Read the full script of Module 8, Episode 6 of the Global Growth Master Class below. Want to get certified on global expansion? Simply click here to access the complete course today.

An organization with global aspirations must be structured in the right way to leverage the Global Class Mindset and all the tools and frameworks shared in this course. This sparks the question:

How should our organization be structured to support global growth? What functions should be localized, regionalized, and centralized?

We covered how to build strong local teams and interpreneurial talent across the organization. We also addressed how to build support roles and structures to allow local teams to focus on getting product-market fit and deeper penetration in the market (through the LRT), but it’s important to take a step back and pair these more ground-level structures with an aligned organizational structure to truly support global growth instead of hindering it. 

All of these momentum builders are for naught if the organization is structured in a way where international growth is doomed to failure. 

As previously noted, expanding internationally is often not clearly defined within established companies. A centralized "international" function may not exist (and it doesn’t have to), and even when there is a team dedicated to global expansion, they may face challenges with cross-functional input and implementation that they have no authority over. Responsibility for international growth can be spread across various roles, from executives in charge of revenue, growth, or operations to departments such as sales, products, and more.

Determining the appropriate structure or functional home for a team dedicated to global growth is not straightforward and can vary depending on the company's growth drivers. Whether the company is product-driven, engineering-driven, customer-driven, or another type of focus will influence the best approach. 

A concern not to be overlooked is managing operational overhead and assessing what functions should be centralized, regionalized, or localized while matching complexity and the demands of localization.

When a company expands its presence in multiple markets and reaches a stage of market growth, it becomes crucial to make decisions on how to structure the team to support its global footprint. As the company scales in new countries and its presence reaches a level of maturity, the support models need to be reevaluated. This typically involves making choices as to what functions should be localized, regionalized, or centralized based on many factors including financial and human resources, business function, and product or industry type.

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We label this as the “Job Function Pendulum”, which illustrates the “swinging back and forth” between centralized and localized decision-making as a company's international growth initiatives evolve over time. The pendulum is affected by many factors, such as the distribution or centralization of decision-making authority, the size of operations, and which business function is driving growth. For example, companies that are driven by product development may centralize decision-making and resources for that function under a centralized reporting structure at HQ, but they may opt to build a local presence for less critical functions. In the next module, we delve deeper into how guidelines can be established to divide authority between HQ and local offices, which can influence the pendulum's swing.

Initially, certain functions may need to be localized, such as sales, while others may remain centralized, such as product development. As the company expands into new countries, a localized function may serve an entire region until there is enough traction in a new market for a dedicated person in that country to take ownership of that function. Eventually, it may no longer make sense to have different people in each country working on the same functional area, and centralization may be preferred, especially if there are market linkages where a similar operational model works across multiple countries.

For example, let’s take a company with a physical product

It may make sense for the company to have a local operations and logistics manager to work with local vendors, navigating local customs requirements and distribution nuances, otherwise, it may be hard to deliver the product if this responsibility was centralized at HQ. However, as the company enters multiple markets the team may find that the customs and distribution processes in a few countries are similar, allowing for this local team member to expand his scope to include other markets.

If results do not meet expectations at any time, however, regionalization or localization may be reconsidered. Having local administrative support during the initial launch and product-market fit search stages may speed up the process, while centralizing it during the market growth stage may be more effective. It is important to conduct a cost-benefit analysis and consider ROI throughout this process.

The Autonomy Curve, previously discussed, plays a crucial role in determining the appropriate placement of work functions on the pendulum during the expansion timeline of a specific local market and a company's overall global growth initiative. During the initial post-launch stages, it is important to allow local teams to have autonomy to maximize key learnings and focus on high-impact activities instead of following the procedures at HQ (localized functions). 

As time goes by, it may be reasonable to reduce some autonomy to limit localization premium and create continuity within regions (centralized functions). However, in the final stage of scaling, a certain level of autonomy becomes an essential tool to empower local teams to feel in control of some aspects of the business rather than just following HQ's directives from afar. It is worth noting that, in all cases and at all stages, the level of autonomy granted to local teams must align with the company's culture.

By implementing effective processes and organizational structures, companies can achieve positive momentum during market entry and growth, creating a solid foundation for global scale. However, this must be accompanied by a set of guiding principles to ensure alignment and direction. These three factors - hard-coded processes, organizational structures, and soft-coded principles - are the key catalysts for successful global growth initiatives and serve as the backbone of Global Class Companies.

How to implement within your own organization 

The process for leveraging the Job Function Pendulum is pretty straightforward:

Map out what functions you think need to be localized, regionalized, and centralized at initial market entry. Consider what the company’s core focus and driver is - that should likely be centralized. If the company is product-driven, for example, then the product should stay centralized, although there should be team members specifically focused on international. 

1. Established thresholds and milestones that would trigger the need for certain functions or resources to be hired in a local market, or to become regionalized or centralized. For example, if the product is so complex that a high-level of customer support is needed to ensure customers are retained and not lost through insufficient support, or once a market reaches a certain volume of customers, then local customer success team members should be hired in the market. Or, upon market entry into additional countries in the same region, the most mature marketing team in the region would support that market until a pilot is completed (or some other milestone is met), and then a local representative would be hired

2. Establish regular evaluations among the leadership team where the localization, regionalization, and centralizations of the functions are reviewed for effectiveness and tweaks are made

3. Establish regular evaluations among the leadership team where the localization, regionalization, and centralizations of the functions are reviewed for effectiveness and tweaks are made

   
   NOTE: Don't miss out on the next episode! If you want to continue learning about global expansion strategies and dive deeper into the course material, simply click here to access Module 8, Episode 7 of the Global Growth Master Class.