Managing Change Across Borders: Part I

An all-too frequent scenario in global organizations involves the failure of headquarters-driven initiatives to be embraced by local offices in other parts of the world. It is common for a new strategic direction, IT system, or human resources policy to face a long gauntlet of blows from the forces of ingrained habit, suspicion of foreign ways, and culturally-based preferences for existing procedures.

Obstacles to Change

One form of resistance that many global initiatives meet is simply inaction. Overseas operations are insulated by the same barriers that make communication with them so challenging. Distant subsidiaries, affiliates, or partners are less immediately visible to top executives at headquarters, who naturally tend to give them less attention than the pressing demands of home market customers or employees. The Chinese saying, "Heaven is high and the Emperor is far away," also applies to many corporations. Local employees frequently take matters into their own hands, implementing, modifying, or ignoring headquarters initiatives as they see fit.

Another reason for not implementing a change agenda is the global version of the "flavor of the month" phenomenon that occurs in companies whose transformation efforts lack consistency. Frequent turnover among key corporate leaders or expatriates often results in flip-flops between different global market strategies, leaving overseas employees weary because they must educate yet another aggressive crop of executives regarding what does or does not work in their country environments. Veteran subsidiary employees will say things such as, "The first six months it is best to ignore them because they don't know what they are doing yet."

Yet another brand of failed change efforts falls under the rubric of "The Living Dead," those multiple layers of half-hearted, overlapping, and contradictory initiatives that employees make a show of doing whenever their foreign bosses appear. Overt compliance for a time with changes imposed from abroad can mask stored up resentment that finally explodes in emotional conflicts, employee departures, and so on.

The Foreign Capital Company Syndrome

Perhaps the most common pitfall for cross-border change efforts could be labeled as the "Foreign Capital Company Syndrome," a negative cycle of misunderstanding and misguided efforts.

• HQ Imperatives: Well-intentioned "global" initiatives are rolled out from company headquarters
• Limited Local Capabilities: These initiatives often encounter limited local capabilities due to fewer human and financial resources within smaller and less mature subsidiary operations.
• Strong Pressure: There is strong verbal pressure from headquarters or its expatriate representatives to cooperate and to get in step with the global program.
• "Irrational" Opposition: Opposing views from subsidiary employees often appear irrational due to the lack of language skills or an inability to make what headquarters would regard as a strong business case.
• Forceful Decisions: These local views are therefore ultimately brushed aside in favor of forceful directives to go ahead as planned.
• Covert Resistance: Under such circumstances, even those local employees who struggle to comply act without gusto. Many harbor the quiet hope that the headquarters initiative will fall on its face because their own views have been disregarded and overridden.
• Frustration & Confrontation: Frustrated headquarters representatives ultimately sniff out this lack of whole-hearted commitment or compliance and confront local employees.
• Resignation & Withdrawal: These employees, who are in no position to offer effective resistance, resign themselves to following instructions, and are less inclined to offer their own frank views next time around (there may be those who literally resign from the organization as well).
• Stalemate: This unproductive stalemate naturally leads to poor business results, which can become the impetus for the next major initiative from headquarters, and the cycle is repeated.

The figure below provides a visual representation of the cycle - these are the standard symptoms of a dysfunctional partnership.

It is possible to arrest the cycle at any point, but this is particularly difficult in the case of cross-border transactions. The overlapping obstacles of time, distance, unfamiliar business practices, wishful thinking, and organizational inertia all contribute. Companies must make a concerted effort to develop a full menu of global people skills that will enable them to reverse the descent into this hellish and costly cycle.

Part II of this series on managing change across borders will present a set of 10 steps for handling change that are recommended in order to avoid the Foreign Capital Company Syndrome.

This article has been excerpted from an upcoming book by Ernest Gundling, co-managing director of Meridian Resources, entitled "Working GlobeSmart: 12 People Skills for Doing Business Across Borders". "Working GlobeSmart" is scheduled to be published in May 2003 by Davies-Black Publishing, a division of CPP, Inc.