Developing Global Leaders is America's Competitive Advantage

HBR.org published this article on why developing global leaders is America’s competitive advantage. 

By Bill George

As global companies focus their strategies on developed and emerging markets, they require substantial cadres of leaders capable of operating effectively anywhere in the world. American companies and academic institutions possess unique competitive advantages in developing these global leaders. They are remarkably open to talented people from diverse backgrounds, and are highly skilled at giving future leaders the knowledge and experience they need to lead successfully in the global economy. As American leaders work with foreign nationals, they become more open, better informed, and more effective in collaborating with people around the world. The ability to develop global leaders strengthens American companies and the U.S. economy, expands America's global trade, and attracts foreign companies to base operations in the U.S.

Let's examine the reasons why America possesses this important advantage:

1. America's higher education system is a magnet for talented leaders from all over the world. The U.S. has become a Mecca for international scientists, engineers and business students — particularly those undertaking graduate studies. Since the 2008 financial collapse, a new generation of business school deans is placing increased emphasis on developing global leaders. In particular, Harvard, MIT, and Stanford have geared their programs toward global leaders: as a result, 26-38% of their graduate students are foreign nationals.

Here at Harvard Business School, Dean Nitin Nohria has revamped HBS's MBA curriculum to emphasize practical leadership and global experiences. In January all 900 of HBS's first-year students — 34% of whom are international students — worked in developing countries. In 2011, 71% of HBS's new cases were written about foreign companies. HBS welcomes 6,360 foreign nationals (64% of the total) to its executive education courses each year, enriching the experiences for Americans as well. As a consequence, these foreign-born executives become more interested in doing business with American companies and many will eventually work in the U.S.

2. U.S. companies actively promote executive officers with diverse geographic and cultural backgrounds. Coca-Cola has been a pioneer in developing global leaders. It started 30 years ago with the progressive and unusual step (for that time) of shifting from local nationals as country managers to global leaders from other countries. This has enabled the company to develop exceptional global leaders. As a consequence, five of its CEOs have been non-American-born, including today's CEO, Turkish-born Muhtar Kent. In addition, eight of its top nine line executives are from outside the U.S. Many global companies have followed Coke's lead by appointing foreign-born CEOs and executives. For example, PepsiCo CEO Indra Nooyi was born in India, Avon's Andrea Jung is Chinese-Canadian, and Medtronic CEO Omar Ishrak grew up in Bangladesh. UK-born George Buckley, CEO of 3M, will be succeeded by Swedish-born Inge Thulin. Half of 3M's executive committee comes from outside America.

In contrast, the CEOs and executives of leading companies in Germany, India, Korea, Japan and China are almost all natives of their home countries. Swiss companies like Nestle, Novartis, and Credit Suisse are notable exceptions, as they have non-Swiss CEOs and a majority of non-Swiss executives.

3. American companies send their most promising leaders abroad for global leadership assignments. Major U.S. companies like Cargill, ExxonMobil, 3M, and IBM insist their line executives have numerous assignments running overseas operations to ensure they understand their global businesses. They also conduct intensive development programs for global leaders through in-house training programs. Two of the best-known programs, GE's Crotonville and Goldman Sachs's Pine Street, are committed to having 50% of participants from overseas entities.

4. The U.S. leverages its pool of top talent to attract research and business units. Many foreign companies are basing research centers and business units in the U.S. to take advantage of America's talented leaders. In 2002 Novartis relocated its research headquarters from Switzerland to Boston and hired Harvard Cardiologist Mark Fishman as its leader. Nestle, Unilever, and Novartis have several business units based in the U.S. French pharmaceutical company Sanofi recently acquired Boston-based Genzyme to tap into America's intellectual capital in biotechnology.

5. America fosters risk-taking and innovation by entrepreneurs who become global leaders.America has repeatedly demonstrated its capacity to develop entrepreneurs who start with revolutionary ideas and create global companies that dominate their markets. Intel, Microsoft, Apple, Genentech, Starbucks, Google, Cisco, Amazon, Medtronic and Facebook are some of the success stories resulting from an American culture that fosters risk-taking, openness, and innovation. Their successes globally have created enormous stakeholder value for their customers, employees, communities, and investors.

In the increasingly competitive global economy, the United States needs to take advantage of its ability to develop global leaders who are capable of addressing the complex challenges facing global institutions. Unfortunately, this unique American capability is often undermined by U.S. government policies, such as limitations on work permits for foreign graduates of American universities that force them to return to their home countries. Visa restrictions also limit U.S. companies from bringing foreign nationals to America for assignments enabling them to become global leaders. American executives, educators, and government officials need to collaborate to strengthen America's leadership of the global economy.