How do high-performance businesses compete successfully on a global scale? According to R. Gopalakrishnan, executive director of India’s Tata Sons, by becoming masters of “creative tensions.”
These companies are both global and local, integrated but also agile. They respect the often considerable cultural diversity of their people while also building a single, coherent organizational culture. And these top performers succeed in managing these tensions regardless of whether their senior leadership teams are Indian, Brazilian or German; whether their companies are owned by a family, shareholders or a state agency; whether they are competing in a new or a mature market; or whether they are five, 50 or 150 years old.
In this podcast, the authors discuss the top three attributes that leadership teams must have to successfully guide their businesses on a global scale.|
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The multinational universe has exploded during the past two decades. As of 2008, there were more than 80,000 such companies, up from about 35,000 in 1990. And each has, on average, nearly 10 foreign affiliates; 20 years ago, the average was just over four. According to a UN estimate, the largest 100 multinationals cumulatively employ more people outside their home countries than within them.
To learn about how companies are responding to the growing complexity and volatility of the global business environment—how they are managing these creative tensions—Accenture, over the past year, interviewed more than 40 CEOs and other top leaders at multinationals representing 20 industries. The challenge of trying to compete across markets with very different rules, against competitors with very different styles—all the while searching for economies of scale—explains why many senior leaders we interviewed argued that cohesion at the top was essential to high performance.
While the responses of our interviewees varied greatly—as one would expect, given their geographic dispersion and the range of industries they represent—we discerned three key attributes that top teams must have if they are to successfully guide their businesses on a global scale: clarity of focus, agility and a foot in the future. These may sound simple, but in practice they are surprisingly hard to achieve.
1. Clarity of focus
Asking a global leadership team to define its unique responsibility does not, surprisingly, always produce a clear, unanimous answer. Far from it.
Case in point: We ran a workshop for the top team of a global manufacturing company on how to improve decision making. At the very beginning of the session, the attendees—the CEO and 10 of his direct reports—were asked, “What do you do that no one else in the company has the responsibility to do?”
After 30 minutes of vigorous debate failed to produce any consensus, the CEO intervened and gave his team two hours to come up with a charter it could live with. Later, the group concluded that many of its difficulties with decision making were linked to its collective inability to answer that one simple question.
Global top teams must be very clear about why they exist. A clear sense of unique responsibilities can reduce the duplication of effort and frustration that often builds up in a diverse team whose members can be scattered around the world—whether those frustrations originate in communication roadblocks and linguistic barriers or in divergent perspectives. Shedding responsibility for day-to-day decisions that can best be handled by focused committees is one way to obtain this clarity, an approach recently put into practice at global hotelier Four Seasons (see Sidebar 1).
The level of complexity and risk in the global environment, as well as the attendant costs (capital outlay, diversion of management attention, disruption to core processes), make clarity about purpose and process especially important. Simply admonishing a leadership team to “think globally and act locally” is hardly enough in a world where cultural and other differences at the local level remain astonishingly large.
Sometimes, a team can arrive at a clear leadership charter by being locked in a room for two hours. Such an approach has a way of concentrating the mind. In other instances, more time for reflection is called for. For example, the leadership team at Tata Chemicals periodically holds off-site meetings intended to stimulate thinking about management’s purpose.
Another way to create clarity of focus is by developing a set of operating principles to address the means while a charter addresses the ends. These principles are hammered out through sometimes intense discussion and trimmed down to a few simple but memorable rules that serve to remind the team how it will achieve its goals.
A large media and professional services firm created a set of four operating principles and pledged to adhere to them as part of its journey to high performance. Each principle—for example: “We will speak with one voice”—carried clear indicators that could be measured (e.g., “We will reach 100 percent closure on our commitments”) and were communicated to the rest of the company.
A leadership charter and a set of operating principles may never need to be written down if they are unambiguous and easily understood. But they do need to be communicable so that new members and other layers of the organization can quickly assimilate them as a guide to action.
