UGBA105: UGBA105: Organizational BehaviorOrganizational Behavior

Professor Jim LincolnProfessor Jim Lincoln

Week 13: Week 13:

Managing Globally Managing Globally

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OutlineOutline

• 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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ReadingsReadings

• Lecture– “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 Global sourcing is becoming the norm in manufacturing norm in manufacturing andand services 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 MANAGEMENTGLOBAL 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 greaterBut 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 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 Networking is the key to doing business in much of the world 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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U4

3

5

68

79

1012

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PoliticiansPoliticians

SuppliersSuppliers

DistributorsDistributors

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How to manage cultural diversityHow 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 Global marketing fiascos that a little cultural savvy might have preventedcultural 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 Dimensions of National CultureNational Culture

Group Individual

Hierarchical

Egalitarian

Universal

Situational Direct

Indirect

Task

PastVerbal

NonverbalFuture

Relationship Informal

Formal

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National culture and business style: National culture and business style: ScandinaviaScandinavia

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.

Across the Board, June, 1999

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National culture and business style: National culture and business style: GermanyGermany

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: National culture and business style: FranceFrance

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: National culture and business style: JapanJapan

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 strategiesGlobal 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?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 expatThe 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. Foreign assignments make better managers. Quotes from expats: 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: The new expat strategy: cross-postingcross-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:The global manager model:multilingual, multicultural generalistmultilingual, multicultural generalist

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Should companies Should companies “make” or “buy” “make” or “buy” global expertise? 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 U. S. companies are behind in global management training 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?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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China

ItalyGermany

Sweden

Canada

BrazilFr

USJapan

UKUS

FranceiPOD divisioniPOD division

HeadquartersHeadquartersMarketing Marketing

departmentdepartment

The global networkerThe global networker

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Organizational designs for Organizational designs for international corporationsinternational 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 Most companies doing business abroad are “international”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 Is Wal-Mart a global company, or just a U.S. company with foreign divisions? 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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CEO

North America

Europe Asia Pacific

CarsHous-

ingElec-

tronicsCars

Hous-ing

Elec-tronics

CarsHous-

ingElec-

tronics

The mulinational corporation The mulinational corporation

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Decentralizing product responsibility in Decentralizing product responsibility in the transnational companythe 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 But cross-national teams may have trouble integratingtrouble 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: Unilever’s transnational organization: Coordinate specialists with networks and culture 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.

Unilever executive

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But cross-national teams may have But cross-national teams may have trouble integratingtrouble 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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TakeawaysTakeaways• 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 Lincoln Electric: Venturing Abroad”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?