Developing Leaders for the Global Frontier

Imagine the experiences of explorers such as Magellan or Cook as they scanned the horizon of the great Pacific Ocean for days; they had no reliable charts, an unfamiliar hemisphere of stars, shark-infested waters, a crew losing confidence with each passing day, storm clouds gathering in the distance, waves crashing over the ship’s bow, and wind howling. In many ways, the new business world is just as dangerous, filled with brutal storms of competitors, endless seas of change, seemingly strange cultures, confusing marketing channels, and unknown frontiers of technology.

The great difference, however, is that only a few great and courageous explorers were needed in the days of Magellan. Once the seas and their islands were charted, the coordinates didn’t change. In contrast, the islands, mountains, rivers, and valleys of today’s global business world are not static; they change. Markets, suppliers, competitors, technology, and customers are constantly shifting.Consequently, global business now requires all leaders to be explorers, guided by only the faintest glimmer of unfamiliar stars and excited by the opportunity and uncertainty of untapped markets.

At current growth rates, trade between nations will exceed total commerce with- in nations by 2015.1 In industries such as semiconductors, automobiles, commercial aircraft, telecommunications, computers, and consumer electronics, it is impossible to survive and not scan the world for competitors, customers, human resources, suppliers, and technology.

These forces of change help explain why leadership models of the past will not work in a global future. Provincial Japanese models of leadership have worked in Japan because Japanese leaders largely interacted with other Japanese. The same has been true for American, German, or French leadership models. In the future, a new breed of leader will be needed. Recently, Jack Welch, CEO of General Electric, commented:

“The Jack Welch of the future cannot be like me. I spent my entire career in the United States. The next head of General Electric will be somebody who spent time in Bombay, in Hong Kong, in Buenos Aires. We have to send our best and brightest overseas and make sure they have the training that will allow them to be the global leaders who will make GE flourish in the future.”2

Most companies lack an adequate number of globally competent executives. Based on the results of a three-year study, we found that almost all companies claim that they need more global leaders, and most want future global leaders of higher caliber and quality (see the sidebar for details on the study).

Of the U.S. Fortune 500 firms we surveyed, 85 percent do not think they have an adequate number of global leaders (see Figure 1); 67 percent of the firms think that their existing leaders need additional skills and knowledge before they meet or exceed needed capabilities. Jack Riechert, recently retired CEO of Brunswick Corporation, reflects the sentiments of many senior executives we interviewed: “Financial resources are not the problem. We have the money, products, and position to be a dominant global player. What we lack are the human resources. We just don’t have enough people with the needed global leadership capabilities.”

Another aspect of our survey is the high rating of global leadership compared to other factors in a company’s global business success (see Table 1).

Characteristics of Global Leaders

As multinational firms compete in the unpredictable business frontier, they must confront two persistent, perplexing questions:

1. What are the characteristics of leaders who can guide organizations that span diverse countries, cultures, and customers?
2. How can companies effectively develop these leaders?

Our research revealed that every global leader needs a set of context-specific abilities and must have a core of certain characteristics. Roughly one-third of global business leaders’ success depends on the knowledge and skills for specific contexts. For example, corporate cultures, industry dynamics, and “country of origin” management practices can permeate a company’s worldwide operations and require unique knowledge and skills for successful leadership. About two-thirds of the characteristics apply generically to leaders, regardless of their managerial position, corporate culture, industry norms, or country-of-origin management practices. These general global leadership characteristics include exhibiting character, embracing duality, and demonstrating savvy. Most important, the leaders in our study saw inquisitiveness as the force underlying these characteristics.

Unbridled Inquisitiveness

While all leaders have substantial intelligence, all are not necessarily inquisitive. Constantly crossing cultural, language, political, social, and economic borders makes global business complex and uncertain. As a consequence, constant learning is required for success. Global business is physically taxing on managers. Travel, jet lag, and working in different languages and across different cultures can be tiring. For unsuccessful leaders, these aspects are just too overwhelming. Successful leaders are invigorated by the differences around them. They are driven by a sense of adventure and a desire to see and experience new things.

When studying individuals on international assignments, researchers have found this same characteristic to be important in cross-cultural adjustment and job performance.3 They have called it adventuresomeness, curiosity, or open-mindedness. While international assignment responsibilities are not the same as global leadership, it does seem that whether a manager is crossing one country border or many, inquisitiveness is key to success (see the sidebar on Mikell Rigg McGuire).

Global leaders stated repeatedly that inquisitiveness is the fuel for increasing their global savvy, enhancing their ability to understand people and maintain integrity, and augmenting their capacity for dealing with uncertainty and managing tensions. Inquisitiveness enables global leaders to not only develop the characteristics of character, duality, and savvy, but also build a complex understanding of how all three work together.

Personal Character

From our interviews, we determined that personal character involves two components: emotionally connecting with people from various backgrounds and exhibiting uncompromising integrity.

Emotional Connection.

A genuine emotional connection with people throughout the company’s worldwide operations is a function of a three-step process: (1) a sincere interest in and concern for others, (2) an effort to really listen to people, and (3) an understanding of different viewpoints. Leaders in the survey pointed out that understanding different viewpoints is not the same as embracing them but does lead to respecting them.4 This process is particularly challenging when cultural and language differences confound communication. Ample opportunity exists for misunderstanding and taking and giving offense. Without the ability to connect with individuals, cultural diversity becomes a huge obstacle to effective leadership.

In the literature on expatriates, we have found similar concepts. For example, willingness to communicate with host country nationals has been found to facilitate the cross-cultural adjustment of expatriates.5 Ethnocentricity and sociability also relate to making connections across cultures and have been discussed extensively in the literature.6

Fundamentally, emotional connection is important because it leads to goodwill. In turn, employees give leaders the benefit of the doubt on difficult matters, put forth their best efforts, and make sacrifices. In global organizations with webs of interrelated units that must cooperate and coordinate to meet customer needs, goodwill — rather than clear lines of command and control — is what leaders need to achieve global initiatives (see the sidebar on Jon Huntsman).

Integrity.

Executives described integrity in terms of ethical behavior and loyalty to the company’s agreed-on values and strategy. Both personal and company standards are substantially more prone to compromise overseas.7 When far removed from corporate oversight, managers are often tempted to change themselves and their organizations to appeal to local values and demands. Yet despite the opportunities for short-term advantage, the global leaders we studied were most effective when they consistently maintained the highest ethical standards in personal and company matters. Successful global leaders indicated that integrity significantly increased the overall levels of trust throughout the organization. They pointed out that when crossing cultural, national, functional, and business unit lines, trust is an essential, irreplaceable ingredient for effec tive execution. They were quick to add that quite often the difference between winners and losers in global competition is great execution, not great strategy, and added that for great execution, you need employees’ trust and commitment.

They felt that their high level of inquisitiveness actually facilitated their ability to maintain ethical integrity. All acknowledged that definitions of allowable ethical behavior varied from country to country. However, their inquisitiveness led them to probe below the surface, deep into people’s ethical values. For example, one manager made the following observation: “It’s true that practices differ from one country to another. ‘Gifts’ might be more or less accepted from one country to another. However, around the world, employees and customers alike trust managers who conduct business above board and on the basis of business merit” (see the sidebar on Lane Cook).

Duality

Global leaders embrace duality by managing uncertainty, essentially knowing when to act and when to gather more information, and balancing tensions, understanding what needs to change and what needs to stay the same from country to country and region to region.

Capacity for Managing Uncertainty.

At the heart of any multinational, uncertainty reigns supreme, and successful leaders have a capacity for managing in changing conditions. In the global business arena, they confront a dearth of quality data and a staggering number of questions; for example: What is a country’s real market potential? Is this country a good platform for global operations? How secure is the local currency? How long will it take to train local managers? While purely domestic executives face some of these same questions, the degree of uncertainty that global managers face is exponentially higher. The recent Asian financial and currency crisis underscores this point.

