UGBA105:
Organizational Behavior
Professor Jim Lincoln
Week 13:
Managing Globally
Outline
• Monday lecture
– How can global companies best manage cultural and
institutional diversity?
– What is a global manager?
• How to get them: Make or buy?
– Is there “one best way” to design a global company?
• Wednesday discussion
– Discuss case: “Lincoln Electric: Venturing Abroad”
– Prepare for team project presentations
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Readings
• Lecture
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–
–
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“Managing the global workforce”
“The myth of the global executive”
“Ford and Honda”
“IBM showing that giants can be nimble”
• Discussion
– “Lincoln Electric: Venturing Abroad”
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Global sourcing is becoming the
norm in manufacturing and services
Apple outsources the entire manufacture of the device to a number of
Asian enterprises, among them Asustek, Inventec Appliances and
Foxconn. And they only do final assembly. The 451 component parts
are made elsewhere.
Hal R. Varian: An iPod Has Global Value. Ask the (Many) Countries That Make It. NYT, 6/28/07
High-end technology services are increasingly following the global
sourcing formula. Skills are combined from across the globe and
delivered on-site or remotely over the Internet.
The globalization of services as the next big shift in the business
landscape, and I.B.M. is moving to adapt.
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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
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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
• Human resource systems
– No lay-off rules in many countries
• Organization design
– Formal and rigid vs. fuzzy and flexible
• Corporate governance
– Stakeholder vs. stockholder capitalism
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Networking is the key to doing
business in much 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.
Business Week, 8/7/1995.
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1
4
Distributors
8
U
3
7
9
12
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Politicians
10
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Suppliers
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How to manage cultural diversity
• Be multilingual!
– If you’re not an English speaker, learn English!
– If you’re an English speaker, learn something
else!
• Become culturally savvy: Learn to read the
culture: grasp preferences, tastes, & habits
– At a minimum, avoid faux pas
– Should you be yourself or try to fit in?
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Global marketing fiascos that a little
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 in Chinese means “bite the wax tadpole”
• “Come alive with the Pepsi generation” in Chinese means
“Pepsi will bring your ancestors back from the dead”
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Dimensions of
National Culture
Formal
Hierarchical
Task
Nonverbal
Future
Indirect
Universal
Group
Individual
Situational
Direct
Past
Verbal
Relationship
Informal
Egalitaria
n
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National culture and business style:
Scandinavia
Scandinavian business culture shares some
characteristics with that of the Japanese. Saving face
is important, and, rather than direct frontal attack.
“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 a
condition for dialogue and the preferred outcome of
the dialogue.
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.
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Across the Board, June, 1999
National culture and business style:
Germany
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.
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
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National culture and business style:
France
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.
WSJ 4/14/93 Interview with Prof. Peter Lawrence
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National culture and business style:
Japan
The secret of negotiating with (the Japanese) is not to persuade by talking
but to listen. 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. 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.
Financial Times, 10/17/01
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Global management strategies
• Human resource issues
– What is a global manager?
• Organization design issues
– What form should the global corporation take?
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What exactly 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 demise of the expat
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.
– Also dual careers families have made expat
assignments less attractive
• Up to 45% of U. S. expatriate assignments fail
Financial Times, 10/8/1997
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Foreign assignments make better managers.
Quotes from expats:
“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 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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The global manager model:
multilingual, multicultural generalist
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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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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
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Is the global manager a myth?
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.
Corning eventually realized they had taken wrong turns. They
found that an elite of jet-setters was difficult to integrate into the
corporate mainstream. They did not need an international team
of big-picture overseers to the exclusion of focused experts.
Bartlett and Ghoshal, HBR, 1992
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The global networker
Canada
China
Germany
Fr
Italy
Marketing Sweden
department
US
Japan
Brazil
US
Headquarters
UK
France
iPOD division
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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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Most companies doing business
abroad are “international”
“Outside a handful of companies – maybe a dozen
worldwide– 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.”
McKinsey consultant quoted in
Financial Times 10/08/97
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Is Wal-Mart a global company, or just a
U.S. company with foreign divisions?
…critics believe that the company retains a headquarters-knows-best
mind-set. ..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.
"I get the impression that Wal-Mart is insisting on the American-style
layouts and business approach," says Seol Do Won, marketing director at
Samsung Tesco Co. in South Korea. "It's good to introduce global
standards, but you also need to adapt to local practice," he says.
Business Week 9/3/01
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The mulinational corporation
CEO
North
America
Cars
Housing
Electronics
Europe
Cars
Housing
Asia Pacific
Electronics
Cars
Housing
Electronics
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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 product-division managers
with the title of global business manager.
(Transnational) companies, however, look for business leadership
from their best units, wherever they may be located.
For example, in Asea Brown Boveri’s (the Swiss-headquartered
electrical engineering corporation) 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 Norway, and the manager for electrical metering is in the United
States”
Barlett and Ghoshal, HBR, 1992
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But cross-national teams may have
trouble integrating
"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 at to whether the
whole thing really mattered.”
Language was not the issue. It was more basic than that."
Financial Times 10/08/97
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Unilever’s transnational organization:
Coordinate specialists with networks and culture
“Te need to benefit from everybody’s creativity and experience makes
a sophisticated means of transferring information across our
organization highly desirable.
Our present structure is a matrix of individual managers around the
world who share a common vision and understanding of corporate
strategy.
..‘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.
..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.
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Unilever executive
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 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. The problem was not language; it was more fundamental
than that.”
Financial Times 10/08/97
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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
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“Lincoln Electric: Venturing
Abroad”
What was the LE "incentive management"
system? Was it aligned with the company's
structure, culture, and leadership? Why did it
work so well to motivate U. S. employees? What
happened when LE tried to implement its
incentive system in its foreign-based
facilities? Why was LE more successful in its
early foreign ventures than the later ones? What
mistakes did LE make in going abroad, and what
should they have done differently?
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