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Every global company’s competitive advantage depends on its ability to coordinate critical resources and information that are spread across different geographical locations. Today there are myriad organizational mechanisms that global corporations can use to integrate dispersed operations. But the most effective tool is the global business team: a cross-border team of individuals of different nationalities, working in different cultures, businesses and functions, who come together to coordinate some aspect of the multinational operation on a global basis.
It is virtually impossible for a multinational corporation to exploit economies of global scale and scope, maximize the transfer of knowledge or cultivate a global mind-set without understanding and mastering the management of global business teams. That, however, is easier said than done. In our study of 70 such teams, we discovered that only 18% considered their performance “highly successful” and the remaining 82% fell short of their intended goals. In fact, fully one-third of the teams in our sample rated their performance as largely unsuccessful.1 How can companies reverse the weak performance of faltering global business teams? First, they must understand the obstacles to success that global business teams confront. Then they can take concrete steps to avoid those pitfalls and build effective and efficient teams.
Why Global Business Teams Fail
Domestic teams and global teams are plagued by many of the same problems — misalignment of individual team members’ goals, a dearth of the necessary knowledge and skills, and lack of clarity regarding team objectives, to name a few. But global business teams face additional challenges resulting from differences in geography, language and culture. Teams can fail when they are unable to cultivate trust among their members or when they cannot break down often-formidable communication barriers. The results of our survey of 58 senior executives from five U.S. and four European multinational organizations confirm that important, unique challenges confront global business teams — challenges that tend to exacerbate the more common problems all teams face. (See “The Challenge of Managing Global Business Teams.”)
The Challenge of Managing Global Business Teams
The Inability To Cultivate Trust Among Team Members
Trust is critical to the success of global business teams in that it encourages cooperation and minimizes unproductive conflict.2 Each member of a global business team brings a unique cognitive lens to the group. If harnessed effectively, the resulting diversity can yield significant synergies and produce a collective wisdom superior to that of any individual. Without mutual trust, however, team members may shy away from revealing their true beliefs; or if they do express their viewpoints, they may not be “heard.” In one way or another, the absence of trust is likely to turn a team’s diversity into a liability rather than an asset.
Global business teams are particularly prone to problems of trust. Among the many factors that determine how much trust people feel, three important ones are individual characteristics, quality of communication and the broader institutional context. More specifically, research shows that, on average, people trust one another more when they share similarities, communicate frequently and operate in a common cultural context that imposes tough sanctions for behaving in an untrustworthy manner.3 Global business teams, by their very nature, suffer from severe limitations on all three dimensions. Not surprisingly, when global business teams fail, it is often because the team process did not emphasize cultivating trust.
Hindrances to Communication
Communication barriers resulting from differences in geography, language and culture also can sabotage global business teams.
With members living in different countries, separated by time zones and conflicting schedules, arranging team meetings can pose logistical challenges. Undoubtedly, technology (e-mail, teleconferencing and video-conferencing) can enable members to work together despite geographical distance; but technology should be viewed as a complement to, not as a substitute for, team meetings. Face-to-face meetings foster familiarity and trust — not easily established through virtual meetings. When members cannot see one another’s body language and directly experience one another’s reactions, the emotional dimension critical to a team’s success suffers. Moreover, certain types of deliberations demand face-to-face meetings. Brainstorming, for instance, requires unstructured free-form interaction over an extended period that is not suited to a virtual meeting.
The inability to understand what another person is saying is always a potential barrier to communication in cross-cultural settings. If language barriers are not adequately addressed, the likelihood of creating an atmosphere conducive to candid sharing of different viewpoints — and hence conducive to achieving creative solutions — is greatly diminished.
One extreme example would be a team whose members all speak different languages and have poor facility in a common language. Such a team would undoubtedly require interpreters, who, regardless of their skill, may not capture the full richness of the communication. Even in the case of global teams whose members speak the same language, differences in semantics, accents, tone, pitch and dialects can be impediments. For example, whereas the term table a motion means to postpone discussion in the United States, in the United Kingdom it means to discuss the issue right away.
Members of global business teams typically come from diverse cultures and, as a result, may bring different values, norms, assumptions and patterns of behavior to the group.
