Companies that rapidly expand their international operations often try and replicate their culture and systems around the world, but can thwart the creativity of local management by being too prescriptive.
Naturally global companies want to replicate their culture, core processes and systems around the world. It is their primary means of achieving operational consistency. But many mistakenly see this as a means to create global control over disparate businesses which although part of a group, may vary significantly at an operational level. They confuse their requirement for a set of consistent outputs – profits, managed risks and a common ethos – with a perception that they must manage the inputs. In other words, they confuse consistency with control.
It has been proven time and again that businesses perform best when allowed to be entrepreneurial. That implies a certain amount of operational freedom to determine an appropriate local structure which will optimise their contribution to the greater corporate good. I seem to recall that the Swiss company ABB achieved this spectacularly in the eighties by breaking down its entire global operations into small operational cells similar in size to start up businesses. Not everyone might want to go that far but most organisations recognise that entrepreneurialism and innovation are critical to success.
In the past few years, there has been growing interest in two-tier or multi-tier ERP strategies that can add not only flexibility for local needs, but can also cut costs. A multi-tier approach means keeping the corporate, administrative ERP system at HQ level, but rolling out other ERP systems at local, operational level.
It’s all about managing the global outputs and leaving the locals to decide on the appropriate local inputs.