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Why companies fail: localise decision-making and empower regional and country managers

One of IBM’s regional bosses for Central Eastern Europe, Middle East and Africa (CEEMEA) says he constantly has difficulties moving corporate decision-making forward. Senior management is slow to allow loca lmanagers to step up business development. He comments:
We should just let our country managers run the show as they see fit based on local circumstances. We as a centre can provide guidance, all kinds of support and teach them lessons of success and failure from other markets.
 It is clear that companies that give more decision-making power to their local managers – particularly in marketing, sales, pay and bonuses- usually do better than the centralisers. However, companies that leave all the decision-making to their local partners are often just saving on costs. It is local underinvestment that explains what distinguishes losers from winners. Underinvestment is often a result of focusing on short-term rather than longer-term results, especially in listed companies. Roberto Goizueta, former CEO of Coca-Cola, who championed investments in emerging markets, was famous for taking issue with analysts when they criticised the company for its quarterly earnings and “reckless investments”. He also made his regional managers accountable for three-year results (not one quarter or one year). When Goizueta took over as CEO, he was stunned to discover how little say the company had about how its product was marketed around the world because of its reliance on partners to look after such things.

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