Move to Locally Led Management Through "Post Expatriates Model" and Improving Global Competitiveness | Insights

There are growing moves to revise management systems dependent on Japanese assignees abroad as the globalization of companies continues to develop. Amid this context, increasing attention is falling on the Post Assignee Model. The Post Assignee Model seeks to streamline costs, accelerate decision making and improve retention rates by utilizing local talent and promoting businesses under local leadership.
In this Insight, we go over changes in the global business environment and the structural issues associated with the assignee model. We then propose the Post Assignee Model as a management approach for increasing local subsidiary autonomy, and explain how ABeam Consulting helps companies realize this approach, while touching on specific case studies.

About the Author

Hiroki Nabeshima

Senior Manager
Kiichi Hirota

Senior Consultant

Changes in The Global Business Environment and the Turning Point for the Assignee Model

Recent years have seen the environment around the global expansions of Japanese companies change dramatically. As developing markets beginning with ASEAN are seeing their positions change from “supplementary locations” to the “frontlines of growth,” the competition for elite local talent is heating up. Companies have entered into an era where a strong brand is not enough to capture personnel. The challenges facing companies have grown more complex than ever before, with diversifying workstyles, wage rises, cost pressures including exchange rates and inflation, and compliance with ESG and human capital disclosure to contend with.

Under these circumstances it is talent that holds the keys to growth. Attracting elite local talent and putting in place the framework to let them shine is essential. Traditionally, Japanese assignees have played important roles in starting up businesses and establishing controls and quality standards. But with diversification in business models and changes in the business environment due to DX, there have been cases where the presence of assignees has even become a factor interfering with locally led management.
On this point, many Japanese corporate HQs are stuck with at most vague notions of what factors are getting in the way of locally led management. In many cases, their thinking does not even get as far as designing a division of roles that says, specifically, what should be done at HQ and what should be delegated to RHQs regional headquarters (RHQs) or overseas subsidiaries. This results in companies persistently failing to take action despite HQ being aware of the need for decentralization. Furthermore, these issues manifest at local subsidiaries in the form of serious side effects such as delays in decision making and barriers to opportunities for developing personnel. It is precisely the existence of these sorts of “invisible problems” in the current assignee model that increase the awareness gap between HQs and subsidiaries, and, by extension, risk bringing on reductions in competitiveness across the whole business.

At ABeam Consulting, we believe that it is utilizing and developing local talent that acts as the driving force behind sustainable business growth in the global development of Japanese companies. This approach also contributes to agile decision making based on market insight and the establishment of long-term management foundations. Moving on from dependence on assignees and transitioning to a truly locally led management structure is thus essential to securing future competitiveness.

The Structural Factors Behind the Failure to Move on from the Assignee Model

Why do so many companies fail to make progress on moving to a Post Assignee Model despite understanding the need to decentralize management? The answer is that multiple structural factors lie behind this.

(1)

HQ-led control culture: Final strategic and decision making power is concentrated in Japanese HQs, leaving local management personnel unable to exercise any discretion, effectively leaving them “unutilized.”
(2)

Lack of strategic development of successor personnel: Designs for transferring responsibility to local personnel when assignments end are lacking, with assignees thus ultimately performing no more than short-term linking roles.
(3)

Presence of unreformed HR systems: Salary, evaluation and promotion systems are not matched to local markets and elite talent are not retained.

These structural factors cannot be addressed through a simple change of system. Instead, the situation calls for a redesign of organizational culture, decision-making processes and the fundamentals of HR management.

What Is a Post Assignee Model and How Does it Increase Local Subsidiary Autonomy?

The structural design that addresses these issues is the Post Assignee Model. The Post Assignee Model seeks to do more than just cut personnel costs or reduce the number of Japanese employees seconded to subsidiaries. Rather, it represents a strategic effort to get the most out of the potential of local talent, achieve regional optimization and realize greater agility by building an ecosystem that lets local management talent work independently (see Figure 1).

The following three points are key for realizing the Post Assignee Model.