The CEOs and other leaders we interviewed cited the importance of integration at the top as a way of bridging at least some of the gaps created by a diversity of businesses, countries, cultures and functions within multinational organizations. We were told, however, that integration should not come at the expense of agility.
The key to that agility is having the right people in the room at the right time.
Leaders must be able to reconfigure themselves into teams of different sizes, compositions and decision-making styles—which can, under the right circumstances, even be autocratic. A consensus, egalitarian approach isn’t necessarily the default just because the word “team” is used.
|This ability to reconfigure as needed presupposes that each decision-making group has a charter of its own—either one it’s handed or one it composes. Moreover, this is not the same as having a typical hierarchy of executive bodies, such as an executive leadership team, an operations team, a global steering council and perhaps a cross-sectional conference of high-potential managers. True agility at the top means having a repertoire of standing teams and temporary teams that can be called into existence (or reconfigured) to meet particular challenges as they arise.
In such cases, it’s critical that team members recognize and even declare what hat they are wearing during a particular debate. Hemant Nerurkar, managing director of Tata Steel, points out that he has to be clear about whether “I’m in this room because of my role as head of Asia, or as head of outsourcing, or as a functional leader of finance. Am I anchored in one role, or am I sharing the burdens, the responsibilities, the perspectives of the top leader and looking at the whole of the organization?”
Only when team members recognize potential biases caused by the variety of roles they inhabit can a team arrive at a fully informed decision.
Agility also manifests itself in the ability of top leaders to change their decision-making styles to accommodate a wide array of variable factors, such as urgency, risk level, time constraints and cultural difference. According to Hervé Borensztejn, executive vice president at Converteam, a French company specializing in power conversion that was recently acquired by General Electric Co.: “We [sometimes] change our decision-making structure when we have to make decisions immediately in order to keep up with the speed and pace of our competitors . . . even though not all of us are available at the same time.”
Flexibility matters for Canadian grocery chain Sobey’s because its top team must expand and contract to deal with the tensions associated with sourcing globally while marketing locally to very different provincial customers. As chief leadership development officer Ashim Khemani puts it, “We’re constantly toggling between what needs to happen today and how our offer is relevant, and then how we position ourselves for the longer term from an offer standpoint and a supply chain standpoint.”
Another way to get the right people into the room is to think of the top leadership group as a network rather than as a fixed hierarchy. As London-headquartered home-improvement retailer Kingfisher has discovered, organizing around particular issues is an effective approach in a company rapidly expanding beyond its home market (see Sidebar 2).
3. A foot in the future
Given their responsibilities for strategic direction, global leadership teams often find themselves with “one foot in today and one foot in tomorrow,” to borrow an operating principle from one top team. But the men and women we interviewed gave real substance and energy to that idea.
To be able to change ahead of the curve, to be prepared for the widest range of eventualities, global leadership teams must be confronted by challenging ideas and people. Some executives, such as former UPS CEO Mike Eskew, search for ways to bring “the future into the room.” For example, during his tenure, Eskew exposed his team to new technologies and their inventors, new demographic groups and new cultures.
The vice president of the European sales region for a Chinese global telecom company described for us a network of “professors, institute heads and top-level people from companies and institutions worldwide” that his company communicates with often and relies on to generate critical insights on global trends. Other leaders use scenario exercises or new analytical techniques to slice through the mountains of data available from enterprise IT systems in an effort to discern possible futures.
Top teams also need to foster a global mindset as part of their efforts to develop next-generation leaders. According to Ana Dutra, CEO for the leadership and talent consulting arm of global executive search firm Korn/Ferry International, in many organizations, such a mindset is the newest addition to the definition of a “high-potential” manager.
While agreeing that travel and exposure matter, our interviewees dismissed the idea that a global mindset comes with a worn passport. In a business context, a global mindset was best described by Anil Garg, head of HR for Asia at Whirlpool of India: “If you can home in on one trait in a global leader, it is learning agility. A person with learning agility can be placed in an unfamiliar territory or function, and can, in a short period of time, create a team, identify business opportunities and build strategic alliances.” In other words, a global mindset doesn’t require constant globetrotting.
