The Current and Future Role of Regional Headquarters for Central & Eastern Europe

Transcription

1 The Current and Future Role of Regional Headquarters for Central & Eastern Europe Arnold Schuh Director - Competence Center for Central & Eastern Europe 1. European Headquarters Congress, Vienna, October 5, 2012

2 The researchers Research project leaders: Arnold Schuh, Competence Center for CEE Jürgen Mühlbacher, Institute for Change Management and Management Development The Master Class CEE : 2 Top Row: Alfons Priessner, Dimitri Paunov, Ilja Morozov, Katharina Zeiler, Mirela Frecateanu, Aleksandra Lukasik, Alexandra Kleemann Middle Row: Schuh Michaela - Role Weichselbaum, of CEE-HQ Marta Glowacka, Tantiana Rosik, Vladka Adamenkova, Patrick Madl, Ulrike Würflingsdobler Bottom Row: Elisabeth Graf, Eva-Maria Wallner, Martin Hrusovsky, Marcus Lebesmühlbacher, Melina Zdravkova, Andrea Markova, Isaac Acquah

3 CEE headquarters An Austrian specialty CEE-HQ have played an important role in the going east of Western multinational firms since the fall of the Iron Curtain. Geographic/mental proximity to region, already existing business relations and visionary managers gave Austrian subsidiaries a head start. More than 200 CEE-HQ (e.g., Henkel, Siemens, Canon, Rewe Int l., Mondi, Banco do Brasil, Western Union) are located in Austria about as many as in Czech Republic, Hungary, Slovakia and Poland together. CEE-HQ is either a spin-off of an Austrian subsidiary, a newly founded unit or the result of a takeover of firm with CEE presence (e.g., Brau Union - Heineken, Volksbanken Int l. Sberbank). 3

4 Dynamics in CEE and internal developments drive discussion about role of CEE-HQ New constellation leads to the question if the role of CEE headquarters is still the same or if changes in the regional management model have taken place. Dynamics in CEE 2008: End of long boom period CEE still suffers from global financial crisis CEE lost growth region status Growing heterogeneity among countries Role of CEE-HQ? Internal developments From expansion & building to running a regional group More autonomous CEE subsidiaries Differentiated structures in MNCs Virtualization Globalization 4

5 What is the current and future role of regional headquarters for CEE? Our main research questions are: What are the main characteristics of regional headquarters for CEE in Austria? What is their current role? What is the regional and functional scope of the mandate? How is the CEE headquarters organized? Which changes in the role can we expect? How do CEE-HQ justify their existence and add value to the corporate group? 5

6 Research design Review of extant literature on regional HQ Insight talks with corporate partners 11 case studies of CEE-HQ Online survey (32 respondents) Data analysis & interpretation December March April July May July 6

7 40% of CEE-HQ belong to German parents Characteristics of sample (online): Industrial goods and consumer goods are the dominant industries in this sample. A firm size of employees, that is staff dedicated to RHQ tasks, is typical for a CEE-HQ. 7

8 Most CEE-HQ control more than 20 countries Characteristics of sample (online): More than half of the companies entered CEE before For nearly 80% of the companies CEE sales represent up to 15% of corporate group sales. 28% of companies control only 1 5 national subsidiaries, while 38% control more than 20 country organizations. 8

9 CEE headquarters are typically located at 2 nd or 3 rd hierarchy level A CEE-HQ is an organizational unit that acts as an intermediary between global/european headquarters and country operations in CEE and is located in or next to the region. European Companies Non-European Companies 2 nd Level 3 rd Level Global Headquarters CEE Headquarters CEE countries Global Headquarters EMEA CEE Headquarters CEE countries 9

10 Growth is still the main motive for a presence in CEE What is CEE's role in corporate strategy? CEE is a... Source of growth Source of profitability Source of human resources Production location Source of supplies 1,5 2,0 2,5 3,0 3,5 4,0 Importance 1 = not important; 4 = very important 10

11 Central and Southeast European countries are typically part of the regional mandate In..% of cases the following countries are covered by the mandate: 100% 90% Czech Republic, Hungary, Slovakia 80% Croatia, Slovenia, Romania 70% 60% <50% Bulgaria, Serbia Bosnia-Herzegovina, Poland, Macedonia, Montenegro, Moldova Albania, Ukraine, Russia, Kazakhstan, Turkey, Baltics 11 Online survey: Which of the following countries are covered by your CEE mandate?

