This year’s Fortune Global 500 features a whole tranche of new entries. Companies like Chubb and Medtronic that have gone over the US$20bn threshold to become a truly major multinational corporation (MNC). The top 500 companies turnover $27.7 trillion and employ 67 million people in 34 countries – but they are just a drop in the growing ocean of multinational enterprises.
Back in 1600 the world had just one multinational – the East India Company. Even by 1967 the total was just 7,000. However, by 2007 the total reached 80,000 and today it has grown to an estimated 447,000. So what has been happening to businesses that so many are now multinational?
The East India Company earned its wealth by trade. It operated independently from the British empire, but its actions helped to break into territories the British could then more easily conquer and its continuing influence helped to cement British rule. Multinationals have always been inextricably connected to colonialism and when empires waned they took over when military rule ended.
As Ennst Dichter of Exxon once explained “The idea of a global corporate village entailed the management and reconstitution of parochial attachments to one’s nation. It involved not a denial of the naturalness of national attachments, but an internationalization of the way a nation defines itself.”
Through a process of branding that goes well beyond product identity a corporation transmits a whole world view to everything and everyone it touches. To do this a company just has to attach its pervasive symbols to those transmitted through a target country’s culture – like putting fermented bean paste into a Big Mac to sell to the Chinese or replacing toast with a crêpe to satisfy the French breakfast market. Whatever the item, it will be the twist given to the cultural icon that takes it somewhere else and eventually to the corporate branding homeland of ultimate acceptance for what everyone else in the world is consuming.
But this is where everything is also changing. The old hegemonies are dying. The new multinationals are primarily not in manufacturing or international trade, but in sectors such as professional services. These companies can be as small as 15 people or as big as 2,000 – but they have one approach in common. They are international not because of economies of scale, the opportunity to take advantage of cheap labour in developing countries or low tax regimes. They are not peddling major global brands – but simply being international because the world has gone that way and because the key skills necessary to do complex software or business operations are scattered geographically around the globe.
We are entering an era of “post globalization” where being global is the norm and being local an abnormal state. This has been reached right down to the unit of the individual and mainly all thanks to the Internet. The next phase has not even yet a name, but it will emerge out of block chain concepts and embrace far more than bitcoin. All that may eventually be left are brands – and even these may be replaced by “standards”, then fizzle and die. MCN’s will no doubt ride this storm, but end up very differently from today. The big question will be how MCN’s will interact with politics and if the power of the nation state will decline to be replaced by MCN dominated trading blocks.
In this new era the way that companies – and especially multinationals – exploit human resources has changed too. Many in the service sector now have only a small core of employees. Companies pay retainers, and minimize salary payments, securing skills from the freelance market as they need them. Supply chains are also digitized, so complexity is no longer the barrier it once represented. Monetary rewards remain important, but they have lost the old status trappings. The kind of car a contractor turns up in no longer defines them. Qualifications also matter less than what someone knows and if they can be trusted and are easy to work with. Individuals accumulating strings of credentials after their name reduce, not improve their career chances outside academia – betraying their lack of security and marking them out as the unutilizable “perpetual student”.
But what has not disappeared in the face of these changes is uncertainty. With 2.5 million court precedents and around 365,000 new laws or substantial legal amendments happening around the world it is no longer possible to be sure that a company’s policies are legally compliant. Documents are often invalid the moment they are drafted and in no jurisdiction is ignorance of the law a valid defence.
As we found in our recent survey of HR legal compliance it is not only litigation that MNC’s HR departments fear – but loss of public reputation, the ability to maintain good employee relations and even a “moral duty to all stakeholders”. But however big the organization it would be impossible to maintain “real time” compliance. Faced with this, many clearly take a “head in the sand” approach. But inaction is, of course, the worst form of action. FedEE was founded 29 years ago to help reduce all such grey areas and that is why we are starting in this issue to change the whole way we report news. This will eventually lead to a new alert service and a number of HR self-assessment compliance tools.