Multi­na­tional orga­ni­za­tions ordi­narily make a choice to cham­pion one of two main approaches to conducting their oper­a­tions. A global strategy that creates homo­geneity across busi­ness outlets is one option. The other approach segments the orga­ni­za­tion and gives each branch the autonomy to act according to their indi­vidual context, with little input from a central HQ.

But what happens when an orga­ni­za­tion wants the best of both? Is it really possible to have an orga­ni­za­tional culture that is both global and local?

Voda­fone CEO Vittorio Colao believes this to be some­thing that is within reach for global orga­ni­za­tions. Read on to find out more about how he managed to achieve this and how this model fares when prob­lems arise — prob­lems like millions of dollars found missing in accounting…

Voda­fone: A Global Telecom­mu­ni­ca­tions Story

Started in 1991 in the UK, Voda­fone grew to become one of the leading providers of voice, data, and phone services across Africa, Asia, Europe, and Oceania. Head­quar­tered in London, Voda­fone oper­ates in 25 coun­tries, with an addi­tional 47 part­ner­ships giving them some of the most exten­sive coverage in the world. 

About a decade ago, Voda­fone always appeared to have a common iden­tity world­wide. In reality, regional branches oper­ated in silo. Never­the­less, there was an expec­ta­tion that as a global company, there should be a level of stan­dard­iza­tion across busi­ness oper­a­tions. Recog­nizing a need to change in this area, Voda­fone moved to get a global leader that would drive this agenda forward.

“Nobody is Global”: Vittorio Colao

In 2008, Vittorio Colao took over as CEO of Voda­fone. His mission was to bring cohe­sion to a very frag­mented busi­ness model. While there was some collab­o­ra­tion that existed between the Euro­pean branches of Voda­fone, it was limited. Across conti­nents, there was little to no collab­o­ra­tion at all. 

Colao however, was aware that the customer is king. In order to retain their place in the market or expand further, Voda­fone needed to remain a company that was able to adapt to the needs of their local customers. The needs of customers in Tanzania would differ, some­times massively, from the needs of customers in Ireland. Expec­ta­tions would be different based on socio-economic factors. Clearly, a ‘one size fits all’ approach would not solve the issue. The company was global, but customers are not. 

Having said that, in order for Voda­fone to capi­talize on the power of a strong brand, there needed to be some­thing that united all busi­ness oper­a­tions under a single banner and behind a common purpose.

Colao’s answer to this? 

“The Voda­fone Way”: The Global-Local Tension

The Voda­fone Way described Colao’s vision of a company that would have “inter­na­tional values and local roots”. With this ethos to underpin all the branches across the world, Voda­fone hoped to instill a code of conduct that would govern the strate­gies of Voda­fone CEO’s while giving them the autonomy and the flex­i­bility to respond to local market needs appropriately.

The overall vision and values would come from central head­quar­ters, but the inter­pre­ta­tion and imple­men­ta­tion of the vision were flex­ible, providing regional CEOs could justify their strategy. 

As an approach, “Inter­na­tional Values and Local Roots” faced some crit­i­cism. Described as a “strange beast”, Colao’s philos­ophy of main­taining a “global-local” tension left a grey area that not all people were comfort­able with. 

For middle managers, for example, it was clear that they often had diffi­cult choices to make; should they prior­i­tize a global agenda or a local agenda? What would happen if the market shifted and central HQ was slow to respond? Was there ever such a thing as giving too much autonomy?

On the other hand, the regional CEOs loved the autonomy that allowed them to make high-level deci­sions and achieve success in their unique contexts. If they decided to chal­lenge some­thing from HQ, they knew that they would need to have a water­tight busi­ness case in order to do that. Marketing campaigns, for instance, were local­ized to suit customer tastes, giving Voda­fone an extra edge.

Colao himself believed in this philos­ophy whole­heart­edly. It empow­ered local CEOs to deliver their best work and achieve incred­ible things. Main­taining that “global-local” tension, however, became a chal­lenge when it came to disci­pli­nary matters. 

How is fair­ness achieved when there are so many different contexts to consider? One such situ­a­tion put him to the test, and with a whole company watching, Colao had some diffi­cult deci­sions to make.

Accounts Gone Wrong

It had been brought to Colao’s atten­tion that two major accounting discrep­an­cies had been discov­ered. In one of the cases, the audit committee had uncov­ered a €60 million gap in the books. After exten­sive inves­ti­ga­tion, it was discov­ered that this mistake had been caused because figures had not been checked manu­ally earlier in the accounting process. The people involved weren’t in any way mali­cious in their intent. 

It was an expen­sive mistake, but an honest one. Colao was aware that the audit committee expected the reper­cus­sions for the employees involved to be severe.

The second discrep­ancy was much more sinister. €7 million appeared to be missing but the amount itself was too little to be picked up by the audit committee. After a series of checks, it became evident that invest­ments and costs had been misre­ported. Although it was common prac­tice in the industry to delay the reporting of invest­ments and costs for the future, there seemed to be no reason for the employees involved to do such a thing. It wasn’t a method that was widely prac­ticed at Voda­fone, so justi­fi­ca­tion was needed in order to break protocol this way. None was forthcoming.

In addi­tion to this, as inves­ti­ga­tions continued, it became increas­ingly clear that the employees were, in fact, bene­fit­ting from the missing money. There was defi­nitely a hint of dishon­esty in the air.

So what to do? 

With the whole company watching, how would the “Voda­fone Way” perform in deliv­ering a just and fair response to these matters? Voda­fone was now a €46.6 billion company, so clearly the strategy was working exter­nally. But the ques­tion remained; how could Colao stay true to his belief in “Inter­na­tional Values and Local Roots” while getting the company house in order and main­taining the culture of trust and integrity he had worked so hard to build?

