Managing across borders.
Wisse Dekker, former CEO of Dutch electronics giant Philips, once remarked that the U.S. market was something of a problem for American managers, because "so few of them look outside it." With the exception of such places as Hong Kong, Singapore, and the Netherlands, most companies were reasonably self-sufficient in their home markets. Many were internally integrated, with all or most of the functions, sales, marketing, and manufacturing taking place inside their own organizations. Strategic product decisions were made within a country's borders by executives from that nation. Today, the closed-border model increasingly appears antiquated, even in the U.S. The linear relationship between supply and demand and jobs and markets no longer applies. During the 1980s, companies globalized their supply sources. In the 1990s, the collapse of Communism has created new emerging markets and the globalization of demand.
Even within U.S. corporations, the ranks of non-U.S.-born leaders are growing. Ford's Alex Trotman was born in Britain. Compaq's Eckhard Pfeiffer is German. Case Corp.'s Jean-Pierre Rosso is French. Heinz's Tony O'Reilly hails from Ireland. Aramark's Joseph Neubauer was born in Israel and Goodyear's Sam Gibara in Egypt. The Coca-Cola Co.'s Roberto Goizueta is Cuban. Computer Associates' Charles Wang comes from Taiwan.
In the meantime, the information revolution has begun to translate the internationalization of demand into new economies of scale in which market power shifts away from producers toward customers. As per capita income rises and people spend proportionally less on food, more disposable income is available for other things. The importance of national borders is decreased as people want the best or cheapest items wherever they may be made. In "Going Global," a book written by William Taylor and Alan Webber, Kenichi Ohmae says globalization has meant a shift in competition from variable to fixed cost. Japanese companies, for example, used to license innovations from U.S. or European firms. A Japanese company might pay 2 percent in royalties, and if sales went up, fees went up. It was a variable cost. Then, as international competition intensified, foreign companies refused to license Japanese competitors, which were forced to spend huge amounts to innovate for themselves. When such costs become fixed, it makes more sense to produce for as many markets as is practical. In a sense, companies have no choice. As customers seek the best value from around the world, the distinction between local and international becomes moot.
In the following roundtable, conducted in partnership with Ernst & Young LLP, CEOs reckon this development turns the traditional logic of competition on its head. Business cannot play the variable cost game any longer. Companies need strategies and partners to help them maximize their contribution to fixed costs. Barriers to entry are-few and falling fast. Information is fungible, and information technology often has a leveling effect, allowing small or regional producers to extend their reach.
What does this mean for the traditionally organized multinational? Does it stay multi-domestic with headquarters and numerous branches, or, like ABB, become a loose confederation of semiautonomous units? Participants argue that one of the trickiest and most necessary elements in managing across borders is the development of culture and managerial talent. For many, developing the right people is what "thinking globally" really means.
A GLOBAL AGENDA
Terrence Ozan (Ernst & Young LLP): International commerce is not new, so what's all the hoopla about managing across borders today? The answer is that as we move from domestic to multinational to global companies, the set of management issues changes drastically. A domestic company obviously operates within one country with essentially the same laws, financing, culture, and style of communication. A multinational company operates autonomously in many countries, developing and marketing products separately under an overall umbrella of corporate strategy and financing.
For a global company, however, it's not just where you operate, it's how you operate. It comes down to two things: forming worldwide teams rather than individual country teams and changing the nature of the business processes themselves. For example, a global company would have a product development team comprising employees from around the world, not individual product development teams in each country of operation. And instead of having national or regional supply chains, a global company tries to source and distribute goods from all over the world.
Simply put, going global yields additional economies of scale and worldwide knowledge. For example, Whirlpool was largely a North American company until seven or eight years ago, when someone said, "We make washers in every part of the world, but no two screws are the same in any two of our washers in any part of the world." So Whirlpool began working on global product development by creating worldwide teams and working on common technology to create a common platform for its products, while still allowing for locally customized products. Today, Whirlpool has facilities in the U.S., Europe, and Latin America making products in more than 120 locations.
