BA105:
Organizational Behavior
Professor Jim Lincoln
Managing globally
GLOBAL MANAGEMENT
Is it different from the "management of diversity?”
– The issues and stakes are similar:
• Serving a diverse international market
• Realizing the potential of people in a globally diverse
workforce
• Leveraging global diversity to increase efficiency,
flexibility, creativity, and ultimately bottom-line
performance
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But the challenge is greater
• In addition to cultural, ethnic, and racial diversity:
– language, values, norms, ethics, habits, customs, traditions,
beliefs, interpersonal styles, etiquette
• There are institutional differences to deal with:
– Education levels and systems, legal and court systems,
business practices and ethics, regulatory systems, status
systems, social networks, unions, labor markets and
employment systems, welfare systems
3
Managing language & culture diversity
• Be multilingual! If monolingual, speak
clear English!
• Read the culture: grasp preferences, tastes,
& habits
– Learn interpersonal norms (e.g., etiquette)
Avoid faux pas
– Should you be yourself or try to fit in?
4
Global marketing fiascos that an ounce of
cultural savvy might have prevented
• “Nothing sucks like an Electrolux”
• Ford’s marketing of the Pinto (translates as small male genitalia) in Brazil
• Ford’s marketing of the European-made “Ka” (translates as mosquito) in
Japan.
• GM’s marketing of the Chevy Nova (translates as “no go” in
Spanish) in California and Latin America
• Coca-cola rendered phonetically in Chinese translated as “bite the
wax tadpole”
• “Come alive with the Pepsi generation” translated in Chinese as
“Pepsi will bring your ancestors back from the dead”
• P&G’s marketing of diapers and all-temperature detergent in Japan
5
Fedex in Europe
The open door policy maintained in the U. S. by FEDEX… is
still not widely used abroad. In the U. S., the company has.. a
casual atmosphere; employees are on a first-name basis, and
executives .. mingle with employees and solicit their opinions and
suggestions. Managers and workers in European and Asian
countries are often uncomfortable with this type and level of
formality.
To illustrate, when Charles Thomson visited a newly acquired
company in Brussels, he behaved as he would in the U. S. He
arrived early took, off his coat, walked around the facility, and
chatted with employees. Later, Thomson discovered that his
behavior had damaged his image among managers in Brussels; he
had spoken to employees who were not his direct reports and
without their managers being present, and his casual manner and
attire offended these managers.
D. Lewin, D. Dralle, C. W. Thomson: “International HR at
Federal Express (B). March, 1992.
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Globally-varying management practices
• Strategic orientation
– Finance/marketing vs. engineering/manufacturing
– Profitability vs. growth
• Decision-making practices
– Consensus/participatory vs. top-down
• Leadership style
– Heroic vs. developmental
– Command-and-control vs. participation
• Organization design
– Grouping and linking strategy
– Formal and rigid vs. fuzzy and flexible
• Corporate governance
– Stakeholder vs. stockholder capitalism
– Insider vs. outsider boards
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HR systems and labor markets
• Recruitment practices
– Midcareer vs. new grads
• Retention and dismissal
– Constraints on leaving and firing
• Performance appraisal
– Direct vs. indirect
• Compensation
– Basis: seniority, skill, performance
– Norms of equity & inequality
• Working hours and overtime
• Promotion, rotation and transfer
• Discrimination/diversity
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Legal systems
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Labor law (e.g., codetermination)
Contract law
Antitrust law and enforcement
Intellectual property law
Accounting rules
Taxation
Equal employment regulations
Protectionist regulation
– Local content rules
– Protected/subsidized sectors (e.g., small firms; agriculture)
– Licensing/inspection
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Capital markets
•
•
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Equity, bank & corporate debt
Market size, “efficiency,” sensitivity
Institutional vs. individual investors
Market for corporate control (M & A)
Venture capital & IPO’s
10
Supply chain organization
• Cozy and exclusive or arms-length & open?
