Do INGOs pay a globalization penalty?


I came across this graphic this morning in the latest issue of the McKinsey Quarterly and wondered how it might relate to INGOs. (read full article here) I’ve worked for half a dozen INGOs and recognize some of the pain points noted here, in particular the creeping complexity and culture clashes that make maintaining alignment of direction and organizational culture, implementing change programs, and promoting innovation and learning more difficult.

The article highlights a number of weaknesses in high-performing global companies:

  • they are less effective at setting a shared vision and engaging employees around it than are their local counterparts.
  • they find maintaining professional standards and encouraging innovation of all kinds more difficult
  • they find it more challenging than local leaders do to build government and community relationships and business partnerships.

I suppose these findings aren’t surprising, but they do stir some thoughts. In all three areas of organizational health, globalized companies fare worse than locally-focused ones. According to McKinsey researchers, ‘at least 50 percent of an organization’s long-term success is a function of its health, [so] this globalization penalty should be a red flag for high performers with a rapidly expanding international reach.

The primary tension seems to be one of ‘balancing local adaption against global scale, scope, and coordination’. Does this sound familiar? It sure does to me. Another way to think of this is the tension between centralizing and decentralizing decision rights (leadership), technology, systems, standards etc. When should we standardize and when should we encourage diversity? When should the center control and when should it open its hand?

It all reminds me a bit of the central analogy in the book The Starfish and the Spider. There is surprising strength in decentralized organizations (or as the authors of the Starfish/Spider book would content – in leaderless organizations), but there are also tradeoffs to decentralization that limit how far it can be taken in an INGO. In my experience, however, it seems to me that the tendency is to keep the organization too centralized and standardized. Organizations seem better at calculating the savings of standardization and the centralization of key functions than at calculating its costs.  Some of the hard-to-monetize costs may be decreased innovation and creativity, decreased agility and responsiveness, decreased relevance and fit across multiple sites, and increased administrative load and complexity.

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