Leadership in a Global Context

One article and one survey result, both coming from McKinsey Quarterly, highlight the need for diversity and leadership particularly when operating globally. In the article “Is there a payoff from top team diversity” April 2012, Barta et al., conclude from their studies that between 2008 and 2010, companies with more diverse teams were also top financial performers. Studying return on equity (RoE) and the earnings (EBIT) of 180 companies from France, Germany, the UK and the USA and comparing them with the number of women and foreign nationals on senior teams, they found that companies in the top quartile of executive-board diversity had an average of 53% greater RoE and 14% higher EBIT than those of the least diverse companies.

In the survey of 4,666 executives at global companies, Acquila et al., conclude in “Managing at global scale” June 2012, that the respondents are “satisfied with their organisation’s overall capabilities but see room to improve in innovation and motivation. Better leaders are key.” Regardless of the company type or current performance, respondents indicated that “developing leaders who are culturally and functionally proficient across regions is a key to more effective multiregional operations.” Whilst reviewing the survey results for local strengths, organic growth advantages, and operational scale, the survey also focused on how executives thought that operations could be improved.

Here’s a summary of ways to improve operations followed by further implications (“et alors”):

Leadership in a Global Context

The top six suggestions by percentage of respondents who selected each statement as a way to make their organisation’s operations more effective are:

1.       Develop leaders who are culturally and functionally proficient across regions

2.       Improve formal and informal networks to maximise use of expertise across divisions and/or regions

3.       Drive innovation more effectively across regions and divisions

4.       Adapt organisational structure to improve balance between global standardisation and local responsiveness

5.       Strengthen performance culture and performance-management practices

6.       Build capabilities in a few key value creating processes and roll them out globally

Et alors?

Some of these are easier said than done (such as “driving” innovation); some are classic global/local dilemmas which are always a challenge (such as points number four and six); and some are more visionary than concrete (such as points two and five). However, they all come under the context of “global” leadership and the first point clearly summarises it with a feasible objective. As the authors state, better “leaders” are key when operating globally. What the respondents appear to want is more culturally “proficient” leaders who can effectively work across different national and corporate cultures. This desired improvement appeared to apply to all companies including those who were already succeeding with a global strategy. For a global company, besides education, exposure and experience, cultural proficiency amongst leaders might be more easily achieved by having a diverse talent pool from which to identify, select and develop leaders. Leadership and diversity appear to go hand-in-hand in a global context.

As the authors of the first article mention themselves, even though they have highlighted the correlation between diversity and performance, they cannot be certain of a causal link. For example, it might be that successful companies have more time and resources to dedicate to ensuring they are diverse rather than diversity being the cause of greater success. There is also the interesting case of France where contrary to the other countries in the study, for the more diverse companies the RoE was 6% less (whereas, like the other countries, the EBIT was still greater)! How could that be? Perhaps it is the French corporate focus on savoir-faire rather than savoir-etre whereas many other cultures rely on a mix of the two to ensure enhanced business performance with greater diversity mainly contributing to the latter rather than the former.

The other hypothesis is that the French culture is so strong that it is “immune” to diversity! The assumption in France is that non-French nationals arriving to work in France will have to “adapt” to the local culture in order to integrate. However, in cultural terms, a better interpretation of the word “adaptation” is most probably “assimilation”. The real expectation is that the foreigner will become completely assimilated into the French culture. Notwithstanding the relative merits (or not) of this philosophy, the end result is that by the time the non-French national is assimilated, all the possible benefits of diversity in terms of performance (for example, different and broader perspectives) are completely neutralised. Better leadership might be the solution! Not only might the operational performance of French companies operating globally be improved, but so too might the benefits of diversity be leveraged. Leadership and diversity appear to go hand-in-hand in a global context!