Leadership for a Global Enterprise

 

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Leadership for a Global Enterprise

By Arun Kottolli

A Global company is more than a firm with offshore operations; A global firm operates basically without the constrains or traditions of national boundaries and seeks to compete in any high potential marketplace on earth. A leader for a global enterprise must know what to do when competitive advantage is fleeting, when change is omnipresent, and when home base is the globe.

The Global enterprise is a new organizational form that emerged in 1990's, and has come to dominate competitive behavior in many industries around the world. The Global Enterprise is a consequence of several new and sophisticated forces that have come to shape the world economy over the last decade, including:

Free trade policies and lowering of tariffs on a global scale

Relatively free flow of financial, technological and management resources

Highly efficient communication channels and rapid information transfer

Technology development and application that seek both leading edge and low cost positions in product creation and production

Recognition of the potential for mass markets, mass customizations, and global brands

Evolution of the Global Organization

A business goes through four conceptually distinct and progressively more complex stages as it evolves from a successful domestic organization to a global corporation:

Stage - 1: Domestic Enterprise

Operates in domestic markets only, using domestic suppliers and selling to local customers.

Stage - 2: Exporter

A successful business which also sells its products in foreign markets. The firm has little knowledge about foreign markets and virtually no operations abroad.

Stage - 3: International Corporation

The organization sells in international markets extensively, and has built manufacturing, distribution and marketing capabilities abroad. Operations in foreign country is often operated by locals and enjoys substantial autonomy over local operations. Parent organization maintains tight control over strategy, resource allocation and technology. Such firms are also called "Multi-domestic" firms.

Stage - 4: Global Enterprise

Global enterprise is an extension of International Corporation, but with few major changes in the way of its management: Headquarters has substantial control over foreign subsidiaries and maintains a cohesive and consistent view of strategy, technology and resource allocation. Subsidiaries interact extensively with other subsidiaries and headquarters and recourses including knowledge flows freely among various subsidiaries and the parent corporation without the barriers such as national or regional boundaries.

When an organization moves from an international to a global perspective, an essential shift takes place - A shift from the tight control of a bureaucracy to an entrepreneurial, flexible, rapid-response capability that is totally comfortable with cross-cultural influences and conditions.

A global organization is always looking for potential products or businesses to deliver in the best markets at the lowest cost and with most appropriate management resources. The goal is to reach and capture market share before local or international competitors are equipped to exploit the opportunities.

Global strategy deals with a series of differentiation and integration decisions, On one hand, companies have a clear need for a sense of global strategic intent, or for broad based resource, technology, and market allocation schemes. At the same time, they need to sense of localized customer focus and competitiveness that deals with regional or local conditions as well as culture, behavior, and values.

Global Leadership - Development Agenda

 

Figure above shows the leadership development requirements that face a global corporation. Several premises lie behind the agenda:

The customers is the center of focus of development and training. In other words, the primary focus of training and development is serving customers increasingly well and with competitive advantage.

The firm's global strategy wraps around the training and development approaches; the organization's essential sense of competitiveness and strategic intent is embedded in all training programs and interventions.

The six leadership development clusters have a contemporary management viewpoint. The clusters are organized around requirements for global competitive success rather than traditional skill sets.

Each of the clusters are briefly described below:

Managing the Environmental Scan

The systematic process of assessing and understanding the major internal and external influences on the enterprise's ability to achieve competitive advantage is called environmental scan. In a larger sense, it focuses on changing the frame of reference from a local or a national orientation to a truly global perspective. In involves understanding influences, trends, and directions in technology, financial resources, marketing and distribution practices, political and cultural influences and internal economics.

Operationally, information systems and data-collection processes need to be reframed and revised to enable the organization to collect and utilize proactively to manage the business. To collect and use information it requires an understanding of today's critical success factors - those few things that must go right for the business to prosper - and the appropriate data about them. That often means narrowing, not enlarging, the information agenda and being careful about specifying information and data sets that are critical to the firm's success.

Managing the Competitive Strategy

Leaders and Mangers of global firms need to understand and develop competitive strategies, plans and tactics that operate outside the confines of a domestic (headquarters) orientation. It requires changing the basic reference or point of view from which competitive activities and strategies are addressed. To accomplish it, several new issues need to addressed and internalized.

The global competitive environment operates in a greatly expanded and increasingly complex manner. Market strategy can be complicated by new issues and problems arising from unknown new competitors, the possibility of new entrants and the implications of legislation such as tariffs and quotas.

The resources and assets of the enterprise needs to be looked at in dramatically expanded ways. For instance, the role of brand positioning has to be considered in terms of global strategic presence, as well as local marketing and competitive conditions. The internalization of taste modified by local culture and values, supports the practice of mass customization and segmentation, but always from the perspective of the global brand, product offering or business franchise.

The issues of quality, resource efficiency, and cost leadership are becoming elements of marketing as well as financial strategy. Innovation and creativity have strong strategic implications as the organization confronts different competitors in virtually every local marketplace. Marketing tactics such as pricing and promotion plans, which historically have operated on a local basis must now have a global coherence as well as coordinated to face the competition.