The answer to that lies in Vodafone’s commit­ment to a core value system.

The Power of Values

Creating fair­ness within a dynamic of global-local tension, espe­cially in matters of a disci­pli­nary nature, can be a diffi­cult thing to achieve for a global leader. What makes it possible is a strong set of values. You’ll have noticed that the ethos of “The Voda­fone Way” is “Inter­na­tional Values and Local Roots”. Essen­tially what that means is that Voda­fone, as a global company, is committed to a single value system but dele­gates the autonomy of indi­vidual markets to inter­pret that value system in a way that makes sense in their unique context.

Why is this important?

A strong set of values is not about having catchy buzz­words that look great on marketing mate­rials. They form the bedrock of every deci­sion that gets made and every action that is taken as a result of those decisions. 

Values become the lens through which leaders and employees see and monitor their own actions and the actions of others. If the “Inter­na­tional Values” do what they are meant to and provide a guiding set of philo­soph­ical prin­ci­ples for leaders and employees to inter­nalize, then in theory, “local roots” busi­ness strate­gies will fall within the bound­aries of the Voda­fone Way value system. 

It’s risky, but it’s genius. 

On the surface of things, local leaders are given autonomy in a system that looks like everyone can do as they please. In reality, a moral code helps leaders and employees work on strategy in a way that conforms to a cultur­ally tran­scen­dent standard. 

So let’s look at how the “Inter­na­tional Values” might help Vittorio Colao deal with these two signif­i­cant accounting errors.

Incom­pe­tence or Dishonesty?

Having ingrained values should help Colao gain some clarity around what the appro­priate disci­pli­nary action should be. Are accounting issues integrity-based or competency-based?

Dealing with Incompetence 

Of course, Colao has much to consider here. The audit committee is there to look at major accounting discrep­an­cies. Natu­rally, having gone through the labo­rious process of inves­ti­gating this case, they might want to see a leader like Colao take drastic action in the form of dismissals or demoting those responsible.

But while the prac­tical duties of the employees involved have not been discharged correctly, gaps in their knowl­edge can be filled. A look into why the proper checks weren’t carried out needs to take place, other­wise, there’s a large risk that the same issue could crop up again at a different time, with different employees. Perhaps the process was not clear and the managers did the best they could with the infor­ma­tion they had.

If the issue is down to compe­tency, or lack thereof, then read­justing bonuses seems like a fair response. That’s a natural result that can be expected for not deliv­ering work to the highest stan­dard. €60 million is a large sum of money but the employees involved are incom­pe­tent, not dishonest. 

This softer approach seems coun­ter­in­tu­itive, but it sends a vital message across the busi­ness that although mistakes are not rewarded, Voda­fone as a company doesn’t just give up on their leaders and staff that embody the company values and have a track record of good char­acter. The benev­o­lence conveyed when a company chooses “a second chance” approach, is good for morale. It also stops fear creeping in, which totally kills inno­va­tion; this would be detri­mental to the “Inter­na­tional Values and Local Roots” strategy because people would be too afraid to try some­thing new, for fear of it going wrong and them losing their jobs.

Yes, the audit committee would be expecting hell­fire and brim­stone, but global leaders have to have the bigger picture in mind.

Dealing with Dishonesty

The other case, on the face of it, looks signif­i­cantly smaller. €7 million in compar­ison to the other can feel like a drop in the ocean. If Colao wants to take a softer approach with the employees who made a €60 million mistake, then surely these guys should just get let off as well?

Not so. The impor­tant thing to note here is that it looks as though dishon­esty and personal gain are at the heart of the matter. 

This is a problem.

It’s a problem because this accounting case is indica­tive of a dishonest mindset. It’s a direct assault on the company values of integrity and trust. Allowing people with that kind of mindset to continue in the orga­ni­za­tion would send a message that the company turns a blind eye to dishon­esty and theft. It’s €7 million worth of accounting damage at the moment. But what it could become, is a company-wide, industry renowned scandal that would damage Vodafone’s cred­i­bility in the eyes of competi­tors and customers. 

This might not be the case that achieves that level of infamy. But you can guar­antee that some­body else would raise the dishon­esty bar and go for even greater amounts of money; this type of behavior only esca­lates if not rooted out.

As a global leader, Colao is balancing the expec­ta­tions set not only by the culture of Voda­fone but by the cultures of the people that make up all Voda­fone employees. Trust and integrity are universal values that tran­scend culture. Simi­larly, inten­tional theft is an action that is univer­sally disap­proved of. 

With that said, there’s an argu­ment to be had that the employees involved should be dismissed outright once foul play has been proved. This should be broad­cast company-wide as a deter­rent for similar situ­a­tions in the future. As a global leader, you work hard to build an orga­ni­za­tional culture that you are your team can be proud of. As such, you natu­rally become a guardian of that culture, doing what you can to defend its integrity. For that reason, it makes sense to weed out a mindset that is so contrary to every­thing the company believes in, even though the amount of money lost is signif­i­cantly smaller.

By taking both approaches, Colao has the oppor­tu­nity to solidify the culture while at the same time not rewarding incom­pe­tence. He also retains the respect of his team because action has been taken to sort out the problems.

What would you do in Vittorio Colao’s situ­a­tion? Is the above approach too harsh or not harsh enough? As a global leader or an aspiring global leader, would you have what it takes to solve this issue? 

For more case studies like this, feel free to have a look through our other arti­cles to see how global leaders are managing chal­lenging, real-life envi­ron­ments. To read the full case study — it’s worth it — visit the store of Harvard Busi­ness Review. For more infor­ma­tion on getting the skills and the mentoring you need to become the most effec­tive global leader, please don’t hesi­tate to get in touch. Lastly, make sure you don’t miss out on our next arti­cles by signing up for our newsletter: