these capabilities as selection criteria.     

Some organizations have created mechanisms and built bridges to narrow this differentiation and encourage integration. For example, many large corporations have modified their reward systems to reinforce collaboration and cooperation across divisions; others have focused on developing a corporate culture which helps employees to identify with the firm (e.g., “I’m an IBMer”; “I’m a Merckie”). However, it can seem like an uphill battle at times.

In fact, many organizations, especially those that have a presence in many countries, are constantly looking to create the “glue” that will bind employees’ hearts and minds together and will transcend country or national culture differences. Establishing such a global corporate culture can be difficult especially for relatively young corporations (those so-called born-global companies such as Uber) or for corporations expanding its overseas presence (such as Hyundai and Haier). Those that have been successful have established strong cultures that transcend boundaries; talk to managers in some of these multinational companies, and you will hear them refer to the Ford Way, or the Unilever Way, or the Toyota Way.

While there has been much written about the role of headquarters in reaching out to the subsidiaries, there has not been as much advice to subsidiaries, and what local managers can do. Birkinshaw et al.’s article (2007) is one of the few that have examined what subsidiaries could do to get headquarters to pay more attention to them. They make the argument that “A subsidiary’s degree of decision-making autonomy has no meaningful effect on the level of executive attention it receives.” In their research, they asked subsidiaries how they were getting HQs to pay more attention to them. For example, they asked, “How does a subsidiary which lacks weight attract the attention of management?” They concluded that subsidiaries can make two kinds of efforts: initiative taking (e.g., developing new products, penetrating new markets) and profile building (e.g., supporting corporate objectives, creating a center of expertise. Unfortunately, subsidiaries that are not considered strategically important may not get the level of attention, and therefore the resources, they need. The lost opportunities that might result include competition taking market share away from the subsidiary, business ventures that if nurtured might grow the subsidiary significantly, or attracting local talent to help build the human capital in the subsidiary.

Here are five recommendations for those of you in subsidiaries who may be somewhat frustrated with the lack of understanding that your regional or headquarters bosses have. First, understand where your bosses are coming from, their pressure points, and what’s driving them. As Marshall Goldsmith has often reiterated when explaining upward influence, consider your boss as a customer. Second, share information willingly and proactively, not just with your bosses but also with your peers in other countries. In one corporation, a country manager from a South American subsidiary suggested a business solution he had found useful to his colleague from the corporation’s African subsidiary. A year later, the African subsidiary had successfully implemented this solution and the South American manager got recognition for his contributions by being promoted to a regional role.

Third, find common ground on issues. Rather than repeating the refrain that your country is unique and that corporate practices will not work in your country, find those corporate practices that will work and highlight those. Find local actions you can take that build on the subsidiary’s capabilities and that can be applied in other markets.  Fourth, remind yourself that you are a corporate citizen, a member of your global company, and not just an employee at a subsidiary. Remember that in your country, many see you as the representative of your global company. Make an effort to understand the strategic objectives of the company, and make sure you demonstrate that what you are doing aligns with these objectives. As Birkinshaw et al. (1998) point out, “For initiatives to be accepted by the corporate headquarters, they must be aligned with the MNC’s existing strategic priorities, otherwise they are likely to be viewed as self-interested behavior.” (p. 236)

And fifth, proactively initiate actions to get headquarters to understand the country perspective. Here are some examples: provide information to regional or corporate management on local consumer or competitive information; invite corporate executives to visit your subsidiary; send some local talent to headquarters to learn, network and to do some indirect PR about your subsidiary; offer to host a regional meeting in your subsidiary.

Birkinshaw, J. et al. (1998). Building Firm-Specific Advantages in Multinational Corporations: The Role of Subsidiary Initiative. Strategic Management Journal, 19, 221-241.

Birkinshaw, J. et al. (2007). Managing Executive Attention in the Global Company. MIT Sloan Management Review, 48 (4), pp. 39-45.

CEB and Russell Reynolds Associates (2015). Hello? Anyone in HQ Listening? Harvard Business Review, April.

Enright, M. and Subramanian, V. (2007). An Organizing Framework for MNC Subsidiary Typologies. Management International Review, 47 (6), pp. 895-924.

Gerstner, L. (2002). Who Says Elephants Can’t Dance? New York: HarperBusiness.

