Managing Talent in Global Organizations - Part I

As a young professional in an emerging market, would you rather work for a global multi-national or for a local company?  As recently as five years ago, this question was a “no-brainer” for many bright talented men and women in emerging markets like China, Thailand, Vietnam, and Chile.  Working for a global company, especially one with a “brand” name and a strong reputation was especially attractive.  In many cases, the pay was better but beyond that, the opportunities for developing professionally, as well as advancing (maybe even being sent abroad for an assignment), were far better than they were for local companies.

Recently, executives from several global companies whom I have interviewed paint a far different picture of the competition for talent today, especially in these emerging markets.  First, many global multi-nationals’ growth plans have stalled, or at least have slowed down.  Second, in some cases, these multi-nationals have had to downsize and lay off local staff; in a few cases, companies have exited their markets entirely.  Third, local companies, by contrast, have been growing and in some cases, have begun to grow and expand outside of their home country.  Fourth, as local companies have begun to build a strong managerial base and a more professional development process, the gap in development between global and local companies has narrowed.   And fifth, the gap in compensation packages between global and local companies has also narrowed.

There are of course tremendous advantages that some global multi-nationals have.  Many of these companies have been around for over fifty years, and they have a stable and deep history, which is still very appealing today to many young people in overseas markets.  Furthermore, management practices such as managing by objectives, performance reviews, and coaching are well-established in these companies.  So someone just out of school or coming from a state-owned company or family-owned business to join a multi-national would have significant opportunities to learn about these good management practices.

Nonetheless, the reality is that competing for talent in today’s globalized world, especially for U.S.- and European-based multi-national companies, is as tough as ever, perhaps even tougher.  Here are some examples from my own experiences in working with various multi-nationals and interviewing executives from these firms.

First example.  A multi-national company that was entering the Chinese market was looking for a Managing Director to head their operation.  Originally, the company had discussed the position with an executive recruiting firm to see whether there were suitable candidates from the competition and/or from the region who might be interested.  Fortunately, the company found the right person for the job within the company itself.  He was actually a European who had been with the company for over twenty years and had a good track record.  He had lived in China as a college student, and in fact had married a Chinese and so spoke Mandarin fairly well.  And perhaps as important as these other factors, he and his wife were eager to return to China, and this position was a match made in heaven for them.

Second example.  One of the most difficult leadership challenges is motivating a work force that is about to be laid off – not only the high potentials who would most likely get other jobs anyway, but the majority of the work force.  This was the situation for several manufacturing plants that the company decided were going to be shut down in a year and a half.  The employees knew the company’s rationale and recognized that they would be losing their jobs.  In the meantime, they were expected to continue to be productive, adhere to good manufacturing practices and maintain quality standards. 

Several months after the announcement was made (and about a year before all the plants were scheduled to close), company executives were surprised to discover that in one plant, productivity measures were breaking records.  They sent some managers to the plant to find out what was going on.  What they found was a work place where everyone was engaged – due in no small measure to the actions of the plant manager.  Let’s call him Matt Jackson.  A long-time employee of the company who had gone to night school to get his MBA, Matt was a passionate leader who believed strongly in what he called “treating people right.”   When he found out that his plant was closing, he immediately called a town hall meeting and let everyone know that he would not only be updating them regularly, but that he and his management team would do what they could to help everyone find jobs. 

He set up daily briefings with his direct reports, who in turn communicated these discussions to the rest of the employees.  He set up career centers with his HR department to help every employee work on his or her resume and provide career counseling to everyone who was interested.  The HR team began to contact local recruiters and employment agencies in an effort to find jobs for the plant employees, many of who preferred to stay in the area.  Rather than feeling anxious or resentful about the closings - or worse, distracted from their work - employees became determined to prove that their plant could be productive during its last year and a half of existence.