Other global companies such as Procter & Gamble, Sara Lee, Unilever, and Heineken are partnering with major supermarket retailers to move goods around the world, manage categories of products together, and improve response to consumers. Efficient consumer response can cut costs by as much as 35 percent, in addition to enabling companies to transfer knowledge around the world much faster. A dominant theme in the global marketplace is "how do I get so fast that I can make my mistakes quickly and replace them even more quickly with the right solution?"
In such an environment, it's vital to manage employees properly, helping them adapt to new markets and sensitizing them to new cultures. This task is somewhat easier if a company has managers and employees who have lived in and understand other countries. For example, some 15 percent of West Coast biotechnology company Amgen's U.S. staff is foreign national. The company sorts its managers by their capability rather than nationality, as many of its executives travel around the globe working to maintain a common platform rather than running operations. They rotate every few months at each of Amgen's locations.
Claude I. Taylor (Air Canada): When we first started to go international, we had Canadians everywhere. We found that didn't work, because they weren't accepted and they didn't understand the local culture. That meant we had two levels of labor problems: We had a management problem and a contract problem.
Today, we're expanding rapidly in the U.S., and we have the odd Canadian in there part time. But our philosophy for outside markets is to bring foreigners--from France, Germany, Hong Kong, and South Korea, for example--into Canada for six months, indoctrinate them about what we do, and then send them back.
WHEN IN ROME...
J. Carter Beese Jr. (Alex. Brown International): To be truly global, do companies need to set a common ethic and controls for their entire worldwide operations? Common management wisdom doesn't seem to support the "when in Rome, do as the Romans do" philosophy anymore.
Philip A. Laskawy (Ernst & Young LLP): Companies are a long way from adopting a common ethic because of cultural differences in so many parts of the world. It's something to strive for, but very difficult to achieve.
Aleksandar M. Erdeljan (R.P. Scherer): That's true. Even regulations are interpreted differently in each country. For example, our general manager once picked me up at the airport and drove me to Rome, running through several red lights along the way. After the third one, I asked him why he didn't stop. He responded, "In Italy, a red light is only a suggestion, not an obligation." [Laughter.]
Nonetheless, over the last 20 or 30 years, there has been a convergence of North American and European practices. With numerous business schools being established in Europe, things that North American management has known for 20 or 30 years are no longer new in Europe. The easy 80 percent has been done. The remaining core--dealing with national characteristics and practices--will be difficult to crack. The ideal of a common ethic is great, but I'm not sure how close we'll ever come to it.
Werner G. Nennecker (Pegasus Gold): We run our business on a certain set of standards, regardless of whether we're in the U.S. or Kazakhstan. Our in-house environmental policy is much more stringent than that required by any of the areas in which we operate, but it's inviolate. It's been interesting getting people in some parts of the world that haven't worried much about environmental issues to focus on them. Our solution was to base a large part of our bonus program on employees' avoidance of environmental incidents.
Alfred F. Lynch (JCPenney International): In 1913, we implemented the Penney Idea, which contains six principles governing the way we do business--not only with other companies but with our consumers. It has been a godsend in terms of dealing with other cultures, because we don't run into trouble on ethical issues; I simply lay the document on the table and say, "This is the way we conduct our business."
We even had the principles translated into Chinese, and I hand that document out at meetings.
J.P. Donlon (CE): How do the Chinese interpret it?
Lynch: They ask a lot of questions, but they have been responsive, and we haven't run into any issues about payoffs. That subject doesn't even come up.
Victoria Lam (China Industrial Group): Getting the Americans and British to agree is difficult, but getting the Americans and the Chinese to agree is extremely difficult. Every word is interpreted differently. A lot of time is spent trying to translate a word between the two cultures. You have to train a team to recognize that this is a problem. Management spends a lot of time anticipating the reactions of the Americans, the British, the Chinese, etc. At the senior levels, a lot of chatting is done before you can introduce a policy on the culture. In Hong Kong, you may have the same policy, but you have to word it differently.
Donlon: It's interesting that France's leading companies now all speak English at management meetings. That's a giant change for a country that takes its culture very seriously.
Erdeljan: It is a reluctant concession to reality, since the French consider themselves to be a world beacon of culture.
