Cross-Border Change Management: Implications for Organization Development

By Ernie Gundling, Ph.D. May 8, 2009
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Q: How can an organization increase its effectiveness at managing change across borders?

A: Significant organizational changes can create a “vicious cycle” of conflict between two locations in the same country, but it is more likely to occur, and harder to address, when there are differences in language, time zones, institutions and business practices. Culturally-based assumptions about customer needs, infrastructure, competitive threats and so on make it more difficult to find common ground. What differentiates a company’s offerings in one country may not hold true elsewhere, and the strengths that it has in its home market are not easily replicated elsewhere.

Example: A new strategic initiative is rolled out from headquarters with much fanfare. Although it is welcomed in some parts of the business, some international locations have a different reaction. Employees far from headquarters try to raise objections to the initiative but aren’t able to make a convincing case and eventually are told to “get on board.” They do so, but with lukewarm support and less than stellar results. In a candid conversation they tend to say things such as, “Well, we tried to explain why this was not a good strategy for this market, but headquarters wanted us to do it anyway. Frankly I would not be sorry to see the initiative fail. It wasn’t my idea.” Under these circumstances it is common to see a new strategic initiative emerge from headquarters to take the place of the last one, requiring the change process to begin all over again.

Common Issues and Solutions

Partnership. The fundamental problem is the lack of a partnership approach. It is natural for a company to consider its home market and its largest customers when planning change efforts. However, the voices from these sources can easily drown out the needs of employees or clients in distant markets, including those that could have high growth potential. By partnering with all employees and clients from the beginning and considering future potential for revenue, profit and growth, a company can build an approach to change that integrates the patterns of success from its past with future directions.

Example: A company that was very successful in its home market often introduced change initiatives that were unsuitable in key emerging markets because they were positioned with a premium brand image instead of a mass market appeal. Only through years of trial and error and steady efforts by both local staff and headquarters champions was the company able to systematically integrate the needs of new markets in its planning efforts and provide them with more welcome forms of support.

Misreading Similarities, Differences. It is easy to assume greater similarities and differences between markets than actually exist. And it is common to project solutions suitable for one environment on another environment halfway around the world, or to assume that customers abroad are anxious to behave “more like us,” when this may or may not be true. To make matters more complicated, foreign products may have considerable appeal in some markets, but often for reasons that only make sense in the local context and in a way that is modified to fit local tastes. Think of ethnic food in the U.S., for instance, and how in many cases it bears little resemblance to the original. Another mistake companies make is to expect the same competitive landscape, with the same type of competitors. Yet the largest competitive threats may come from companies that are unknown back at headquarters.

Example: A Western high-tech firm was very happy with its rapid growth in an emerging market country. Its growth rate in the country was similar to or higher than the growth rates for its primary global competitors. However, a less well-known local firm was growing at a rate that was twice as fast and actually turned out to be a tougher competitor than the usual global players, providing products that were better suited to the needs of local customers. Over a period of a few years that local competitor came to dominate its own country market because larger companies had underestimated it and emerged as an effective global competitor in its own right.

Accountability. It is difficult to establish accountability at the local level when employees lack a sense of ownership for a new initiative. This can be exacerbated by the matrix organizational structure that is typical at many global companies. Employees who report into both a global business unit and a local management structure frequently pay the closest attention to the managers whom they encounter every day and who are most likely to affect their futures.

Example: A change initiative being run by a project manager based at headquarters was making little progress. Project team members in a critical location were more loyal to a country manager who had a different set of priorities, so their participation in the global initiative was limited. Attempts by the headquarters-based project manager to “hold team members accountable” were not taken seriously and, in fact, led to diminished participation. Team members only became engaged once the global and local strategies were aligned at a higher organizational level and the local manager pledged his support. Another important step was aligning their team performance metrics with other metrics based on regional and local business objectives they were responsible for achieving as well.

Global change initiatives must take into account these kinds of issues and plan to address them in advance. In doing so, they will be far more likely to avoid change-related pitfalls, achieve their objectives and build business partnerships characterized by mutual learning, friendship and superior business results.

Ernie Gundling, Ph.D., is president of Aperian Global and a member of SHRM’s Organizational Development Special Expertise Panel.

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