Consider, for example, differences between “individualistic” and “collectivistic” cultural norms for decision making.4 The need for consensus deemed critical in collectivistic cultures is a relatively low priority in individualistic cultures. What if some team members come from highly individualistic cultures (such as the United States and Britain) and others from highly collectivistic cultures (such as Japan and Venezuela)? Unless the differences in assumptions and beliefs inherent in that diversity are explicitly addressed, the cohesiveness of the group is likely to suffer and impede effectiveness.
Defining the Team Charter
In order to overcome the unique challenges confronting global business teams and create a high-performing, effective unit, executives must carefully craft the team’s charter, composition and process. All three areas demand equal attention. (See “A Framework for High-Performing Global Business Teams.”) A clear charter without the appropriate mix of team members leads to failure. Similarly, when a team’s composition is sound but its process is not, effectiveness suffers. In short, the three work as a system to determine overall team effectiveness.
A Framework for High-Performing Global Business Teams
Given the communication problems and trust issues that plague global business teams, structuring the team charter is particularly critical to success. Three primary questions need attention: Is the charter defined correctly? Is it framed correctly? And is it clearly understood?
Is the Charter Defined Correctly?
One of the first concerns for any global business team must be to explicitly discuss the team’s agenda and ensure that it is defined clearly and correctly. Many teams doom themselves from the start because they skip that step or do not fully resolve the issues involved.
In 1995, a certain European manufacturer of industrial components set up a global-customer-account team to coordinate the company’s marketing, sales and service offerings to one of its largest customers. At the team’s first meeting, members identified three possible objectives: to help the customer move toward coordinated global sourcing at a faster pace, to offer the customer global volume discounts (and thus, lower prices) and to offer a more attractive bundle of products and services based on a better, more comprehensive understanding of the customer’s global needs than its individual buying locations might have. After considerable discussion, the team decided against the first two alternatives and embraced the third. The third alternative was seen as the most appropriate because it accomplished several key corporate objectives simultaneously: It eliminated internal price competition across plants, thus boosting gross margins; it made the company’s product and service offerings more comprehensive; and it dramatically enhanced the company’s ability to respond appropriately to a customer’s moves toward coordinated global sourcing.
Is the Charter Framed Correctly?
Ensuring that the charter is framed correctly is a more subtle challenge. By framing, we mean the way an idea is expressed or a problem is formulated. Issues can be framed in multiple ways, and different framing of the same problem can produce different outcomes.5
Because global teams have members from different subsidiaries that typically compete with one another for scarce corporate resources, they tend to have a high degree of internal conflict — in addition to a low level of trust. As a result, it is generally best to frame the team’s charter in terms of the company’s position vis-à-vis the external marketplace instead of emphasizing internal dynamics.
For example, in the mid-1990s, senior executives of a consumer-products company assembled a global manufacturing team to rationalize the company’s production network. Given the objective, there were at least two ways of framing the team’s charter. Consider this option: “The team’s charter is to cut costs by reducing the number of factories in our worldwide network from 15 to nine and by downsizing the work force.” Compare it with the following: “We want to be the clear industry leader in terms of creating customer and shareholder value. This goal requires that we be world-class in manufacturing, better than our best-in-class competitor in terms of cost, quality and service. Given these targets, the team’s charter is to propose the optimal network of factories for our business.” The second option is by far the preferable charter. Its broad, external focus encourages benchmarking, fosters creativity and provides a compelling rationale for making the tough decisions inherent in any manufacturing rationalization and work-force reduction.
Is the Charter Clearly Understood?
When teams have frequent face-to-face meetings, they are able to iron out ambiguities in the team charter. If they meet less often, the charter has to be crystal clear so that tasks can be delegated effectively. Given the communication problems inherent in global business teams, it is imperative that members understand the specifics of the charter: in particular, the scope of the project, the expected deliverables and the timeline. Understandably, cultural and language differences complicate the task of getting team members to agree on the specifics of a charter. Clarity is essential to promoting commitment and accountability.
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Consider the successful experience of an industrial-products company. It formed a team to examine the organizational design of its global businesses. Several meetings were arranged between the internal sponsor and the team members to ensure that the team charter was clearly understood. The scope of the project included: an analysis of the current organizational design across the company’s five growth-platform businesses (part of the diagnostic challenge was to determine whether a single organizational design made sense across all five); external benchmarking of world-class global organizations, with attention to the latest research on the best approaches; and recommendations, with development of the business case, for an organizational design that would optimize global growth potential across the five businesses (including ways to capture potential synergies in areas such as research and development, information technology, human resources and the supply chain).