  

Third example.   I knew an executive who worked for a pharmaceutical company that many years ago embarked on a strategy of globalizing their manufacturing operations.  They turned to Robert Marconi (not his real name), an engineer who had worked locally in the U.S. in the company’s various manufacturing plants.  Robert was single, and eager to go overseas.  For the next twenty years, he helped his company build greenfield manufacturing operations in various countries - selecting a team, hiring locals, directing construction and making sure the plant met FDA approvals.  When I met him, Robert was about to meet with the FDA to walk them through the manufacturing plant that was nearing completion in an Asian country.  He was then in his late fifties, certainly not being considered for a senior leadership position in the company.  But he was a highly valued talent for the company.  It would have been nearly impossible for the company to have replaced someone like him immediately.  This is the kind of person that I call a “critical skills” employee for a multi-national.

Fourth example.  In a consumer products organization where I once worked, its German subsidiary was underperforming.  Germany was one of its largest markets but unfortunately suffered from a lack of strong leadership.  Senior management considered hiring a German from outside the firm to lead the subsidiary but, after much discussion, decided to transfer a high-potential South American to become General Manager.  At first blush, this seemed like a poor fit, at least culturally.  However, Enrique Martinez (again, not his real name) had proven himself well in the small Latin American country he had led over the past three years and was ready for bigger challenges.  Furthermore, he had many of the attributes which the company believed the German subsidiary needed – an inspirational leader who was very results-driven, with strong people skills and an execution mind set.  Martinez moved with his family to Germany and within six months, had accomplished an incredible turnaround.

One of the lessons that these examples demonstrate is that companies need to think about their talent multi-dimensionally.  While there should be an overall corporate talent strategy (much like an overall corporate business strategy), companies should also consider talent strategies for at least four segments of its employee population (as reflected in the examples above):

1.     How do we build successors and create a pipeline for the senior levels of the company?

2.     How do we retain the solid performers and the B-players?

3.     How do we recruit and develop talent at the junior levels?

4.     How do we motivate the critical skills employees in our company?

There is no single answer to each of these questions, partly because the answers depend on the particular industry of the company and its competitive position within that industry, the strategic direction of the organization, and its talent philosophy.  Regardless of the particular approach and talent strategy, however, it is important for companies to keep in mind the outcome:  to have an organization with the best talent to help the company achieve sustainable competitive advantage.  This means having people with the right sets of skills and the right mindsets in all the geographies where the organization does business.

Becoming a Global Leader from a Regional Leader’s Perspective

When Zoe Chang was promoted to become the Asia-Pacific regional marketing head for her company, a major global consumer products firm, she was very excited.  She had been head of marketing for Taiwan for the past five years, and had achieved outstanding results. 

Shortly after her promotion, Zoe flew to the United States to meet with her new boss and her counterparts from the other regions.  She was determined to get an in-depth understanding of the company’s global marketing strategy and its implications for her region.  While in the United States, she also scheduled one-on-one meetings with some potential key stakeholders, such as the Head of R&D and the head of Human Resources.  She spent time meeting with her new boss, hoping to understand exactly what his expectations were and what his perspective was on whether and how to adapt global strategies to fit local markets.  And she accompanied marketing researchers to retail stores where some of the company’s key products were being sold to find out more about consumers and their preferences in the U.S. market.

After returning to Taiwan, she then decided to visit each of the six countries that she was now responsible for and spend time meeting with the marketing teams to better understand their local customers.  While in each country, she took time to explain the company’s global marketing strategies and asked each team how they thought these strategies could be implemented in their market, and where they thought these strategies could be adapted to better fit local market conditions.  She also described her marketing vision for the region, how excited she was to be working with them, and shared some of her expectations. 

Rather than flying “in and out,” as she observed previous executives had done, Zoe made sure to spend a week in each country.  Working with the local marketing head, she developed an agenda for each country that involved meeting with the country head and his functional heads, meeting one-on-one and in groups with the marketing professionals, and visiting retail stores to learn about marketing and consumer practices in the country.  Her evenings were not exactly free either.  She scheduled dinners with several key executives (both from within the subsidiary as well as outsiders, such as key suppliers and government officials) and had at least one group dinner in each country. 

At the end of each visit, Zoe shared with the local marketing head her observations, asked for feedback, and, with the team, identified follow-up actions for her team and herself.  She asked the country manager for feedback, as well as for any additional support or resources that might be needed for the country’s marketing team.

