When expanding into international markets, how much autonomy should home office leaders give local teams? Maintaining too tight control over your overseas divisions can hinder their ability to operate effectively and make decisions—but giving them too much autonomy can also be detrimental, leading to I face quality issues, inconsistencies, duplicate work, and many other challenges. .
To explore this difficult question, my colleague and I did more than that. 100 in-depth interviews With executives from multinational corporations located all over the world. We asked them how they’ve struck this balance in their organizations, and identified three questions leaders should ask to determine how best to collaborate and collaborate with their international teams.
1. How fast is your business sector?
The first important question is how fast is your business growing in this new market? Fast-paced sectors typically require rapid decision-making to respond to rapidly evolving opportunities and threats, and so teams in these sectors often benefit from greater autonomy.
For example, our interviews suggested that in the tech sector, Chinese consumers expect new rollouts, features, and updates at a much faster pace than in other global markets. Thus, to compete in this space, companies have to move fast or risk being left behind. For example, China’s leading ride-hailing app Didi Chuxing launched its core product just three months after the company was founded – much faster than the typical rollout of similar products in other markets.
To succeed in such a market, multinational companies will benefit from giving their local teams ample room to respond to changing demand and competitive landscapes. For example, when Indian mobile advertising company InMobi expanded into China, it gave its China unit far more autonomy than it had given other local teams: while all other international teams were based in India. Moqim worked with a joint product team, the China unit with its own product team. Additionally, local marketing, sales, finance, and many other business divisions reported directly to the general manager of the China team, not to headquarters. This allowed InMobi to operate with the speed and agility of a startup, eventually becoming China’s largest independent mobile ad network by partnering with more than 30,000 native apps.
Importantly, this is not just a matter of the overall momentum of an entire market. Although the Chinese market moves quickly across many industries, executives should be sure to analyze the pace of the specific industry in which their businesses operate. Sectors like chemical engineering and traditional manufacturing, for example, grow relatively slowly and experience little change (even in a typically fast-moving market like China). Companies in these sectors would do well to centralize decision-making to streamline operations and avoid the costs associated with duplicating similar functions across different teams. For example, ExxonMobil has had a relatively stable customer base in China over the years, and has experienced minimal need for rapid product development or other major changes. As such, its leadership decided to keep business operations and structures highly centralized, with most of the key decision-making power remaining at headquarters.
2. How dependent is your business on local assets?
Next, managers should consider the extent to which their business depends on local assets. Decentralization is necessary if a global company relies heavily on local capabilities such as purchasing, production, and sales. Global fast food chain Yum! Brands serves as a good example: when it launched Yum! China, it began sourcing, producing and selling more and more products in China, making the headquarters loosely operational for management. Finally, Yum! Brands even spun off its China division entirely, allowing it to operate and trade publicly as a separate company.
Conversely, for businesses that rely less on local assets, a higher degree of centralization often makes more sense. For example, we spoke to executives from several American and European luxury brands that have expanded into Middle Eastern markets to reach a substantial customer base in the region. These companies typically maintain relatively tight control over their global teams, in part because the resources needed to design and manufacture luxury products do not exist in these regions (eg, specialized facilities, expertise, etc.). Luxury brands also typically rely heavily on the parent company’s strong, central brand, and so it makes sense for these organizations to ensure that their regional teams align with their headquarters. That this key asset should not be undermined.
For example, the French luxury brand Cartier designs and manufactures its products exclusively in France and Switzerland, and so it made sense for the company to center its governance structure at its headquarters. In addition, Cartier’s key executives based in the Middle East (including its CEO and head of HR) are Cartier veterans originally from Paris, who carry the company’s values and principles even in this geographically distant subsidiary. Help ensure consistent retention.
3. How strong is your relationship with local leadership?
The final question to ask yourself is how much do you trust your local counterparts? The stronger and more trusting your relationship is, the more autonomy it will be possible to give local teams.
For example, one of the reasons Amazon India enjoys considerable autonomy is that the India team is led by Amit Agarwal—an Amazon veteran and longtime member of Jeff Bezos’ leadership circle who has a deep home office presence. There is trust. In contrast, interviews with the company’s senior leadership in 2019 suggested that HQ had less confidence in its China team, and as a result Amazon China’s autonomy was more limited, with most of its functional units divided into multiple units. Decisions had to be approved by headquarters (Amazon has since closed its domestic business in China). Similarly, when InMobi hired a new, inexperienced China manager, the company decided that only the local sales team would report to him, with all other China teams reporting to headquarters. But over time, as she built a track record of growth and won the trust of her bosses in India, she was able to gain more autonomy for her team.
It’s also helpful to note that there are different ways to develop trust. In some cases, it may just take time to develop naturally, while in other cases, organizations can build trust in their cultures through concerted, deliberate efforts. Netflix offers a particular example of the latter: its culture Radical transparency and trust Encourages managers to hire only those they feel they can truly trust, and to whom they feel comfortable giving considerable autonomy. This is evident in its global teams – for example, its business development director in Brazil was empowered to sign contracts and agreements on behalf of Netflix without anyone’s approval. Likewise, his director of marketing in Italy was tasked with using the entire marketing budget for Italy as he wished, with no oversight from his American boss.
Effective implementation takes planning and communication.
These three questions can help you determine how much autonomy to give your international teams—but, of course, figuring it out is just the first step. The next step is to develop a plan to actually implement these different levels and types of autonomy around the world. This means working with different departments to define where and how autonomy should be granted, and then ensuring that information is clearly documented and communicated throughout the organization. go
To begin, managers must clearly define the categories of decisions they will face (with specific examples of each), and determine who will be responsible for making them. Once they develop this plan, home office managers can work with their counterparts on the ground to ensure implementation. For example, in answering the questions above, an executive at a US-based Internet company determined that he should give his China team more autonomy—he just wasn’t sure that Where and how? As such, they began holding detailed planning sessions with representatives from each major department to identify areas where increasing the autonomy of the China team would make the most sense. This led to concrete agreements with several departments:
On the sales team, managers from both headquarters and local offices agreed that if a customer in the Chinese market was a global customer, the home office would lead and the local team would provide support. But if a customer was local, the China team would handle it themselves, and would have the power to decide prices, organize events, etc.
Marketing took a slightly different approach: leadership decided that the local team should develop its own marketing strategy entirely, since effective customer acquisition strategies were very different in the US and Chinese markets. They decided that to ensure speed and agility, the local team should not consult the home office before making marketing decisions, as long as they stayed within the approved budget and reported a return on those investments. .
In contrast, on the product front, the company determined that less autonomy was needed. Because the China market used the same product as other markets, the product team was centralized in the home office. However, a few engineers were assigned to focus on Chinese market requests for new features or product modifications to meet location-specific requirements.
Of course, this is just one company’s point of view. The specifics will vary widely based on the specific industry and market you’re hoping to enter. Depending on the speed of the sector, your reliance on local assets, and your level of trust in local leaders, you will need to determine which overseas divisions would benefit from a more centralized structure, and which would not. It would be better to make decisions independently. – and then develop a detailed, well-communicated plan to turn those ideas into action.