BA105: BA105: Organizational Behavior Organizational Behavior

Professor Jim LincolnProfessor Jim Lincoln

Managing globally Managing globally

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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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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?

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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

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Fedex in EuropeThe 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 • 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

• Equity, bank & corporate debt

• Market size, “efficiency,” sensitivity

• Institutional vs. individual investors

• Market for corporate control (M & A)

• Venture capital & IPO’s

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Supply chain organization

• Cozy and exclusive or arms-length & open?

• Complexity/middlemen/layering/scale

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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.

Associated Press

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Scandinavian business styleScandinavian 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. Old-fashioned 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

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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 JapaneseBusiness 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 FrenchWhenever 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 expatIn 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 managerIn 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

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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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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 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, 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.

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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 product-based 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.

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And Exide, tooLast 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 world-wide 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 product-division 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

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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.

Unilever executive

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Nissan globalizes its design teamsNissan 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

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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

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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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Class business

• Thursday 11/15– Course evaluations– Review session– Hand out exam case

• Tuesday 11/20: International panel