Finally, the CEO and the top team must take personal responsibility for cultivating the next generation of global leaders so that they, too, can change ahead of the curve. Several CEOs noted that the world their successors will inherit is going to be extraordinarily complex and that global leadership will therefore require even more diverse backgrounds and experiences.
At beverage giant Diageo, human resources director Gareth Williams explained that “we are progressing on how we develop local talent into global roles, and then ultimately into succession candidates for the top jobs. Consequently, in five to 10 years’ time, the upper levels of our leadership cadre will look very different from what they are today.”
The creative tensions inherent in managing a multinational are unlikely to diminish. Having a clear sense of purpose, the right people in the room and the ability to change ahead of the curve will be the hallmarks of successful, truly global leadership teams.
Does your top leadership team have what it takes? Take our survey to assess its effectiveness.
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For further reading
“Different strokes: How to manage a global workforce,” Outlook 2011, No. 2
Sidebar 1 | Changing the guard at Four Seasons
After nearly 50 years at the helm, Four Seasons Hotels and Resorts’ founder Isadore Sharp stepped down from the CEO role in 2010. And in the wake of this momentous event, notes Nick Mutton, executive vice president of human resources and administration, the hospitality company has been going through “a process of change from a founder-based company, where [Sharp] had complete control of decision making, to a new structure of shared decision making.”
From its beginnings as a humble “motor hotel” in Toronto in 1961, Four Seasons now operates 85 hotels in 35 countries, and has more than 35,000 employees on its payroll. Gone are the days when an executive such as Mutton could, on his own, travel the globe to bring the company’s culture to every destination.
Further, as President and CEO Kathleen Taylor told us, international expansion has brought new complexities to the very question of culture. “We came to realize that you couldn’t take a North American focus and transplant it elsewhere,” she says. “There are subtleties around how services are delivered, how people are addressed, how interactions between employees and guests occur. In our business, it’s very important to understand the cultural nuances of all the different locales.”
Taylor’s solution has been to make sure the right team is at the top—and that members work together effectively on the most immediate leadership concerns.
For Four Seasons’ executive leadership team, it has been critical to ensure that tactical decisions don’t get in the way of strategic work. “We’ve mapped out a strategy that will centralize the strategic discussion and decision making,” notes Taylor, “but decentralize the preparatory work, strategic recommendations and tactical decision making.”
Five committees, each chaired by a member of the team, are responsible for making sure that whatever needs to be decided gets resolved quickly, and for deciding whether certain issues need to come to the full executive leadership team. This frees up the team itself to take on the long-term issues that are critical to the company’s future success.
The executive leadership team takes special care to ensure that the right people are in the room to make decisions—meaning there are networks and concentric circles of decision makers for different types of leadership decisions. HR chief Mutton explains: “We’re now making decisions in a collaborative way for several major areas of concern for the company. First always is talent development, because our business depends on people to run the businesses around the world.”
Other leadership decisions address the performance of each hotel, worldwide development, investment and innovation. Thus, Four Seasons has been able to develop a clear leadership charter at the top while maintaining agility through its networks of leaders.
Being oriented toward the future—the third leg of effective global leadership teams—is not easy in a hospitality company. As Ellen Dubois du Bellay, vice president of global initiatives, puts it, “The business we are in is driven by the guest in front of you today, by the shareholder who owns your hotel today, and by quarterly results that they’re expecting at the end of this month. We also live in an environment [where all these considerations are] always unpredictable.” Dubois du Bellay also points to the difficulty any global company faces in dealing with long distances and many time zones: “Our challenge is to get people on the phone and involved in decisions when they should be sleeping, or enjoying time with their families.”
Taking control of the leadership pipeline is a big part of handling this unpredictability. CEO Taylor notes that “we have senior leaders from every part of the world.” Mutton adds that the company has a talent management system in place that keeps track of “who is ready, willing and able to move to the 96 projects in 37 countries.”
With a focused, agile team at the top and a well-stocked leadership pipeline, Four Seasons is preparing itself to weather the uncertainty that the future will inevitably bring. (Back to story.)
