In a bid to achieve improved economies of scale and global synergy, more and more companies are taking back control from local centres and centralising various functions. Does this tension between global and local control spell the end for the country General Manager? ask Mark Goodridge and Gary Ashton 

The traditional role of country General Managers (GM) of international businesses was to ensure that the company adapted successfully to local conditions. Their role can be compared to Darwin’s finches inhabiting the various islands of the Galapagos, where all 13 species have developed a different beak sizes and shapes, which has allowed them to exploit local food sources and thrive locally. 

However, having worked with many global firms across all sectors and functions, to help them build efficient global capability, ER Consultants has observed that the role of the country GM is being hollowed out. In other words, their role is being weakened with them having authority over fewer and fewer business levers. We see many battles raging between the global centre, regional centres and local companies as each try and dominate the other to meet their performance targets. This was the case for a telecoms firm that we recently worked with, which had grown through a series of acquisitions across the globe. At the point of acquisition each company was a stand-alone entity with the supply chain within its direct control. Country GMs continued to be fully accountable for business performance reporting to Regional CEOs, through to the Group CEO. The business model was simple, but it struggled to generate the efficiencies, cost-savings and assumed benefits expected at acquisition. 

Like this firm, it’s common for large companies to collect wide ranges of assets across the globe either through organic growth or acquisitions, but then fail to address the issue of how to organise and manage them. The problem? Too often targets, organisations and accountabilities are not aligned. The challenge is getting the balance between local autonomy and global scale right. The issues usually revolve around structure and people. How do we make this structure work? How do we get the right people for the increasingly complex role of the country GM? 

It took the telecoms firm in the above scenario approximately four years to get these two issues right and finally benefit from global synergies achieved through centralising various functions. We helped them achieve this through three phases: 

Phase one – Collaboration
What we sometimes refer to as “consenting adults” is the idea that synergy capture will be achieved by encouraging the key players (mainly country GMs) to co-operate within the formal central/global organisational boundaries. By creating a series of cross business committees, all country leaders together explored areas where there was synergy potential. Much talking was done, ideas were formed, but little action followed. It was hard for local country GMs to introduce recommendations, which not only did they feel diluted their control, but weakened their influence on a business for which they ultimately carried the can for.  

Phase two – Integration and hard-wiring
In this phase the synergy committees gave way to hard-wired structures where different aspects of the value chain were increasingly controlled by global functions. The first point of global integration was the brand. Each company was required to share a common name, logo, design and brand values. This had the effect of removing one of the elements from the country GM’s portfolio. This was the start of the global matrix, with Global (centralised) defining the brand, and local companies executing the brand. The next step was products and services. These also became defined globally as costs were too high for each country to develop their own, and even if they did, this would only serve to dilute the brand. Suppliers of elements of those products and services were also contracted globally, which meant another pillar of the local company was removed. This obviously created tension, with the trade-off between losing speed and adaptation to local markets versus the benefit of “develop only once”. 

Phase three – Striking the global versus local balance
As time has gone on function after function has become increasingly influenced by global executives working on behalf of the world rather than a local market. Over time, the role of the Country GM has been hollowed out, leaving either a country sales/marketing manager or in extremis, a figurehead and facilities manager where all the key business decisions have been made.  

Of course, as with this firm, country GMs can and do rebel against some of the more extreme globalisation of the organisation where vanilla (one size fits all) solutions make little sense in some locations. But having gone through the three phases, there is now a much healthier dynamic between global, regions and country businesses as they develop a stronger mutual understanding, and a better set of relationships on which to broker the shifting sands of globalisation. 

ER Consultants Approach
The question for many international companies is to what extent do they centralise? That depends on a number of factors and where you are on the spectrum in the chart above. The more to the left you are (closer to option 1), the more your functions are centralised. And this depends on a series of assumptions: 

• There is a global demand for the group of products or services and its nature is similar;
• There is little overlap and duplication of those products and services when there is more than one business stream;
• The routes to market for different product streams are distinct and can support separate sales channels;
• There are few local modifications/applications/customisation required;
• That there are supply chain efficiencies in supplying products and services in an integrated and common manner. 

Of course, not all global companies fulfil all these conditions which is why we see a spectrum of global business models where different parts of the business’ value chain may be global and others quite local. It is the balance of these that determine the option you go for. As the chart below illustrates Option 1 is the truly global business that fulfils all the conditions set out above. Option 5 is the collection of separate independent companies reporting into a corporate centre that is largely operating a holding company. It is the options in between that preoccupy most companies, and usually the point at which they seek external help. 

Common success factors
What is common across all these options are a number of critical success factors:

• Accurately locating accountability;
• Accurately locating the best place for decisions to be made and how;
• Detailed consideration of the linkages and trade-offs;
• Clarity of role understanding – especially in understanding the linkages and interdependencies and hence how trade-off decisions are going to be made.

It is through focusing on meeting these criteria that ER Consultants can help to speed up your integration process and minimise the turf wars that are so evident in global companies between functions, geographies and business units. 

The results
The resulting role of the country GM will vary considerably depending on the option you go for. Local business activities may be managed from global, regional or country levels, and the country GM has to balance these different spheres of influence and somehow weld it all into a coherent set of country based activities to meet local demands and local business conditions.   The success of the new global business model, however, will be determined by two key questions:

1. Which activities will continue to exist within the geographical entities?
2. What about the interdependence of these elements and the extent to which they are subject to local trade-off decisions?

  Of course, there are no easy answers, but from our experience of working with many global companies there is a solution out there for every company. Ideally, cost savings and economies of scale will be achieved by centralising the right functions for your business. And there is a risk of potentially losing some adaptability to the local market. Ultimately, it’s about getting that trade-off and balance right, and finding the most appropriate solution for your organisation. Does it hollow out the role of the country GM? Inevitable their role does change, and the extent of that change will depend on the global business model you go for. 

For more information, contact: Gary.Ashton@erconsultants.co.uk  

How ER Consultants Can Help Speed Up Global Integration
 Working at the interface between corporate head quarters and country CEO, ER Consultants can help ensure the effective delivery of synergies whilst maintaining local adaptability where it adds value. We do this by working with you to:

• Assess and recommend the most effective organisational model;
• Operate as the independent advisor between the corporate head quarters and country business leaders;
• Provide a route map to deliver step by step change, that delivers value as the global organisation evolves;
• Build the new capabilities required at the global, regional and local centres to operate the new organisational model.