The project also was intended to be a personal learning experience that could help the team members become experts on organizational design and understand the many facets of globalization within the company’s businesses. Furthermore, the team members were explicitly told not to work on nongrowth business units or subsidiaries or to reformulate the global strategies of the five businesses.
Two deliverables were expected from the team: a set of recommendations on the optimal worldwide organizational design for the five major growth-platform businesses and a presentation of the team’s key findings, including a process or a methodology for tackling potential global-organizational issues.
The specificity of the objectives, project scope and deliverables, along with the time spent at the start of the project getting the team members to internalize and accept the charter, helped the team stay on course and make progress.
Choosing Team Members
Another key to creating a successful global business team is choosing the right team members. Three issues are of particular importance: How do you balance diversity within the team? How big — or small — should the team be? And who should occupy positions of leadership?
The Question of Diversity
There are at least three reasons why global business teams have high levels of diversity. First, members come from diverse cultural and national backgrounds. Second, team members generally represent subsidiaries whose agendas may not be congruent. Third, because team members often represent different functional units, their priorities and perspectives may differ. Is the high level of diversity a necessary evil that must be curbed or a source of strength that should be cultivated? The answer depends on whether the type of diversity is cognitive or behavioral.
Cognitive diversity refers to differences in the substantive content of how members perceive the team’s challenges and opportunities, options to be evaluated and optimal course of action. Diversity of nationality can account for substantive differences on issues such as whether the free Internet-service model pioneered in the United Kingdom can be transferred to other countries. Diversity in subsidiaries’ histories and charters can account for substantive differences on issues such as whether Singapore, Hong Kong or Tokyo is the optimal location for a company’s Asian headquarters. Diversity in functional backgrounds can account for substantive differences on issues such as the relative importance of “market pull” and “technology push” in a company’s new-product-development efforts. Because no single team member ever can have a monopoly on wisdom, cognitive diversity is almost always a source of strength. Divergent perspectives foster creativity and a more comprehensive search for and assessment of options. But the team must be able to integrate the perspectives and come to a single solution.
Behavioral diversity, by contrast, refers to differences in language as well as culture-driven norms of behavior. Consider, for example, a cross-border business team in a Franco-American company. The norm in most U.S. teams is that the most senior member presents the team’s perspective, but in a French team, the most junior member typically does so. Unless the members of the Franco-American team are sensitized to such differences, misunderstandings easily can emerge and block or distort communication. Behavioral diversity is best regarded as a necessary evil: something that no global business team can avoid but the effects of which the team must attempt to minimize through language training and cultural sensitization.
The Ideal Team Size
The optimal size of a global business team is one that can ensure the required knowledge and skill base with the smallest number of people.
Deciding on team size is never easy. On one hand, representing every required knowledge and skill calls for a large team. On the other hand, very large teams become cumbersome and dysfunctional, making it difficult to foster broad participation, bring out diverse viewpoints or get the unity needed for meaningful action.6 An effective solution is to establish a core team and supplement it as needed. Membership in the core team would be limited to a relatively manageable number — say, 10 people or fewer. Then, if the core team requires input from others, those individuals could be brought in on an ad hoc basis. Thus, the extended team could include all relevant stakeholders both within the organization and outside. If for some reason, the core team itself has to be large, then it is best to break it into subteams, each assigned to tackle specific aspects of the overall team’s objectives.
The Selection of Team Leadership
Structuring the leadership of a global business team involves critical decisions about three roles: the team leader, the external coach and the internal sponsor.
Choosing an effective team leader.
Despite an increasing emphasis on team self-management, the leader plays a pivotal role in cross-border teams. Effective leaders must manage the organizational, linguistic, cultural and physical distances that separate members, create severe communication barriers, impede the development of trust and contribute to the misalignment of members’ goals. They are likely to be those with the biggest stake in the outcome of the project. Other important qualities: credibility resulting from a proven track record; conflict-resolution and integration skills; and expertise in process management, including diagnosing problems, assessing situations, and generating and evaluating options.
Determining the need for an external coach.
An external coach serves as an ad hoc member of the team and is an expert in process rather than content. The more complex and challenging the process to be managed, the greater the need for and the value added by an external coach. A global business team will find using an external coach beneficial under certain conditions. (See “When Do Global Business Teams Need a Coach?”) The need for such a coach is likely to be particularly high when the process-management task is complex and the process-management skills of the best available team leader are inadequate. Consider a global financial-services firm that set up a cross-border task force to rationalize the number of its offices spread across three continents. The appointed leader, a team member with a major stake in the project’s outcome, turned out to be rigid, inflexible and overbearing. Alternative views were stifled. The team was able to make progress only when an external coach was brought in.
When Do Global Business Teams Need a Coach?
Selecting a GBT sponsor.
The sponsor of a GBT is typically a senior-level executive in the company who has a strong interest in the success of the team. The sponsor who performs the role well indirectly encourages open and candid conversations among team members drawn from different countries and cultures. Among the responsibilities of the sponsor are to: clarify and interpret the charter; clarify performance expectations and deliverables; provide ongoing guidelines, input and support; facilitate access to resources; manage political roadblocks on behalf of the team; be an intellectual sounding board on content; review team progress; and hold the team accountable.
Managing Team Process
Having a clearly and correctly defined charter and an optimally constituted membership is merely the foundation of an effective global business team. Without skillfully managing process, the team is more than likely to fail in accomplishing its objectives. The primary goals of an effective team process are to facilitate open and rich communication among the team members and to cultivate a culture of trust.
Overcoming Communication Barriers
Several process mechanisms can be used to overcome the communication barriers that plague global business teams.
Language and culture.
In order to overcome the barriers to communication created by the linguistic and cultural divides separating members of the typical global business team, companies need to invest in language education and cross-cultural training. Language training reduces the need for third-party mediators such as translators and thus fosters more direct, spontaneous and free-form communication. The ABB Group provides a good example of how even a bit of progress on linguistic skills can go a long way toward reducing communication barriers. Goran Lindahl, ABB’s former CEO, was explicit in referring to his company’s official language as “poor English” to drive home the point that no one should be embarrassed to express an idea because of a lack of perfection in English.
Investments in cross-cultural skills also help global business team members. A better understanding of team members’ different cultures can improve richness of communication: People pick up the signals in verbal and nonverbal communications more comprehensively and accurately. Investment in cross-cultural skills also can improve team members’ ability to understand and respect diversity and turn it into a competitive advantage.
Agreeing on norms of behavior.
Establishing ground rules that reflect desired norms of behavior can serve as a powerful self-policing mechanism to overcome communication barriers, enrich the content of team discussions and keep the team operating as an integrated whole.
A global-customer-account-management team created by a European industrial-packaging company illustrates how agreeing on certain ground rules can facilitate a team’s smooth functioning. The team established two ground rules: First, whenever a member of the account team had any meeting with the customer, that member would send a briefing to every other member of the team; second, the customer’s primary contact would be with one or more of the members of the global account team, with no other employee authorized to discuss or decide policy or strategy issues with the customer. The ground rules proved especially useful when the customer tested the relationship. Occasionally, the customer would contact employees other than those on the account team, but the employees would always refer them to someone on the team. When the customer would contact different members on the account team about issues such as prices and delivery times, the ground rules ensured that the customer always got the same answer from every member.
Adopting data-driven decisions.
In the absence of facts, people often resort to opinions. As everyone knows, discussions based largely on opinion can degenerate into personal attacks. By contrast, if opinions are accompanied by factual data, conflicting ideas can be evaluated more objectively. Fact-based discussions encourage team members to be more forthcoming in sharing their viewpoints, even if their views are at odds with the prevailing wisdom.7
For instance, a certain global consumer-products company formed a cross-border team to recommend ways to improve the profitability of one of its global businesses. The team, with the help of a consulting firm, assembled a detailed base of facts, including fundamental shifts in the industry, competitors’ moves and the company’s current positioning. The concrete data helped elevate the team’s level of discourse. Instead of denying problems, shifting the blame to uncontrollable external factors, or focusing on individual personalities, the team was able to brainstorm and come to terms with the critical vulnerabilities in the company’s competitive positioning. A clear agreement emerged that the vulnerabilities required immediate, decisive and visible action.