(1) Transferring authority to local subsidiaries

The first point is to transfer authority to local subsidiaries. With the intensification of global management, mere pro forma delegation of authority is no longer enough. It is now essential for companies to create systems that allow for local subsidiaries to make decisions autonomously and to take responsibility for running their businesses. Companies where the HQ decides policy unilaterally will see themselves unable to keep up with rapidly changing market environments and diversifying business models.
This is why companies need to not only clarify where authority lies in the execution of business, but also build systems that let local management take the lead in setting and managing their own KPIs even for core operations such as finance, HR and procurement. Putting in place these sorts of “autonomous and distributed” management structures increases the ability of companies to respond agilely to local markets and contributes to improved competitiveness for the company as a whole.
At the same time, it is also essential to think through carefully to what degree HQs should control strategy and operations with a view to global optimization, and not just focus on local autonomy. In other words, designing the balance between autonomy and integration is at the heart of building an effective governance model.

(2) Developing and utilizing local talent

The second point is to systematically develop and utilize local talent. Traditionally, at Japanese companies, the general practice was a “HQ-led model” of succession in which HQ would select and dispatch management successors unilaterally. This approach failed to adequately reflect the local business environment and the state of the talent pool, and had limits in terms of development speed and diversity of talent utilization.
Amid this context, recent years have seen a “dual management model,” in which HQs and RHQs divide responsibilities, be effective. Under this model, HQ would formulate principles and frameworks such as the leadership model and evaluation standards, ensuring companywide consistency and good governance. RHQ, meanwhile, would take the lead in selecting candidates, planning their development and making proposals for how to deploy them in line with local markets and the HR situation, enabling more dynamic talent utilization.
The pivot to this hybrid framework, defined by “HQ guidelines x RHQ operating capacity,” expanded the field of vision of leaders responsible for local management and became key to underpinning the sustainable growth of businesses.

(3) Localizing systems to reflect culture and values

The third point is to localize systems to reflect local cultures and values. In order to have local employees developed by the company serve for a long time, it is essential to design systems that are attractive based on local culture and values. If companies ignore ethnic perspectives, religious considerations and differences in life events, their systems will become mere formalities and elite talent will end up leaving.
Consequently, it is important for companies to redesign their internal systems, including evaluations, remuneration, leave and benefits, to be in line with local markets and cultures.

How ABeam Consulting Supports Companies in Realizing a Post Assignee Model

ABeam Consulting helps clients realize a Post Assignee Model by working side by side with them to provide necessary support for decentralizing their companies, covering everything from revising the designs of their systems to designing organizations and positions, and developing personnel and implementing retention measures. We build systems that allow local subsidiaries to function autonomously and drive the fulfillment of a Post Assignee Model through multifaceted support in line with the conditions of each client.
In the following section, we will go over in detail how ABeam Consulting supports clients, touching on specific examples.

Designing Organizations and Positions to Accelerate Locally Led Business Promotion

ABeam helps companies optimize how they design organizations and positions to accelerate locally led business promotion.
Company A, which was developing its business globally, had failed to move on from a Japanese management style, and it had become typical for seconded HQ employees to have numbers of subordinates far beyond the appropriate limits of the company’s span of control. At first glance, this way of running the organization could be interpreted as “the assignee taking responsibility for leading the local subsidiary.” But, in fact, it was causing the following serious issues.

Stalling talent development: Because excessive management responsibility was concentrated in a single assignee, opportunities to adequately guide and develop subordinates were passed up, interfering with the growth of local employees.
Delayed utilization of local managers: Because important decision-making powers and authority were concentrated among assignees, local employees struggled to get management experience and the company failed to make progress in developing and utilizing local leaders.
Compliance risks: With management stretched, the risks of fraud, misconduct and deterioration of the workplace environment going undetected increase, rendering this a major issue in terms of corporate governance.

In response to this, we established “Head of X (HoX)” local manager positions and clearly defined selection criteria, responsibilities and treatment for them. We organized systems in which each department and team could autonomously set its own goals and drive operations using on-the-ground judgment.
The background to these measures was the fact that many companies stop at conceptual measures such as “defining the skills needed for next-generation leaders” and “creating development roadmaps,” but fail to achieve adequate development impacts in practice. The key success factor (KSF) for producing real outcomes is not merely defining skills, but combining organizational design with assignment of positions to structurally facilitate the acquisition of those skills. We believe it is important to align skill definition, organization/position design and system design and get HR measures functioning as sustainable initiatives on the ground, so that such efforts do more than just “exist on paper,” as companies often complain that they do.

