Article Series on Global Leadership
Published on March 8, 2012
This set of four articles were all initially published in Harvard Business Review.
New Era for Global Leadership Development
The realities of globalization, with increasing emphasis on emerging markets, present corporate leaders with enormous challenges in developing the leaders required to run global organizations. Too many multinational companies — particularly Japanese, Indian, German, and some American ones — still concentrate vital decisions in the hands of a small group of trusted leaders from their home country. They hire technical specialists, local experts, and country managers from emerging markets but rarely promote them to corporate positions. Instead, they groom future global leaders from the headquarters nation by sending them on overseas appointments.
This approach worked relatively well for companies selling standard products in developed markets, but as multinationals transition into truly global organizations relying on emerging markets for growth, it’s far from adequate. In order to adapt to local cultures and market needs, companies must shift to decentralized, collaborative decision-making. That requires developing many leaders capable of working anywhere.
To address these needs, new approaches for developing global leaders are required:
- The diversity of top leadership should reflect the diversity of the firm’s customers.
- Global leaders must be effective in aligning employees around the company’s mission and values, empowering people to lead, and collaborating horizontally rather than managing vertically.
- Rather than concentrating on the on the top 50 leaders, global companies need to develop hundreds, even thousands, of leaders comfortable operating in a variety of cultures.
- Developing global leaders with cultural sensitivities and collaborative skills requires greater focus on emotional intelligence, self-awareness, and empowerment than on traditional management skills.
To understand these approaches, let’s examine what leading global companies are doing:
Create diversity among senior leadership. To make sound decisions, companies need a diverse set of leaders who have deep understanding of their local customers, especially those in emerging markets. Opportunities at the highest levels, including C-suite and CEO, must be open to people of all national origins. Atlanta-based Coca-Cola is a pioneer in geographic diversity. As early as the 1960s, the company was run by South African Paul Austin. Since that time, Coca-Cola has had Cuban, Australian, and Irish CEOs, leading to today’s CEO, Turkish-American Muhtar Kent.
Over the past decade two Swiss companies, Nestle and Novartis, have made dramatic shifts from Swiss-dominated boards and executive leadership to a diverse set of nationalities. Both now have non-Swiss majorities on their boards and several business units based outside Switzerland. Nestle’s executive board represents ten different nationalities, while 80% of Novartis executives come from outside Switzerland.
Focus on values, not hierarchy. The characteristics of successful global leaders today are quite different than traditional hierarchical managers. They need high levels of emotional intelligence and self-awareness to unite people of different cultures, many who are new to the enterprise, around the organization’s mission and its values and empower them to make decisions without waiting for higher-level directions.
Samuel Palmisano, IBM’s chairman and former CEO, recognized that IBM’s traditional hierarchical structure would not be effective in the 21st century because it was dominated by product and market silos. In 2003 he reorganized the company into an “integrated global enterprise” based on leading by values and collaboration, and uses special bonuses to empower leaders to extend IBM’s culture globally.
Broaden the reach of leadership development. Collaborative organizations like IBM’s require far more leaders than the traditional focus on a select group of top leaders. With flatter organizations and decentralization of power, corporations must develop savvy global leaders capable of operating locally and globally simultaneously. IBM’s former chief learning officer recently estimated that IBM will need 50,000 leaders in the future.
Unilever has more than half of its business in Asia, and that percentage will continue to increase. The company has undertaken a major initiative to develop 500 global leaders in intensive leadership development programs to prepare them for expanded roles. According to CEO Paul Polman, “Unilever’s Leadership Development Programme prepares our future leaders for an increasingly volatile and uncertain world where the only true differentiation is the quality of leadership.”
To be effective in global roles, leaders require experience working and living in multiple countries. Extensive travel overseas is no substitute for living there, gaining fluency in local languages, and deeply immersing in the culture. German chemical maker Henkel, whose executives come from a diverse set of countries, insists they live in at least two different countries before being considered for promotion.
New methods for developing global leaders. Developing global leaders necessitates a shift from focusing on management skills to helping leaders be effective in different cultures by increasing their self-awareness, emotional intelligence, and resilience. Dean Nitin Nohria at Harvard Business School recently sent 900 MBA students overseas to work with companies in countries where they have neither lived nor worked.
It’s not enough just to work overseas. To process and learn from their experiences, individuals should utilize introspective practices like journaling, meditation or prayer, and develop support networks of peers like True North Groups. There they can consult confidentially with people they trust about important decisions and have honest conversations about their dilemmas, mistakes, and challenges. These experiences enable leaders to develop the self-mastery and appreciation and acceptance of people from diverse backgrounds required to become effective global leaders.
These methods of developing global leaders for the future are still in their nascent phase, but there is little doubt that they will have a profound impact on developing global leaders in the years ahead.
Developing Global Leaders Is America’s Competitive Advantage
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.
How IBM’s Sam Palmisano Redefined the Global Corporation
In the 20th century, a select group of leaders — General Motor’s Alfred Sloan, HP’s David Packard and Bill Hewlett, and GE’s Jack Welch — set the standard for the way corporations are run. In the 21st century only IBM’s Sam Palmisano has done so.
When Palmisano retired this month, the media chronicled his success by focusing on IBM’s 21% annual growth in earnings per share and its increase in market capitalization to $218 billion. But IBM hasn’t flourished because it kowtows to Wall Street. In fact, five years after Palmisano took over, IBM stock was stuck where it had been when his tenure began.
The real story behind IBM’s success is the course Palmisano set for 21st century global enterprises. Recognizing that the company’s command-and-control culture wouldn’t work in the 21st century, he defined leadership as leading by values and created a unique collaborative organizational structure.
In 2002 Palmisano succeeded a legendary leader in Lou Gerstner, who saved IBM from being broken up and put it on a viable course. Whereas Gerstner famously declared “the last thing IBM needs is a vision,” Palmisano had a clear vision for the company. He saw its unique strength as offering complete solutions tailored to customers’ needs — something no other company could match. To concentrate on customer solutions, Palmisano spun off personal computers and disk drives and acquired PriceWaterhouseCoopers’ consulting business.
Executing this strategy required seamless integration of IBM’s product capabilities with its geographic reach. This meant abandoning IBM’s existing organization, in which product silos and geographic entities operated independently and frequently were more competitive than collaborative. Palmisano reorganized IBM into a “globally integrated enterprise” focused on worldwide collaboration. He cajoled, pushed, and pulled the company into a client-centric, agile structure able to customize delivery of IBM’s software assets, hardware assets, and intellectual property.
With 440,000 employees in 170 countries, Palmisano recognized that IBM couldn’t be run solely from the top; rather, it needed thousands of leaders operating collaboratively around the globe to fulfill its customers’ diverse needs. His first act was to abolish IBM’s corporate executive committee.
Palmisano understood that reorganizing IBM’s formal structure wouldn’t be sufficient; he had to thoroughly transform the company’s culture and do so in a sustainable way. His ingenious first step toward creating a collaborative culture was a massive, global collaboration. In 2003 he launched an online, interactive “values jam” involving all employees for 72 hours to determine what IBM’s values should be. The three principles that emerged from that event guided decision-making throughout the organization, giving IBM’s huge, globally dispersed workforce the discipline necessary to execute the company’s new strategy.
Palmisano could not have succeeded at placing values at the center of IBM’s operations without strong principles of his own. These are the qualities I believe made him the best CEO, so far, of the 21st century:
Humility and openness. Palmisano has an engaging manner and keen sense of humor. Colleagues say his humility and humor are disarming. In a speech on IBM’s 100th anniversary, he said:
The old model of the heroic superman is increasingly archaic. The most active and successful leaders today see themselves as part of the global community and peer groups. They listen as well as they speak. Never confuse charisma with leadership. The first job of a leader is to enable an organization to survive without him or her. The key to that is to build a sustainable culture.
He practiced this by listening intently to employees throughout the organization. He also talked to customers on a daily basis and circumnavigated the globe six times a year to meet customers in person. These relationships were essential in gaining the confidence of customers who had qualms about outsourcing to IBM.
Patience and a long-term view. Palmisano warned against prioritizing shareholders or other constituents, calling this “a false choice,” and explaining that “Long-term management is a serious challenge in a world driven by short-term thinking. Forward-thinking leaders are not just achieving measurable success in the short-term. They are innovating in ways that create virtuous circles for a generation or more.” He was comfortable making smart bets to position IBM for decades-long growth, such as creating the Emerging Business Organization to incubate new businesses and shield them from P&L pressures. And his time leading IBM’s Asia-Pacific business taught him about the value of building long-term relationships, not just doing transactions.
Directness. Palmisano believes the technology industry requires “a high-performance, in-your-face, speak-your-mind culture.” He’s personable, but blunt. Known for walking out of long meetings to make sales calls, he shortened IBM’s two-month annual budget process to six days. Instead of formal performance reviews, he regularly engaged in short conversations, focusing on key initiatives. Many who know him cite his impatience as a strength; it kept him relentlessly focused on execution.