Developing alternatives to enrich the debate.
Surfacing alternatives is often useful in ensuring the expression of diverse views within a global business team. Two well-recognized formal mechanisms — dialectical inquiry and devil’s advocate — are aimed at uncovering alternatives.8 In a dialectical inquiry, for every potential solution, the team is instructed to develop a full-fledged counterapproach based on different assumptions; then a debate ensues on the merits of the plan and the counterplan. In the devil’s-advocate approach, the team critiques a potential solution (but doesn’t necessarily develop a full-blown counter-approach). Both methods can benefit the process and the outcome of team discussions by giving creative license to members to express different views.9
The team established by the industrial-products company described earlier explicitly sought multiple alternatives to draw out its members’ intellectual diversity. For each of the company’s five major global businesses, the team collectively generated three distinct organizational forms and assigned subteams to develop the best arguments for each form. The resulting recommendations reflected the comprehensive discussions that followed each subteam’s presentation of its approach to solving the problem.
Rotating meeting locations.
Rotating the location of team meetings to different parts of the world is yet another mechanism to enrich the cognitive base of the team and also legitimize the expression of divergent viewpoints. VeriFone, a market leader in the automation and delivery of secure payment and payment-related transactions, uses that approach to keep its top management team informed about the global environment. The team, consisting of the CEO and his direct reports, meets for five days every six weeks at different locations around the globe.10
Cultivating a Culture of Trust
Just as process mechanisms can help global companies break down barriers to communication, so too can they help organizations cultivate trust among team members.
Scheduling face-to-face meetings.
Face-to-face interaction is the richest form of communication. It can help develop the solid social foundation and mutual trust that distance technologies can build on later. It is critical that the first few meetings of a global business team occur face to face.
In our interviews, the CEO of a global consumer-products company underscored the importance of early face-to-face meetings in cultivating trust: “There is an enormous premium on good, clean, nonbureaucratic communication, and that depends enormously on a high level of trust. That’s why at the start of the team process, you have to be together personally. You can’t start them with memos or telephone calls or things like that. You’ve got to get the group together to know each other and get a level of comfort and trust with one another. After that you can resort to the phone calls and video conferences.”
Rotating and diffusing team leadership.
By rotating and diffusing team leadership across countries, managers in several subsidiaries gain an appreciation for cross-border coordination and learn to iron out conflicts en route to achieving their objectives. Moreover, diffusion of team leadership creates mutual interdependencies across countries because a country manager typically will lead one global business team while acting as a contributing member in another. Mutual dependence does not eliminate all conflicts, but it minimizes politicking and the more destructive types of conflicts.
To quote John Pepper, chairman of Procter & Gamble: “We felt that if each subsidiary manager also led a team, they would come to understand the value and challenge of working on a regional basis. We set up a brand team on Lenor, another on Pampers, another on Pantene, and so on. We assigned different country managers to lead these. Really wanting to get everybody into the fire, so to speak, in experiencing it. What made the teams work was the mutual interdependency that grew.”11
Linking rewards to team performance.
Linking rewards to team performance encourages members to resolve conflicts and reach effective solutions. Consider two scenarios. In the first, a subsidiary manager’s incentive bonus is based solely on country-level performance, even though part of the manager’s time is devoted to being a member of a global team. In the second scenario, the manager’s bonus also is linked to attaining the team’s goals. The motivation for the manager in the second scenario to behave in a distrustful manner is low because that would compromise his bonus. Such considerations lie at the heart of Procter & Gamble’s policy to give explicit weight to both country and team performance in computing annual incentive payments to its country managers.12
Building social capital.
At any given time, a global enterprise typically will have many teams working on different cross-border coordination issues. It therefore makes sense for the company to undertake corporatewide initiatives to create interpersonal familiarity and trust among key managers of different subsidiaries. Initiatives to build social capital could take many forms. For example, Unilever uses several approaches to building social networks among managers who hail from different countries — including bringing together managers from different subsidiaries in executive-development programs and horizontally rotating managers across locations.