In one country, there was quite a bit of concern and pushback about the pricing for one of the company’s products that were about to be introduced.  Both the country manager and the marketing head were not convinced that the proposed pricing from corporate would be competitive and would generate the expected revenue for the product.  That week, Zoe and the country manager made calls to the Global Marketing head as well as the head of Asia Pacific to express their concerns, and to present data based on market research on competitors’ price points and consumer preferences.  Based on these discussions, the pricing was modified.    

It is too early to tell whether or not Zoe’s approach will lead to outstanding results, but I believe, based on my experience and practices of successful global companies, that Zoe is on the right path to becoming an outstanding global leader.

    

Let’s examine more carefully what Zoe is doing.

First, it is clear that Zoe is adopting a global mindset.  She understands that while headquarters may be driving global strategies, her role is not simply to push this strategy down to the countries but to make sure that she can synthesize and integrate, adapting where necessary to local market conditions. 

Second, Zoe is making an effort to understand her company’s overall strategy and priorities.  At the same time, Zoe is aware that she needs to align her region to the company’s goals, so a clear understanding of the company’s priorities is important so that she can explain this perspective to her country teams.

Third, Zoe is also making an effort to understand local stakeholders’ and customers’ needs.   As Bartlett and many others have pointed out (Bartlett and Beamish, 2008), one of the key challenges of a global company is managing the tension between standardization and customization.  By drilling down so that she is familiar with each market, Zoe will be in a better position to recognize and recommend solutions that meet both corporate needs as well as regional and local needs.

Fourth, Zoe is building relationships.  She understands that in many Asian cultures, relationships come before task.  People will need to trust you first before they will do business with you, and so Zoe is spending time building relationships.  She is doing this both through formal and informal means, spending time in meetings as well as socializing after office hours.

Based on my experience and discussions with many successful regional leaders, these four practices – adopting a global mindset, integrating the company’s overall strategy and priorities with regional and local needs, understanding local customers’ needs, and building relationships – are key to the success of a regional leader in a global company.

Bartlett, C. and Beamish, P.  Transnational Management, 6^th Edition.  (2008).  New York:  McGraw-Hill.

  

The Failure of Success When Internationalizing

Wal-Mart in Korea … Best Buy in China … Tesco in the U.S. …  The list of companies that have tried to expand internationally and have failed is long indeed, as my students learn in my classes in International Business.  Of course, there are companies that have also been successful as they internationalized, such as IBM, BMW, Toyota, Mastercard, and UPS, to name just a few.

My students are initially very surprised that companies that have been so successful in their home markets could stumble when expanding overseas.  When I ask them why these companies have failed, the two most common reasons they give are that they did not do sufficient market research, and that they failed to adapt to the needs of consumers in the market.

But I push them to dig deeper, to look at some of the root causes.  I challenge them on why they would assume that these companies did not do any market research.  And was the failure to adapt simply a blindness to differences, or a willing choice they made?  After all, these companies have relatively deep pockets, and would want to be sure that their investments would pay off.  Wouldn’t they want to do their homework and due diligence before plunging into a new market?

In interviews with executives, various discussions with students (many of whom work for global companies, some at fairly senior levels), and from research on the topic, I believe that the reasons for failure come down to four underlying causes.

Number one is a “readiness” factor.  Cavusgil et al. (2012) have explained this very clearly when they write that management needs to “… determine the degree to which they have the motivation, resources, and skills necessary to successfully engage in international business.”  For many companies, considering the possibility of expanding into an international market and increasing revenues is reason enough for them.  Unfortunately, these companies get ahead of themselves and forge ahead without laying the proper groundwork.  Part of this groundwork includes the four questions that Cavusgil et al. suggest firms should ask themselves:

1.     What do we hope to gain from international business?

2.     Is international expansion consistent with other firm goals, now or in the future?

3.     What demands will internalization place on firm resources?

4.     What is the basis of the firm’s competitive advantage?

For example, Target is a successful company that has only recently started to expand internationally.  It did this by acquiring the Canadian retail chain Zellers.  Target seems to be very cautious in its approach.  Even though many Canadians are familiar with Target and its logo, Target will continue to use the Zellers name as it learns how to operate their business model in a different country.  Contrast this with Best Buy, which opened its largest-ever store in China and then quickly added eight more stores.  Then, in 2011, it pulled the plug on all nine stores, realizing that its business model did not work in the Chinese market. 

