Carlos Garcia Pont

Don't knock middle management

As multinationals cope with the simultaneous forces of globalisation and localisation, company headquarters are shrinking. Once the bastions of power at the heart of the operation, many HQs now function mainly as the CEO's office, or the place where the board meets.

by Iese Insight
Last Updated: 23 Jul 2013

As this happens, the company's subsidiary units around the world are becoming more important. But this re-distribution of power means a complete reassessment of the leadership and organisation of the company. In a paper published on Iese Insight, Carlos Garcia Pont writes: "A company's transnationality thus requires higher levels of coordination, specialisation and integration among the multinational subsidiaries."

This, Garcia Pont argues, means that the role of the middle manager in multinational companies is becoming significantly more important. The increasingly complex nature of such companies requires individuals who are able not just to manage one subsidiary, but lead across a mix of green fields and acquisitions. "Subsidiaries are no longer self-contained businesses but sets of activities within the entire value chain," he writes.

Garcia Pont presents the case of an anonymous company, which he calls the Anglo-Saxon multinational "WEA". It buys three Spanish companies to boost its car sales. The three companies do not serve as mere factories, however - they are developed into centres of "operational knowledge" which add great value to the multinational company.

Garcia Pont found that because subsidiaries do not dominate a complete business (because more and more value chain activities are taken away from their command), this leaves holes in the business that are seen to be uncontrollable. He argues that this causes middle managers to become pessimistic, seeing themselves as pawns of executive decision makers.

In reality, however, the role of middle managers is becoming more important and more strategic, Garcia Pont argues. In order to maximise value for the company, subsidiaries need to operate in a much more dynamic and "open" way, dealing not only with suppliers and customers but also other units within the mother company's value chain. This means that the role of the unit's manager changes dramatically, Garcia Pont says. A middle manager of a modern multinational company has to co-ordinate, mediate and negotiate on operational matters with other units, effectively driving the strategic direction of the company, he argues.

Garcia Pont writes: "Middle managers are more likely to exert greater levels of strategic influence because their formal role offers them greater opportunities for mediating between the organisation's internal and external environment."

He argues that middle managers and senior managers share the same importance, though senior managers often under-estimate the importance of middle management. "The middle manager who is able to gather information from the environment and communicate a personal evaluation to senior management is able to redefine the strategic context and have a voice in the implementation of the strategy chosen."

Middle Managers: From Pawns to Knights
Carlos Garcia Pont
Iese Insight
Review by Nick Loney

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