Sidebar 2 | Knitting Kingfisher together
A major challenge for any top team managing a company that is rapidly expanding abroad is figuring out how to integrate the business’s far-flung operations. Just ask UK-based Kingfisher, one of the world’s largest home-improvement retailers.
The bulk of Kingfisher’s sales come from the United Kingdom, Ireland and France, where it operates variously as the B&Q, Screwfix, Brico Dépôt and Castorama chains. However, it also has stores in China, Russia, Spain and Poland, and it is part of a 50-50 joint venture with Koç Group in Turkey. Rounding out its portfolio, Kingfisher holds a 21 percent stake in Hornbach, a German company with 130 do-it-yourself stores across Europe. All told, Kingfisher operates nearly 860 stores in eight countries in Europe and Asia, and had sales in its most recent fiscal year of about $16.6 billion.
In this environment, the top team must integrate the businesses while reining in complexity, especially concerning the number of products it offers and their sourcing. Chief among the team’s goals: have 50 percent of products common to all stores (up from 5 percent today), and simplify the complex mix of brands throughout the stores by replacing them with a group of “superbrands” common to all locations.
Group chief executive Ian Cheshire has begun the process of knitting the businesses together—a process that he realizes will involve a simultaneous shift in the way the top leadership team at Kingfisher thinks and behaves.
For example, the team has been reoriented toward group-level goals in order to achieve greater clarity of focus. Cheshire explains, “The first step on the road toward greater integration was to create a group executive that owned the total agenda rather than purely their local responsibilities.” When operations in China needed to be refocused, for instance, the group acted as a team: “We went [to China] as a group to review the strategy, and we collectively solved those issues,” he says.
Beyond the five members of Kingfisher’s group executive, other senior leaders come together in cross-functional teams to solve problems. Cheshire explains that the goal is to work through “collective and intelligent networks” on such issues as supply chain optimization and Internet channel development, and that the networks have often arisen spontaneously—an example of structural agility.
These networks allow leaders to make decisions in a style that matches the problem at hand—say, collaborating closely to reduce complexity in product assortment. The approach is having an impact at lower levels, such as when French regional managers came to visit B&Q’s UK headquarters, many for the first time. “It was like they were discovering their long-lost cousin,” Cheshire told us. “They created a community and brought practices from one place to another.”
Kingfisher is preparing for the future by creating new leaders from its operations around the world. Cheshire recognizes the potential benefits of this approach. “In the last three years,” he says, “we have increasingly mixed up the team so that we can get not just the scale benefits from being international but also the diversity benefits of different perspectives and experiences.”
As Kingfisher increasingly seeks new growth around the world, the focus on reducing complexity and developing next-generation leaders from beyond its traditional base of operations will be critical to its success. (Back to story.)
About the authors
Robert J. Thomas is the executive director of the Accenture Institute for High Performance. He is the author or coauthor of seven books on leadership and organizational change, including Crucibles of Leadership: How to Learn from Experience to Be a Great Leader (Harvard Business Press, 2008), The Talent Powered Organization (Kogan Page, 2007) and The Organizational Networks Fieldbook (Jossey-Bass, 2010). Based in Boston, Mr. Thomas is also a frequent contributor to Outlook.
Joshua B. Bellin is a research fellow with the Accenture Institute for High Performance in Boston. His work has been published in numerous publications, including the Wall Street Journal, MIT Sloan Management Review and the Journal of Business Strategy. He focuses on issues related to globalization, such as operating models in multinational companies.
Washington, DC-based Claudy Jules is a senior principal in Accenture Management Consulting. One of the lead architects of the company’s executive assessment and development offerings, Dr. Jules works with top teams to tackle their organizational challenges and strengthen their leadership capabilities.
Nandani Lynton is a professor at China Europe International Business School (CEIBS) in Shanghai, where she focuses on global leadership issues. Her published work has appeared in Harvard Business Review, Organizational Dynamics, Businessweek.com and elsewhere.