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In the far-flung subsidiaries of global corporations, getting attention from headquarters can often be an asset. Country managers in neglected outposts often envy their counterparts in “hot markets,” who seem to be able to attract all the high-level support, interest and resources they need. However, such attention from headquarters can have a downside as well, sometimes triggering a dynamic that hampers performance.
The pervasiveness of these negative forces became apparent during an international workshop we ran for managers of foreign subsidiaries on how to manage the attention of headquarters staff. Although we expected to hear dissatisfaction from managers of neglected subsidiaries, we were surprised at the level of frustration voiced by managers of subsidiaries on which plenty of attention had been lavished. This discovery suggested that, even with the best of intentions, headquarters’ “support” can easily mutate into “hyper-attention” that destroys value. To explore this phenomenon, we conducted 55 interviews with subsidiary managers based in China, one of the world’s “hottest” markets in recent years.
Rather than study all types of interactions between headquarters and subsidiary executives (including video, telephone, email, and headquarters’ requests for written information and reports), we chose to focus on visits from the head office. For subsidiary executives, such visits consume considerable amounts of time and energy, and from a research perspective, they offer a rich vein of information (even though the interviewees agreed to speak only on condition of anonymity).
The companies we studied represented a variety of industries involved in both products and services, and included major corporations based in the United States or Europe. Only about a quarter of the managers we interviewed were broadly satisfied with the quantity and quality of attention received from the headquarters; many of the others said that headquarters prevented them from achieving higher performance. The managers’ complaints tended to focus on three issues: the number of visits they received; the increased workload generated by interactions with headquarters; and a perceived lack of understanding and realism on the part of headquarters executives.
1. The Number of Visits
The overriding complaint from China subsidiary managers concerns the number of visits from head office staff. For many subsidiaries, visits from board members, top executives or product managers are a monthly routine. In extreme cases, such visits occur nearly every week. According to the China country manager of a European luxury-goods group, “Not only do they come often, but they want to spend more time, and they all come on weekends! For my team, it means that nearly every weekend, there is somebody to entertain.”
Many subsidiary managers believed that visitors from headquarters were motivated by personal agendas. “China is the hot topic in headquarters,” said the China head of a U.S. health-care company. “People who have been there have more authority, more power, more weight. So that encourages other people who have not yet been [here] to come to China.”
The proliferation of visits is especially disruptive when subsidiaries are overstretched and pursuing ambitious growth targets. Visits by senior executives require serious preparation, forcing local staff to spend time developing agendas, business reviews and itineraries for visitors. Once they arrive, visitors expect to be shown around and accompanied on field visits. The China head of a European specialty chemicals group asked: “So how much time do you actually have to drive your organization, as opposed to preparing for the next visit of whoever is coming?”
2. The Increased Workload
The visits also generate follow-up work and online meetings that can interfere with running the business. According to the China sales head of a European water utility group: “The local people get frustrated because the global people, after they return, keep asking for more information. … But we don’t have 500 people running around who are able to produce a report overnight.”
Although local managers admit that the visits from headquarters can have positive elements and provide opportunities for personal exposure, many believe the return on the time invested is lower than it should be. A recurrent complaint of subsidiary managers was the one-way flow of information and lack of reciprocity. As the subsidiary manager of a European consulting group noted, “The HQ staff are like, ‘Now I know China better. Now I can make China decisions.’” But when subsidiary managers needed information or help, they perceived that global executives were often less attentive. In one case, the local operation of a European power-systems group needed support for assembling the team of people who could deliver the growth levels headquarters expected. The head of China recalled: “They heard that we could deliver the numbers all right. What they did not hear was the ‘but’ part of it.” Having spent a lot of time explaining their context and constraints, local subsidiary managers get frustrated when they fail to receive the support they need.
3. A Lack of Understanding
The third area of frustration had to do with the perceived lack of understanding and realism of headquarters executives. Although headquarters visits to China subsidiaries were intended to build trust and alignment, subsidiary managers reported that the visits often had the opposite effect. According to a subsidiary executive from a European automotive supplier, “They [headquarters executives] all give their different opinions and views, and they create even more disruption.”
In the view of many subsidiary managers, some headquarters executives have an inflated sense of their understanding of the Chinese market, which often leads them to promote ideas that are impractical and ill-suited to the subsidiary’s circumstances. The China head of a European logistics group observed that local employees spend many years learning about the nuances of the market. “But that’s not the way I feel [headquarters executives] operate. They act like they know, and that it’s their business. You have to be very careful trying to make other people’s decisions for them.”
Intermittent exposure to the Chinese market can also cause global staff to develop unrealistic expectations about how much growth is possible. For example, during a market visit in Beijing, the CEO of a U.S. beverage company concluded that the potential market was significantly larger than managers were reaching. So he set a new goal of doubling the previous best year within a year. According to a subsidiary executive, “The budget had been closed and everything aligned. We didn’t have any additional resources. But based on the CEO’s assessment, we had to adopt this target.”
Frequent visits from headquarters are allegedly driven by a desire to “learn,” “exchange ideas” or “help the local operations,” but that’s not how local managers always perceive these interactions. According to the subsidiary head of a European express delivery group, “The code word for ‘fix’ is ‘help.’ They say ‘we’re coming to help.’ No, they’re not. They’re coming to fix. Trust me.”