A customer focused strategy - with responsiveness and value adding activities that support changing tastes and needs is the still the fundamental driving force behind competitiveness. Being close to customers remains a crucial element of success in the global model.

Managing Organizational Versatility

The advent of global organization will bring changes and learning requirements for individuals. The most basic shift will take place as an organization moves from the classical bureaucratic control model to one that is characterized by flexible and responsive structures, adaptive and sometimes temporary operating systems, control mechanisms driven by information networks and decision making and behavior processes that are entrepreneurial, rapid response and risk oriented.

Unstable business environments and irregular competitive and customer changes will contribute to a state of continuous organization and reorganization of resources, technologies, marketing and distribution systems. Such changes will be necessary for adapting to the new success factors that will be critical for the business.

The underlying issue and challenge will be one of rapid and continuous response to opportunities and threats in terms or resource allocation, strategies and human behavior. Certainly those seem straight forward, but the new approaches and systems may seem foreign to the conventional thinking that characterizes management practice in today's successful international firms.

Managing Teams and Alliances

The central operating mode for the Global Enterprise will be the creation, organization and management of multinational teams and alliances - groups that represent diversity in functional capabilities, experience levels and cultural values.

The effective global manager will need to understand how to organize and lead multinational teams; deal with issues of collaboration and cross-cultural variances; and develop processes for coaching, mentoring, and assessing performance across a variety of attitudes, beliefs, and standards. That requires the ability to effectively lead and direct a diverse group of people, most of whom will have values, beliefs, behaviors, business practice standards, and traditions that are likely to be culturally different from those of the manger or leader.

Success in global model will also come from the ability to create links across traditional organizational and national boundaries. Strategic partnerships will be formed to achieve higher performance or lower cost. The basis for such alliances is always mutually shared purpose that has to transcends cultural differences. This requires leaders to reflect sensitivity to cultural diversity and accept - sometimes conflicting - social forces without prejudice. Often a manager will be required to operate in an unfamiliar and uncomfortable organizational setting.

Managers of cross-cultural teams should recognize and focus on subtle requirements for organizational loyalty and commitment, despite the presence of different cultural values and beliefs. At the same time, they must manage in the context of continuous change and diversity.

Managing Change

Continuous change - not stability - is the dominant influence in global business activities today. That demands not only new skills, but also new realities, and even new comfort zones for global mangers, who must realize and understand that global management will operate largely in the face of continuous change. The idea that change will be the regular and understood frame of reference for global management underlies the need for training, development, and understanding for managers who operate in international or global enterprises.

Managing continuous change is also a process of continuous learning and improvement and of viewing success as a process of improving (and changing) faster than competitors i.e., learning more quickly about opportunities and responding more completely when information and strategy point the way.

A significant learning opportunity in the domain of managing change is contextual: creating the mindsets, metaphors, beliefs, and attitudes that support and define the impact of irregular and chaotic change at an individual level. This means developing self-management and personal growth practices that can provide the stability, energy, and managerial confidence that are crucial to effectively handling such conditions

Managing Personal Effectiveness

The personal growth and adaptation requirements for many managers, as they move toward operating in global enterprises, will be far-reaching, primarily because locally (US or India) based managers lack the experience, diversity, and globetrotting skills of many of their offshore counterparts. Personal adaptation to the changing conditions, cultures, and operating requirements of the global enterprise represents a significant and largely unfunded training need. Training and development of global mangers in most businesses is on done ad hoc basis if it done at all.

A global leader will need to have a cosmopolitan perspective, a working knowledge of international relations and foreign affairs, as well as a careful and complete sensitivity to the diversity of foreign cultures, beliefs, social forces and values and a commitment to treating the diversity without prejudice.

Global managers will have to manage accelerated change in their own lives, family relations, living conditions, and perhaps even economic constrains. A true world view and sense of global citizenship will be a valuable frame of reference. At the same time remaining grounded in their skills, capacities, and personal sense of energy and balance, often under the continuing impact of destabilizing organizational and personal influences. This will be particularly true as they move across cultures. Even aspects of their lives as mundane as personal living requirements will be challenging and at times difficult.

Thus an effective manger will be a global citizen, always anchored in a national framework, but embodying the openness, adaptability and personal versatility necessary to live under new and often unpredictable conditions.

The Global Management Matrix

Corporate Type Leadership Development Clusters
Managing the Environmental Scan

How do we determine what must go right?

Managing the Competitive Strategy

How do we allocate resources?

Managing organizational Versatility


How do we organize for success today & tomorrow?

Managing Teams & Alliances


How do we connect with others for advantage? 

Managing Change

 

How to thrive in times of change?

Managing Personal Effectiveness


How do we change and grow successfully as individual?