• Complexity/middlemen/layering/scale
11
Networking is the key to doing
business in most of the world
“…many Germans are admitting that they have liked their
business relationships cozy. If a supplier wanted to
remodel a customer’s house for a low price or shower a
key contact with gifts, no one would make a fuss about it.
‘There is an inbred nature to the Germany economy,” says
David Herman, the American chief of Opel. ‘The
American style is more puritanical,” says management
consultant Gertrud Hoehler. ..Calls for reform are on the
rise. Auditors are complaining they have no mandate to
look for improper expenditures…Germans suddenly are
embarrassed that their tax code actually allows deductions
for bribes.”
Business Week, 8/7/1995.
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Cultural obstacles to British
entrepreneurial success
Imagine you're a high-tech entrepreneur desperate for funds. Riding in
an elevator with a prospective investor, you have just 30 seconds to persuade
him to risk his money on your start-up. If you're British, you might make a
modest, even apologetic, presentation and expect your idea to sell itself. It
won't.
International venture capitalists tried Monday to teach British
entrepreneurs some proven American tricks for winning over financial
backers. Distilled to its essence, their advice was simple: Brag.
Participants at a conference on high-tech business said British
entrepreneurs need to ditch their customary reserve and come on strong -with a Texan's swagger and a New Yorker's persistence.
American entrepreneurs may tend to exaggerate what they are capable
of, but conference participants said British entrepreneurs err too far in the
opposite direction.
``If an American gives a presentation, we always divide by three. If an
Englishman gives a presentation, you always get to multiply by 10,'' said
Peter Cochrane, the chief technologist at British Telecommunications.13
Associated Press
Scandinavian business style
Scandinavian business culture shares some characteristics with
that of the Japanese. Saving face is important, and, rather than direct
frontal attack, Scandinavians prefer a subtler approach. “new ideas are
better stated in quite general and vague terms initially in order to invite
others into the process,” note I. Holmberg and S. Akerlblom of the
Stockholm School of Economics. “Consensus is seen as a condition for
dialogue and also as a preferred outcome of the dialogue. Oldfashioned virtues are in. Our business is built on trust. This means
that we keep legalities to a minimum. We talk to each other, settle it,
and get on with it.
”There is definitely a Scandinavian style of management,” says
Kevin Barham, coauthor of ABB: the Dancing Giant. It is very
informal. At the same time, it is very practical and down to earth.
Unlike the British and the French, there is an aversion to paperwork.
To some, the Scandinavian style is deeply bedded in what might ..be
called vagueness. Informality and cultural sensitivity mean that
Scandinavians can sometimes appear elusive. Where they stand, what
drives them, and what they value can seem mysterious.”At the same
time, being up front and communicating openly is expected.”
Across the Board, June, 1999
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German management style
The Germans are very disciplined and precise They do exactly
what the boss asks them to do and what is agreed or put down in
writing. A problem is that the Swedish notion of “taking on
responsibilities for yourself,” the cornerstone of their work policy, is
not perceived in the same way by the Germans, who have a tendency
to adhere very closely to precisely defined rules and instructions.
To implement a decision “some notes on the back of a cigarette
packet are often sufficient” for the Swedes. In contrast, Germans are
more comfortable adhering to formal procedures: “We need procedures
and forms. Germans love administration because it provides us with
security.”
P. Grol, C. Schoch, and CPA: IKEA
15
French management style
Company life there is another world, where the most important
thing is educational antecedents. French managers are extremely smart,
picked precisely because of their educational track records. They talk
well, communicate perfectly with each other, operate brilliantly within
their own elite. But when a situation arises where it doesn't help to be
clever, they may not perform well. They're not good at motivating
downward. They're the opposite of the breezy, chummy, superficially
friendly American manager. They talk to their secretaries and they talk
to each other, and that's it. And yet, despite its weaknesses, the system
serves itself well. Yes, because the bureaucrats and politicians in
France are picked for the same reasons. That's why France is at its best
when all these sides are working together, especially on something big
and high-tech and glittery like the TGV train, the Ariane rocket
launches, nuclear power, civil aviation. It's all stuff the government
picked and fast tracked.