Rugman, A. et al. (2011). Re-conceptualizing Bartlett and Ghoshal’s Classification of National Subsidiary Roles in the Multinational Enterprise. Journal of Management Studies, 48 (2), pp. 253-277.

Building Cultural Self-Awareness

In a recent coaching session I had with an executive I will call Henry, we reviewed the results of 360-degree feedback interviews I had conducted with over 12 of his stakeholders (e.g., his boss, direct reports, internal and external customers) as well as the results of an anonymous survey. Like many very successful managers, Henry believed he was pretty self-aware, yet was surprised at some of the feedback he heard, especially from his direct reports in several Asian countries. While Henry saw himself as a “straight shooter” and open about his opinions, his Asian direct reports had a different impression. They described him as intimidating and as someone who argues too much without listening.

We know that self-awareness is an important component of emotional intelligence and for becoming an effective leader. For global managers, I would add that cultural self-awareness is also an important key to their success interacting with and getting results through others from various cultures. In psychological counseling over the past twenty years or so, there has been a strong emphasis in making sure that therapists are aware of their own assumptions, biases and values. Various assessments and training have been introduced to enhance therapists’ competence and their effectiveness (Roysircar, 2004). As Royscircar notes:

“Therapists must put their assumptions, values, and biases to scrutiny because they will resort to these anyway. They need to ask themselves how U.S. sociopolitical issues, such as prejudice against minority groups, communism, Islamic fundamentalism, immigration to the U/S., bilingualism, or those with visible physical differences and disabilities have affected their social views of people and whether these social views may be related to their theoretical orientation in professional practice.” (p. 660)

Similarly, global managers (especially those from the Western world) must also put their assumptions, values and biases to self-scrutiny since otherwise, they will resort to these unthinkingly. Their unconscious biases when dealing with others who don’t speak English very well, whose attire might not fit with what might be considered appropriate in a corporate setting, or whose physical mannerisms might be inappropriate in a Western setting will certainly affect their interactions with and judgments about these individuals.

 

According to Eurich (2017), there are two main categories of self-awareness: internal (understanding yourself) and external (understanding how other people see you). Her distinction is actually based on self-concept theory; psychologists in this field use the term objective self-awareness and subjective self-awareness respectively. Eurich argues that the two are not necessarily correlated but there is some evidence that these might be influenced by culture.

Cultural self-awareness is first of all about understanding your own culture, and acknowledging that part of your behavior (as some anthropologists claim, as much as 25 percent) may be due to cultural influences. This may difficult to achieve, especially for those who have never traveled, or who have not been exposed to cultural diversity. Hall (1973) and Adler (2008) have used the analogy of a fish that cannot imagine what it is like outside the water because it has been swimming in that environment all its life. 

The second aspect of cultural self-awareness is recognizing the differences between your culture and other cultures, especially when it comes to behavior in the work place. Gina, a manager for a global financial services company whose parents were Puerto Rican, recalled the excitement she felt when her company asked her to move to London for two years: “In my mind, London was just like New York. I had travelled internationally before and of course spoke English; I was set. I came to New York as a young child and growing up, thought it was the center of the world. I really subscribed to the cliché that if you can make it here, you can make it anywhere. I expected the world to conform to my beliefs.”

She remembered some of her initial impressions of her British colleagues at the F/X desk where she worked. Most of them spoke more than three languages, and she met one colleague who spoke seven languages. When she mentioned to him that she wanted to learn another language, he commented, “You do not speak English, you speak American. We speak English.” Rather than taking this remark as an insult, Gina reflected on her lack of cultural self-awareness, and her arrogance in thinking that coming to London would be easy because she already knew the language. Adler (2008) makes this insightful comment: “Although we may think that the biggest obstacle to conducting business around the world is understanding foreigners, the greater difficulty actually involves becoming aware of our own cultural conditioning.” (p. 81)

A third aspect of cultural self-awareness includes understanding of different gestures and other non-verbals, which are important in building our intercultural competence. This ability to understand cultural rules and codes has been shown to be a predictor of positive interpersonal outcomes. In an interesting series of studies, Molinsky and his colleagues (Molinsky et al, 2005) developed a measure which they called the Gesture Recognition Task (GRT). This was made up of a series of 15 real (e.g., a shoulder shrug) and 13 fake non-verbal gestures (e.g., twirling the right finger in front of the body from chest level to above the head). Several hundred U.S.-born and non-native-born students participated in the study. In their first study, they also developed a measure of intercultural competence, and they found a positive relationship between performance on the GRT with self-ratings of intercultural competence. In a second study, performance on the GRT was also positively associated with ratings of observers who rated the students on their intercultural competence, reinforcing the importance of the ability to “read” cultural non-verbal behaviors.

