Companies today work with an increasingly diverse array of people. To thrive, organizations need culturally neutral, globally coherent leadership standards.
Digital technologies aren’t just strengthening customer relationships, reducing costs, and creating competitive advantage. They are changing how we organize work, and thus, how executives must lead.
And while unprecedented technological change might appear to present unprecedented challenges for leaders, that is not entirely the case. Similar technology-driven revolutions occurred twice in the 20th century, and each provides important lessons for leaders.
The first occurred in the 1910s, when American businesses adopted workflow analysis technologies such as time and motion studies and Gantt charts. These tools sharply restricted the breadth of individual jobs and created functional departments with hard boundaries. Harsh boss-knows-best leaders, who prescribed work in excruciating detail, inevitably arose.
The second occurred in the 1980s, when the Japanese challenged these CEO-centric practices. Japanese companies deployed quality technologies (like statistical process control) that made them competitive enough to bankrupt reputable American companies; for example, American Motors Corp.’s demise in 1987 reduced the auto industry’s “Big Four” to the “Big Three.” American executives didn’t oppose the new technologies so much as they resisted the organizational and leadership changes they required, including cross-functional teams and empowered subordinates.1
When change finally did come, decades of ironclad beliefs died out very quickly. Teams became basic organizational building blocks, “Break down the silos!” became the new dictum, and leaders learned that they didn’t have to demean subordinates to get good work out of them. Revolutionary technologies often expose shortcomings of existing organizational and leadership models, and the pioneering efforts of a few companies can provide effective examples for widespread emulation. Eventually, and with surprising rapidity, new ideas bury old ways. When I ask executives if they think teams were common in the decades before the 1980s they say, “Yes,” even though they really weren’t.
Digital technologies, too, are producing profound change in the ways we work. The transformations they are enabling, even requiring — such as the distribution of work over time and across geographies — have become quickly well established. Executives now run projects and businesses that span the globe, incorporating both internal and external teams. The new leadership challenge is how to effectively manage the “networked” organization.
The Rising Need for Culturally Neutral Leadership Standards
The organizational impact of digital technologies undercuts two core assumptions of legacy leadership models2:
Outdated Assumption One: Most people working together belong to a single company and are subject to the same organizational structure, policies, and processes. In actuality, many projects today bring together people from both different companies and different cultures. For instance, the creation of the Boeing 787 Dreamliner was the result of a collaboration between four American companies, four Asian companies, and five European companies.
Outdated Assumption Two: Most employees have a common cultural, lingual, religious, and political heritage. In fact, many companies today are made up of people from a broad variety of cultural backgrounds. And leading companies understand this: For instance, IBM is conducting research on cognition, key to its future, in six very different countries — the United States, China, India, Ireland, Israel, and Switzerland.
Companies that still operate according to outdated assumptions produce leadership standards that implicitly embody “home country” cultural values. Employees from non-mainstream backgrounds or other nations must adapt and conform, or forfeit the right to lead. Even companies renowned for progressiveness aren’t immune: In the 2000s, Johnson & Johnson considered the quality of being “indecisive — shows reluctance to commit to decisions” a career derailer.3 This standard could discount, however unintentionally, the deliberative decision-making common in the Asia-Pacific region, potentially limiting opportunities for competent Asian executives.
History warns us that mastering digital technology won’t determine which companies become corporate winners. Instead, making the necessary organizational and leadership changes will. Because companies employ, or partner with, more diverse peoples today, they need culturally neutral, globally coherent leadership standards. These standards should promote needed outcomes (e.g., “make decisions”) without prescribing behaviors (e.g., “is decisive”) that are countercultural to many peoples. Inevitably, significant advantage will accrue to companies that ready their people for truly global leadership — and do it earlier in employees’ careers than ever before.
Japanese companies such as Hitachi Ltd. and Sony Corp. highlight the dangers of not making these cultural changes. These companies, which had become industry leaders, ceded the dominant positions they had achieved. They developed the core ideas of teams and inclusionary leadership, but they couldn’t extend these concepts to attract and retain talented non-Japanese executives.4 Top Japanese executives privately admit that the digital world is acutely accentuating this critical vulnerability.5
The good news is that pioneering companies are increasing efforts to solve the culture challenge. In 2006, after more than 300,000 global employees participated online in redefining IBM’s values, then-CEO Sam Palmisano assembled a diverse team of senior executives to define a “Global IBMer.” In 2013, J&J began rolling out globally relevant leadership standards, which now apply to 70% of its workforce. Because promotion rates of Asian executives in Western companies lag those of their Western peers, Unilever is focusing on raising internal awareness of “Asian leadership.”6
The bad news is that for now, there is a lack of a “complete” model to emulate. IBM’s leadership team in 2016 resembles the one it had in 2008. J&J’s union agreements will preclude 100% coverage of its new leadership standards.7 And Unilever’s approach is ultimately an interim solution: In a digital world, Asian leaders must be able to rally non-Asians. No one said this change would be easy.
Even so, companies must move forward quickly. Because digital work is already distributed globally, cultural biases in leadership can seriously hurt both projects and the companies behind them. There’s emerging evidence that Asian executives in general feel disconnected from their Western employers, just like Westerners do from today’s Japanese companies.8 Companies should draw inspiration from the pioneers, but learn, test, and scale ideas that fit their circumstances. Since the average corporate life span has dropped below that of humans, these efforts could well impact their survival.
Senior business leaders should lead these initiatives. Last year, Daimler AG’s board commissioned a project staffed by executives from around the world to rethink leadership standards. IBM and J&J also began at the top in making their changes, as did most companies that successfully deployed quality technologies early. Efforts should involve many culturally diverse people. The numbers will provide the critical mass necessary when debate occurs over a legacy standard’s disparate impact on different peoples. Diversity will likely produce an outcome that, if not ideal, will at least be acceptably neutral for many.
Proactive Executives Can Create Conditions for Change
Pervasive heterogeneity can tear global companies apart, and no legacy standard should survive if it doesn’t pass the “How can this hurt us in a digital world?” hurdle. Similarly, no new standard should be adopted without passing the “How will this bind us together?” hurdle.
Good executives don’t need a CEO’s permission to be self-reflective and proactive. Openness, regular conversations with those who are different, and critical thinking can enable anyone to independently and immediately apply the essence of Unilever’s approach: understanding that executives from different parts of the world can be equally effective despite having very different leadership styles, as long as these styles are culturally appropriate in their parts of the world. Making one’s leadership behavior culturally neutral ahead of the organization’s declared policy will create conditions for change and accelerate the policy’s ultimate deployment. It may also jump-start an executive’s career.