UK: Other business - Management Classics.

UK: Other business - Management Classics. - Other business - Management Classics - Shared values break down borders. Christopher Bartlett and Sumantra Ghoshal, in their book Managing Across Borders, describe an integrated global organisation as one which

by STUART CRAINER.
Last Updated: 31 Aug 2010

Other business - Management Classics - Shared values break down borders. Christopher Bartlett and Sumantra Ghoshal, in their book Managing Across Borders, describe an integrated global organisation as one which is bound together by values and beliefs that can be effectively managed.

In 1989, when Managing Across Borders was published, understanding of globalisation was in its infancy. The international management model was simply to export elsewhere your own way of doing things.

Colonisation was the essence of managing internationally. Companies often believed global operations were simply a means of achieving economies of scale. As a result, local nuances were overlooked in the quest for worldwide standardisation. Global and local were mutually exclusive. Companies either gave local operations autonomy or, more usually, loomed from afar.

They were corporate despots, laying down the law.

A great deal has happened in the intervening years - although despots remain. Global presence with local responsiveness is one of the mantras of our time. Companies are slowly coming to terms with what it really means to operate worldwide. They are wrestling with the challenges of nurturing innovation in globally dispersed organisations and of disseminating knowledge and learning throughout them.

The process could be a great deal easier for many organisations if managers read Managing Across Borders from cover to cover. Written by Christopher Bartlett of Harvard Business School and Sumantra Ghoshal, then at INSEAD and now at London Business School, the book is one of the few business works of recent years which deserve recognition as a classic.

Bartlett and Ghoshal mapped out the kinds of organisations that a borderless business world requires. They also identified a number of organisational forms prevalent among global companies.

The first was the multinational or multidomestic company. Its strength lay in a high degree of local responsiveness. It was a decentralised federation of local companies, such as Unilever and Philips, linked by a web of personal controls. Expatriates from the home country organisation occupied key positions.

The second was the global firm, such as Ford in the US earlier this century, and Japanese enterprises such as Matsushita. Its strengths were efficiencies of scale and cost advantages. The global firm sought to make standardised products and was often centralised in its home country, with overseas operations seen as delivery pipelines to tap into world market opportunities. Control of strategic decisions, resources and information was tight.

The third type of company was the international one. Its competitive strength was its ability to transfer knowledge and expertise to overseas environments which were less advanced. It was a co-ordinated federation of local companies controlled by sophisticated management systems and corporate staff. The attitude of the parent company tended to be parochial, fostered by superior know-how at the centre.

Bartlett and Ghoshal argued that global competition was forcing many of these companies to shift to a fourth model, which they called the transnational. This form combined local responsiveness with global efficiency, and the ability to transfer know-how better, cheaper and faster.

The transnational has been the model that many companies have aspired to during the 1990s. Inevitably, aspiration is one thing, making it a reality is quite another. The transnational is made up of a network of specialised or differentiated units. Attention is paid to managing integrative links between local companies as well as with the centre. The subsidiary is a distinctive asset, rather than simply an arm of the parent company.

Manufacturing and technology development are located wherever it makes sense, but there is an explicit focus on encouraging local know-how in order to exploit worldwide opportunities.

Bartlett and Ghoshal argued that integration and the creation of 'a coherent system for value delivery' were the new drivers of organisational structure.

The distant outposts of the transnational could not be left to their own devices but had to be brought within the fold while keeping in touch with their local business environment.

But what was the glue binding the global-local elements together? In Managing Across Borders, Bartlett and Ghoshal suggested that companies possess what they call organisational psychology, 'a set of explicit or implicit shared values and beliefs that can be developed and managed just as effectively as the organisational anatomy and physiology'.

In transnational organisations, they said, there are three techniques that are crucial to forming an organisation's psychology.

First, there must be 'clear, shared understanding of the company's mission and objectives'.

Second, the behaviour of senior managers is vital as an example and a statement of commitment. 'Particularly in a transnational organisation, where other signals may be diluted or distorted by the sheer volume of information sent to foreign outposts, top management's actions have a powerful influence on the company's culture. When Sony's founder and chief executive, Akio Morita, relocated to New York to build the company's US operations, he sent the most convincing possible message about Sony's commitment to its overseas businesses.'

Third, corporate personnel policies must be geared up to 'develop a multi-dimensional and flexible organisation process'.

With its emphasis on networking across the global organisation and transferring learning and knowledge, Managing Across Borders effectively set the agenda for a decade; it created an organisational model.

Unfortunately, such is the caution of the modern organisation that many have chosen to remain one-dimensional and inflexible, rather than embrace Bartlett and Ghoshal's transnational alternative.

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