What does globalisation mean for your leadership culture?25.Jul.2012
The quest for growth is fuelling a new sense of urgency among companies with international ambitions. But the future belongs to those with the vision to see beyond their dominant national cultures, says Gurnek Bains. Here he outlines how to avoid falling into the ‘bolt-on’ trap.
As growth in the Western world stutters to a snail’s pace, there are few companies that haven’t recognised the opportunities afforded by countries with substantial populations growing at heady rates of between 5% and 10% a year. Although most of our Western clients have had global aspirations for some time, there is now an urgency to realising these aspirations. Globalisation is not for tomorrow – but a means of driving next quarter’s earnings.
On the other side of the world, it is not uncommon to see companies in China, India, Africa and Latin America – flush with cash and brimming with confidence – wanting to spread their wings beyond their national boundaries. Many look at relatively sleepy Western businesses and feel that they can inject commerciality, as well as leverage trusted Western brands more aggressively, in their domestic markets.
So one way or another, virtually all of our clients are on a journey that involves deepening their global footprint. What this means for individual companies varies considerably. Some clients, like Whitbread, Sainsbury’s or Godrej (see the Spotlight on Godrej article), have predominantly operated in their local marketplace but now have significant aspirations abroad. They are now actively developing their international footprint. Other companies, including a number of Diageo’s flagship brands, for example, have been operating abroad in some shape or other for over a hundred years. Yet Diageo also feels an urgent need to shift focus from Western economies to regions of the world that are growing exceptionally fast.
Get out of your closet
Globalisation requires companies to think about their strategies, their portfolio of brands, the systems and processes that are needed to keep track of business across diverse geographies, and the effective development of supply chains. However, perhaps less attention has been paid to the question of “What does the leadership culture of companies that are going to be successful in deepening their global footprint need to look like?”
Most Western multinationals, including many that have been on the globalisation track for some time, are run by middle-aged men with, perhaps, the occasional representative from the emerging markets in their senior team. Everything about the way in which these companies operate is Western – often the only thing that isn’t is the strategic projections which look at where revenue and income growth are going to come from in the next decade or so!
Emerging market companies that are developing their global footprint are in some ways no different. Either consciously, or through a process of acquisition, many have some Western leaders. But we find such leaders are often kept at the margins – they are considered to be useful bridges to the relevant developed market, but the idea that such individuals could substantially influence the culture of the business at the centre is less evident.
There is, in our experience, a world of difference between companies with a multinational footprint but a dominant national culture on the one hand, versus companies with a genuine global culture that matches their desired global footprint. We believe the future belongs to companies that can create a genuinely global leadership culture, rather than ‘bolt on’ global pretentions to what is essentially a dominant national culture.
Making jam – today
It is all too easy to kid yourself that because you’ve devised a strategy, and invested the money, everything will flow smoothly. The idea of ‘jam tomorrow’ has been a seductive siren call when it comes to global aspirations for too long. In our experience, it is relatively easy for businesses to sink a lot of money into their global aspirations and then retrench when things don’t work out at the speed originally envisaged or, when times get tough. Globalisation, just like any other strategic initiative, requires the right leadership culture in order to work
Creating that culture requires attention to the following six elements – the key areas businesses need to focus on if they are to create a truly global mindset that allows them to achieve their strategic objectives.
1. Building diverse leadership teams at the top
Senior leadership roles in many companies are still relatively inaccessible to 'outsiders', however talented they are. They find it difficult to break into the dominant national culture – with all its existing relationship networks, shared histories and cultural values. Sometimes such individuals can rise to the top, often by leading in growing areas of a business. But one person on an executive board does not make for a truly global mindset.
In our experience, top leaders need to dig deep to establish genuine empathy and respect for colleagues with very different backgrounds. It’s all too easy to judge them harshly for failing to navigate ambiguity, say, or not fostering the right network of relationships – without understanding just how difficult this is when you are not from the dominant national culture.
Our prescription? Systematic coaching can help enormously in enabling ‘outsiders’ to develop the understanding and relational skills needed to penetrate the highest levels of a company.
