People + Strategy: The New Global Leaders
Published on July 24, 2015
Originally published in People + Strategy Journal: Volume 38, Issue 3, Summer 2015
When 31-year-old Facebook founder Mark Zuckerberg decided he wanted a deeper understanding of China, he made concerted efforts to learn Mandarin and then demonstrated his acumen by speaking comfortably with Chinese students. In May, Alibaba founder Jack Ma promoted 42-year-old Daniel Zhang to CEO to “hand over leadership to those born in the ’70s.” These are just two examples of the new global leaders.
As they focus on expanding their business around the world, companies are facing a dearth of experienced global executives capable of leading in all parts of the world, especially in emerging markets. We can rise to the challenge of how companies develop authentic global leaders of all ages by increasing their global intelligence (GQ). Given the enormous volatility of emerging markets, leading today’s global organizations requires different skills and personal qualities than in the past. Just a few years ago, geographic managers could ensure success by relying on their knowledge of local markets, operating skills, technical understanding, and financial acumen.
To create dynamic global strategies and adaptive organizational structures, today’s leaders must understand the global context of their business and possess awareness of how geopolitical events can impact it. They must be skilled in aligning their multicultural organizations around the company’s mission and values, making them the unifying force coalescing their far-flung organizations. Interpersonally, they need high levels of self-awareness, cultural sensitivity, and humility to empower people throughout the world. Finally, they must be able to develop other global leaders and serve as their mentors and role models.
Beyond those challenges, today’s society is demanding that global leaders practice the highest ethical standards and contribute meaningfully to countries in which they do business. It is no longer sufficient to meet the demands of the shareholders and laws and ethics of their home markets without regard for the negative consequences that their businesses may have on the countries where they operate. As a result, global leaders are partnering with local governments to support the progress and growth of their societies.
While it is challenging to possess all these qualities, nothing less is required to sustain consistently superior performance. Firms run by a cadre of global leaders effective in operating in this new world will be more competitive, more productive, and more profitable over the long term.
The multi-national model, with its matrix structure that attempts to balance strategic business units with geographic organizations, has become the dominant organization form, but today its effectiveness requires different kinds of leaders. In the past, multi-national organizations like British bank HSBC sent talented expatriates from their home countries to lead regional and local units and transfer headquarters standards, processes, control systems, and marketing approaches to local countries. These expatriates often failed to take advantage of the creative skills of their local teams and thus were unable to meet the unique needs of local markets. Consequently, they couldn’t compete with skilled local companies with deeper understanding of local consumers.
To maximize growth in emerging markets, companies are recognizing they require greater diversity in their decision-making ranks rather than dominance by headquarters nationals. As a result, they are opening up their executive ranks to the best leaders from around the world, without preference for home country executives. Unilever’s chief operating officer, Harish Manwani, says, “If 70 percent of our future business comes from emerging markets, then 70 percent of our leaders must come from emerging markets.”
Yet even the most progressive companies are struggling to develop top global leaders from emerging markets. Under the leadership of former CEO Daniel Vasella, M.D., and CEO Joe Jimenez, Switzerland-based pharmaceutical company Novartis has been one of the most progressive in expanding its executive ranks beyond its historic Swiss management. Today, its nine-person executive committee consists of four Americans, including CEO Jimenez, two Swiss, and a Belgian, Briton, and German. Yet neither Vasella nor Jimenez considers Novartis’s top team as global. Says Vasella, “We won’t be global until we have a Chinese, an Indian, and a Latino as well as more women.” Adds Jimenez, “It’s not because we aren’t looking, but we haven’t been able to develop them.”
“The big difference between global executives and Americans who have never worked outside America,” continues Jimenez, “is respect for cultural differences. I have seen many people who can’t become global leaders because all their decisions are steeped in their home country’s culture.”
It isn’t just American companies that are dominated by local nationals. Even at Japanese, Indian, Chinese, and German companies it is rare that a non-national executive breaks into the company’s top ranks. As Siemens’ CEO Peter Loescher said in 2008, “Siemens is not achieving its full potential on the international stage because its management is too white, too German, and too male. If you don’t reflect your global client base, you cannot achieve your full potential.”
Historically, companies focused on sending promising leaders from their home country overseas for developmental assignments to position them for key corporate positions. That relegated foreign executives to being country managers and didn’t prepare them to run global business units or reach the top executive ranks. Meanwhile, many foreign nationals who came to headquarters for development faced “tissue rejection” when they returned home.
Developing Global Leaders with Global Intelligence
To address these challenges, leading-edge companies are developing a new generation of global leaders effective anywhere in the world. They recognize that ultimately the diversity of their top leaders must reflect the diversity of their customers. Developing these new global enterprise leaders will require different types of experiences combined with leadership development programs vastly different from today’s corporate training programs. The shortcomings of many global leaders—and subsequent failures—usually result from the lack of leadership capabilities that together make up what we call “global intelligence” (GQ).
GQ consists of seven elements, all of which are essential for global leaders:
- Adaptability to changing world
- Cultural curiosity
Let’s explore each of these seven characteristics.
Adaptability to Changing World
Being a global leader today requires understanding the world and anticipating changes ahead. Global leaders must be able to respond quickly to the rapidly changing global context by shifting resources to opportunity areas and developing contingency plans to cope with adverse geopolitical situations.
Novartis’s Vasella, who spent his formative business years working in the U.S., is an example. He is a visionary who built Novartis from the outset of the 1996 merger of two mid-sized Swiss pharmaceutical companies (Sandoz and Ciba-Geigy) into one of the world’s leading health care companies. His strategic initiatives, such as moving research headquarters from Basel, Switzerland to Cambridge, Massachusetts to tap into top scientists at MIT and Harvard, were well ahead of their time. Vasella also foresaw the need to move from a Swiss-dominated management team and board of directors to a global leadership team, without regard to nationality.
To understand how they will react to the cultural differences they encounter in emerging markets, global leaders must understand their strengths, vulnerabilities, and biases, starting with recognizing the dominant paradigms they grew up with versus those of their headquarters organizations. It requires humility to recognize that other cultures often have better ways of doing things embedded in their cultural norms.
When I was president of Honeywell Europe in the 1980s, the corporation sent American expatriates to Europe to transfer U.S.-based marketing programs as well as engineering and manufacturing expertise. A number of them were insensitive to significant differences in these markets and were intent on imposing U.S. practices. I asked INSEAD Professor Andre Laurent to create a program for Americans to help them understand these cultural differences. He proposed two days on American culture before getting into European cultures, because “Americans rarely understand their own cultural biases, and assume their ways are superior ‘if only the Europeans understood.’”
Global leaders must be curious about myriad cultures and understand how they operate and have the humility to recognize what these cultures offer their organizations. This requires an insatiable desire to learn about these cultures.
When many corporate executives visit India or China, they stay in international hotels, eat Westernized cuisine, and spend their time in offices reviewing presentations. As a result, they learn little about the local culture. Far better to get into the countryside, stay in local hotels, eat at local restaurants, and talk with local people. I learned how important it is to do this in 1975 by living for three weeks in a one-room apartment with my wife and two-year-old son in all-Japanese area of Tokyo. Each day, we learned what middle-class life in urban Japan was like.
On my first trip to China in 1984, I spent 10 days in the countryside negotiating a joint venture. Awakened one morning by cowbells, I saw farmers leading their oxen to market. When I went to the market, I found the government market and the private market. Asking a local which had better produce, he explained, “Obviously, the private market where prices are higher, as farmers sell their required quotas at fixed prices in the government market.” This was the beginning of Deng Xiaoping’s new elite farmers. Had I stayed at Westernized hotels in Tokyo and Beijing, I never would have gained critical insights into each culture.
Empathy is the ability to walk in someone else’s shoes. It requires engaging people from different cultures on a personal level, rather than standing back and judging them. Empathy builds rapport through bonding on a human level and the building of lasting relationships. Only with empathic understanding are leaders able to engage colleagues from different cultures and empower them to achieve exceptional performance.
On my first visit to India, I conducted a “Medtronic Mission and Medallion Ceremony” for several hundred Indian employees, giving each a bronze medallion symbolizing Medtronic’s mission. Afterward, they asked me to plant a tree honoring them with my visit. Rather than a simple tree-planting, this was a traditional Indian ceremony, complete with painting my face, washing my hands, and talking with a native healer. Meanwhile, the employees stood with rapt attention to observe how I was responding to their tradition.