Global Enterprise Global trends, conditions and resources Integrate holistic strategies Create free flowing resource allocation schemes Create global strategic partnerships inter & intra organizational links Pro-actively use changing conditions for advantage Transcend cultural differences
Multinational Corporation Multi-Domestic trends, environmental conditions and strategic resources Proliferate successful domestic market model with cultural adaptation Adapt systems and processes to international competitive conditions Develop multinational alliances and ventures; manage cross-cultural work teams Respond and adapt to change by reallocating resources across national markets Work effectively in cross cultural situations
Exporter Offshore market trends and conditions; domestic strategic resources Extend domestic success to offshore markets Respond to emerging foreign market opportunities Manage cross cultural distribution links Adapt to change by flexibly entering or withdrawing from foreign markets Understand cross cultural needs
Domestic Enterprise Domestic market trends, resources, and environmental conditions Penetrate and segment markets Respond to local competitive and market changes Manage cross functional teams Flexibly protect themselves against unpredictable change Understand oneself and associates

The Leadership Challenge

It is something ironic that conventional wisdom about the inability of firms to compete effectively in global marketplace usually focuses on inadequate spending in technology, plants and equipment. The real venerability may lie in the lack of effective global managers and leaders. The presumed strengths of a firm is the level and quality of technology skills will lead to failure abroad. Global businesses need to realize the need for achieving a global marketplace perspective and a global mindset.

To develop a global mindset and to compete effectively in a global marketplace, a firm needs to:

Recognize that the new business environment will not be driven by the local (old) business model. Clinging on to traditional view of competitiveness and marketplace will increasingly erode an organization's ability to compete.

Develop a global mindset for the organization by educating and training the managers in multinational business skills and cross-cultural knowledge.

Firms also need to clear certain barriers, misconceptions, and beliefs to grapple with the question of developing a global mindset. Research by Andre Laurent, who studied multinational corporations and has made several key observations:

Multinational companies do not and cannot submerge the individuality of different cultures. As strong as corporate culture is, people will never give up their own backgrounds and preferences. People can adapt, but in periods of crisis or uncertainty, they will retreat to their own sets of beliefs and cultural values.

Contact with other nationality groups can even promote determination to be different. It is interesting that many people withdraw when confronted with cultural differences, and reinforce their determination not to adjust and not to give up their own values.

It is useless to present new kinds of management theory and practice to individuals who are culturally unable or unwilling to accept it. For example, performance reviews are difficult in most multinational firms because of differences in personal style. Americans tend to be open, direct and blunt; Asians tend to be much more indirect, oblique, and subtle in giving feedback. Thus, something as apparently basic and common as performance appraisal system probably cannot be implemented uniformly on a global basis.

Several other key paradigms about cross-cultural awareness that affect manager's ability to rethink the new game are worth observing:

The "we are all alike" syndrome is one that many managers have experienced when visiting a foreign land and came back with the perceptions that all people are very much alike - "we are just one, big human race"

The second stage of understanding comes when managers begin to uncover differences, some subtle, some specific. They realize that although people have some significant similarities, they can also have strong differences.

Third comes the realization that we are really both different and similar and that in an organization, a leadership and management model must address diverse behaviors and beliefs.

The difficult task for senior management today is to flip-flop the traditional thinking that suggests that values, beliefs and behaviors need to be highly standardized from a central, corporate perspective and that strategies and resource allocation schemes cane be played out from a local point of view. The reality is that the opposite is true in a global economy and should be the fundamental operating condition for a successful global organization.

The challenge for most enterprises as they move towards a global model will lie in successfully managing international teams. Meeting this challenge will be expensive in terms of both resources and time. Firms need to get on with the task of building a new model for leadership development in a global community - a model that derives from a recognition of a whole new array of leadership requirements:

The capacity to manage, live with, and operate under conditions of continuous change.

The recognition that global advantage is transitory and that the role of managers and leaders will be to continuously assess and adjust resources, technologies, organizational structure, and human resources to reflect simultaneously a centralized view of strategy and a localized view of customers and cultures.

An acknowledgment that the US business model is not necessarily the best point of departure for evaluating the implications and meaning of global marketplace trends and opportunities. A fundamental shift in thinking needs to take place in setting assumptions and beliefs about the role enterprises can play in the global marketplace. Firms need to develop a global outlook that views the home country in the context of the global marketplace.

A heightened awareness of strategic marketing and global competitiveness. On one hand brands, technology and franchises need to be played out from the advantage of scale and clout that only a global point of view can provide. At the same time firms need to recognize and acknowledge the "close to customer" conditions that operate locally or inside major national marketplaces.

The development of skills and capabilities to lead global teams in flexible and responsive ways. Human resources need to reflect the same capacity for adaptation and flexibility as technology and financial resources. The new organizational model that emerges will shift from the traditional bureaucratic control scheme to a contemporary entrepreneurship characterized by flexibility, fluidity of resources and continuously changing business model.

Understand that managers need cross-cultural and expatriate experiences early on and continually throughout their careers.

Closing thoughts

The challenge for all those involved in both management and development of management is to begin to change the context on which they think about human development responsibilities. They clearly need to discard traditional models and views and begin to think from a global paradigm. In the process, they must challenge and change their views about hiring, training, controlling, offering incentives and measuring performances. This is a long term project, probably three to five years for most large enterprises, and in the mean time they will have a whole new game to worry about.

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