The Challenge of Operating Globally

What is a global organisation?

Many organisations now claim to be 'global'. There is an important difference between having global presence, and thinking and acting globally. In reality, most still have a dominant national origin and style which colours their relationships with employees of other nationalities.

Evolution of global organisations

There are four principal models of cross-border companies. These are listed in the sequence in which they emerged as types during the 20th century.

• International: adding an international division to strong domestic operations, which is subsidiary in control, culture and processes - usually a means for exporting products or knowledge from the originating country.
• Multinational: a multi-local model with subsidiaries having considerable autonomy for products and services related to local needs - some expatriate working, but more for co-ordination and knowledge transfer than control from the centre.
• Global: strong operational presence in many countries but controlled firmly by HQ, with common processes and centralised management dominated by the originating country.
• Transnational: the 'networked' organisation, balancing global and local focus through a more flexible and matrixed approach - tends to value diverse ideas and talent, develop shared good practice, and manage through relationships not just control.

In large multi-faceted groups, divisions may work in different ways - more than one of these models may be evident in the same company.

A global culture

While the global model may impose a single culture, a truly global mindset is only possible within the transnational concept. To avoid resentment and encourage talent to emerge in an egalitarian fashion, globalising companies should

• Understand and respect the cultures they acquire - the companies they buy and the national contexts within which they operate
• Develop a shared culture - not imposed from one national standpoint - that draws the best from diverse traditions and means of achieving goals.

A strong and attractive corporate culture trumps other cultures, thus inducing congruence. Choosing a common language is sensible at a managerial level, but sensitivity to different languages sends an important message supporting equal opportunity.

Positioning as a global company

To be successful, global organisations need to compete at both local and global levels. Being seen just as a global company or associated with one particular nation diminishes local appeal - as a business and as an employer. Geo-political issues are now impacting on how companies are viewed, which can affect both business and employee security.

Global leadership

Few companies claiming to be global yet have leadership teams or boards that reflect their supposed diversity. Nonetheless, the onus is on leaders to role-model the global mindset, while developing their successors. They should

• Communicate and travel intensively
• Bind and motivate their organisations towards shared objectives
• Build trust and steer behaviour.

Devolved leadership must be flexible enough to adapt to local cultures - yet purposeful and skilled enough to shape a shared culture. Global leadership teams need to demonstrate visibly that they genuinely are teams.

Global managers

Managers with the right attitude and experience to manage the complexities of global organisations are in short supply. The ability to work with individuals, groups and systems new to them is critical, along with the influencing skills to encourage a common purpose. Hence the importance of both development and selection for different roles and paths. For example

• 'High potentials' who are the general managers of the future, and 'high professionals' with valuable specialist talents
• Country/regional managers, functional heads, business line heads and corporate managers – some transition through the first three helps develop the fourth

Talent management

What is meant by talent and talent management - and their implications - should be clearly articulated. This includes specifying distributed responsibilities for developing talent. Managers in different cultures must understand the differences between current performance and future potential, and why it is in their interests to develop talent.

The new emphasis on experiential learning underlines the necessity of managers being open to peer and subordinate coaching.

Assessment

Assessment for selection and development is known for 'products' of doubtful rigour, while norms and standards vary across the world. Given executives' expectations of consistent and fair treatment, global organisations need to ensure they are rigorous in devising and communicating their assessment practices.

International mobility

Global organisations are shifting from deploying originating country managers and technical experts towards more open sourcing of talent, as other countries' standards rise and as they invest in skills in their operations worldwide. International moves to build global leadership at general and specialist levels is needed, along with a rethinking of career management.

Global resourcing

Flexibility in siting operations in developing economies is a main advantage of being 'global'. The availability of talent - not just low cost manufacturing labour - is increasingly driving location strategies. The rapid rise in wages and costs in India, China, Mexico, etc, demonstrates that purely cost-driven location has limits in the long-term - workforce quality and developing the local market is ultimately more important.

Management of reputation is assuming greater importance among customers as well as workforces - about relocation and, in general, being more socially responsible.

Managing performance

Understanding 'performance' varies between cultures and requires global organisations to create shared practices and standards if the advantages of scale and international reach are to overcome the challenges of complexity. Above all, building a performance culture provides a shared language, plus the motivation:

• To sharpen objective-setting
• Achieve higher standards of appraisal
• Focus on capability to sustain future performance.