Cavusgil’s questions will not only help companies to determine if internalization is right for them at this time, but also help them to develop a game plan, with specific actions and timelines, to improve their readiness.  For example, a company might want to hire an executive who has had extensive experience in the industry and in that country, and who is familiar with that country’s regulatory requirements.  It helps if that executive has some established relationships with government officials, since such relationship-building is very important in certain markets. 

Number two is a failure to consider criteria other than ROI in the decision on whether, where, when and how to internalization.  A company’s financial analysts may crunch the numbers and come up with very favorable returns.  Companies can get giddy with dreams of tremendous returns that they sometimes fail to probe and question the assumptions on which these numbers are based. 

For example, have country, political, and cultural risks been considered seriously?  If intellectual property rights are not strongly adhered to in the country, what is the risk for the company and what risk mitigation strategies should be put in place?  What is the competitive environment like in the country?  Are there strong local competitors as well as global competitors already in the marketplace?  Companies face many short-term pressures, and the allure of expanding into new markets can be compelling.  But ROI and other financial indicators alone should not be the sole criteria for entering a market.  In the M&A research, for example, data clearly show that the majority of mergers and acquisitions fail to meet targeted returns on investment.

Number three is not effectively addressing the right balance between standardization and localization.   In the global companies I have worked for, this tension plays out in many different ways.  In one consumer products company, for example, some general managers in different subsidiary operations insisted on having the final say in such decisions as the color on the packages, the suppliers to use for their printing needs, and even the logo of the company for their countries. 

When Allan Mullaly became CEO of Ford, he was surprised to learn that Ford cars had 27 different car platforms.  Was every one of them necessary?  Ford now has reduced the number of platforms to 14, with nine of them accounting for 87% of Ford’s global sales (Detroit Free Press, February 20, 2013).  The more that a company customizes and localizes its value chain and its product offerings, the higher the costs – although others would argue that the profits will also increase because the products will appeal better to local consumers.  Nonetheless, there are trade-offs here that need to be considered, and companies need to be clear on their strategic priorities. 

Companies need to set clear boundaries on those aspects of their value chain, products and brand image that are “core” to their strategy.  They need to make sure that these boundaries are clearly communicated internally, and that these aspects are standardized globally with some centralized control.  For Ford, these would include their global platforms.  For Nike, it would include their brand image.

And number four is a company mindset that past success should predict future success, especially past success with the company’s business model.  In his terrific book, “What Got You Here Won’t Get You There,” Marshall Goldsmith describes many of his executive clients who refuse to change their behavior since their style, dysfunctional as it may be at present, is what made them successful to begin with.  I believe a parallel may be found with companies that have become so successful that they believe that replicating their business model will work everywhere.  There are companies of course that have succeeded with such replication, and arguably there are certain industries (e.g., consumer electronics) where replication is a safe approach to globalizing.  But for many companies and industries, it always pays to question the validity of a replication strategy.

Based on the above, here are four additional questions that companies should answer before internationalizing:

1.  Is your company “ready” to go global?

2.    Does your definition of success include factors other than just ROI?

3.     Have you defined what aspects of your value chain, products and brand are core and what can be      adapted?

4.     Is your company sure that a replication strategy will work?

Cavusgil, S. et al.  International Business.  (2012).  Upper Saddle River, New Jersey: Prentice Hall.

Goldsmith, M.  What Got You Here Won’t Get You There.  (2007).  New York:  Hyperion.

Adopting a "Reverse Innovation" Attitude

Adopting a “Reverse Innovation” Attitude

Professor Vijay Gavindarajan’s concept of reverse innovation – developing ideas in an emerging market and coaxing them to flow uphill to Western markets - is a powerful one.   If you are familiar with his work, you will know that he cites many examples, especially at GE, where products such as a low-cost ECG machine were originally developed in emerging markets like India and yet have become innovations sold in developed countries as well.