WSJ 4/14/93 Interview with Prof. Peter Lawrence
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Negotiating with the Japanese
Business communication in Japan differs from that in many other parts
of the world. A characteristic of Japanese managers is the ability to listen
and use non-verbal communication.
The secret of negotiating with them is not to persuade by talking but to
listen. The ability to listen is crucial in any bargaining context but it is
especially important in Japan. To understand the other side's case correctly,
listen carefully and interrupt only when you do not understand a point. The
practice of listening and understanding does not mean that you agree.
Silence often disturbs western negotiators, making them feel compelled to
talk. They may then disclose more information than is necessary for the
negotiation. Be less verbal and actively use silences and pauses. Do not
forget that in Japan, silence is a virtue.
No decision will be made at the first meeting and probably even at the
second. Patience is another Japanese virtue.
The Japanese frequently find it hard to grant concessions during the
negotiation itself. This is because the bargaining position of Japanese
negotiators is usually reached via a long internal discussion process before
and during the negotiation
Financial Times, 10/17/01
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Negotiating with the French
Whenever you negotiate in France, avoid assuming a relaxed
and informal manner as you might in, say, the US. Instead, … be
polite and formal... French business people tend to intellectualize.
Unlike in Germany or the US, where the discussion jumps straight
to the details, the negotiations in France are more likely to kick off
with general principles and strategies. The application of these
basic principles comes next; then a rough outline of the content of
the deal; and lastly the details.
If you want to come across as professional, .. be well prepared
and self-confident, but not arrogant or presumptuous. Preparation
in France means, above all, having command of a coherent
argument founded on faultless logic. Avoid the hard-sell and any
marketing gimmicks. Instead, your presentation should be sober,
well-founded and rigorous.
Your French counterparts will put much store by a
sophisticated rhetorical use of language. This means that they
appreciate elaborate and abstract communication. In their eyes,
coming straight to the point is blunt and somewhat uncouth.
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Negotiating in Russia
Negotiations are demanding and may become emotionally
charged. You may find your Russian negotiator banging his or her fist
on the table or leaving the room. Accept such tactics with patience and
calmness. They are designed to put you off your stride.
The disposition to make compromises may be seen as a sign of
weakness. And that can mean that negotiations come to a standstill. If
so, remain patient and keep some stamina in reserve.
Frequently, although the Russian team may consist of many
members, it will present a single opinion. The head of the negotiating
team tends to dominate negotiations and is willing to make any
concessions only if he can expect you to make concessions in return.
Concessions that are easily achieved may make your partner
suspicious, since his approach still derives from the culture of the
former Soviet Union, where everything was complex and difficult.
Even if you have strong arguments, do not overemphasize them.
Russian business people are proud and want to be shown respect.
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Global management strategies
• Human resource issues
• Organization design issues
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What is a global manager?
• The traditional expat
– The home office national on long-term assignment to
another country
• The global executive (aspatial careerist)
– The generalist with diverse language and cultural skills
• The global networker & team player
– “The aim in a global business is to get the best ideas from everywhere.
Each team puts up its best ideas and processes - constantly. That raises the
bar. Our culture is designed around making a hero out of those who
translate ideas from one place to another, who help somebody else.”
Jack Welch
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The decline of the expat
In some respects, the expatriate is a hangover from the old days of
the multinationals, when managers were sent out from
headquarters, like colonial governors, to run the overseas
possessions. The aim is now to employ local managers who
have been imbued with the culture of the organization. The trick
is to achieve a balance: to combine the strength of local
knowledge with global reach.
"But you need a balance between having a very international cadre
and having a national presence," Richard Greenhalgh, head of
management development and training at the Anglo-Dutch
consumer group, Unilever, says. “Five years ago, three of our
four business heads in Italy were expatriates. Now they're all
Italian. In a consumer business like ours, that's important.“
Financial Times, 10/8/1997
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The new expat strategy: Cross-posting
(Unilever’s)..board includes members from six
different countries and virtually every operating company
contains expatriates. We have an Italian managing our
larger company in Brazil, a Dutchman in Taiwan,
Englishman in Malaysia, and American in Mexico.
