International, Multinational or Transnational? The Choice Is Yours

Is your business experiencing growing pains? If not, I would be worried, because think of the alternative.

Someday, your company will reach the point where it needs to expand, or it will stagnate. And when that time comes, you must be prepared. Some organizations see the greatest opportunities for success by expanding globally. And while that kind of ambition should be applauded, it also can lead to major mistakes that could destroy your business.

Typically, organizations move into the international marketplace first, establishing offices in multiple countries with the world headquarters remaining domestically located. But a company often is not considered completely global until it becomes established as a transnational entity.

As the chart below illustrates, transnational companies operate fluidly yet independently with all foreign subsidiaries involved in what essentially is a decentralized decision-making process. In other words, no single country is considered the corporate home. This results in the ability to maintain a high degree of responsiveness to local markets, as well as a keen understanding of the local cultures needs, wants and demands.

Shut Down the Silos

For proof that decentralization works, look no further than the Honda Motor Co., a powerful transnational that does business as a decentralized operation. It sets up an autonomous subsidiary operation wherever it goes, financial journalist Jeffrey Rothfeder, author of Driving Honda: Inside the Worlds Most Innovative Car Company, told The Washington Post in 2014. So, Honda China, Honda of North America, Honda Europe are each independent. Theyre run by local people, so Honda China is led by Chinese people. They get input from Japan. Quickly, theyre running on their own and developing cars and designs for the local market.

Many companies fail to make the jump from multinational (or even international) to transnational status because of cultural clashes (or fear, or egos) that drive the formerly domestic company to retain control of all operational decisions and maintain separate silos for everything from research and development to production and marketing.

That refusal to foster autonomy can have devastating internal and external effects and lead to disgruntled employees, ineffective management and production miscues.

To succeed in the new global economy, you cant rely on old-school thinking. Professional Passport exists to help companies determine what control to relinquish and when, plus how to do so effectively and positively. We admit the process is not easy. Its like giving your teenage son or daughter the keys to the family vehicle for the first road trip without you; fear of the unknown and the potential dangers that lurk around every corner can generate enough anxiety to make you keep those keys away from your kids forever. But because that option simply isnt feasible, you really have no choice but to put faith in your child (and other drivers on the road) and let him or her go.

Similarly, a company seeking to become transnational has no choice but to begin transforming its structure so that it no longer resembles the diagram below.

Three Ways to Handle Growing Pains

Here are three ways to begin that process:

1. Plan the transformation.

Transformation is perhaps the most overused term in business, according to a McKinsey Quarterly piece that emphasizes transformation with a capital T, which we define as an intense, organization-wide program to enhance performance and to boost organizational health.

Thats the kind of transformation that must take place when evolving from multinational to transnational status. Effective change does not happen by default; it must be triggered, and that requires time, energy and a willingness to plan for eliciting the changes required.

2. Build trust.

Without that essential component, transformation will lead to stagnation or worse. Employees of successful transnational companies have faith in each other that they will embrace their decision-making privileges responsibly. Professional Passports training programs help colleagues build the kind of trust that allows businesses to function at a much higher level than its employees ever thought possible.

3. Take care of your employees.

Become global, not greedy. A global company is not a vampire that sucks money out of everything it can including its workforce, by outsourcing cheaper labor to other countries. True transnational companies recognize the value their employees bring to the operation and treat them accordingly, giving them the autonomy they need to help everyone succeed. Achieving transnational status is impossible without buy-in, and going global means taking care of everyone within your organization.

Remember, growing pains are inevitable. But finding ways to ease those pains and embrace change could take your domestic, international or multinational business to the next level.