Once again in the literature on expatriates, we find an interesting parallel in terms of this characteristic for managing uncertainty. Researchers discuss the characteristic less in terms of management and more in terms of tolerance. In fact, most studies referred to tolerance for ambiguity. Research on expatriates has found that crossing from one’s home culture into a foreign one creates significant uncertainty and that those who have a reasonably high tolerance for ambiguity tend to cope and adjust better.8

In the global arena where uncertainty can come from not just one country but a dozen or more at a time, many managers may be tempted to do more research, which they believe will reduce the risk of poor decisions.9 Yet, in many parts of the world and for many products, collecting accurate data sometimes takes so long that the data are useless by the time they are available. Furthermore, in today’s hypercompetitive business environment, waiting for clarity works only if everyone else also waits. While global leaders allow time for research, they do not allow the search for clarity to jeopardize first-mover advantages. They quickly separate the “figure from background” and do not wait for the entire picture to come into focus before moving ahead. They know that speed and a capacity for uncertainty are tightly intertwined (see the sidebar on Gary Griffiths).

Unique Ability to Balance Tensions.

In addition to uncertainty, managers must balance various tensions as they confront the pressures for both global integration and local responsiveness. Successful leaders indicated that it is generally a mistake to either globalize or localize all activities.10 Rather, some activities like R&D may be most appropriately carried out worldwide, while other activities such as advertising and promotion may be best carried out locally or regionally. These leaders stressed that the perspective should not be one of just tolerating tensions but of embracing their inherent duality. A global executive with an engineering background commented:

“If you design a bridge to be completely rigid, it will collapse. If you let it swing freely, no one will be able to use it. Oscillation within a range is good and necessary for the bridge to function. The same is true for global organizations and leaders. That is why effective global leaders embrace duality and tensions.”

These tensions include product standardization versus local adaptation, headquarters’ management style versus the subsidiary’s approach, corporate labor relations policies versus host country norms, and global brand image versus local consumer preferences. Embracing duality requires leaders to view tensions as necessary and good (see the sidebar on Stephen Burke).

Savvy

Because globalization increases both the opportunities for business and the challenges in getting things done, leaders need to be more savvy, much like a high-hurdle runner needs the ability to jump higher than a low-hurdle runner. In our research, we found two dimensions: business savvy and organizational savvy.

Business Savvy.

Global business savvy enables managers to recognize worldwide market opportunities. They either locate new markets for the company’s goods and services or gain more efficient access to the company’s existing markets. To recognize new market opportunities, to arbitrage opportunities involving cost and quality differences across company affiliates, and to maximize efficiencies by reducing redundancies, global leaders must understand competitive conditions.11 Leaders know the sources and location of comparative advantage, country-specific conditions, countries’ political and financial stability, and so on. They also understand international disciplines such as finance, accounting, marketing, operations, human resource management, and strategy. They comprehend issues that domestic-oriented leaders just don’t have to face — such as how real movements in exchange rates can create opportunities to (1) lower prices and increase market share while keeping profit margins stable, or (2) keep prices and market share constant and reap additional profits (see the sidebar on Steve Holliday).12

Organizational Savvy.

Global leaders have intimate knowledge of their firms’ capabilities and their ability to mobilize resources to capture market opportunities. They know the strengths and weaknesses of the organization, are familiar with the company’s subsidiaries and competitive positions, and know key overseas managers.13 Due to changes in cultures, languages, government regulations, increased physical distances, and shifting time zones, as well as unclear lines of authority, the depth and breadth of organizational savvy required to execute effectively is far greater for global leaders (see the sidebar on Ta-Tung Wang).

Developing Global Leaders

Organizations seeking to globalize need look no further than their own leaders to determine if their efforts will succeed or fail. Does the organization have enough global leaders? If not, it must ask if its leaders are born or made. Based on our interviews, the consensus was that global leaders are born and then made.

Assessing Talent

Global leaders, like great musicians or athletes, need superior talent, abundant opportunity, and excellent education and training to succeed. Not everyone has the ability to become one, so companies should not give opportunity and education to just anyone. Companies need to assess whether they are hiring enough young managers with the required baseline level of leadership talent to ensure that, even with normal turnover, they will have future global leaders.

