Summary of Key Points
This article describes an "organizational crisis" that occurred at the Indian subsidiary of a multinational company where the author works. After the CEO of the subsidiary, Anand, suddenly died of a heart attack, business operations came to a complete halt for 21 days, despite the employees continuing to work as usual and everything appearing to be in order on the surface. Matters ranging from small payments of a few thousand rupees and routine expense claims to major supplier negotiations and expansion projects were all delayed due to a lack of authorization from the top management or the fear among middle-level employees to take on additional responsibilities. Upon investigation in India, the author identified the root causes as the local workplace culture of high power distance (clear hierarchies and strict adherence to rules) and the company's lack of emergency authorization mechanisms. The article concludes by emphasizing that multinational companies operating overseas must respect local cultures and establish systems to mitigate the risks associated with relying on individual "key players."
Detailed Analysis
Why Did Business Come to a Standstill Despite an Apparently Normal Office Environment?
When the author arrived at the Indian subsidiary, he observed that employees were arriving on time, greeting each other politely, and the equipment was functioning properly, yet no progress was being made in business operations. There were two critical issues:
- Payment Delays of Several Thousand Rupees: The purchasing team explained that a payment of 100,000 rupees (about several thousand yuan) for raw materials could only be made with Anand's signature, and no action could be taken without it, even for urgent needs.
- Silent Conformity Across Departments: The supply chain manager smiled throughout the meeting but remained silent whenever it came to scheduling adjustments, stating that the subsidiary's CEO needed to make the final decision—yet there was no CEO at the time.
These issues, which might have been quickly resolved domestically, were seen by the Indian team as more important than taking initiative and breaking rules.
High Power Distance: Differences Between China and India
The article mentions Hofstede's power distance index, which measures the strength of hierarchical structures. Both China and India have high scores (77 and 80 respectively), but the practical implications differ significantly:
- In China: Decision-making is prioritized, and middle-level employees will take action first and then follow up with the necessary procedures, as long as the outcome is positive, which is considered a sign of responsibility.
- In India: Strict adherence to rules is emphasized, and employees fear taking responsibility. In industries like manufacturing and finance, where compliance is crucial, the cost of making unauthorized decisions (e.g., facing audits) is too high, so it is better to wait for instructions.
In short, in China, problems are solved first, while in India, rules are followed first.
Don't Assume That "Silicon Valley-style Elites" Represent the Local Workforce
The author initially thought that Anand (a returnee with a Western education) and Suresh (the team leader) represented the capabilities of the Indian workforce. However, it turned out that:
- Globalized elites do not necessarily reflect the norms of local employees: Indian executives in Silicon Valley or Bangalore-based tech companies are influenced by Western flat hierarchies and tend to collaborate proactively, but local manufacturing workers, who grew up in a traditional hierarchical culture, prefer to maintain their roles and boundaries.
- Industry Differences: The tech and outsourcing industries are more open to cultural influences from overseas clients, whereas the manufacturing sector, with its heavy regulatory requirements, has more entrenched hierarchical structures.
Therefore, when setting up operations overseas, it is essential to consider the specific industry and the local workforce.
The Risk of Relying on One Person for Business Operations
The essence of this crisis was the company's reliance on a single individual, rather than on established systems:
- Lack of Delegation: All critical decisions required the CEO's signature, leaving middle-level employees with no authority to make independent decisions.
- Absence of Emergency Procedures: There were no temporary mechanisms for handling emergencies or quick payment processes.
- No Succession Plan: The headquarters had not prepared a successor, and a senior executive had to be brought in urgently to manage the situation.
Everything worked smoothly as long as Anand was in charge, but his departure paralyzed the entire system, highlighting the risk of relying on one person for the success of the business.
Lessons for Multinational Companies
The author concludes that going global does not mean simply replicating domestic practices. Two key actions are necessary:
- Respect Local Cultures: Do not expect Indian teams to act in the same way as domestic teams; understand that their adherence to rules is a rational choice.
- Establish Systems to Mitigate Risks: Implement mechanisms such as delegated authority (e.g., different levels of approval for different amounts of payments), emergency response processes, and succession plans to reduce reliance on individual key players.
In other words, when operating overseas, it is important to adapt to local customs while also putting in place robust systems to mitigate the uncertainties associated with human factors.
Summary and Implications
This article serves as a reminder to all multinational companies that the core of cross-border management is not about hiring the right people but about establishing the right systems. Cultural differences should not be used as excuses; while relying on capable individuals can speed up progress, relying on systems is essential for long-term stability. Especially in industries with heavy assets, it is crucial to build a resilient organizational structure to prevent tragedies such as the complete shutdown of a subsidiary due to the absence of a key leader.