D. George Harris (Harris Chemical Group): I once ran the U.S. subsidiary of a French company and spent probably 40 percent of my time explaining the Americans to the French and the French to the Americans. I had to convince the French that Americans really understand business and aren't just naive and optimistic. And I had to convince the Americans that the French aren't being secretive or trying to stab them in the back, that's just the way they think.
Donlon: Did you succeed?
Harris: No. [Laughter.] The French are trained in an analytical method and will divide things up and study them for three years, while Americans get enough information to make a decision and go ahead. Right now, we're trying to do a joint venture with a French company in Poland, and it has accumulated an incredible amount of information. I never would have had that much.
Ronald M. DeFeo (Terex): About five years ago, General Electric asked the employees of its French medical systems business to wear a GE T-shirt so they would feel they were part of the company. The French literally went to war with GE over the issue of wearing a T-shirt.
The French don't need the physical accoutrements of being part of a team. It's an issue of objectives. The objectives may be common, but the strategy and tactics for achieving them can vary dramatically. Many roads get you to the same location. Americans often focus on implementing our strategies instead of concentrating on the real objectives.
Harris: That's a good reason to have an advisory council composed of senior executives in different countries on whose experiences you can draw. That also gives the local manager a "godfather," so to speak, who's not in the direct chain of command.
Donald J. Shepard (Aegon USA): We've acquired companies and then developed a culture within them that fits with our total corporate culture. Each of our operations has total local management in addition to a local board. This means those of us on the executive board have access to outside businesspeople in the local market who can advise us on whether we're doing the right things culturally.
Michael L. Domecq (Allied Domecq Latin America): I've found it helps to have operating managers on the boards of companies in other countries to encourage cross fertilization in that they have different roles to play and different forums at different levels of management, such as the board of directors, marketing, and production. The more we can get people together to talk about the issues of the company, the more unified the culture becomes.
Shepard: We've also developed a program called Aegon University, in which we put managers in their 30s and 40s from different countries into a dormitory setting and bring in international executives to speak to them. Even more important, this gives them the opportunity to network individually. They are building an e-mail system among the graduates of Aegon University that lets them share best practices they think might work across borders in addition to potential customers that operate globally in the pension business.
The other approach that has solidified our corporate culture--though I initially disagreed with it--is offering stock options to employees lower in the organization. Each of our 20,000 employees gets some stock options after they've been with the company for three years.
Helmut Panke (BMW (US) Holding Corp): "Corporate culture" is a term that denotes more than just a management system or national culture. It actually can make or break your company. For example, at BMW, everyone wants to be the winner, and that can only happen if each member of the team thinks, breathes, and acts BMW. One of our core themes is a fit between corporate culture, values, and products. High-performance products don't fit in with a standard organization with relaxed ethical rules. We indoctrinate, train, and even select employees based on performance expectations.
Donlon: What in BMW have you been able to transmit from the home base to local bases and vice versa?
Panke: BMW stands for high-precision, high-performance German craftsmanship; analytical processes; and no-compromise manufacturing. Likewise, this is how we select our management. On the other hand, when we were investing in the new plant in South Carolina, we vowed to stick to our basic principles but also to incorporate Yankee ingenuity and practicality, the approach of challenging principles and coming up with new solutions. We had to learn not to get stuck in saying, "We have always done it this way, so that's the way we will run it in the future." The American approach is to say, "There must be an easier, better way," and then find it.
This is one of the reasons BMW has started an ex change training program. We brought the first hired associates in Spartanburg, SC, over to our operations in Germany to learn what makes BMW BMW and to impart their different way of thinking to the BMW organization. This process is ongoing and will last 20 years or more.
Edward M. Kopko (Butler International): Management spends a lot of time talking about internal cultures and values. But what about the challenge of going to external suppliers and maintaining the same high-performance cultures and values? Do companies establish methodologies in their supplier programs?
Ozan: We're seeing many cross-company teams in addition to cross-national teams in product development. And there are more partnerships in terms of outsourcing manufacturing, engineering, and distribution. These partnerships are creating a common culture and ethics.
