Implementing Internationalization Strategy: The People Question

Abstract

An internationalization strategy is implemented by people—domestic, expatriate, and local managers and employees working from headquarters or subsidiaries. The first people management decision is staffing. Firms decide to use expatriate managers in key positions at subsidiaries to ensure rigorous implementation of decisions made at headquarters and in case local talent are unavailable. Expatriates build personal networks and create effective links between headquarters and subsidiaries, but firms need to be aware of potential conflicts, which may arise from disparity in compensation between local and expatriate managers, from the challenge of selecting expatriates with the right skill sets, and from the importance of consensus and support in expatriate families. Localization, the gradual substitution of expatriate managers with local managers, contributes to the internationalizing firm’s knowledge of local markets and to building local networks. However, local managers may feel more loyal to the subsidiary than to corporate headquarters. Dedicated human resources policies can narrow this “detachment gap” (with, for example, international mobility, temporary assignments at headquarters, coaching, language training and compensation packages). People management policies, which are usually uniform and decided centrally, need to take into account the significant impact of cultural differences. The results of the GLOBE survey confirm that employees in different geographies expect their managers to behave differently, in ways ranging from focus on performance, egalitarianism, levels of involvement, and status-consciousness.