Nirmalya Kumar

Phanish Puranam

Two summers ago, Frits van Paasschen, the CEO of Starwood Hotels, was talking to his wife, Laura, about China. With 70 properties in operation there and 80 more being built, the People’s Republic had just become Starwood’s second-largest market, after the United States. Van Paasschen jokingly said, “It’s almost like we should move our headquarters there.” Laura’s response, in a nutshell: Perhaps you should.

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What Kind of Multinational Structure Fits Your Company? This two-part diagnostic tool can help you calibrate how geographically clustered or dispersed the key capabilities of your businesses are, and gauge whether your organization can collaborate seamlessly across geographies. First determine, on a scale from 1 to 5, whether your business has highly clustered key capabilities (skills and resources mostly found in one region, often the home region); or moderately clustered (most resources and skills are found in one region, although different regions may possess advantages for different functions); or highly distributed (most skills and resources are spread across multiple regions). Then, on a scale from 1 to 5, determine how competent the people in your organization are at working closely across geographies. Not very competent, effectiveness is confined within specific geographies, functions, and product divisions; or moderately competent (people are somewhat effective at working across geographies); or highly competent, where most or all of the key ingredients of collaboration are in place. By determining your organization’s score on these two scales and plotting them on the accompanying graph, you can identify an appropriate global structure for your company. Companies that score lower on both geographic dispersion of capabilities and competence in working across countries require a front-end/back-end structure. Companies that score in the mid range on both scales require a matrix or a transactional structure. Companies that are both highly distributed in their capabilities and highly competent in working across countries require a T-shaped global structure.

The organizational structures of many multinational corporations are inadequate to the task of capitalizing on opportunities in emerging markets. Locating customer-facing processes in each country&#8212;and even using transnational structures that exploit location-specific advantages&#8212;just doesn&#8217;t cut it anymore. So argue Kumar and Puranam, of London Business School. The authors show how the growth of China and India as lead markets and as talent pools, coupled with advances in technology, enable companies to optimize their organizations by segmenting R&#38;D both vertically and horizontally, thereby creating T-shaped structures. 
The greatest challenge of the T-shaped structure is managing integration across countries. The solution is to allow your corporation&#8217;s center of gravity to shift eastward. That means globalizing the top management team, moving headquarters outside the home country, and genuinely valuing the cultural shifts that those two changes require. Companies such as GE, Intel, and AstraZeneca have had some success in these endeavors, and all multinationals have the potential to secure the advantages of deploying a T-shaped structure.

Have You Restructured for Global Success?

The organizational structures of many multinational corporations are inadequate to the task of capitalizing on opportunities in emerging markets. Locating customer-facing processes in each country—and even using transnational structures that exploit location-specific advantages—just doesn’t cut it anymore. So argue Kumar and Puranam, of London Business School. The authors show how the growth of China and India as lead markets and as talent pools, coupled with advances in technology, enable companies to optimize their organizations by segmenting R&D both vertically and horizontally, thereby creating T-shaped structures. The greatest challenge of the T-shaped structure is managing integration across countries. The solution is to allow your corporation’s center of gravity to shift eastward. That means globalizing the top management team, moving headquarters outside the home country, and genuinely valuing the cultural shifts that those two changes require. Companies such as GE, Intel, and AstraZeneca have had some success in these endeavors, and all multinationals have the potential to secure the advantages of deploying a T-shaped structure.

Have You Restructured for Global Success?

Summary.

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