However, it is breaking down in some instances, because nobody told the purchasing department about all this cooperation, so purchasing keeps operating the old way. Thus, many mixed messages are floating between companies that are cooperating well on one hand and badly on the other. Companies need to make sure the prices are kept in line as they continue with joint product development and customer service and supply.
Panke: I agree. The number of activities done in-house today is decreasing. So companies look for the best. If you only compare on price and how much the price will decrease with a certain volume, you will lose. Instead of comparing prices, you must compare concepts. That will open the manufacturer/supplier relationship.
But don't be fooled; it's a long process. You have to start looking for supplier relationships now, even if they won't go into effect for another five or 10 years. You need a long-term strategy for what you want to do in-house and what you want to outsource. For example, in the 1980s, when BMW was starting to plan the manufacturing operation out of Munich, we began supplier symposiums in the U.S. The American supplier industry simply couldn't figure out why we were doing that, considering the small volume and the fact that all the parts would have to be shipped to Europe. But building those relationships was just the starting point. Now, we have strong relationships with qualified suppliers, both in Europe and the U.S.
It's also important to distribute your mission and standards to people in markets before you begin doing business there. We did that in Japan in the early 1980s and managed to avoid the problems the Big Three ran into where their products weren't well-received.
Taylor: From a marketing point of view, I suspect there are people in the U.S. who wouldn't buy a BMW simply because it's a foreign-built car, no matter what reputation or standards your company holds. So you have to cater to your marketing side, as well.
Panke: That was one of the reasons we decided to establish a manufacturing plant in the U.S. We had to combat that sentiment of "Buy American." However, the important part is that the product has to be independent of where it's built.
Lynch: At JCPenney, we don't manufacture any of our own goods. But to get the same commitment to quality we have in-house, we spent an enormous amount of time developing a quality-control guideline or set of standards to be used for our products. We did this even though we knew our suppliers also were selling to our competitors. We had supplier meetings, we rated suppliers' factories, we reviewed their performance from past supply situations, and we insisted that they buy certain equipment--or we supplied it to them to meet our standards. We also gave out awards for complying with our standards.
Harris: In the chemicals business, we've used an agglomeration strategy to build up an international business. So we have trouble maintaining the local brand names while getting everything under the overall umbrella of Harris Specialty Chemicals.
Domecq: We sold our company a year and a half ago, and I joined a company in which every local company had a different name. We decided to change the names of all the companies to Allied Domecq. That's had an incredible impact. It has really helped to break down the barriers. Suddenly, these companies were much more able to relate to the overall management principles and standards we were trying to establish.
Erdeljan: Five or 10 years ago, the Holy Grail was decentralization. Today, there has been something of a reversal of that process. Around this table, for example, we've been saying we have to get everyone to march to the same tune and standardize.
Harris: Operating internationally means achieving a balance between the central strategic thrust and local decision-making power. Many people can't deal with the international aspect of business because they can't cope with the ambiguity of having two bosses.
Panke: In debating centralization vs. decentralization or strategic vs. operational or local vs. global, we are still stuck in the paradigm of the 1960s or 1970s. This is not a system issue, it is a people issue. An image for the new paradigm can be found in fractal geometry. This means that no matter how much you magnify the object, you always find the same structure and patterns. That's what we need today. We need the same patterns on top and at all the different levels of people throughout the organization. It's similar to a cell in that you must have the same DNA, cell structure, and genes to make it work. The central piece falls in place because it is within the individual.
Arnold B. Pollard (CE): So you're injecting the cultural norm into the genetic structure of the individual?
Panke: The word "injecting" implies too much coming from the outside. The team must possess this structure. You cannot inject it; it has to grow.
TOO GREAT EXPECTATIONS
Kopko: Even if your company has a solid corporate culture, when alliances come into the picture, changes often must be made. Often, you're used to doing things your way from a position of power. But in alliances, everyone has their own view of the world, and success depends on each partner's flexibility and willingness to adapt.
Lynch: We examined ourselves for six or seven months trying to decide what we had to offer as a global player and joint-venture partner. We concluded that for us to succeed, we couldn't take JCPenney as JCPenney abroad. In some countries, such as Indonesia and the Philippines, a foreigner is not permitted to operate a retailer. So we decided to go with licensed stores, company-owned stores, and joint ventures. However, I'm finding that many people in these countries expected us to come in as a full-line department store. Our philosophy is that we have a flexible approach and will open larger stores if possible at a later date, but that wasn't really important because we were building off our strength--private-label quality merchandise. The consumers don't understand that, because when they come to the U.S., they go to our larger stores.