Common measurement systems help to articulate shared aims although, in a global organisation competing locally, this must not be taken to extremes, nor should goals and KPIs be over-elaborate.

Capability development

Development programmes weld together a global organisation culturally - as well as spreading knowledge, shaping global management capability,` and fostering management networks and corporate learning centres. However, providing learning on a devolved basis or in different locations sends a signal that not all is HQ-focused.

It is part of a global company's attraction that it should:

• Provide a breadth of opportunities
• Invest in career and development planning
• Build its ownership among both managers and managed.

While cross-company learning among senior and high potential managers will be seen as a priority, valuable business advantages can also be obtained through peer learning at more junior levels.

Rewards

These are important reward issues for a global organisation.

• Communicating a distinct reward philosophy across its operations for everyone to be clear about what is expected of them and what they can expect – the less clear this is, the more tensions will occur.
• Policies should allow for differences between cultures in motivation, understanding performance standards, reasons for promotion, and recognition of team as well as individual performance - particularly when implementing variable pay and incentive schemes.
• Clarity about behavioural expectations as well as results should, in a multi-cultural context, be carefully considered and communicated.
• Achieving consistency and a sense of fairness across countries with many different pay and benefits systems is critical. It makes sense to implement flexible benefits locally as well as internationally.
• Investment in job evaluation and pay data is important, but communication is what  really matters.

This report provides an overview of practices in expatriate reward, share schemes and recognition.

Communication management

The rigour with which an international organisation organises its communication processes will reflect how global its mindset is. While a well-integrated corporate communication function can provide invaluable help, the most critical factor is the communication capability of the extended leadership team. It is their words and actions that will be assessed most closely by external and internal audiences. Clarity and coordination will, therefore, be priorities. 

Global intranets, management conferences and video-streaming are important, but how they are used is more so.

Teamwork

In literal terms, without global teamwork there is no global organisation. Teamwork is a behavioural trait, a set of processes and support mechanisms - and examples set at the top will critically influence what happens at other levels. Country and global management should be seen to be united. This will overcome any tensions arising between the centre and the parts - and between countries if there is competition for resources and jobs.

Team leaders for cross-border projects should be chosen for their leadership abilities before their technical knowledge. Virtual teamwork also requires particular aptitudes and methods with a strong emphasis on building trusting relationships. Advances in video-streaming may make distant working a little easier.

Knowledge-sharing and innovation

The advantages of global companies depend considerably on their ability to rapidly learn and transfer knowledge between markets and exploit ideas faster than rivals. Blockages, such as the silos and inertia in large, complex structures - and between national rivalries - should be avoided. The key is to focus on building innovation into a performance culture, which should incorporate

• The motivation to share knowledge
• Trusting internal relationships
• Good data and communication systems
• Creating an environment where experimentation is 'safe', with a clear distinction between negligence and 'honest' mistakes that are valuable learning opportunities.

Learning strategies should aim to disarm cultural barriers, provide inspiration for ideas, and have the discipline to turn these into results for the pride and benefit of all.

Engagement

Clear policies for, and measurement of, employee engagement are keys to both organisational performance and cohesion - starting with an attractive employee value proposition across global operations. Engagement is a critical success measure for both the business model and corporate culture.

Challenges and opportunities for HR

HR's role shifts according to the needs of the different business models we have highlighted. A challenge is to develop advanced expertise and knowledge in organisational evolution to become an expert guide and facilitator of change, rather than reacting to management decisions. This means acquiring a deep understanding of global and local market forces, building this into organisation design - and shaping culture, leadership and people management. There are four main priorities. 

• HR philosophies and standards vary across the world - a global company must forge a shared way of managing people that enhances the employer brand, develops capability and drives better competitive performance.
• HR needs to develop its own functional expertise with the same dedication it shows in building talent and leadership succession, to ensure it adds value.
• Acquiring a mastery of evaluation and measurement that guides strategic decision-making about people, while ensuring that short-term tactics do not undermine the building of long-term value.
• HR should provide a lead in demonstrating how to maximise diverse strengths.

To find out how to obtain a copy of the full report, visit the CRF website.