Management in Action  >>  Strategy

Ever since the Czech Republic and other post-Communist countries have opened to outside investment, many foreign companies – in particular American and European ones – have mainly sent in their own people to run operations. The problem is that these managers are usually incompetent and bush-league, and have only one skill, an ability to speak the mother tongue. They add nothing, and end up relying on the innate loyalty and enthusiasm of local employees to get things done. Why are companies so foolish this way?

They’re not foolish – they’re just uneasy. Like American tourists who eat at the McDonald’s on the Champs Elysée or French tourists who bring their own wine into Disney World, they’d rather have comfort than authenticity. Now, “preferring the familiar” may not be a principle of great management, but it’s certainly part of human behavior.

And look, importantly, the problem you describe is universal. It is not unique to American and European companies moving into the post-Communist world. From the beginning of modern globalization, companies have tended to “stick with their own kind” when opening up foreign operations. When the Japanese first moved into the United States or anywhere else for that matter, they typically installed Japanese bosses. And the same pattern is true of the German, British, and many other nationalities. They all want their own, trusted people in charge of far-flung operations, especially at the beginning, when so much is unknown about the local environment.

The key phrase here is at the beginning – because trouble of the type you describe begins when foreign companies stay in comfort mode and keep their own people in charge for longer than a few years.  This tactic misses a real opportunity. Why? Because local people always know their own country better; they know how its government works and how its people think. They know which local universities produce the best minds; they can understand what people on TV, in living rooms, in bars, and on the factory floor are really saying about the country’s political and economic future. They can always “work the system” with more insight and ease. And that’s why good companies know that the sooner you put local executives in charge of foreign operations the better. And the best companies work hard from the day they arrive to find and develop local talent with global training programs, creating a chock-full pipeline of middle managers with a shot at the top.

Without doubt, there will always be global companies that don’t move quickly enough to turn management over to local executives. But eventually, these companies will suffer from real brain drain, as smarter companies move in and steal the local talent for their own expanding operations. In thriving Eastern Europe, as in Asia, the competition for professional management is fierce. No foreign company can afford to keep local employees in lower-level positions, beneath the controlling cloak of executives from the “motherland.” The local talent will leave for companies that offer growth and a future, taking their knowledge with them.

So while we understand your frustration with the “foolish” companies in your region who continue to value comfort over a leap into the unfamiliar, don’t worry too much. This problem is typically self-correcting. In time, good companies put local managers in charge. They have to.