Domecq: It sounds to me that your definition of your business is different from your customers' definition of your business. I, for one, never saw JCPenney as a producer of private-label, high-quality goods; I see it as a retail store. It just goes to show that consumers' expectations are often different from the ones we would like them to have.
Lynch: The government has expectations, as well. In China, the government wants us to open a department store. I've been trying for four years, but it's just not possible because of high import duties and burdensome regulations. The question is, "Do you want to open a store just to have a presence in the country or do you want to open a store to make money?"
Domecq: You must understand that the underlying assumptions of your strategy have to change on an ongoing basis. In Europe and the U.S., that may mean taking into consideration three or four points of inflation or changing interest rates or unemployment, but not the massive changes in underlying economic and political conditions that occur in other countries. Ultimately, you have to decide as a company whether or not you believe a market is there for you in the long term.
Erdeljan: In a sense, we struggled with the same problems. We finally decided it was in our interest to apply a different set of assumptions, standards, and expectations to markets such as China or India as opposed to Japan, Europe, or the U.S. There's a great inclination for people and businesses to be seduced by statistics such as the fact that 95 percent of the world's consumers are outside the U.S. market. So what? What does that mean?
Lynch: You have to ask if they can afford to buy your goods. That's what matters.
Erdeljan: That's right. I recently asked a friend who works for Ford in China, "How's the business?" He replied that they had a great year, with sales up 20 percent--meaning they sold about 300 cars last year. That's ridiculous. There's too much of a herd mentality. People think if every Chinese person drinks just one Coke a day, Coca-Cola could make billions of dollars. The problem is that not every Chinese person drinks Coca-Cola. And they won't let you make any money doing it: They'll either tax it away or they won't let you take it out of the country. So why bother? Life is too short. Forget it.
Lam: Clearly, you have to operate on a different set of assumptions. You can't assume every Chinese consumer is going to drink one Coke, because they won't. They are different people. And the vision must be long-term if you're in an emerging market. It won't happen on a quarterly basis. It will take four quarters before you understand what's going on and can talk about making any sort of profit.
Donlon: What key actions do you plan to take to increase your ability to manage across borders?
Shepard: I advocate developing a young group of managers who get along, so we can start developing a central corporate culture. Right now, we have a collection of different companies that are very separate.
Harris: We have established Mission 2000 to define our mission, culture, and ethics--both internal and external. We then combine this with the teams we have around the world to transfer technology and products from country to country and company to company.
Beese: Communication is the key. It used to be OK to take three days to return a phone call from someone in another country because of the different time zone. But now, e-mail means you must respond within 12 hours. It's also important to build personal relationships to create the feeling of one company, one culture.
Ozan: I would like to get people around the world to share electronically on a daily basis what they did wrong and right and have that information flow companywide, so people are continuously learning and sharing their experiences.
Laskawy: The key for a professional service organization is knowledge transfer. Knowledge is our DNA; it's what we are all about. Cross-border service teams from many countries are also important for us.
Lynch: You have to communicate both what you're doing and how you're doing it and make sure everyone understands that. People need to understand more than the deal or the need to go into a country; they need to understand the country, the opportunity, and the risk.
Lam: We must adopt a real culture for the corporation, translate it into different languages, and communicate it to people around the world; and we must establish an international advisory board to get different perspectives on issues.
Panke: Our role as leaders is our challenge. We have to help build personal relationships within our companies, because only then can we enable our corporations to communicate and experience across borders. We talk about managing across borders, but in the end, it is communicating and experiencing across borders.
Taylor: Marshall McLuhan may have been ahead of his time when he talked about the global village, but that is not what has been created. Modern communications hasn't created one global village; it's created a globe of many different villages. As we look at our own cultures, we're going to have to find a way to adapt ourselves--whether we are European-based such as BMW or Canadian-based such as Air Canada--to accommodate some of these other villages. But we have to be selective. We can't be everywhere.