12 Countries less frequently covered by a CEE mandate rank high in importance Most important existing markets Turkey 100% Russia Poland 85% 91% Czech Republic 73% Romania Hungary 41% 46% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage of companies Online survey: Which of the countries where you are present would you define as your most important markets? 12

13 Vienna is still an attractive location for CEE headquarters In Vienna, there are many multinational firms present and you can find people with the right skills. Moreover, its infrastructure and geographical proximity to the region are real assets of the Austria s capital. 13 CEE has always had a marketing problem...and Vienna is the right place for marketing it. You can reach almost each part of the region within four hours, either by plane or by car. Vienna is a good place to recruit qualified staff. Austria has a great awareness of the region s mentality. Austria was given a gift 20 years ago when the Iron Curtain fell we need to see how we can hold on to this. When people ask me, why we do not have a CEE headquarters somewhere in CEE... I ask them: Where else do you want to put it? Source: Case studies

14 Majority of CEE-HQ is still organized as little replicas of global HQ Frequency Organizational model Description 47% The Fully- Fledged Regional Headquarters In this most comprehensive form your organization is the owner of the CEE-subsidiaries, carries out strategic planning, coordination and management tasks in all key functions, provides central services and is an important manufacturing site for the region. 37% The Regional Management Model In addition to reporting tasks your organization is also engaged in operative tasks for the region such as coordination and steering of regional sales, key account management, marketing and human resources. You also carry out selected central support for the region (e.g. coordination of IT, staff training). 16% The Regional Reporting Unit Your organization is mainly responsible for planning, budgeting and reporting to corporate headquarters for the CEE region, or is assisting the CEE-subsidiaries in fulfilling these tasks. 14 Online Schuh survey: - Role Please of CEE-HQ choose one of the following descriptions that fits best the current situation of your organization.

15 Controlling & reporting, regional strategy development, marketing & sales planning and staff training are the main tasks 15 Online survey: Which of the following HQ functions are carried out by your RHQ for your subsidiaries in CEE?

16 Performance management, regional strategy development & representing the region adds most value Major contributions of RHQ to corporate group performance Helping improve the performance of subs. Developing a regional strategy Spreading best practices across the region Representing the region to GHQ Coordination of business activities Exercise financial control & budget allocation Ensuring compliance with group standards/policies Transferring knowledge from GHQ to subs. Scouting & exploring new business opportunities Exploiting synergies by pooling of resources Assisting subs. in business development Standardize processes throughout the region Support developing a regional culture Transferring knowledge from subs. to GHQ 2,8 2,9 3 3,1 3,2 3,3 3,4 3,5 3,6 3,7 3,8 Importance of contribution 1 = not important; 4 = very important 16 Online Schuh survey: - Role How of do CEE-HQ you rate your contribution as a regional headquarters to the corporate group for the following tasks?

17 CEE-HQ are faced with cost pressure and more centralization Impact of different forces on the organization of CEE activities Pressure to reduce costs Trend towards centralization in corporate group Loss of attractiveness of CEE v-a-v other EMs Need to get closer to country markets Rise of the virtual organization in int'l management Trend towards specialization (COE, SSC) Growing heterogeneity among CEE markets Large countries want to deal directly with GHQ Growing economic nationalism Emancipation of local subsidiaries Declining value of a specific CEE competence RHQ hinders implementation of global strategy Disagree Agree 1 1,5 2 2,5 3 3,5 Perceived impact 1 = strongly disagree; 4 = strongly agree 17 Online survey: Schuh Several - Role of forces CEE-HQ put some CEE-HQ under pressure today. Please state if the following forces have an impact on the organization of your CEE activities.

18 Future brings more work but less decision-making authority Expected changes in the CEE mandate in next 3-5 years Product portfolio 1,57 Functional scope 2,00 Regional scope 1,93 Financial responsibility 2,03 Decision-making authority 2,20 1 More 2 Same 3 Less 18 Online survey: When you look 3-5 years into the future what major changes, if any, in the mandate and organizational Schuh - Role of model CEE-HQ of the regional headquarters would you expect?

19 Balancing global vs. local views and complexity reduction justify existence Better understanding of CEE markets Transformation of global strategies to regional level Main arguments justifying the existence of CEE-HQ Complexity reduction for global HQ Synergies through regionalization Online survey/open-ended question: What are, in your opinion, the main arguments justifying the existence of a CEE HQ today? 19

20 CEE-HQ still play a constructive role in regional management Slower growth rates and disillusion with progress in CEE. Need to improve efficiency and profitability dominates management agenda and calls for optimization of regional structures. More strategic decisions are made at a higher level. CEE-HQ add most value by integrative tasks (coordination, strategy, representation) and assisting subsidiaries in performance improvement and business development. For winning or keeping a regional mandate the motivation, performance record and competence of the management group is decisive. Summing up, CEE-HQ still plays a constructive role in regional management they have not become obsolete. 20

21 Directions of future development of the role of CEE-HQ Providing assistance & representing smaller operations to global HQ Entering new countries even beyond the boundaries of CEE Orchestrating a regional network 21

22 Thank you to our partners Corporate partners of The Master Class CEE Headquarters Austria as our partner in the online survey 22

23 Contact Competence Center for Central and Eastern Europe Augasse 2-6, 1090 Vienna, Austria Ass.Prof. Mag. Dr. Arnold Schuh Director T arnold.schuh@wu.ac.at 23