UK: Multinationals search for a structure for Europe. (4 of 4)

UK: Multinationals search for a structure for Europe. (4 of 4) - As the outposts of a business draw closer together, country managers may find their powers diminishing. In fact some observers have forecast that they will disappear altogether. Once the si

Last Updated: 31 Aug 2010

As the outposts of a business draw closer together, country managers may find their powers diminishing. In fact some observers have forecast that they will disappear altogether. Once the single market is achieved, it is thought, Europe will be covered by an all-knowing centre and a few regional offices. The trends noted above, however, are more likely to ensure the country manager's future. With smaller head offices, and authority being pushed nearer to the marketplace and the customer, the country managers should stand to gain. But the evidence suggests that their role is changing, by being given wider responsibilities in the group in compensation for some loss of authority over their national operations. Instead of being barons in their own fiefdoms, they participate in formulating the group's international strategy, or they are made "lead managers" for a part of the operation in which they have particular expertise.

IBM's European operations point the way. The group as a whole, in "a profound evolutionary phase", according to its European vice-president for market development, Elio Catania, has been gradually pushing some 8,000 head office executives out to the field operations over the past two years or so. The European HQ in Paris is in the course of shrinking proportionally. Behind the move - and behind IBM's flat earnings record in recent years - is the trend in the computer industry towards smaller but ever more powerful desktop machines using open (ie. interchangeable) systems. IBM's traditional hold on its customers through proprietary systems has been terminally loosened, and it finds itself having to compete for hardware sales with all comers. The implication is a dramatic reduction in margins, and a new emphasis on solving customers' IT problems, rather than selling black boxes.

Like the chemical manufacturers, therefore, IBM is having to put more resources closer to the customer, and give its branch managers greater autonomy if they are to have a chance of winning the competitive battle. At the same time, its widely discussed and criticised "conflict management" system - used to resolve disputes between the product, geographical and industry segment axes of a three-way matrix - has given way to a new mood of fraternal co-operation. The top management saw that supposedly clear lines of accountability under the old system were in practice anything but, to the detriment of the service offered to the customer, so teamwork is now the rule.

This implies teamwork between product divisions and geographical subsidiaries as well as between individuals. The current head of IBM Europe, David McKinney, has therefore set up a European management board consisting of the unit presidents (ie. country managers) and others, designed specifically to draw them into central strategy formulation. In addition, the Big Four unit heads - Germany, UK, France and Italy - were last year given specific Europe-wide responsibility for certain product groups and industry sectors. Anthony Cleaver, the UK incumbent, has personal and AIX systems and the service industries; Hans-Olaf Henkel in Germany takes on another product range and the industrial sector; and so on.

Giving executives two hats, a local and a European one, is becoming increasingly popular. It has obvious advantages, but also drawbacks. In some companies anything to break down the turf wars, between product groups as much as nationalities, is a priority. Involving key executives at whatever level of seniority in the Europe-wide business is valuable, both in order to make best use of expertise and to keep the head count down. It also provides a useful career extension for executives who might otherwise be bumping against a national subsidiary's ceiling, but who are reluctant to move to another country. However, not all executives are interested in - or capable of - taking on wider responsibilities in this way. Black and Decker, for one, found that it had to replace nearly all of its country managers, who could not come to terms with a decrease in their local autonomy (particularly for manufacturing), and an increase in their European roles.

There is also a risk of confusion of responsibilities as some executives discover the joys of travel, and the advantages of moving on quickly before the results of their actions are obvious. A number of companies in the survey emphasised the need for able and trustworthy executives in the modern, lean multinational, even if it had no pretensions towards networking.

If the current ideal of a simple, flat management pyramid controlling a flexible and responsive European operation is to be realised, much will still depend on finding and training the right kind of executives. Languages, and a willingness to live and work in other countries, may actually be less important than the ability to work as responsible members of a dispersed European team - whose members can strike in their own minds that elusive balance between the group's central and local interests. Success in the vast and rich European market demands nothing less.

(Tom Lester is a freelance writer and was author of the survey on which this article is based.)

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