Multinationals, Globalization and B-School Blather
Gabby Johnson, Noted Blather Expert
Another interesting article that falls short because of ridiculous Business School jargon and, ultimately, a rather obvious premise. I’m talking about an article in Businessweek with the provocative title “Do Multinationals Really Understand Globalization?” Sounds good so far, and it starts off referencing two recent IBM surveys, one of CEOs and another of students:
Taken together, the studies compare side by side the value system, mindset, and management style of current-generation CEOs with those of the Millennials (aka Generation Y) who are poised to become future leaders.
No surprise, the two groups (apparently) have different views on things.
Only 23 percent of CEOs surveyed believe that globalization will have a big impact on their organization in the next five years.
On the other hand, 55 percent of the Millennials that IBM surveyed expect globalization to massively change organizations in the future.
Looks like a big discrepancy, huh? Sure makes CEOs look pretty stupid, too.
I’m sorry, but I’m not buying it. Survey results are not always reliable, and the authors of the Businessweek article did not include the exact language of the question posed to the CEOs, nor a link to the survey.
If I’m a big-shot CEO, and someone asks me whether globalization will have a big impact on my organization, I might very well think that my company is already set up in response to global trends. In other words, globalization had a big impact on the company a long time ago, and the next five years will be more of the same. Answer: no, not really.
This is pure speculation on my part, but I fail to see how the CEO of a multinational (these are already global enterprises) would really believe that globalization wasn’t a big deal. Let’s get real here.
The second issue involves staffing and diversity:
While many Western CEOs claim that 50 percent to 60 percent of their future growth will come from emerging economies like India and China, another study shows that only 2 percent of their senior leadership currently hails from those fast-growing regions.
This means that 98 out of 100 senior execs in Fortune 500 firms are defending obsolete business models in the old monocentric world (read: the U.S.), whereas only two of them are trying to restructure their organization for growth and success in the new polycentric world!
Goodness gracious!
Two problems with this. First, we are talking about future growth from China and India, not current business. If I’m heading up a company that expects to grow rapidly in an emerging market, snapping up execs from those countries in not necessarily the first thing I want to do. I will just as likely grow into those markets using a combination of home country/international employees plus lower level local staff, and then promote local staff from within the organization as they learn how the company works (locally and globally).
What’s the biggest staffing complaint of MNCs in China? Lack of exceptional senior-level Chinese managers with industry experience (at a reasonable price). This takes a long time to fix, and it has an effect on staffing of MNCs. Just because you expect to grow in China, that doesn’t mean you can hire just any Wang or Zhang off the street and hope that he is qualified. You have to give these things time.
Second problem: just because someone is from a certain country, that doesn’t mean that she is going to cling to orthodox business models used in that country. That’s quite a generalization. Couldn’t we say the same thing about business school graduates from certain countries? In other words, would the authors advise MNCs that they should stop hiring so many folks from Harvard, Wharton and Sloan, their nationalities notwithstanding? Those grads are just going to parrot what their professors taught them anyway.
My point here is that you hire talent and experience. To the extent that an organization is diverse and includes nationals from places where the MNC expects to grow, that sounds like a smart idea. But this is secondary to merit-based hiring. Smart people learn and adapt, and that’s why exceptional staff are often sent to different postings worldwide.
Finally, to their credit, the authors of this article (who I assume are peddling a book on the subject) offer suggestions on how MNCs can restructure for the future. I think that diversity, openness to new ideas, and flexibility are pretty basic (i.e., you don’t need a high-priced consultant to tell you this), but as usual these things sound much different when filtered through the B-School blather filter:
The onus is on existing CEOs to redesign their organizations to leverage global diversity and the creative potential of Millennials (who will soon swell their employee base) in order to find innovative solutions for dealing with complexity in the postrecession global economy. To effectively compete and win in the emerging polycentric world, we believe, monolithic and ethnocentric multinationals must evolve into what we call polycentric organizations that reflect internally the growing external diversity and are able to learn and adapt continuously.
That’s authentic frontier gibberish at its best. In the end, though, I don’t think CEOs are ignoring globalization. Some of them are not very good at changing their organizations, but I think they recognize the challenge. Ultimately, I think common sense can take care of the rest if an organization is flexible and hires the right folks.
Two points. First, the piece underscores what is wrong with many business schools today. You can only imagine what happens to the people graduating from institutions wherein they are subjected to two full years of this kind of pseudo-scholarship: they either reject 80% of what they have learned, or their brains are mush, requiring companies to deprogram them before they can serve any useful purpose. There are exceptions to this, especially schools where many of the professors are themselves former or sabbaticaled executives, but they are rare.
Second, the authors are peddling the same neo-racist human resources theory that gets multinational executives buying into the Holy Grail of Localization. Experience, wisdom and common sense dictate that no intelligent businessperson hires on the basis of skin color or national origin: they hire on the basis of skills, intelligence, talent, and integrity. That two apparently esteemed educators believe and tout the “White Guys Don’t Get World” line of thinking is a damning reflection on the state of modern management thought.
Something tells me you will not be signing up for the next “Polycentric Leadership Conference.”
I think you guys are being a little bit too harsh. I think this statement actually has much deeper implications than you’re giving it credit for:
“To effectively compete and win in the emerging polycentric world, we believe, monolithic and ethnocentric multinationals must evolve into what we call polycentric organizations that reflect internally the growing external diversity and are able to learn and adapt continuously.”
I don’t think they’re talking just about the ethnicity of the individuals that work for a corporation’s foreign subsidiary as much as they’re talking ultimately about the subsidiary itself, which, legally, is a “person” in its own right. When they talk about becoming more “polycentric”, they’re talking about revising the model that treats foreign subsidiaries essentially as spokes of the home-country parent, which ultimately wields managerial influence over the sub. In other words, GM-China (or, better, a multinational’s Chinese subsidiary that is still majority-owned by the parent) should not be seen as an “the Chinese subsidiary of an American company,” with ultimate allegiance to the US parent, but rather more as a Chinese company, with ultimate allegiance to its own presence in China. I think this is a far more realistic vision of the way that corporate subsidiaries are evolving in places like China, where being a “foreign multinational” can be a distinct competitive disadvantage at times, both legally and politically. The more they’re able to become “Chinese,” the more competitive they can be. They’re essentially talking about abandonment of home-country national identity among foreign subsidiaries. The fact that senior management is still almost entirely from the home country is just a symptom of a broader organizational failure to adapt. If subsidiary management is sent to the sub from the parent, that indicates that, ultimately, the sub’s management still answers to the home-country parent.
So, when they say:
They will need to learn to juggle multiple business models, organizational practices, management structures, and even leadership styles in order to harness the growing diversity in the unpredictable global business environment,
they’re talking about the entire business identity of the subsidiary, not just the ethnicity of the people working there.
This model could have some serious implications for international investment policy and global politics. It will interesting to see how it plays out…
@TC,
I believe Stan’s point is simply that most MNC’s have already embraced the concepts that are being covered in this article, which are:
- in order to globalize you need to localize
and
- Innovation is important
to come up with:
To enable innovation within your global organization, leveraging the value-add that diversity solutions will deliver to your talent acquisition of millennialists is mission critical.
Please feel free to use this for your next mission statement….
That was my point, yeah. One further reminder though that just because something like localization is a well-known concept, that doesn’t mean that companies are necessarily good at it (just think of Google’s history in China as an example). However, telling companies that they should do something and helping them figure out which strategies to employ are two separate things.