Pragmatism. When the U.S. government cut back on work permits for foreign nationals, IBM had thousands of Indian employees forced to return to their home country. He turned that problem into competitive advantage by relocating most of IBM’s software operations to India as its Indian operations grew from 3,000 to 100,000 employees. He also forced partners and distributors to commit in writing to uphold IBM’s strict ethical standards. In 2009 he called off the $7 billion acquisition of Sun Microsystems in part due to Sun’s egregious golden parachutes.
As Palmisano built IBM into the world’s leading information technology company, its competitors dithered. HP suffered from a progression of strategic missteps and failed leaders. Microsoft’s enterprise services stagnated. Cisco now sells mostly commoditized products. In contrast, IBM kept laser-like focus on building the global organization to execute its strategy, and financial results followed.
Palmisano once said, “The CEO is not the brand! It is not about you. You are a temporary steward of a wonderful enterprise, so leave it in better shape than you find it.” As he concludes his career, he leaves his successor, Virginia Rometty, with an iconic giant poised to dominate its industry for decades to come.
Enhance Your Overseas Experience
As the world becomes increasingly global, the need for true global citizens to lead organizations in business, nonprofits, and government is far greater than in decades past. Global citizens who understand the importance of cultural nuances are able to bring people together across organizational boundaries and are more effective working and collaborating anywhere in the world.
Becoming a global citizen requires that aspiring leaders spend time living in different countries early in life, so they can appreciate cultural differences, incorporate what they learn into their work lives, and build networks of global relationships. A key to the success of IBM’s Sam Palmisano, for example, was the understanding he gained by living in Japan that enabled him to create IBM’s “globally integrated enterprise” in 2006.
Corporations seek leaders who are comfortable in many cultures; they want those who can speak multiple languages and understand the nuances of doing business outside their home regions. In fact, many global companies have formal international rotation programs to build such global leaders. German consumer company Henkel requires its leaders to work in at least two countries to be considered for promotion.
But the benefits aren’t just organizational. Living in different countries and cultures can lead to a rounder, more fulfilling life. Take our experiences, for example. Bill had formative experiences living with his family in Belgium in the early 1980s and in Switzerland ten years ago. Leading global businesses since the early 1970s and serving as a board member of two European companies, Bill’s travels throughout the world shaped his ideas for developing global leaders. John found working abroad in Europe and the Middle East not only improved his understanding of the importance of cultural and regional differences, but also helped him build a global network of friends and colleagues and lasting memories of the places he visited.
For aspiring leaders who want to become global citizens and increase their global fluency, here are some suggestions to get started:
1. Target at least one fundamentally different culture. While it may be tempting to live in a culture similar to your own — for example, Americans working in Great Britain — the most compelling learning experiences come from living in cultures that are sharply differently from your own. Chinese professionals working in South Africa, for example, will find their existing cultural assumptions challenged as they gain increased humility by learning local languages and coping with different norms.
2. Spend time studying overseas. Studying in different cultures enables young leaders to understand cultural nuances and become actively engaged with global organizations. Harvard Business School now sends all 900 MBAs to work overseas in its Global Immersion Program. Global organizations prefer candidates who have studied abroad because these early experiences will broaden your perspective about seeking fascinating global opportunities throughout your life. Look for opportunities, and if you’re already out of school, ask if your organization offers programs to give you experience abroad.
3. Learn the local language. As English becomes the language of business, it is tempting to get by with limited knowledge of local languages. That’s a mistake. Learning local languages enables you to appreciate cultural nuances and develop more personal relationships. Being fluent in multiple languages makes it easier to learn new ones and opens up career opportunities.
4. Don’t judge cultural differences or local people. When your new environment is sharply different from prior experiences, it’s tempting to make snap judgments about your experiences and stay attached to your own culture. Resist that temptation by observing, listening, learning, and understanding rather than judging. Use your insights to improve local ways of operating, but don’t rush to criticize.
5. Share international experiences with your family. Living in new countries brings your family much closer together and will be a time for growth, bonding, and learning as a family. Hold parties for your local neighbors, join a local church, and get involved in your children’s school. Host regular visits from parents and close friends. Balance breadth and depth in your travels to explore many different areas and countries, and spend time talking with local people. But don’t travel so much that you fail to get deeply involved in your new community and explore its richness.
The coming decades will belong to those global citizens who are comfortable operating anywhere in the world and who can collaborate with people of different cultures to develop solutions to the world’s most pressing problems. Organizations filled with these global citizens will not only survive but thrive and grow. For you, life will be richer and more fulfilling.