Deloitte Touche Tohmatsu, the worldwide audit, tax and consulting firm, must know a thing or two about globalisation. William Welch Deloitte, the first of the three founders and the grandson of a French count, started his career in London in the year 1833. George Touche, the second founder, was a Scottish accountant who set up base in New York in 1899, and Tohmatsu, the last of the trio, was a Japanese admiral. Deloitte’s APAC Strategy and Operations head Jeffrey Watts and India executive director Joydeep Datta Gupta were recently in Mumbai to attend All India Management Association’s 35th annual convention. The theme of the convention was The New Manager and the Deloitte executives were there to deliberate what constitutes a global mindset. Aanand Pandey managed to join the discussion. Edited excerpts:
What is a global mindset? Should we be thankful that the business world is not truly global, yet?
JEFFREY WATTS: What we have seen in the past few weeks is poignant and probably an extreme example. But it must not in any way dissuade one from globalising. In fact, this event holds the promise of reshaping global banking and finance systems for the better. In the future, bankers will have a system that is both safe and vibrant.
To answer your first question, a global mindset is about the ability to see business possibilities in a global world, in an immensely complex environment.
JOYDEEP DATTA GUPTA: To add to that, any company that wishes to go global needs to be inclusive of people and knowledge it gains in the international markets.
Do Indian multinationals have a global mindset?
DATTA GUPTA: When Indian companies are making acquisitions in international markets, we find two extremes. One is that they buy a company, send a plane-load of Indians to descend on that company and take over the operations. in this process they lose value of the acquired company. If the intention is to acquire the market, it stands defeated because the market is held by people who have relationships in the local market - if you lose those people, you lose the local market. At the other extreme, we find that the acquisition is made and companies make no attempt to drive any synergy.
Indian companies go global not only for market access but also for access to knowledge — resident within the companies that they are acquiring or partnering with — as well as access to global capital markets. They should look for people who understand the local market.
This issue is not unique to Indian companies. Jack Welch had written that when General Electric (GE) went to Japan, he found that his managers are hiring only those people who can relate to the Americans. After a while Welch realised that it was a wrong strategy.
So, are Indian MNCs not truly global?
DATTA GUPTA: These companies are at an early stage of the development curve so it is not surprising. They have just begun to reach out to international markets.
But some prominent leading Indian IT MNCs, have been around for more than 20 years...
DATTA GUPTA: It is 20 or 25 years of experience as opposed to 50 or 100 years of globalisation. In the IT industry, the organisational culture is more globally aligned than companies in other sectors.
WATTS: As Joydeep said, it is about maturity. Leading Japanese companies such as Toyota, Nissan and Sony are at the top of their industries. Even with the rest of the companies from the developed markets, you see a transition from a centralised multinational structure to a global structure. However, few companies are global in the true sense of the term.
How do multinationals make the transition?
WATTS: There is a range of investments that organisations make to develop a global mindset. During my term with GE, I saw that they had a system where they moved engineers across functions like manufacturing and marketing.
Overall, global mindset is about the ability to think across boundaries, disciplines and cultures. Companies have to invest in education, experience, evolved HR models. It is about hiring people with characteristics that lend themselves to flexibility, adaption, inclusiveness and creating networks.
What stops Indians from becoming truly global?
WATTS: Companies are making acquisitions and taking their time to integrate operations. Sales forces need to be integrated in the market place. Brands need to be integrated where required.
If you have operations in 20 countries you need to comply with 20 different regulatory requirements and produce global MIS (Management Information System) and global financial statements within a certain period.
We find that multiplicity of programmes and a lack of experience in integrating all of this is a barrier and is preventing growth. A lot of acquisitions made by the companies are yet to be integrated. Therefore, the synergy from the merger or acquisitions is not fully realised.
How to strike the local-central balance?
WATTS: It depends on the type of local operation. For instance, original equipment manufacturers allow more freedom to their sales and marketing units. Their manufacturing units, on the other hand, follow more consistent and centralised standards.
The right balance comes with an understanding of the real source of value. For a software enterprise, for instance, the real value comes from software developers or from engineers working in the research and development department.
Does the authority vested in a country manager depend on the nature of the local operation?
WATTS: It must be thought in terms of maturity and scale, in terms of how you match your business structure with performance optimisation. What usually happens is that when companies enter a market, they build the distribution, sales and marketing operations.
Meanwhile, they keep the value chain offshore. As the business matures, companies put more capabilities onshore.
However, we find that a lot of companies, at this level, don’t take advantage of ceding more power to local management. This results in loss of profit opportunities. The loss is greater for companies operating in sectors like retail that require a company’s business agility positioned close to the market.