Even e-mail communication can be influenced by cultural differences. Holtbrugge and his colleagues (2013) did an interesting study of a sample of professionals in the IT and services industry of large multinationals. The sample, which was obtained from professional social networking sites such as LinkedIn, consisted of 235 participants from 28 different nationalities, including India, Finland, Germany, USA, and China. According to the authors, 75-80 percent of virtual team communication is done by e-mail. They constructed a 23-item questionnaire measuring such dimensions as directness, promptness, preciseness and task-relatedness. The researchers found significant differences between respondents coming from high-context (e.g., Argentina, Brazil, China, Italy, Pakistan, and Uruguay) and low-context (Austria, Denmark, Germany, Sweden and the U.S.A.) cultures in their e-mail communication styles, with high-context, polychronic cultures preferring more formal but more fluid e-mail communication, and low-context, monochronic cultures preferring more precise and prompt e-mail communication.

The following are several strategies to enhance your cultural self-awareness. One, find out what managers’ impressions are about your own culture. Of course, some of their impressions may be based on simplistic and even outdated stereotypes.  However, they can provide some insights into the cultural influences that impact workplace behavior in your culture. Some might not be willing to express their opinions directly for fear of being “politically incorrect” (although in my experience Europeans seem to be more candid than Americans about expressing their impressions of different nationalities). In conversations, therefore, you might have to probe and ask different questions. For example, you might ask them to compare and contrast two managers they know who are of the same nationality.

Two, learn about the successes and failures of managers from your country who have worked in other cultures. For example, Brad, a British manager of a multinational identified several British colleagues who had been sent overseas on expatriate assignments. Through his contacts, he found a few who were successful and others who were less successful in their assignments, and reached out to them. Learning about the experiences of individuals in both groups gave him valuable insights on his own cultural self-awareness and important lessons to apply.

Three, look for opportunities where you can immerse yourself in a different culture. You might ask, how can I do this unless I actually travel to that country? Nieto (2006) has described a practice called a cultural plunge that professors in San Diego State University have been using over many years. A cultural plunge “…is individual exposure to persons or groups markedly different in culture (ethnicity, language, socioeconomic status, sexual orientation, and/or physical exceptionality) from that of the ‘plunger’.” Examples he gives are attending services or religious ceremonies of a group with a different ethnicity (e.g., African-American) or language (e.g., Vietnamese), or interacting with homeless people or people with disabilities. The plunges don’t have to be that long; to help with cultural self-awareness, however, it is important to reflect on the experience in a structured or organized way. Adapting Nieto’s suggestions, I would suggest that after whatever “plunge” you undertake, make sure that you jot down or type the following right after your plunge: what you experienced, your emotional response, whether the plunge reinforced or challenged your stereotypes, lessons learned and implications for your role as a global manager or leader.

Adler, Nancy J. 2008. International Dimensions of Organizational Behavior, Fifth Edition. Mason, OH: South-Western Publishing.

Eurich, T. (2017). Insight. New York: Crown Business.

Hall, E. (1973). The Silent Language. New York: Anchor Books.

Heine, S. Positive Self-Views: Understanding Universals and Variability Across Cultures. Journal of Cultural and Evolutionary Psychology, 2: 109-122.

Molinsky, Andrew. 2007. Cross-Cultural Code-Switching: The Psychological Challenges of Adapting Behavior in Foreign Cultural Interactions. Academy of Management Review 32(2): 622–640.

Nieto, J. (2006). The Cultural Plunge: Cultural Immersion as a Means of Promoting Self-Awareness and Cultural Sensitivity Among Student Teachers. Teacher Education Quarterly, Winter: 75-84.

Roysircar, G. (2004). Cultural Self-Awareness Assessment: Practice Examples from Psychology Training. Professional Psychology: Research and Practice, 35 (6): 658-666.