15 Dec 2003  Research & Ideas

The New Global Business Manager

What are the critical skills global managers need today compared to ten years ago? An interview with Harvard Business School professor Christopher A. Bartlett.

 

In a 1992 article for Harvard Business Review, HBS professor Christopher A. Bartlett and co-author Sumantra Ghoshal tackled the question, "What is a Global Manager?" Their answer then was that "there is no such thing as a universal global manager." Indeed, multinationals required three kinds of specialists: business managers, country managers, and functional managers, with a group of senior executives to coordinate the efforts of the specialists.

In 2003, as globalization has become a much more pressing issue and the talents of global managers are in high demand, has Bartlett changed his views? Cynthia D. Churchwell interviewed him at his office at Harvard Business School.

Cynthia Churchwell: Since your article "What is a Global Manager?" was first published in the Harvard Business Review eleven years ago, what key differences have you seen in global managers? How have your own views changed?

Christopher Bartlett: Well, fortunately, the basic argument has held up. But the world has evolved and we do see some new patterns emerging. But first let's focus on the things that have stayed constant.

Companies have still got to be globally efficient and competitive by integrating activities and coordinating resources across national borders. At the same time, they also need to be sensitive and responsive to national differences in consumer tastes and government requirements, for example. Now these two demands are often in conflict, and this tension still is at the heart of transnational management.

But we also described a third strategic imperative, one that has become increasingly important in recent years. Today, global managers need to see the world not just as a collection of national marketplaces, but also as a source of scarce information, knowledge, and expertise—the key resources required in the development and diffusion of innovation worldwide. So this increasingly important capability really is about using one's global presence to promote worldwide innovation and learning.

Now these three strategic imperatives have to be reflected in the multinational company's organizational capability. And that is where the role of the global manager is shaped. We argued that companies should not define this as an offline specialist role, but neither must they try to make everyone global managers. Rather, there are three key groups who should be involved.

You must have at the table the global business managers who can represent the need for an integrated worldwide strategy and more efficient standardized products. They can then argue with country managers who say, "No, we need to respond to these local opportunities or demands." In turn, they can talk to the functional managers who maintain oversight on the company's resources—its financial, human, or information assets—and who are able to see how those need to be developed and diffused around the world.

Companies must recognize and legitimize the diversity represented by those three views at the table, and create the process for its debate and resolution. The role of top management is to create channels of engagement and the forums for interaction to facilitate that process, and to put a thumb on the scale to be able to keep that debate in balance.

Now what's different? A couple of things. One is that more companies are being born global. In the '80s and the '90s, our focus was really more about how established successful companies adapted to the booming global environment. The game was being defined by giant American, European, and Japanese companies. But now we see new competitors come from smaller countries that, because their home markets are too small to support them, are moving immediately onto the global stage. We also see whole industries that are being born global, particularly the information-based, knowledge-intensive service economy. A company like India's Infosys illustrates both trends.

Another big change is that companies are finally recognizing that being global is not just about entering incremental overseas markets. It is also about accessing scarce resources. And the scarcest of all resources is the human resource, particularly management. So the assumption that "all the smart, capable people were born within a ten-mile radius of our head office" is being eroded. As an Australian, I am aware that the current CEOs of Kellogg and of Coca-Cola, and the last CEOs of Ford and Philip Morris, are all Australians. And a recent BusinessWeek cover story tracked the impact that Indian managers have had on American management.

Q: You have said there is no such thing as a universal global manager. Rather, you say, there are three types of specialists who contribute to the overall functioning of a global corporation, the activities of which are coordinated by a fourth type of specialist. What are the particular strengths of each type of global manager that you've recognized?

A: If you are a country subsidiary manager, you have to be sensitive and responsive to national differences. You had better not put someone in there who is an arrogant, ethnocentric person. It is important to understand country differences as strengths, not as impediments to your operation. The real battle now is shifting to how you use the world as a source of ideas and expertise; and the country manager's role is key.

For example, I just wrote a case on Procter & Gamble in Japan. They understand that Japanese women are incredibly sophisticated, demanding customers who spend more money on cosmetics than anyone else in the world. Instead of saying, "Well, we've got Olay and Cover Girl. We'll just drive that down the pipeline and put a Japanese label on it," the local managers said, "Wait a minute. We've got very demanding customers here. We've got incredibly tough competitors here. That creates a fabulous environment that's going to drive innovation, so let's build our R&D here and use this environment to drive innovation." Out of that commitment came SK-II, a skin care product that sells for about $120 a bottle and has moved them into a whole new range. Now this prestige line is being rolled out globally. So the ability to be sensitive, responsive, and entrepreneurial is the critical role of country managers.

More companies are being born global.

Business managers, on the other hand, need a perspective that allows them to look across the world and recognize commonalities or see opportunities for economies. They've got to be able to play a game of global chess with competitors who may take profits from one market and cross-subsidize losses in another. They've got to have a big, strategic world view, and be able to see broad cross-market trends and commonalities. In the P&G case, it was the global business manager who assessed the worldwide potential for SK-II and decided to roll it out in Asia, then Europe.