Colgate-Palmolive, a company with decades of international business experience, often hires entry-level marketing candidates who have already demonstrated such characteristics and capabilities. It intentionally hires newly minted undergraduates or MBAs who have lived or worked abroad, speak more than one language, or can demonstrate their preexisting aptitude for global business. Still, even individuals with potential need outstanding developmental opportunities. In our research, firms with comprehensive development systems performed better financially than firms without such systems. However, most firms do not have comprehensive systems for developing global leaders (see Figure 2).

The Development Process

How are global leaders made? The basic mental process for development is to understand the whole world, not just one country. For most of us, that requires both some rearranging and stretching of our mind-sets. However, it usually takes a pretty hard blow to the head and some real tugging before we rearrange and stretch our minds enough to encompass the whole earth.14 Direct confrontations with new terrain can create a sharp contrast between what we know and what lies before us.

We might consider the example of one American’s seemingly simple trip to a traditional Japanese restaurant. As this very tall businessman walked in, he hit his head on the wooden beam over the entry with such force that it shook and rattled the doors and windows and caused the other patrons to fear an impending earthquake. The American did the same thing the very next day. Finally, on his third trip to the restaurant, he remembered to duck when entering.

Most of us are like this person. It takes getting hit in the head — hard and probably more than once — before we are ready to change our mind-sets. And we need to expand our minds to recognize global opportunities and to marshal worldwide organizational resources. We need to emotionally connect with people who are different from ourselves and engender their good will. We need to understand people of different ethics and demonstrate integrity in a way that inspires trust. We need to embrace the constant dualities and tensions of global and local business demands. One reason that inquisitiveness differentiates between successful global leaders and those who struggle with worldwide responsibilities is that it ignites and fuels the motivation to go through this mind-altering process.

Strategies for Developing Global Leaders

In our research across Europe, North America, and Asia, we found four strategies that, when properly used, are effective at developing global leaders: travel, teams, training, and transfers.

Travel

Foreign travel, the first strategy, must put potential global leaders in the middle of the country, its culture, economy, political system, market, and so on, uninsulated by the common corporate cocoon of a western luxury hotel, car and driver, dutiful staffers, and choreographed itinerary. When Procter & Gamble CEO John Pepper travels, he visits several families’ homes in each country to see firsthand how they use products, before he goes to his hotel or office. His approach helped him see that the French prefer front-load washers and would not easily change to top-load washers. This, in turn, helped Pepper better manage the introduction of a new cold-water detergent brand globally and, at the same time, find a way to meet the local need for distributing the detergent evenly throughout the clothes in front-load washers. This led to the invention of an innovative plastic ball into which a customer pours the detergent; it evenly distributes the detergent through little holes.

The successful global leaders in our survey consistently described two ways to enhance the developmental potential of international travel: First, take detours. Often the greatest contrasts and opportunities for stretching and rearranging minds are found off the beaten path. Second, get wet. Dive into the shops, markets, schools, homes, and so forth to find out what local life is really like.

Teams

The second strategy is to establish teams in which individuals with diverse backgrounds and perspectives work together closely.15 Contrasting views and values can force members to think globally. Managed well, a culturally diverse team can also produce better business decisions.

Recently, Black & Decker implemented a 360 degree performance appraisal and feedback system, using a team from the United States and several Asian countries, including Singapore and Malaysia. Tracy Billbrough, president of Black & Decker Eastern Hemisphere, felt that the global team experience helped him better understand how to connect emotionally with people from different cultural backgrounds and appreciate why those connections aided in successful implementation.

Multicultural teams can be quite problematic, however, if not managed well. To help make teams more effective in developing global leaders:

• People should become team members before becoming team leaders.
• In general, people should be members or leaders of single-function, multicultural teams before becoming members or leaders of multiple-function, multi-cultural teams.
• Companies should give team members adequate training in topics such as cross-cultural communication, conflict resolution, and multicultural team dynamics.