Effective Process for Global Business Teams
Global Business Teams Can Succeed
Global business teams are ubiquitous throughout multinational corporations. But managing them effectively and steering them toward their intended goals is not easy. Barriers to communication and to cultivating trust routinely sabotage the most well-intentioned team. By making the right choices for the team’s charter, composition and process, global teams can overcome the problems and efficiently achieve their ends.
A solid framework for designing high-performing global business teams is essential. (See “Effective Process for Global Business Teams.”) When a team consists of members with distinct knowledge and skills, drawn from different subsidiaries in different countries, the potential for cognitive diversity is high. That can be a source of real competitive strength. But intellectual diversity almost always will bring with it some degree of interpersonal incompatibility and communication difficulty. Process mechanisms that recognize and anticipate such pitfalls — and integrate the best of individuals’ ideas and contributions — are needed to help the team reconcile diverse perspectives and arrive at better, more creative and novel solutions.
1. To date, no empirical study has presented data on the effectiveness of global business teams. A broad treatment of the international dimensions of organizational behavior, however, suggests that, although cross-cultural teams are necessary, the challenge of managing diversity often renders them ineffective. See Nancy Adler, “International Dimensions of Organizational Behavior” (Boston: Kent Publishing, 1986), 99–118.
2. D.J. McAllister, “Affect- and Cognition-Based Trust as the Foundations for Interpersonal Cooperation in Organizations,” Academy of Management Journal 38 (1995): 24–59.
3. R.M. Kramer and T.R. Tyler, eds., “Trust in Organizations: Frontiers of Theory and Research” (Thousand Oaks, California: Sage Publications, 1996).
4. H. Hofstede, “Motivation, Leadership and Organization: Do American Theories Apply Abroad?” Organizational Dynamics 9 (summer 1980): 42–63. According to Hofstede, cultures can differ across four dimensions: power distance, the extent to which power is centralized; individualism/collectivism, the extent to which people view themselves as individuals as opposed to belonging to a larger entity; uncertainty avoidance, the difficulty people have in coping with uncertainty and ambiguity; and masculinity/feminism, the extent to which people value materialism as opposed to concern for others.
5. A. Tversky and D. Kahneman, “The Framing of Decisions and the Psychology of Choice,” Science 211 (January 1981): 453–458.
6. K.G. Smith, K.A. Smith, J.D. Olian, D.P. O’Bannon and J.A. Scully, “Top Management Team Demography and Process: The Role of Social Integration and Communication,” Administrative Science Quarterly 17 (1994): 36–68.
7. K.M. Eisenhardt, J.L. Kahwajy and L.J. Bourgeois, “How Management Teams Can Have a Good Fight,” Harvard Business Review 17 (July–August 1997): 77–85.
9. M.N. Chaniu and H.J. Shapiro, “Dialectical and Devils’ Advocate Problem Solving,” Asia Pacific Journal of Management (May 1984): 159–168.
10. D.B. Stoppard, A. Donnellon and R.I. Nolan, “Verifone,” HBS case no. 9-398-030 (Boston: Harvard Business School Publishing Corp., 1993).
11. John Pepper, chairman of the board, Procter & Gamble: remarks to an MBA class at the Tuck School, Dartmouth College, May 1995.
Readers interested in learning more about teams in general and global business teams in particular should note: D. Ancona and D. Caldwell’s 1992 article, “Demography and Design: Predictors of New Product Team Performance,” in Organization Science; K. Bantel and S. Jackson’s 1989 “Top Management and Innovations in Banking” in Strategic Management Journal; J.R. Hackman and associates’ 1990 book “Groups That Work and Groups That Don’t,” from Jossey-Bass; D. Hambrick, T. Cho and M.-J. Chen’s “The Influence of Top Management Team Heterogeneity on Firms’ Competitive Moves” from a 1996 Administrative Science Quarterly; L.H. Pelled, “Demographic Diversity, Conflict and Work Group Outcomes: An Intervening Process Theory,” in a 1996 Organization Science; S. Finkelstein and D. Hambrick’s 1996 Jossey-Bass book, “Strategic Leadership”; J.R. Katzenbach and D.K. Smith’s 1993 article in Harvard Business Review, “The Discipline of Teams”; and P.C. Earley and E. Mosakowski’s “Creating Hybrid Team Cultures: An Empirical Test of Transnational Team Functioning,” published last year in Academy of Management Journal.