..Cross-posting establish unity, common sense of purpose,
and understanding of different national cultures.”
Unilever executive
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What are the benefits and costs to the
manager of foreign assignments?
“Working abroad makes you more knowledgeable about the questions to
ask, not the answers.”
“I learned how to work in two cultures…to compromise, not to be a
dictator. It’s very similar to two domestic cultures…like marketing
and engineering.”
“I’m more open minded…more able to deal with a wider range of
people..because I ran into many other points of view.”
“Because I only understood a fraction of what was really going on
overseas, maybe 50 percent, I had to make decision on a fraction of the
necessary information. Now I can tolerate nonclosure and ambiguity
better.”
“I increased my tolerance for other people. For the first time, I was the
underdog, the minority.”
“I used to be more ruthless than I am now…I was the All-American
manager. Now I stop and realize the human impact more. I use others
as resources. I do more communicating with others in the
organization.”
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The myth of the global manager
In the early stages of its drive overseas, Corning Glass
hired an American ex-ambassador to head up its international
division. He had excellent contacts in the governments of many
nations and could converse in several languages, but he was less
familiar with Corning and its businesses. In contrast, ITT
decided to set up a massive educational program to “globalize”
all managers responsible for its worldwide telecommunications
business– in essence, to replace its national specialists with
global generalists.
Corning and ITT eventually realized they had taken wrong
turns. Like many other companies organizing for worldwide
operations in recent years, they found that an elite of jet-setters
was often difficult to integrate into the corporate mainstream;
nor did they need an international team of big-picture overseers
to the exclusion of focused experts.
Bartlett and Ghoshal, HBR, 1992
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Should companies “make” or “buy”
global expertise?
• The “buy” option?
– Where are the best global managers?
• The “make” option
– Training programs
– Rotation
• Cross-functional, cross-product, and cross-national
– Teamwork and networking skills
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Jack Welch says hire Swedes
We are trying desperately to hire more global people. There
are certain people who are extremely comfortable in global
environments - the Dutch, for instance, or the Swedes. Pound
for pound, Sweden probably has more good managers than any
other country. A Swede is a global traveler. It's global attitude.
Among Americans, it is in shorter supply - although it is
becoming easier with younger people. I think they see that if
you are going to grow in GE, you are not going to have had a
domestic background all your life.
Jack Welch, Interviewed in the Financial Times 10/1/97
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Most U. S. companies are behind
in global management training
• A survey of 50 large North American
companies found:
– only 25% have a global focus in their training
programs
– only 4% offer cross-cultural training to all
managers
• Yet, cross-cultural management is a minefield
– 10-45% expatriate assignments are failures
28
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29
Organizational designs for
international corporations
• The international corporation
– low localization; high home office control
• The mature multinational
– high localization: decentralized regional divisions
• The global corporation
– Centralized functions and product divisions run by
globally-savvy executives
• The transnational corporation
– Localizing while maintaining product focus and
functional expertise. Coordinate by culture, teams, and
networks.
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How global is Wal-Mart?
…critics believe that the company retains a headquarters-knows-best
mind-set. That raises the question, is Wal-Mart truly a global company, or
just a U.S. company with a foreign division? ..Wal-Mart has few top
managers who aren't American and few who speak more than one
language and have been posted in several spots abroad.
That might be one reason why some competitors scoff at Wal-Mart's
claim that it's now sensitive to local tastes. "I get the impression that WalMart is insisting on the American-style layouts and business approach,"
says Seol Do Won, marketing director at Samsung Tesco Co. in South
Korea, which runs seven Home Plus stores. "It's good to introduce global
standards, but you also need to adapt to local practice," he says.
.. when Wal-Mart entered Canada in 1994, its blueprint specified
what to sell and where to sell it--including liquid detergent and Kathie Lee
clothing that flopped there.