Training

The third strategy, training, can supply all the contrast and confrontation of teams with a structured learning environment. For example, Sunkyong, one of the five largest industrial organizations in Korea, has a global leader program that involves both classroom and action learning projects for participants from the company’s worldwide businesses. One project examined liquid natural gas opportunities in China. Its outcome helped Sunkyong avoid some costly mistakes; the training program teams discovered partners who were much more capable and competent than those the Chinese government had been promoting. Y.C. Kim, director of human resources, felt that exposure to various people through the company-provided training program enhanced his organizational savvy, and he met people who could help him in the future.

To enhance global leadership development, effective training programs should have these characteristics:

• Participants should come from the company’s worldwide operations.
• Programs should include topics on international strategy and vision, worldwide organizational structure and design, change management, cross-cultural communication, international business ethics, multi-cultural team leadership, new market entry, dynamics of developing countries and markets, and managing in uncertainty.
• To ensure that the training encourages people to rearrange and stretch their minds, programs should include action learning components such as a field-based business project.

Transfers

The fourth, most powerful strategy is to provide overseas assignments.16 We asked leaders: “What has been the most powerful experience in your life for developing global leadership capabilities?” Eighty percent identified living and working in a foreign country as the single most influential experience in their lives. Given the respondents’ diverse nationalities, functional experiences, company affiliations, and so on, this finding is significant. More than any of the other three strategies, working in a foreign locale every day makes it possible to have mind-altering, head-cracking experiences.

Not everyone is open to the potential of an international assignment. People usually have one of four basic responses:

Broken heads. People with no global leadership potential have such thick heads they do not even realize when they have hit them and hence learn nothing from the assignment.

Bruised heads. Those with little potential realize that they have hit their heads, but they go back to being just as they were before the mishap and learn almost nothing.

Bright heads. People with a moderate amount of potential learn to duck after they first hit their heads; that is, they learn country-specific lessons.

Brilliant heads. When unexpectedly hit in the head, people with significant talent do not ignore it, do not try to simply reconstruct their original mind-sets, and do not create unique mental maps for each new situation and country. Instead, they continually monitor little bumps and major cracks and then update contingent, general mental maps that transcend country boundaries.

For example, NORTEL (Northern Telecom) maximizes the learning impact of international transfers by carefully managing each phase. NORTEL establishes candidate pools for international assignments, encourages informed self-selection, provides predeparture training, establishes support mechanisms, plans for repatriation, debriefs employees and families on return, and uses repatriates’ international skills and knowledge throughout the organization. NORTEL’s strategic and systematic approach to international transfers produces increased market reach, quick innovation transfers, sound strategic alliances, and better global leaders.

How can firms enhance the power and effectiveness of international assignments?

Select the person carefully. Begin by thinking about how the person and the company will use the international experience in the future.

Consider the person’s family. Ensure that family members are well suited for the assignment. Their difficulties could cause the global leader to lose the development potential of the assignment.

Provide training. Training helps people adjust quickly, be resilient, and better capture the potential of an assignment.

Facilitate repatriation. Companies need to retain people to leverage their international development. Unfortunately, approximately 25 percent of U.S. expatriates who successfully complete an international assignment leave their company within a year. Companies such as Monsanto, however, employ certain strategies to retain and better utilize potential global leaders after international assignments: They provide a sponsor to help with placement and reentry and plan for repatriation three to six months in advance. They help employees locate a suitable position before their return. They allow some “down time” for employees to put things in place at home. They provide repatriation training and facilitate the family’s readjustment. They provide the opportunity to use international experience and allow for reasonable autonomy in the first job following repatriation.

Conclusion

Like explorers of old, today’s global leaders face uncharted seas. While the characteristics these leaders must possess could clearly benefit domestic leaders, the difference is that global leaders cannot succeed without them. Our research suggests that most companies clearly lack the quantity or quality of global leaders they need — today or in the future. In the near term, this may create a valuable “free agent market” for those with proven capabilities until more leaders can be developed.