Scaling Across European Borders: How to Tackle Regulation and Team Culture When Expanding Your Company
Even with a single currency, expanding to a new EU country is not a walk in the park.
For any European company that has prospered in its home country, the next logical step is always to grow across borders. This usually means expanding within the EU itself, and it's a leap that offers plenty of benefits for businesses. Those operating on the continent have the power to use just one currency, move goods around freely -- and for EU residents, there's no need to solicit a work visa.
But still, don't expect scaling internationally to be a walk in the park. While European countries might all stand under one umbrella, each has its separate languages, laws and social codes. Different tax regulations, cultural differences and nationalistic feelings all come into play, making growing across Europe more complicated than you might think. Here's how to overcome those cultural and regulation-related roadblocks:
Focus on culture during acquisitions.
It's difficult to expand into a new country alone. But, acquiring a competitor with intimate knowledge of the market is a great catalyst for success. This is especially true if moving into Germany or France; together, the countries constitute more than one-third of the EU's GDP, making them smart first markets to tackle if expanding across the region. Even more, cross-border acquisitions allow you to establish platforms locally -- something that's required if you want to be at all relevant in a market.
However, whenever different cultures meet -- whether they be workplace, or country-specific -- there's going to be some friction. So, for any acquisition to be successful, you need to focus on culture first. Don't be surprised if you face certain forms of cultural resistance when opening an office in a new country. Team members might be defensive about some processes or ideas that come from the acquiring company, or feel like new managers are imposing their cultural ideals.
To overcome this, it's important that company leaders show they value the acquiree team's culture. Consider the message of sending a Polish manager to live in France, for example. If she's chosen to move with her family -- and send her kids to French schools -- it demonstrates to the team that the manager respects the country and wants to integrate.
It's also imperative to mix teams. At our own company, we try to take someone from each international organization we acquire and have him join the larger management team. This way, employees in every country feel like they have someone up top to defend their interests.
Keep the same rules, but let each office have its own personality.
Once you successfully break into one foreign market, you will soon find yourself eyeing the next country in which to launch an office. However, this isn't a game of Risk. It's imperative to avoid a situation in which you are just a collection of companies -- it is important to keep your team cohesive across borders.
So, how do you keep so many employees on the same page? Don't overcomplicate it. Ensure all the tools and processes used in each country are the same. This way if team members make a business trip, there will be no changes in the way they work. It also enables managers to govern teams remotely.
But, if an acquisition has just taken place, it can be difficult to consolidate offices all at once. That's why company-wide rules need to be implemented one by one -- think job titles, or certain sales techniques. It's also a great idea to have the same managers in both local and global roles. Global leaders working from local offices means information trickles down more naturally -- and well, teams are less likely to feel like they're marionettes being controlled from above.
However, at the end of the day, you still need to let each local team create its own culture. Employees at our Berlin offices enjoy going out to dinner once a month. In Warsaw, they project a film in the office. At our Polish offices, pizza day is sacred. And those in Munich get to have a special coffee machine. People want to identify themselves with an office that's part of their community, as well as being part of a global company. So, give each office the freedom to do so.
Consider which regulations are harmonized across Europe, and which aren't.
For the past few years, the EU has been pushing a Digital Single Market -- this would help in "tearing down regulatory walls and moving from 28 national markets to a single one," according to the European Commission.
The initiative calls for a large range of policy changes, including a more modern European copyright frame, better parcel delivery, ending unjustified geo-blocking -- and yes, the famous General Data Protection Regulation (GDPR). Starting May 25, this regulation will require businesses worldwide that work with EU residents' data to gather it under strict conditions. And if they don't, they'll be fined €10 million (or if it's higher, two percent of the company's global annual turnover).
So yes, Europe is beginning to address its fragmented nature to better serve consumers and businesses alike. But, here's the thing: Opening an office just 300 kilometers away from home in Europe can still mean all new laws and regulations. While the EU is harmonized in some regards, each country abides by very different local, environmental and labor laws.
Let's take a quick look at labor regulations for example. In the Netherlands, employees have the right to two years of sick leave at 70 percent pay. In the U.K., employers are required to give 28 weeks, and a flat pay of £89.35 per week. In Ireland, maternity leave lasts for 42 weeks -- however many other countries follow the EU standard of 14 weeks. In short: Labor laws heavily differ depending on location.
So do taxes. The way a business accounts for revenue is different in every country. There's no umbrella tax system -- it's something the EU is currently reviewing, by looking into how separate tax systems impact small business. And of course, each country has its own environmental, local and zoning laws to consider, as well. All in all, it's a hugely complex topic -- with the EU itself making laws, the EU making laws in hand with member states and member states making their own individual laws, it's enough to make your head spin.
How do you deal with it all, then? You need to hire local auditors and lawyers in each country, who have an intimate knowledge of the local laws and regulations. But, choosing the right people is an art. You need to do your homework. At our company, we meet with various candidates in person, compare what competitors are telling us and never settle a deal after a first meeting. Local lawyers and auditors might have your company's fate in their hands, so it's imperative to pick the right people off the bat.
So no, expanding your company across Europe is not a walk in the park. However, if you focus on culture, keeping the team harmonized, and bringing local lawyers and auditors on board to deal with varying laws and regulations, your new office will be off to a great start.