Business Week 9/3/01
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Whirlpool’s global centralization
causes problems in Europe
"Whirlpool also angered German retailers and lost customers,
competitors and employees say, because it regularly replaced its
top managers. Company officials attribute the heavy turnover to
the reorganization, a switch from operating along country lines to
operating along product lines. They concede that the changes
spurred some customer grumbling but say sales and profit will
benefit in the long run. Because of the changes, however,
Bauknecht's market share in Germany fell to 5% from 7%,
according to union officials. Whirlpool acknowledges a "small
decline" but gives no numbers.
32
Ford shifts from a global to a more local focus
Under "Ford 2000,'' the No. 2 U.S. car maker's most sweeping
management redesign to date, Ford sought to forge its functional
departments -- such as new-car development -- and its geographical
fiefs into a single global automotive operation, pursuing the productbased model. A Ford spokesman says the reorganization, begun in
early 1995, saved $5 billion during the first three years, primarily
through swifter product development and the adoption of world-wide
manufacturing standards.
However, it cost Ford some of the ground it had gained in
Europe. By January 2000, the company's European market share had
slipped to 8.8% from 13% five years earlier. Between 1996 and 1999,
four different executives oversaw its European operations.
Early last year, Ford shuffled senior management again, restoring
some of its regional executives' lost authority. They gained more power
to decide what kinds of cars and trucks to make and how to market
them. Ford called the partial retreat a "refinement'' of Ford 2000.
WSJ 6/27/01
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So does GM
“..it appeared last week that GM had agreed to a code of conduct
designed to eliminate bureaucratic overlap within the company's European
operations. The guidelines address worries that Opel was being forced to
accept too many compromises in the interests of GM's globalization.
"The idea is to help the company get back to its success" of the early
1990s, David Herman, the outgoing chairman of Opel, said in an interview.
"We want to nurture local advantages in a way that doesn't denigrate
globalization.“ (Moreover)… most of GM's International Operations division
(will move)… from Zurich to Detroit.
Together, the moves amount to taking GM's European operations back to
the way they used to be run in the late 1980s, when GM Chairman Jack Smith
was head of GM Europe and the company's Zurich staff coordinated more
than it commanded, people familiar with the situation say.
That structure, along with aggressive cost-cutting and investments in
new models, paved the way for Opel's market success with models such as the
subcompact Corsa, which together with the Opel Astra are the lead products in
GM's emerging-markets strategy.
But Opel executives soon began complaining of growing bureaucracy as
the international operations division asserted greater influence over Opel's
European product development, production and marketing operations.
34
And Exide, too
Last year, Robert A. Lutz, chairman and chief executive of Exide Corp.,
launched a master plan to help turn around the money-losing battery
maker and solve a thorny business problem.
Exide's structure -- built around 10 separate country organizations -- was
encouraging its managers in Europe to undercut one another's prices.
They were "driven to maximize their own results -- even if it was at the
price of their next-door neighbor, who also was Exide," says Mr. Lutz.
"The guys were poking each other in the eye.''
So, Mr. Lutz spent about a year and $8 million crafting a new structure for
the $2.4 billion company. In place of the geographical fiefs, he formed
global business units to manage the company's various product lines,
such as car batteries and industrial batteries for high-tech gear.
But that gave rise to new problems. Half of Exide's top European
managers resigned. And when Exide made an important acquisition, it
worried that a top executive it wanted to keep would be miffed if his
turf got swallowed up by one of the new units. Soon, Mr. Lutz was
tinkering with Exide's structure again, tilting the organizational seesaw
back toward the geography plan.
Wall Street Journal
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The transnational corporation: managing
globally with a network of specialists
“Success in today’s international climate– a far cry from only
decade ago– demands highly specialized yet closely linked groups of
global business managers, country or regional managers, and worldwide functional managers. This kind of organization characterizes a
transnational rather than an old-line international, multinational, or
global company. Transnationals integrate assets, resources, and
diverse people in operating units around the world. Through a
flexible management process in which business, country, and
functional managers form a triad of different perspectives that
balance one another, transnational companies can build three
strategic capabilities
– Global-scale efficiency and competitiveness (product mgrs)
– National-level responsiveness and flexibility (country mgrs)
– Cross-market capacity to leverage learning on a worldwide basis
(functional mgrs)
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Decentralizing product responsibility in
the transnational company
“Many traditional multinational companies have made the
mistake of automatically anointing their home country productdivision managers with the title of global business manager.
