No, it’s not the title of a movie or a fiction novel – but rather the daily reality for everyone working for or with foreign-owned companies.

Knowingly or unknowingly, we are deciding by our daily statements and actions one of the fundamental issues for every foreign subsidiary: Where shall the ‘BREAK’ be

• between local senior management and European headquarters, or
• between local senior management and local staff/clients?

This seems to be a meaningless question and it could be assumed that the right answer would be that a company should have no such ‘Break’.

Unfortunately every company with subsidiaries in other nations will have a ‘Break’ – it is inevitable.

What Now Is ’The Break’?

Certainly not an easy question to answer and it may very well be a case of “we know it when we see it.”

Since this is obviously not of much help, an approximation could be as following: The ‘Break’ is no more and no less than the border/the grey area between two fundamentally different systems of thinking and acting, based on existing customs and structures in separate environments that have to interact somehow.

A European headquarters and a U.S. based subsidiary are a typical example.

It is not a specific block of situations or actions, but the combination of many individual and ever changing actions and reactions as well as the assumption and interpretation of other people’s behavior.

And What Does This Have To Do With Our Daily Business?

Its influence is prompting question like:

• Should the leader of a foreign subsidiary be a ‘local’ or come from the cultural background of the parent company?
• Should managers of the European parent company form the local Board of Directors (‘the couple of decisions we need to make, we can just take care of between ourselves’) or are local business leaders needed to balance out misunderstandings?
• Should the employment contract for a local general manager be founded in European or in American thinking and business customs?
• Should the European parent company expect a local second tier manager to speak out about of the local president’s shortcomings? If not, is he/she loyal or just ‘soft’?
• How many years does it take for a foreigner to become a ‘local’ business executive? Is it even a question of time, or rather a question of how intense he/she is immersed into local live style and customs?
• Is there really a significant difference between a ‘European in America’ and an ‘Americanized European’? How can it be measured? Is it good? Is it even important?

These questions have been neglected in light of the global business mantra in the past that only ‘native’ managers should be employed. And such arrangement has obviously done little to overcome the effects of the ‘break’ – it just shifted the focus from the local level to the point of interaction between local and parent company management.

To do what could indeed be right (i.e., give local staff and clients their local managers) does not seem to be beneficial when the results cost more time and effort for the parent company’s senior management (multiplied by the quantity of subsidiaries around the world). Not to mention the often resulting confusion between the two management groups.

Indeed, as long as business is good, the accompanying irritations are taking in stride. When times gets tough, the confusion and the added complexity of daily communications quickly become too much of a burden.

It comes as no surprise that increasing numbers of European firms are falling back to the seemingly easiest solution for ‘improving communication’ between the two sides: using managers from the parent company (or parent company’s nationality) to run their subsidiary.

On the flip-side, it is then expected that local staff and local clients just deal with the resulting misunderstandings and communication problems instead.

So, What Can We Do?

No simple or generic structural adjustments can negate the basic fact that a ‘break’ between overlapping cultural expectations, values and customs exist. Nor can they eliminate the necessity of dealing with their effects – large and small – on a daily basis. In reality, no across-the-board decision can have any influence on the complexity, the problems, and pitfalls of this ‘break’.

In reality, it is rather irrelevant if the U.S.-based general manager has the same cultural background as the parent company, or is a ‘native’ American or ‘Americanized’ European. It only shifts the format of the daily problems without alleviating the reality created by its existence as such.

The best course, therefore, is to select as general manager the individual best suited to deal with the specifics of the company, its products/services and clients. This person will need to determine how the specifics of any inter-cultural issues in his/her company influences the daily reality of the firm, how it is perceived, and how it needs to be dealt with.

As such, it will be less of a philosophical issue, rather than one of concrete business decisions and a dedicated effort to overcome the limitations, confusions and – yes, no question about it – the regular irritations between the main parties involved.

Selecting the ‘best manager available’ rather than a person with an artificially designed profile will be a good step in this direction.

by: Egon L. Lacher, Managing Partner/Miami