2. Immersing leaders in other cultures
For a company to develop a truly global culture, a critical number of people need to understand emotionally, and feel part of, the global story. In many organisations, there is often a significant minority who have in-depth experience of other cultures; but they typically sit alongside a larger majority at headquarters for whom the global world is a little bit theoretical. These leaders might be aware of the business opportunities and the cultural predilections of different parts of the world, but they have never lived and felt these things for themselves. It is commonly assumed that regular visits abroad can do the trick. But you need deep immersion in other cultures to really understand them and to develop a truly global mindset.
Our prescription? A vigorous policy of leader rotation. Even when this isn’t possible, we’ve found that executives significantly benefit from spending a month or two in an environment, really getting a feel for the culture and building relationships, in a way that isn’t possible from short burst trips.
3. Developing strong relationship skills in executives
One of the most important things driving global cooperation is the depth and quality of relationships that exist across a multinational business. It is not uncommon for people from different cultural backgrounds to get along well with each other on the surface; but they often find it harder to establish a deeper emotional connection.
Our prescription? Don’t skimp on investing in your leaders’ relational skills. Creating a strong international relationship culture clearly pays dividends internally: co-ordinating activities is much easier, and different parts of the business will respond much faster to the needs of others. But it also helps leaders form effective partnerships with third parties, governments and customers. Many emerging market cultures put a strong emphasis on relationships. Western leaders not attuned to this can find it difficult to make things happen as fast or reliably as they want or expect.
4. Being clear on the values that matter
Adopting an overly relativistic position about how a business should operate in different environments can be a dangerous road for a global company to follow. The reputational damage, not to mention the financial consequences, of failing to do business in the right way can be severe. Unsurprisingly, this is one of the areas that leaders of global companies worry about the most.
Our prescription? It’s crucial to develop a clear sense of values that are non-negotiable – and put them firmly front of mind in every environment in which the company operates. They should inform everything from recruitment and induction, to leadership development and performance management. Many companies get this right early on, but their fast pace of growth often means they lose focus – and are then surprised when the business culture of one of their entities leads to some kind of ‘crash’. Hence the importance of a systematic process to inculcate core values and ensure they’re faithfully transmitted – and regular checks that they’re being observed and not diluted down as the company grows.
5. Becoming more lean and agile
In our conversations with leaders from some of the world’s faster growing economies, one of the most common complaints is that the culture of Western companies is overly bureaucratic, cumbersome, excessively process-driven, and slow. This lack of agility is a serious cause of frustration and is perceived by many leaders as a significant brake on opportunities.
Our prescription? While staying true to some of their core values, Western companies must constantly challenge their modus operandi and push for higher levels of speed and agility. What is seen as ‘professional’ in Western contexts is simply slow, self-indulgent and irrelevant in the eyes of other cultures. This ‘agility deficit’, however, isn’t just a Western problem. Some emerging market companies are similarly stymied by their more intuitive, instinctive, hierarchal, and family-driven cultures. Western-trained leaders are sometimes brought in to make the organisation more professional, but frequently end up being marginalised and departing. In our view, these companies need to question how they can make themselves more flexible to accommodate incomers bringing a more long-term perspective.
6. Accelerating the development of talent in different markets
Despite the rate at which many emerging market economies are producing talented and driven individuals with excellent academic qualifications, many multinationals find talent to be one of the biggest barriers to seizing global opportunities. One of the issues here is that the education systems and national cultures in different parts of the world don’t always produce young people with the mindset and aptitude for working fluidly in a global company. A war for talent can thus emerge for the relatively small numbers who do fit the bill. Such individuals quickly learn to appreciate their own value and become hard to attract, as well as relatively ‘promiscuous’ in moving between companies for advancement.
Our prescription? An important part of the solution is for global companies to build their own local talent development processes to nurture the qualities they need. Identifying the particular areas that require development in different cultures – and the right kind of local environment to foster them – is key. It has to be done on a culture-by-culture basis and according to the particular needs of a given multinational. The subtleties of doing business in different environments vary enormously. Ultimately, global companies cannot be successful until they build up an effective pipeline of local talent who feel valued, understood and engaged – without having to pay over the odds, or engaging in a zero-sum competition with other multinationals.