Sophisticated transnational companies, however, have long since
separated the notions of coordination and centralization, looking for
business leadership from their best units, wherever they may be
located. For example, Asea Brown Boveri, the Swiss-headquartered
electrical engineering corporation, has tried to leverage the strengths of
its operating companies and exploit their location in critical markets by
putting its business managers wherever strategic and organizational
dimensions coincide. In ABB’s power-transmission business, the
manager for switchgear is located in Sweden, the manager for power
transformers is in Germany, the manager for distribution transformers
is in Nortway, and the manager for electrical metering is in the United
States”
Barlett and Ghoshal, HBR, 1992
37
Unilever’s transnational organization:
Coordinate specialists with networks and culture
“The very nature of our products requires proximity to local markets;
economies of scale in certain functions justify a number of head office
departments; and the need to benefit from everybody’s creativity and
experience makes a sophisticated means of transferring information
across our organization highly desirable. All of these factors led to our
present structure: a matrix of individual managers around the world
who nonetheless share a common vision and understanding of
corporate strategy.
..In our case, ‘thinking transnationally means an informal type of
worldwide cooperation among self-sufficient units..everyone
must..share the values that lead to flexibility on every level. In a
worldwide company, incorporating both unity and diversity, business
strategy and structure are inextricably linked– and always evolving.
..The head office recognized the need for common culture among
many scattered units and set up formal training programs aimed at the
‘unileverization” of all its managers.
38
Unilever executive
Nissan globalizes its design teams
Nissan Motor Co. will make its design teams more multinational
and multicultural by raising the number of non-Japanese designers to
10% of the total.
The move is aimed at breathing new life into the automaker's
underachieving design studios. Carlos Ghosn, Nissan's chief operating
officer who is originally from French automaker Renault S.A., has
pointed out that the lack of design sophistication in Nissan vehicles is
partially responsible for sluggish sales.
Nissan also plans to facilitate exchanges between its Japan-based
designers and those at its overseas design studios and Renault. In
addition, newly hired foreign designers will be compensated based on
their performance.
Currently, only two of the 200 designers in Nissan's design
division are non-Japanese. The nation's second-largest automaker plans
to raise that number to at least 20 in the next two to three years
Nikkei Interactive 1/22/00
39
But cross-national teams may have
trouble integrating
Steve Redwood, a London-based management consultant with Price
Waterhouse, tells of a client who had assembled a team from eight different
countries to work on a project.
"The national stereotypes applied," he says. "The people from Switzerland
and Germany were mainly interested in the way the project was organized. The
people from Spain took a much more intuitive approach. The British displayed a
high level of skepticism on whether the whole thing really mattered. Language
was not the issue. It was more basic than that."
Behind this lies the most fundamental problem of all: the fact that outside a
handful of companies - Mr. Bryan of McKinsey puts it at between a dozen and 20
worldwide - even the biggest corporations are dominated by the culture of the
home country.
"Outside that handful", Mr Bryan says, "companies are very German, or
very British, or very American. One big difference with American companies is
they assume globalization means Americanizing the world. Others don't have that
arrogance.“
Financial Times 10/08/97
40
Takeaways
• Global savvy is indispensable for success in
today’s economy
– Companies should step up their efforts to select and
socialize for it
• But the pure global manager, like the pure global
corporation, is a myth
– While international assignments have many benefits,
most people function best in their home country
• The trick in global management is to leverage
corporate culture and networks in getting the right
mix of country, product, and functional expertise
41
Class business
• Thursday 11/15
– Course evaluations
– Review session
– Hand out exam case
• Tuesday 11/20: International panel
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