Our findings are echoed by recent research on the role of headquarters in the innovation processes of multinational corporations. Researchers Francesco Ciabuschi, Mats Forsgren and Oscar Martín Martín, writing in a 2011 article in the Journal of International Business Studies, noted the urge of headquarters to intervene in spite of their lack of relevant knowledge — and dubbed this the “sheer ignorance” perspective.
Behind the Worries About China
Realistically, casting the subsidiary as the victim and headquarters as the wrongdoer represents only part of the story. A more complex reading of the situation indicates that the driver of the attention from headquarters is the anxiety corporate executives feel about the market opportunity. “A lot of companies rely very much on the performance of the China market,” said the quality assurance manager in China for a European food giant. “From the business point of view, they need this market to deliver.”
The relationship between anxiety and attention biases is well established: Humans are programmed to attend rapidly and persistently to potential threats in the environment. Although increased vigilance improves the chances of survival, research indicates that it can also distort our perceptions and produce suboptimal or misguided responses.
Significantly, hot markets don’t always generate frayed nerves among executives. For example, fast growth in a niche market or a noncore division doesn’t usually lead to too much attention from headquarters. However, when the market in question is more critical to the company’s long-term survival, executives tend to respond differently. Indeed, such markets represent threats as much as opportunities. In vital markets, any blip in performance can trigger doubts by headquarters executives and staff as to whether the local team is able to meet expectations.
In the face of scrutiny, attempts by headquarters managers to “understand what’s going on” can easily be construed as mistrust, leading subsidiary managers to become cautious and wary about what they reveal to visiting executives. As the China head of a European industrial gas company put it: “There’s a definite view that we don’t want to show our weaknesses to headquarters, because that only brings more pressure and more people [who want to visit].” However, this kind of spinning can also backfire, feeding suspicions among headquarters executives instead of allaying their fears. In time, executives from the home office may determine that they have no choice but to increase their involvement.
Guidelines for Healthy Interactions
We encountered some China subsidiary heads who enjoyed constructive relations with their head offices. Based on their experiences, we have developed a set of recommendations for healthier dynamics between corporate headquarters and affiliates.
Advice for Headquarters
The headquarters-subsidiary relationship is often compared to the relationship between a parent and child. But this metaphor can encourage the wrong kind of attention. In our view, headquarters needs to become more like a partner than a parent. With this in mind, we suggest the following:
Encourage open dialogue. As a precondition for adding value, headquarters staff must understand the business of the local subsidiary, which requires a willingness to listen and to engage in unstructured interactions. “Where possible, try to spend time with customers and frontline employees, and to travel to places other than Shanghai and Beijing,” advised the China head of a U.S. sanitation technology group.
Play the role of consultant or coach. To add value, headquarters should put the subsidiary’s interest in driving the business at the top of the agenda. The China country manager of a U.S. consumer goods company reported a particularly productive relationship with his corporate parent. “In our case, the affiliate is the entrepreneur and the corporate head office staff are the consultants who are here to support us,” he said. “The moment that you get experts coming out from the corporate headquarters telling you what to do, then that would be very frustrating, particularly in a place like China.”
Be a problem solver. In addition to challenging subsidiary managers and helping them develop their plans, headquarters staff can actually do things for the subsidiary managers. Indeed, rather than organizing their time in China around their own priorities, executives from headquarters should reserve some time to support the subsidiary managers’ priorities. As the China head of government affairs and corporate communications for a U.S. health-care group explained, “Sometimes we need to leverage higher people from global to do what we cannot do [with] our own personnel in China.”
Advice for Subsidiaries
Although China subsidiaries have become increasingly important for many companies, their influence has typically lagged behind. For greater stature, we recommend these changes:
Learn to say no. Many China subsidiary managers view visits from headquarters as something beyond their control. One way subsidiaries can develop more clout is by saying no (or not now) to unwanted visits. Reviewing visa invitations to China is one way to ensure that visits from headquarters are relevant and appropriate. Even if subsidiary heads don’t oppose visits, they can try to postpone them or coordinate them with other visits. By having a say on the timing, the subsidiary can transform the visit from a disruption into a catalyst.
Confront unrealistic expectations. The key to being heard is having credibility, which is based partly on results but also on the ability to meet expectations. However, having credibility also means that subsidiary executives must be ready to push back when headquarters’ goals are unrealistic, difficult as this may be. It is probably less costly to oppose unrealistic initiatives up front than to sign on for “mission impossible” and suffer the inevitable backlash. Of course, there are limits to how often subsidiary executives can resist headquarters. A China subsidiary manager with excellent ties to the headquarters of her European financial services group said, “It’s important to pick your battles.”
Manage the process. Besides developing stronger voices, subsidiaries can improve their relations with headquarters by managing visits from headquarters people more actively to highlight the issues they want to accentuate. For example, rather than arranging meetings only with satisfied customers, they should include visits to customers who have complaints. Another approach is to try to turn selected executives into advocates. The China president of a pharmaceuticals company who reported a strong relationship with his European headquarters commented: “We really expose them to things that they wouldn’t have understood otherwise, so that they become ‘China experts’ in the eyes of their bosses and essentially carry your voice. They become ambassadors of the subsidiary.”
Ultimately, subsidiary managers need to move beyond their frustrations with headquarters and take some responsibility for managing the relationship. As a country manager who successfully turned around his corporation’s China operation observed, how a subsidiary manager frames the visits from headquarters executives is key: “If you see the visit as a burden, then it will be a burden for you. But you can also see it as an opportunity to bring across the core messages you want to deliver and to help people understand a specific topic.”