Global leaders need to align employees around the company’s mission and values with a commitment that transcends national and cultural differences. Achieving alignment is far more difficult in emerging markets because local employees are being asked to put company values ahead of their native values, often in cultures where ethical standards differ sharply from the company’s. However, this does not mean giving up their culture and their norms, as norms can differ widely, provided that employees commit to the company’s ethical standards and business practices.
Global leaders like former IBM CEO Sam Palmisano understand it isn’t possible to write a code of rules and regulations covering every context. In launching IBM’s 2003 “values jam,” he wrote, “In this world of intense scrutiny, one reaction is to create more processes, controls, and bureaucracy. A better alternative is to trust the values that bind us together in the absence of controls. Values provide the framework to make decisions when procedures aren’t clear, using judgment based on values.”
Gaining alignment requires frequent face-to-face meetings in myriad countries to understand how the mission and values translate locally. Alignment is the only tool that inspires organizations to achieve superior performance and unites them in difficult times. The ability to achieve alignment in complex global organizations is the trademark of exceptional leaders.
In the global context, collaborative leaders create horizontal networks that cut across geographic lines, unite people around common goals, and create a modus operandi that transcends geographic goals. This requires putting the company’s and project’s goals first, and working in partnerships to achieve them. The most successful geographic collaborations are orchestrated by leaders who know the strengths and weaknesses of each geographic group and make assignments that take advantage of their relative strengths.
When Bangladesh-born Omar Ishrak became CEO of Medtronic in 2011, the company was struggling to establish itself in emerging markets. He immediately diversified its executive committee by promoting six executives from emerging markets and holding quarterly meetings in Shanghai and Mumbai. In addition, he created new business models for emerging markets to enable locals to gain access to Medtronic therapies.
The greatest challenge facing global leaders is incorporating local issues into an integrated corporate strategy. Such a strategy enables them to optimize their position in a wide array of local markets in an efficient manner to create sustainable competitive advantage. Doing so requires deep understanding of local markets and the vision to see how their companies can serve their customers in a superior manner by leveraging their corporate strengths. That’s the only way they can outcompete local companies, which often have a cost advantage.
Unilever’s Manwani takes the tradition of “think global, act local,” and turns it on its head, saying the key today is to “think local, act global.” In his view, all strategies emanate from a deep understanding of local needs, but if they only act local, global companies have no competitive advantage over local suppliers. Rather, they need to create global strategies to leverage their unique strengths to deliver superior solutions for customers.
Next Generation Global Leaders
Role models for these new global leaders include executives like Unilever’s Paul Polman, PepsiCo’s Indra Nooyi, and Alibaba’s founder Jack Ma.
Under Polman’s leadership, London-based Unilever, with 170,000 employees in 160 countries, has become one of the world’s most global companies with 55 percent of its revenues coming from emerging markets. Yet Polman acknowledges the company still has a long way to go in developing global leaders as most of its senior executives come from the U.K. or the Netherlands. Since becoming CEO in 2009, Polman has invested heavily in developing global leaders, sending its 600 top executives to London and Singapore for in-house training as authentic global leaders. He says, “In the long-run, the only true differentiation is the quality of leadership of all.”
PepsiCo’s Nooyi got her university education in India before attending Yale’s graduate school. As CEO since 2006, she has focused on “performance with purpose” to steadily shift PepsiCo’s product portfolio to healthful foods and beverages and meet the needs of emerging markets. She has also diversified her global leadership team with a wide range of nationalities.
Alibaba’s Ma has emerged as China’s first true global leader. A remarkable visionary who has created over $200 billion in shareholder value, Ma is creating an ecosystem that can serve two billion Asian consumers with products from one million small businesses sourced throughout the world.
Stepping Up to the Challenge
Just as Mark Zuckerberg’s success at Facebook and Daniel Zhang’s promotion at Alibaba herald the rise of younger global leaders, global companies are crying out for a new generation of leaders—regardless of age—to step up to challenging leadership roles. Progressive companies like Unilever, Novartis, PepsiCo, and Alibaba are working hard to develop this new cadre. While ideas will evolve about how to develop them, one thing seems clear: Sustaining success in the 21st century will require global chiefs with sophisticated leadership qualities that operate with high levels of GQ.