Your Business Isn't Really “Multinational”

By Yang Zhao

As the rush into emerging markets continues, more and more companies are establishing multiple headquarters abroad. But rarely do new headquarters share decision-making power with old ones. Conventional advice for multinationals tends to emphasize a “hub and spokes” model in which directives issued from a central office dictate culture across the organization. This, experts argue, ensures different offices have a uniform company culture.

Here’s the thing: it’s not working.

McKinsey research finds that even highly successful global companies suffer a “globalization penalty.” Compared to locally focused competitors, multinationals are less effective at promoting innovation, maintaining professional standards, articulating a shared vision, and engaging their employees. All of these point to one problem: most multinationals’ company cultures are weak.

The problem is that hub-and-spokes isn’t the best way to get employees far from home base invested in the company mission. Harvard Business Review warns against the dangers of “cultural disintegration,” in which company culture can't be translated internationally, as well as communication breakdowns and employees who “frequently split into separate camps that have an 'us versus them' dynamic.”

New research shows that to build a strong culture, international teams need to become more cooperative and collaborative. That means breaking down the hub-and-spokes model so that different headquarters can share responsibilities more equally. Where possible, employees from different headquarters should be assigned to the same team, and given enough independence to solve problems and hash out plans together.

It also means that everyone in the company, from the CEO on down, needs to travel. A lot.

It's human nature to trust someone we've talked to in person over someone we've never met. Virtual meetings are nice, but they are not a substitute for the real thing. In the technological age, it's easy to feel like your whole organization is at your fingertips, just a click or a tap away. But that feeling can be deceptive. Ideally, the CEO of a truly multinational company will split time between the two headquarters equally — two weeks at one, two weeks at the other. It’s difficult to do, but not impossible. I travelled back and forth between our headquarters in Andover, MA and Wuxi, China every month of my first 12 years as CEO. That’s 288 transcontinental plane flights, if you’re counting — and in my opinion every one of them was worth it.

But it doesn’t stop with the CEO. Developing a shared sense of culture means sharing your people. Harvard Business Review recommends multinationals “be heterogeneous everywhere”—meaning ensuring diversity within each location, mixing tasks between hubs, and building cultural bridges. Swapping employees between locations helps improve cultural sensitivity.

While being on the go can be challenging (and CEOs should take care to avoid burnout), it's nearly always worth it. One study found that every $1 invested in business travel companies realize $12.50 in incremental revenue.

When employees can’t travel between hubs, remember that it’s still possible to collaborate in real time. Sure, productivity and project management apps have eased communication between disjointed teams. But nothing can fully replace the efficiency of talking through issues in a conference call or meeting. We schedule weekly standing calls for each of our teams, either in the early morning or late evening US time.

Companies should also make an effort to use the latest collaboration tools, and empower their teams to experiment with new ones. Recent research suggests that firms that actively embrace new communication and collaboration technology, including brand new tools from startups, are much more successful in terms of project success than those that don't.

Managed properly, large time differences actually have great advantages. Teams effectively managing the gaps can essentially run in 24-hour development cycle when projects inevitably hit crunch time. I myself have worked until 5 a.m. to oversee operations at our China headquarters in real time—inconvenient, but totally worth the results.

One final issue for multinational companies is language. Though conducting business in English may be the most practical solution for many, studies have illustrated that enforcing only one language across international teams can cause friction and employee resentment. Staffing your US office with bilingual or multilingual employees can be a great fix for this. If a Chinese engineering team is having difficulty describing a technical specification in English, it’s a great help if someone on the US side of the conference call can switch to Mandarin to clarify the issue.

Constant travel, 5 a.m. conference calls, foreign languages — for many US-based headquarters used to doing things their way, this may seem a little much. But creating a successful culture is only possible when employees and executives treat each other with mutual respect. And that means not sitting at a US office “hub” and waiting for the spokes to come to you.

With contribution from the Hippo Thinks research network.

Dr. Yang Zhao is the founder and CEO of MEMSIC, a Boston-based MEMS sensor company. Founded in 1999, MEMSIC, was the first MEMS company to go public on the NASDAQ in 2007. Dr. Zhao holds a B.S. degree in physics from Peking University and a master's degree and Ph.D. in electrical engineering from Princeton University, and also holds 35 patents. Dr. Zhao was named as one of the 12 Movers and Shakers in MEMS Industry, and recently received the 2015 Frost & Sullivan Technology Innovation Award for MEMSIC's anisotropic magnetoresistance sensor technology.

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