Attracting the right type of attention

Dec 05 2006 by Brian Amble Print This Article

UK companies are constantly being urged to be more innovative, more competitive and to close the productivity gap with their economic rivals.

But whether or not this happens is going to depend to a significant extent on the four out of 10 private-sector companies that are fully-owned subsidiaries of foreign multinationals.

The extent to which these subsidiaries are able to meet the economic and competitive challenges that face the UK is explored in a new report by the Advanced Institute of Management Research (AIM), "Attention HQ: Strategies for UK Subsidiary Companies".

They key message to emerge from the research is that much depends on how their UK-based management handles their relationship with the non-UK based parent company, and in particular whether they get enough - and the right kind - of attention.

"The challenge for the subsidiary country managers in the UK is this," said the report's co-author, Julian Birkinshaw, AIM Senior Fellow and Professor of Strategic and International Management at London Business School.

"How do they manage the relationship with HQ so that they attract sufficient resources and decision making power, allowing them to determine the future of the subsidiary in a way that benefits both the parent company and the UK?"

This is where the role played by UK subsidiary managers becomes so important, because, as the AIM research makes clear, there are a number of things that they can do to ensure that they continue to make a positive contribution to their companies and to the prosperity of the UK.

At the same time, however, the research suggests that UK subsidiary companies are hamstrung because they have limited autonomy to act in their own interests.

For example, they do not have the same degree of freedom as their counterparts in Canada Ė the only G7 country currently running a budget surplus Ė or Australia, several places above the UK in the World Economic Forum's Global Competitiveness Index.

What this means in practice is that managers running UK subsidiaries may be highly constrained in their ability to shape their own strategy.

The research also suggests that the type of attention the subsidiary gets from the parent company - and how it manages that attention - is critical.

"Attention" may seem like a simple concept, but in this context it emerges as highly complex, with the signals that shape the degree of attention given by HQ to a subsidiary coming via two channels.

External stimuli come via industry reports, media companies etc., regardless of any action or inaction on the part of the country managers. Internal stimuli come via the organisation, bottom up through regular reporting procedures, or through the active lobbying of particular executives.

Moreover, there are six forms of attention: top down/bottom up; directive/supportive; instrumental/symbolic.

High performing subsidiaries have higher levels on all positive forms of attention (bottom-up, supportive, symbolic), while poor performing subsidiaries have higher levels on all negative forms (top-down, instrumental, directive).

But despite the challenges, the report suggests that there are winning strategies for managing both attention and the relationships with HQ that UK subsidiaries can adopt.

However the dilemma for country managers of UK subsidiaries is that by increasing attention, they risk losing autonomy through the involvement of the parent company.

Nevertheless, the AIM research suggests that it is possible to both increase attention and autonomy - as long as the correct strategy is adopted.

These winning strategies include improving the subsidiary's track record to establish credibility in the eyes of the parent company, taking the initiative to identify new market making opportunities and maintaining exposure to show that local initiatives can contribute to the greater good. Subsidiaries should also endeavour to be a good citizen so as to demonstrate identification with the organisation as a whole.

Furthermore, the research says, managers of UK subsidiaries must act as global networkers and profile builders, entrepreneurs and catalysts for change, as well as being advocates and defenders of country operations.

"If UK subsidiaries of MNCs are to thrive, the executive team in the UK must manage the issues of attention and autonomy with their HQ effectively," says Julian Birkinshaw.

"If not, attempts to improve the long term competitiveness of the UK may prove futile."