RELATED ARTICLE: A Who's Who Of Roundtable Participants
J. Carter Beese Jr. is vice chairman of Alex. Brown International in Baltimore, MD, a $1.28 billion financial-services company. He is also a former SEC commissioner.
Ronald M. DeFeo is president and chief executive of Westport, CT-based Terex, a $1.03 billion equipment manufacturer.
Michael L. Domecq is president and chief executive of Allied Domecq Latin America, and chairman and CEO of Domecq Importers in the U.S., with $400 million in combined revenue, Old Greenwich, CT-based units of Allied Domecq Spirits & Wine, a subsidiary of Allied Domecq PLC.
Aleksandar M. ErdelJan is chairman, president, and chief executive of Troy, MI-based R.P. Scherer, a $536.7 million maker of drug delivery systems, particularly gelatin capsules.
D. George Harris is chairman and chief executive of $1.15 billion Harris Chemical Group in New York, a maker of inorganic chemicals.
Edward M. Kopko is chairman, president, and chief executive of Montvale, NJ-based Butler International, a $450 million provider of business services to industry, including aviation, telecommunications, technology, and automotive.
Victoria Lam is chairman and chief executive of China Industrial Group in New York, a $365 million manufacturer and distributor of industrial products.
Philip A. Laskawy is chairman of New York-based Ernst & Young LLP, a $2.2 billion auditing and management consulting company.
Alfred F. Lynch is president and chief executive of JCPenney International, a $214.2 million subsidiary of $18 billion JCPenney Co., a consumer apparel retailer in Dallas.
Werner C. Nennecker is president and chief executive of Spokane, WA-based Pegasus Gold, a $255.6 million open pit gold mining company.
Terrence Ozan is vice chairman, management consulting, at Ernst & Young LLP.
Helmut Panke is chairman and chief executive of Woodcliff Lake, NJ-based BMW (US) Holding Corp, the $5 billion North American subsidiary of automaker BMW in Munich, Germany.
Donald J. Shepard is chairman, president, and chief executive of Baltimore, MD-based Aegon USA with $32 billion in assets, the U.S. subsidiary of $13 billion insurance company Aegon nv with assets of $93 billion, based in the Netherlands.
Claude I. Taylor is chairman emeritus of Air Canada in Quebec, a $4.51 billion airline.
RELATED ARTICLE: The U.S. AS A `Foreign' Market
When foreign investors come calling on the "land of opportunity," they often find the red tape, cultural differences, and Yankee pay scale more than they bargained for.
When Michael Lock, managing director of British motorcycle maker Triumph, recently decided to open a manufacturing facility in the U.S., he discovered a curious thing: Far from being the commercial land of the free, America was, in fact, a bureaucratic minefield.
"Employee legislation in California, Maryland, and New York left me particularly dizzy," says a bemused Lock. "The state governments seemed to want to run my business for me." Faced with this intrusiveness, Lock did what a growing number of other European investors (including recently both Mercedes-Benz and BMW) had done before him: He headed south--in his case, to the more liberal investment climes of Georgia.
Laissez-faire investment legislation is not the only FDI strong point of the southern states, according to Fons Trompenaars, head of the influential Dutch-based Centre for International Business Studies. The South also scores high with foreign investors for its gentler attitude to the whole business of doing business, he says.
A consultant on U.S. market operations to such European blue bloods as British Petroleum and Royal Dutch/Shell, Trompenaars has long been struck by the fact that his clients' problems have: tended to revolve not so much around concrete issues--the mysterious workings of the Internal Revenue Service, say--as around day-to-day differences in corporate behavior.
For Japanese and British investors, for example, the yes-no briskness of Yankee deal-making often seems offensively brusque. When Charles Hampden-Turner --a lecturer at Cambridge University's Judge Institute of Management and a writer on comparative management cultures--recently canvassed Japanese investors in the U.S. as to why they tended to gravitate toward the South, their answers surprisingly had less to do with distribution channels or labor costs than with the willingness of Southerners to talk about fishing. An hour or so of shooting the breeze--a time-honored constituent of Southern courtesy--also fits in nicely with Asian ideas about the etiquette of conducting contractual negotiations.
