Such steps are essential because most multilatinas — 85 percent of companies in one of our studies — provide their international operations with only the minimum of independence. Their ambivalence is clear. “Our main challenge is to speed up the international expansion, and we will be able to achieve this only by delegating more to the field,” said one CEO. “But I am not sure I want to give [country managers] more authority.”
Why this reluctance to empower? Many companies have enjoyed success with the centralized management style of an owner or CEO. This leader is often reluctant to share power or may simply enjoy playing a direct role in day-to-day operations. A disinclination to delegate is also often exacerbated by the company’s limited experience with new businesses or geographies and by a shortage of managers with the necessary skills and consistent track records to lead international businesses. In addition, due to immature processes and systems, most multilatinas lack the minimum control mechanisms needed to manage decentralization. These factors tend to lead to inconsistent relations between headquarters and the field. Periods of delegation are often followed by periods of strong central control, especially when results fail to meet expectations.
The path to internationalization for multilatinas is demanding, often forcing them to fight in unfamiliar environments. But if they truly learn to master the complexities of governance, multilatinas will win access to capital to sustain expansion and at the same time increase their ability to navigate the myriad obstacles that stand in the way of their success.
Paolo Pigorini is a partner with Booz & Company based in Rio de Janeiro. He specializes in major transformation and reorganization services, including change management, business models, and organizational design.
Arthur Ramos is a partner with Booz & Company based in Sao Paulo. He works with companies in the energy sector on merger strategy and integration, regulation, governance, and organization.
Ivan de Souza is a senior partner with Booz & Company, a former member of the firm’s board of directors, and head of the firm for south Latin America. He is based in Sao Paulo, where he specializes in strategy, marketing, and organization services for financial institutions and conglomerates.