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Jo Geraghty

Director

Cross border organisational cultures

Date added: 27th Feb 2015
Category: Organisational Culture Change

Having a strong organisational culture which recognises and celebrates differences and which therefore enables sub-cultures to meet local needs will only strengthen the organisation in the long term.

In an increasingly global environment, organisations are as likely to be collaborating with suppliers or creating subsidiaries in another country as they are in the next town.  And it’s easy to see why.  With communication solutions such as video conferencing, instant messaging, chat rooms, shared web documents and so on at their fingertips, for today’s leaders the team member sitting at the next desk could just as easily be the team member in the next country.

But the ease with which we can communicate across boundaries can create its own problems.  It is all too easy to assume that just because someone else can see the same documents they will interpret them in the same way; just because we can video-conference with a subsidiary, they will automatically assimilate the organisation’s culture. And it is also all too easy to forget that overseas subsidiaries or suppliers may well be operating under a totally different set of rules and regulations to those which govern the parent organisation.

The challenges and benefits of cross-border organisations were illustrated recently in a Bank of England publication, On a tight leash: does bank organisational structure matter for macroprudential spillovers?  The paper essentially examined “whether cross-border spillovers of macroprudential regulation depend on the organisational structure of banks’ foreign affiliates” but although the paper largely related to lending and capital management within banking it also contained some interesting observations on the way in which the nature of the link between the parent organisation and the subsidiary can affect behaviour.

Key among these observations was the difference in perception and control between overseas branches which largely operate under the parent organisation’s rules and structure, and subsidiaries which are more autonomous and can operate under the regime of the country in which they are domiciled.  Overlaying this difference was a conclusion that the way in which branches and subsidiaries react to changes in regulation in their own countries depends on the nature of the regulation.

Although the paper is primarily of interest to those within the banking sphere, it is an interesting reminder of the way in which those operating across borders need to factor the effects of differing relationships and regulations into their planning.  But what in practical terms does this mean for those looking to maintain cross-border offices or subsidiaries?  In particular, how do organisations which value their culture integrate that culture into multi-site operations?

Observation suggests that organisations can go one of two ways.  The first group see overseas subsidiaries as merely being extensions of the parent organisation.  They look to impose the parent culture in its entirety and disregard as far as possible the effects of local regulations, aptitudes or customs.  However, whilst such an approach may be intended to exert control over the organisation or to deliver a strong brand, the business is potentially missing out on the richness and diversity which a more flexible approach could bring and may also be losing custom to those who seek to provide a more locally-appropriate solution.

The second approach is adopted by leaders who understand that whilst maintaining a core culture is essential, overlaying the core culture with a more local sub-culture regime can strengthen the overall offering.  These businesses are able to work with national ethos and regulations to not only provide a local service from a global organisation but to take advantage of the differing aptitudes which are in evidence across the globe.  Recognising that those working in America will naturally adopt a different approach to those working in England or India or elsewhere means that global organisations can apportion projects to those who are best suited to meet the particular challenge.

Similarly, recognising that customers in different countries naturally expect differing levels of interaction will enable organisations to create outstanding customer experiences across the globe rather than imposing one level of experience on all.

We may live in a global environment but being global is not and should not be synonymous with expecting everyone to think and act and operate in exactly the same way.  Having a strong organisational culture which recognises and celebrates differences and which therefore enables sub-cultures to meet local needs will only strengthen the organisation in the long term.

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