Designing and Fully Establishing Attractive HR Systems to Attract Local Talent

To retain local talent for the long term, it is essential for companies to design systems that are attractive to local talent in line with local cultures and values. ABeam Consulting helps companies design evaluation, remuneration and benefits systems that reflect local conditions and the needs of local employees.
Company B, which was developing its business globally, was facing issues in properly evaluating young and already-capable talent based on their traditional systems, which prioritized seniority and years of service. In recent years, fairness of remuneration and a sense of acceptance and transparency about outcomes have been elements that influence career choices and retention. Increasingly, traditional systems fail to meet those expectations.
With this awareness of its local employees, the company sought to fully adopt a hybrid design approach that combined “local leadership x HQ governance” in updating its HR systems. In the process of designing new systems, local representatives took center stage in debates around the direction and details of systems, with the local team leading the way in sites for engagement with local employees such as seminars and trainings for evaluators. HQ, meanwhile, took charge of parts of this process that significantly affect management such as remuneration ranges and promotion standards, ensuring companywide consistency and transparency, while still maintaining a locally led face for the project. HQ also dispatched HR manager class personnel and provided resources to support the system design project, taking on the role of bridging the local subsidiary to global insights and best practices.
The company also sought to do more than just design systems, working to connect them to day-to-day operations and consolidate their practice. HQ engaged in repeated companywide and individual FAQ sessions and careful briefings, and put in place measures to smooth the transition to the new system, while connecting evaluation and remuneration processes to the local management cycle and limiting the operational burden this involved.
As a result, young and high-performing employees saw greater retention and opportunities for growth, while the process promoted renewal in the organization as a whole through clear career paths and talent rotation. The combination of “HQ controlling key points while locals take the lead, rooted in their culture” was central to a system that generated buy-in and trust from local employees.

Succession Planning for Sustainably Developing Next-Generation Leaders

Recent years have seen growing moves among global companies seeking to enhance their succession planning, centering on a theme of “sustainably developing next-generation leaders.”
Company C, which was developing its business globally, aligned its HQ and RHQs so that it could centrally visualize its talent positions and succession candidates across all global regions. The company put in place mechanisms to strategically promote the development and utilization of this talent.
The stand-out features of this initiative can be summarized in the following three pillars.

1. Surfacing positions and candidates on the global level

The company integrated the management of succession candidates using a global dashboard, with this previously having been divided across locations and countries. It thus created a system that allowed it to visualize vacancies in key positions and the fill rate of candidates, enabling RHQs and HR in each country to promote development planning based on shared data. This increased the flow of talent between locations and allowed the company to quickly deploy people in an optimal way.

2. Appointing managers charged with developing successors

The company appointed a manager charged with overseeing the process from selecting candidates to executing on plans to develop them for each key position. The company built a system in which head of business unit class positions were overseen by regional heads and CFOs or CHROs, while HQ and business unit heads supported the process as advisors. This promoted development from a perspective closer to the ground, combined with consistency across the company as a whole.

3. Finding high-potential talent early and developing them gradually

The company created a tiered categorization for next-generation executive leadership candidates as high-potential talents and provided opportunities for development in line with their career stages. It deployed a selective development program running from the section head tier to the executive tier. By sending such talent on MBA programs or providing them with opportunities to gain overseas experience, the company fostered the management perspectives and transformational drives it needed in global leaders.
The company thus accelerated the formation of a global leader pipeline by establishing a shared governance model, in which HQ was responsible for setting overall policies and standards, while promoting execution of initiatives on the ground by RHQs.

Summary

The traditional assignee-dependent model has played its role in the globalization of Japanese companies. But with change in the business environment accelerating, the limitations of that model are becoming clear. It is precisely by building systems to utilize and develop local talent, and to allow them to manage subsidiaries autonomously that companies will be able to achieve outcomes such as faster decision making at said subsidiaries, streamlined costs and better retention of elite talent. This means it is essential for companies to not merely reduce the number of employees they are assigning to overseas subsidiaries, but to secure their future competitiveness by implementing a Post Assignee Model that increases autonomy at subsidiaries.

ABeam Consulting provides total support to companies seeking to transition to locally led management through multifaceted support that connects skill definition, organization/position design and system design. Going forward, we will continue to strive to play the role of a transformation partner to improve the business competitiveness of our clients and help them implement human capital management that lets them succeed in global markets.

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