Read the full script of Module 10, 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.

While there is no exact formula that outlines what decisions HQ should make, and which should be left to local teams; one thing, however, is clear. If you don’t intentionally create structure around decision-making, then ineffective decision-making and mistrust abound. So:

How do we divide decision-making between HQ and local teams?

Most companies, unfortunately, aren’t clear about who decides on what, leading to confusion and a lack of trust. A key aspect of any global management strategy is determining the decision-making process and who has the power to decide on what. This involves identifying which decisions can be made autonomously by the local team, which require joint agreement between HQ and the local team, and which should be controlled and directed by HQ.

Determining who has decision-making authority is a crucial aspect of any international management strategy. It is important to consider factors such as minimizing localization premium by centralizing decision-making or decentralizing to achieve company-market fit, as well as leveraging expertise to remove obstacles and gain a global perspective while also empowering local teams. 

It is not up to us to dictate which decisions should be made by whom, such as pricing, performance reviews, or marketing campaigns. Each company must make these decisions based on what works best for them. The key is to address the issue directly and openly, which we found repeatedly mentioned in our research under the labels of "decision rights" or "decision authority." Regardless of who makes the decisions, transparency is crucial to fostering strong communication, trust, and engagement.

Creating a strategy for decision rights can increase transparency for a process that is often unclear

This can make it provide a framework for core values and make it easier for both HQ and local teams to determine when to lead and when to seek advice, enhancing the chance to truly create. Trust and autonomy in your organization to the local teams., which are essential to various facets of global expansion, are especially critical in delegating decision-making, making it one of the Four Commitments.

Decentralizing decision-making authority and being open to accepting failure can empower local teams, something that aligns with the global agile mindset. Trust is a crucial element of empowerment, as is instilling a sense of purpose and responsibility within the local team. However, empowerment does not come solely from granting complete autonomy to the local team. 

Instead, it arises when HQ adopts an enabler and supporter role, eschewing a command-and-control style. Even when HQ establishes boundaries, individuals tend to feel empowered when given a clear framework to operate within, rather than feeling uncertain about who has decision-making authority.

As companies progress through different stages of market entry, growth, or maturity, their HQ and local teams interact at various points on the bridge in the GCM Model. The allocation of decision-making power shifts between HQ and the local market as needed, based on factors such as company culture and market maturity. However, finding the right balance is crucial as over-reliance on HQ can hinder localization efforts, while too much delegation can lead to excessive complexity. The key is to establish a local approach that aligns with global objectives and to establish guardrails to ensure continuity with HQ. This should also align with the Autonomy Curve discussed earlier in the course.

Similar to the Job Function Pendulum that was discussed in another module, there is also a pendulum effect with decision rights. The strategic decision of where to place decision-making authority shifts the balance of the pendulum between HQ and the local team, and this balance can change over time.

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Different companies can choose to grant different levels of autonomy to their international teams, and there is no one-size-fits-all solution. During their early expansion phases, Uber and Apple took opposite approaches to international management, with Uber giving local offices almost complete autonomy while Apple maintained a more centralized control structure. Both approaches can be successful. It is important to remember, however, that if HQ dictates exactly what the local team should do, the team will have little empowerment. As noted by executives we spoke with, true empowerment comes from a more enabling and supportive role for HQ.

The complex network of internal organizations within a company gathers inputs to create outputs, which then become the inputs for other teams. Therefore, it is crucial to establish centralized visibility and processes to prevent bureaucracy, complexity, and silos. Scaling requires the centralization of certain elements, including decision rights, as well as other processes and structures designed to build momentum.

Centralizing certain decisions can create a more equitable playing field by reducing the influence of favored markets and giving all teams an equal voice. However, there is also a compelling argument for decentralizing decision-making and giving local markets more responsibility. Often the farther HQ is from the problem, the less effective their idea of a solution would be - so often local teams have better insights. This is particularly true for changes that need to be made to scale in a local market. Headquarters is not a control tower; it's the scaffolding and infrastructure that supports a global operation and enables it to work. 

Hence, it is important to find the right balance between centralization and decentralization to foster effective decision-making and facilitate the smooth functioning of the organization.

How do you map out decision rights?

The allocation of responsibilities depends on various factors specific to a company's industry, target markets, customer base, and growth stage. However, our research suggests that the distribution of decision-making authority and control should be guided by and aligned with the company's culture and core values and the stage of growth in each market. One thing that is consistent, however, is to Additionally, it is crucial to ensure transparency and open communication regarding decision rights across the organization.

Granting autonomy can foster momentum and increase morale, as long as the proper support structure, such as a Localization Resource Team, is in place. This targeted autonomy in operational areas can produce rapid victories that act as a catalyst for the commitment and involvement of a developing local team. 

Autonomy enables scale. This holds true not only in the early stages of expansion but also over a more extended period. Granting autonomy to local teams does not imply complete freedom, but it prevents HQ from getting stuck in the minutiae, which would otherwise distract from more critical strategic initiatives across the organization.

HQ may encounter cultural challenges in convincing local teams to embrace and effectively utilize autonomy. Even with the right local leaders in place, some cultures are naturally resistant to rapid decision-making. For instance, in Japan, decision-making often occurs in groups, and local teams may be less inclined to make independent decisions without guidance or approval from HQ. While this norm can be advantageous for organizations during periods of market growth, when alignment and managing complexity are crucial to generating momentum, it may impede momentum during market entry where teams have to be more iterative and agile. To overcome this challenge, HQ must effectively communicate the value of autonomy and demonstrate support when local leaders take ownership, even in the face of mistakes.

How do you establish the appropriate degree of control?

For local teams, granting autonomy creates control. On the other hand, from HQ's perspective, providing clarity regarding core values and setting guidelines for internationalization and uniformity helps to maintain control.

So what is the best way to map out decision rights?

Here are four main factors to consider when deciding where decision-making responsibility lies in your organization:

1. Think about the main pillars that would affect how decision rights are allocated. First, consider the stage of the company’s global growth and the stage of growth in an individual country. Map this stage to the Autonomy Curve we previously discussed, where more autonomy is given during Market Entry, how this reduces during Market Growth, and how it needs to increase again during Market Maturity to capture a deeper market share.

2. Next, consider the Company Knowledge of the local team, and especially the local team leadership. Has trust been built? Does the local team know how to get things done at HQ? Is there core value alignment to ensure that decisions are made locally that don’t just consider the local context, but align with company culture?

3. Then, think about the Job Function Pendulum, what functions are centralized vs. regionalized or localized? Functions that are more centralized should carry more decision rights, versus an area that is more localized with a presence in each market.

4. Finally, consider company culture and the core drivers of growth for the company. If you are a product-driven company or a marketing/brand-driven company, then decisions that fall in that category would more likely be kept at HQ, while others that fall outside of that scope can more easily be given to local teams

Finding the right balance is crucial. Adopting a strict command-and-control approach that is centered on HQ will impede effective localization, just as overly favoring local offices will require companies to manage a range of different models that are difficult to manage and scale. The key is for companies to establish a localized approach instead of relying solely on a standardized company-wide approach. However, guardrails must also be put in place to ensure consistency with HQ.

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 10, Episode 8 of the Global Growth Master Class.