As he points out, reverse innovation “refers as much to a state of mind as to best practice.”   While he does not spell out what this state of mind is, let me offer some thoughts on what global managers can do to adopt an attitude of reverse innovation.

If you work for a for-profit or a not-for-profit firm these days, you will more than likely have interactions with people from different parts of the world.  Like myself, some of you will have gone overseas on short-term or long-term assignments.  Many of you are also members or leaders of global teams.

Before reverse innovation can even be considered as an organizational practice, a global company should examine its approach and overall relationship towards its overseas offices and locations.  In my experience, reverse innovation can best thrive when a company views its overseas offices as:

1.     Important markets or locations which could potentially make a contribution to the company

2.     A source for potentially good ideas, best practices, or specific areas of expertise of value to the company

3.     An integrated part of the company where these offices are not treated as “second-class citizens.”

It does not thrive when companies see their overseas arms simply as an additional source of profits or cost advantage, or as a resource to be exploited.  In other words, adopting a stance similar to that of the colonizers (e.g., Great Britain) with their possessions in the early days (e.g., India) will not help a company become truly global and take advantage of reverse innovation.

Without these three conditions in place at the organizational level, it will be very difficult for a global manager to encourage and practice reverse innovation at the individual level.  Now if you happen to be with a company where these organizational conditions are present, then you are fortunate.  But having these organizational conditions is not enough.  Here is what you can do to take advantage of your opportunity and adapt a reverse innovation attitude.

First, become more self-aware.  Learning more about yourself, your strengths and weaknesses and where you can improve, will give you a dash of humility plus a degree of self-confidence.  Since we are all subject to biases, especially about ourselves, you will need to have the courage to ask others what you can to do improve.  Asking for feedback is necessary for you to increase your self-awareness.  Of course others may have their own biases so be sure to ask people who you can trust, who know you well, and whom you believe are relatively objective in their observations.  They can be someone with whom you have a significant relationship, a close friend, a co-worker or a mentor.  When you do this, be sure you have a specific behavior in mind and not just ask a general question on how you can improve.  You might want to ask, for example, how you can be a better listener.  Try using Marshall Goldsmith’s feed forward tool or discussing the results of your 360-degree feedback with a trusted friend or co-worker.

Second, develop respect for different cultures and business practices.  In my MBA course on Cross-Cultural Management, many of my students who have never worked overseas are surprised at what they assume to be common management techniques and practices is not that common in other countries.  Asking subordinates who speak up and express their opinion, or to disagree with you if necessary, is something not typically done in societies with higher “power distance” than our own.  Recognizing that these practices are different from ours, and not necessarily inferior, is a difficult concept to grasp initially for some of my students, but is necessary for a successful global manager.  A good rule of thumb to follow is that when you see a management practice in another culture that is different, try describing what the practice is first and suspend judgment by evaluating it right away.

Third, improve your listening skills.  In my work with executives over the years, one common weakness I see in many of them is their lack of listening skills.  For those of you managing globally, this means not only paying attention to content but to context as well.  First of all, you will meet many very smart managers who may struggle at times with their English, and who may not understand some of the idioms and expressions we use.  Do not assume that there is a correlation between intelligence and the ability to speak English.  I have seen too many instances of American executives who are so impressed by how well some non-U.S. executives in their overseas locations speak English that they want to immediately place them on a fast promotion track.  Second, many countries, especially in Asia and Latin America, belong to what Edward Hall calls “high context” cultures.  This means listening to what is said “between the lines,” and how something is said becomes very important.  Effective salespersons know how to do this well.  You should, too.  Listen carefully to what your global counterparts are saying, paying attention to what they are saying (e.g., how direct or indirect their message is) as well as how they are saying it (e.g., body language, tone of voice).

The road to becoming a truly global manager with a reverse innovation attitude starts with these fundamentals.

Goldsmith, M.  (2002).  Try Feedforward Instead of Feedback.  Adapted from Leader to Leader Magazine (www:marshallgoldsmithlibrary.com/cim/articles).

Gonvindarajan, V.  et al.  (2012).  Reverse Innovation.  Boston:  Harvard Business Review Press.

Hall, E.  (1992).  Beyond Culture.  New York:  Anchor Books.