Rebels with a Parent Company

Description

Conventional international business strategy preaches the need for subsidiaries of multinationals to align themselves with the agenda set by headquarters. But believing corporate parents always know best is a mistake. Although subsidiaries tend to seek approval of initiatives via dialogue with headquarters, there are also “maverick” subsidiaries that pursue independent initiatives covertly. And the author’s qualitative research on factors influencing independent subsidiary initiatives has found that maverick behaviour can deliver superior business results. Whenever HQ has a different interpretation of local conditions, subsidiary managers tend to see their own assessment as superior (often rightly so). This situational awareness illustrates one of the pitfalls of the command-and-control approach adopted by most headquarters. Subsidiaries that fail to meet performance metrics established by headquarters tend to be subjected to more oversight than subsidiaries that beat expectations. As a result, rebel managers at these subsidiaries can be driven to covertly pursue independent subsidiary initiatives in a quest to show that they can deliver superior business results through more autonomy. Although sanctioned and unapproved subsidiary initiatives can deliver success, the independent initiatives the author has studied demonstrate that subsidiary managers tend to go rogue because they see it as a path to superior results. Subsidiaries should not, of course, be granted absolute freedom. After all, the trust handed to subsidiaries that beat expectations can transform into complacency. Nonetheless, there is a need for a better mixture of central control and local autonomy so that subsidiaries can be agile as multinationals continue to expand into new markets and monitoring becomes more difficult.