Lack of managerial talent

58

59 Many MNCs send their people to CEE countries as expatriates. This is a very common practice in the region. However, managers coming into CEE pursue different roles in different companies. One approach uses expatriates as ambassadors of the corporate culture and principles. His and his team’s goal in the short term perspective is to take control over the critical functions at country level and establish a firm base for the process of integration.

Meanwhile they are building up a team of local managers who can be appointed in their position after a certain time. In the long term, most of the expatriates leave. Only two or three of them stay to keep the business running. This approach is frequently used by industrial goods companies.

The role of expatriates can be different in other companies. They are appointed into a senior position but not the very top. At the very beginning their task is to get acquainted with local environment and learn its specifics. The creation of personal networks follows. That is the goal in mid-term time horizon. In the long term view, an expatriate becomes top manager or the CEO. This model is usually applied in countries where a strong local awareness is crucial and powerful network is a key issue for success. Ukraine is one of the countries where this approach is proper to be applied.

Another strategy focuses on geographical distribution of HQ functions. This idea stems from a need to attract the best people. People with huge potential are used to seek challenges. If a company’s strategy is to centralize all decision making power in the headquarters, the function of country teams is just to execute the given orders. This is definitely not a model which would raise high interest for challenge seekers. Therefore some companies started running strategic projects on regional levels. That usually leads to creation of regional centres of excellence. Local managers are then more engaged and feel more like contributing to the performance of the whole group. But, naturally, an adequate remuneration should be put in place accordingly.

60

On principle, every region runs a strategic project. Once the project is successful in one country then it is rolled out over all regions. Thanks to this leaner connection to headquarters, regions have a freedom to decide on how they operate and meet their pre-set targets. The positive results have been already observed. Companies attracted best people also from competitors and current employees retained given excitement about the job. Thanks to this approach, firms adapted better to market conditions and captured the local trends faster.

Some companies solved the problem by building the organization around the talent available.

As an example we can use the case of a Russian-based international power-generating company. This company operated in more than 7 countries around Western, Central and Eastern Europe. It employed almost 12 000 people in total and the power generation and distribution were its core activities. Even though this company is absolutely familiar with the CEE environment and its challenges, it was immensely surprised by the rapid development in late 1990s. After recognition of the problem, a proper calculation was made. They identified a need to reach market capitalization of $15 billion from current $ 1.2 billion in 7 years (over 160% annual growth) to exploit the growth and retain the position at market. In order to achieve this target, an organizational restructuring was put in place. It came out that a geo-matrix structure would be the optimal solution based on international benchmark.

Standard approach in industry Distributed HQs model

2

1

4

5 3

HQ 2

1

4

5 3

HQ

61 Having tried to implement the chosen strategy, the “lack of talent” problem occurred. It appeared to be impossible for the company to find 4-5 regional directors who are capable of combining the rapid regional development and operational excellence. Furthermore, the matrix functioning was too complex for many CEE local managers to understand. The solution required certain adjustments. The matrix structure was substituted by simple vertical reporting lines and only one strong COO was appointed to drive the operational excellence.

Regional directors report directly to CEO to maintain the necessary local status.

Having generalized this approach along with other MNC methods, a “4-step approach”

addressing the “lack of talent” problem has been formulated, allowing building the organization under talent constrains.

Regional Director

Regional Director

Regional Director

CEO

CFO CTO. Strategy ...

COO Regional

Director

Regional Director

Regional Director

CEO

CFO CTO Strategy ...

62 Step 1: Develop “no constrains” plan – develop organizational options without taking talent constrains into account

Step 2: Identify bottlenecks – identify critical point concerning personnel/talent issues

Step 3: Develop “realistic” options – develop realistic options and the select best one on talent availability

Step 4: Define next steps – monitor talent availability over time and keep directing the company to the ideal structure as defined in Step 1.

In order to avoid the lack of talent problem, many companies started organizing management trainee programs. The principle of this program is to address fresh university graduates, select the one with highest potential and best fitting into corporate culture and grow him up within the company. The successful candidate is given proper training preparing him since the beginning for a managerial position. There is naturally a certain risk related to this approach.

Companies invest huge money to select the proper person and grow him/her up. But the trainee is usually not obliged to stay in the company when the training is over. It might sound illogical, but it is favourable for both parties involved. Having that kind of clause in the contract could discourage the best candidates from applying; secondly, if the trainee does not like the company, he would leave after the fixed period anyway and for the company he would represent just another sunk cost.