Asian investors also have a particular problem with U.S. "short-termism," notably manifested in the way American executives view their corporate career plans. According to one London-based analyst, a perennial difficulty for Japanese and Korean investors has been that feasibility studies prepared in Tokyo or Seoul take for granted the fact that U.S. workers, especially white-collar staff, share Asian ideas about company loyalty. In fact, labor turnover in U.S. firms is roughly eight times as high as in Japanese ones--a difference that can play havoc with productivity (and payback) projections.
European investors face their own brand of heartache from the fluid U.S. labor market. The more competitive American attitude to changing employers--sniffily dubbed "the quick-buck, quick-job tendency" by one British analyst--means that pay rates tend to be far higher in real terms for U.S. executives than for their French or Italian cousins. This, in turn, means that expatriate staff (often brought in for start-up operations) must be paid at U.S. rates during their time in America, a problem that becomes particularly tricky when the executive in question eventually is sent back to Europe.
"Nobody ever complained about being given a 20,000[pounds sterling] pay rise," observes Trompenaars. "But just try telling an employee that he is expected to take a 20,000[pounds sterling] pay cut and see what happens."
RELATED ARTICLE: GLOBAL GROOMING MANAGERS
A few decades ago, executives were sent abroad when their careers began to wane or their companies decided they weren't good enough to fill a top spot at headquarters. Today, an international post isn't corporate banishment; it's de rigueur for managers with corner-office aspirations.
"Companies are demanding managers whose tickets have been punched in many places around the world," says Kathryn Harrigan, a professor of business leadership at Columbia University Graduate School of Business. "International exposure is critical, but it's a terrific challenge for companies to send these executives abroad, bring them back, and then manage them."
In describing an ideal model for identifying, developing, nurturing, and retaining international managerial talent, Harrigan and Harvard Business School Professor of Business Administration Christopher Bartlett offer the following conglomeration of strategies from companies such as Gillette, GE, Cambrex, Becton Dickinson, and McKinsey & Co. in the U.S.; the Netherlands' Unilever; Switzerland's ABB; Britain's Morgan Crucible; and Japan's Komatsu:
* Identify managerial talent by looking for individuals with a broad, nonparochial view of the company and its operations and a deep understanding of their own business, country, or functional tasks.
* Provide opportunities for achievement that allow managers to handle negotiations in a worldwide context. Beginning with mid-level managers, require at least two short-term (18 months to three years) tours of managerial duty in a foreign country, with the aim of solving a specific business problem in a specific geographic location.
* Implement a training program with a cultural sensitivity focus to prepare executives for their stint abroad.
* Create cross-country teams that regularly communicate problems and best practices worldwide.
* Appoint mentors and establish video links in the home country to maintain communication with and update executives posted abroad.
* Establish a "repatriation" or "re-entry" program that eases returning executives back into headquarters and provides for a debriefing session so the company can take advantage of and disseminate the knowledge acquired abroad.
"It's more important to move people around than to simply send them to training facilities at headquarters," Bartlett emphasizes. This means the playing field is relatively level, even for mid-sized organizations such as health-care company Becton Dickinson that don't necessarily have the training resources of conglomerates GE and ABB. Instead, Becton Dickinson has created a cadre of internationalists who rotate around, learning, for example, about innovations in blood collection or new product lines from the Europeans or Japanese and then relaying this information to domestic and other international managers.
Though most companies tend to take people from home and transfer them abroad, others, including ceramics concern Morgan Crucible, are beginning to rotate foreign national country managers around the world, eventually including a stint at headquarters.
Consultant McKinsey & Co. establishes "lifelines" between partners at home and associates abroad, a two-way contact that facilitates dissemination of information and makes it easier for managers to get back in the swing of things when they return to their home offices. Industrial equipment concern Komatsu has a "return ticket policy," an assurance that an international post is meant to be a broadening experience, and that the executive eventually will have a management position in Japan.
"Companies must ensure that a job is waiting for executives on their return to headquarters," Harrigan says. "Otherwise, they just might be tapped by another employer--probably a competitor."