In recent weeks I’ve been having two separate conversations with very large clients (each with more than 250,000 employees). Who have both separately and neatly encapsulated a key dilemma in being a global company; finding the balance of leverage and agility.
One of them spent some time explaining to me that their recent reorganization was “all about leverage”. They have created global business groups and more integrated central functions. They need to leverage their core product innovation more effectively worldwide, share their central systems and learning and execute their strategy in a disciplined way all around the world. The benefits of this kind of leverage can be huge and everyone is very excited about it.
Having explained this for a while, my client added “Oh, and it’s imperative that we preserve agility while we do it”. Now that is the trick!
It’s relatively easy to deliver leverage in a top-down way. You can mandate product launches, common systems and functional processes. The challenge however is to actually get them used. Exercising executive power to force in change is not usually very successful strategy and needs to be used sparingly (for example in an emergency).
I was working with another client last week when they were looking at the role of the global HQ in introducing change. This central group was very much focused on the leverage they could provide and, in the way of most central groups, were optimistic about the upsides that they could bring. At the same time, their local colleagues were resistant to some of these initiatives as they felt it gave them less flexibility and agility locally.
We need agility to compete with smaller local competitors, to change quickly and to stay lean and effective. Some monolithic central processes can seem to have been actively designed as change prevention mechanisms.
Let’s not forget also that there is a control and autonomy dynamic going on here. Everyone likes to be in control, but nobody likes to be controlled.
It’s a fine balance and the solution lies in being clear about where leverage really adds value, where it is of sufficient impact on the overall business to outweigh the costs of local inflexibility and a lack of agility.
Even where we choose, on balance, to increase leverage we need to design initiatives to preserve critical local agility and to be open to change.
For example, when we introduce common Information Systems and make decision information available globally we need to make sure that this doesn’t pull us into making the decisions globally too. If we provide better quality, globally consistent information to local decision-makers to allow them to make better local decisions then we get the best of both worlds.
Because central groups tend to be overly optimistic about the value of leverage (partly because it’s in their interests) and local groups are more sensitive to the risks and downsides of losing agility (and some of their autonomy), it’s essential to have a dialogue between these two groups to come up with an accurate estimate of the value of the leverage and the risk to agility.
This can be quite a challenging conversation, but a very useful one. If you think it’s a conversation that your business should be having, give us a call.