Functional managers with worldwide responsibilities really have to know their specialty—whether it's technology, R&D, or people. They must know where best practice is and how to leverage it. "What's this technology they have developed in Japan that I can quickly move to Europe?" or "Who is this key person in Europe we can transfer to Japan to drive this initiative?" So they've got to be the pollinators, the cross-fertilizers, very much in touch with their expertise and with what's happening around the world.

The fourth role is that of the general manager—the division head, or the CEO. We used to always talk about the CEO as being the grand strategic architect, sitting on top of the company and defining the priorities and making the strategic investments. Historically, that was the role. But now the world is so complex and so fast moving that you can't haul all the information to the top for someone to make all those calls.

In a world that's moving in nanoseconds, empowerment is driving more strategic decisions down to people who are closest to the customers, competitors, and technology changes. So the general manager's role really is less about managing content and more about managing or framing context, creating an environment in which these people can negotiate the best solution for the organization.

Q: What is your advice for people who want to develop skills as a global manager?

A: Whether you are a young MBA just graduating or an experienced manager, the most critical global attribute is open-mindedness. There's a curse that Americans in particular face, in that they're born in the world's largest, richest, and most technologically developed market. This can make it harder to step out of that mindset and ask, "What is it that we could learn from the leading-edge environmental trends in Germany? Or the more sophisticated consumers in Japan? Or from our toughest competitor who happens to be coming at us out of India?" Having that open-mindedness is critical.

[As important as] open-mindedness, I think, is recognizing that global management is all about legitimizing diversity. We often talk about diversity in terms of race or gender. But it is really about a total perspective. It is about legitimizing diverse views in an organization, including those based in cultural differences. People from other cultures think, argue, and perceive things very differently. A manager who is sensitive to that will understand and respond much better in a global context.

Just living in that world of trade-offs can be invaluable. Understanding how the need for global efficiency cannot always trump the need for local responsiveness, for example. Or having the experience of finding that the brightest marketing person in your organization is in Australia. Or finding the best new product ideas coming out of the U.K. Such experience is invaluable in developing the needed skills and perspectives.

Q: You emphasize the importance of organizations making a distinction between coordination and centralization. How does each term apply to a global manager?

A: In the drive to achieve global-scale efficiency, the old assumption was that you would follow the lead of the Japanese who used that skill to build their global competitiveness. Their approach was simple: They centralized huge scale and built all the Toyotas in Toyoda City. Or they produced all the Panasonic VCRs out of Osaka. These huge, centralized, scale-intensive operations drove their costs down.

But it is not centralization that drives scale; it's specialization. And that doesn't have to be central at all. Maybe you want to specialize the sourcing of your components in Taiwan, supplying regional assembly operations worldwide. But maybe you want to specialize your R&D in England where you've got access to some very bright PhDs who happen to be in excess supply around Oxford or Cambridge. And you may place your lead marketing operation in Japan where your consumers are most demanding. Specialization is about where you create centers of excellence—and that may or may not be at the corporate center.

Whether you are a young MBA just graduating or an experienced manager, the most critical global attribute is open-mindedness.

Now, creating this integrated network of specialized operations does increase the coordination needs. So when we wrote about centralization versus coordination, we emphasized the challenges of coordinating operations that were no longer independent of the center nor dependent on the center. The new relationship is one of coordinated interdependence.

Q: What challenges do you foresee global managers encountering during the next five to ten years? Will they need to develop new skills?

A: Multinational corporations are incredibly powerful. Because they operate across national boundaries, they are in essence beyond the control of any single governmental entity. Country by country, host governments define national laws that the multinational must obey. But if one country's laws are too constraining, it can move to another one.

So while there are few effective transnational governmental bodies, there are very effective transnational corporations. With that power comes a huge responsibility to act as global citizens who contribute, who don't just exploit. As the wave of anti-globalization suggests, the great challenge for multinational companies in the next decade will be to establish the confidence of society at large, governments in particular, and even of individual consumers, to assure them that they are worthy of their trust.

I've just written a case about Genzyme in Massachusetts. Their Cerezyme plant runs twenty-four hours a day, 365 days a year, and produces six kilos of product in all that time. You could fit it in a little six-pack bag. But it is sufficient to treat the 6,000 people around the world—and that's all there are—who suffer from a rare affliction called Gaucher disease.

In the United States, the treatment costs a couple of hundred thousand dollars a year. But Genzyme will treat anyone in the world who has this disease, and there are two prices for the product they produce. One is the price that exists here or in Europe where countries can afford it. The other is free. Through Project Hope, they seek out people who are suffering from this disease, in Africa or China, for example, and provide the therapy.

This approach is in stark contrast to some of the big pharmaceutical companies that were producing AIDS drugs, sitting on their patents, and refusing to deal with this horrific disease as it spread through Africa. Multinational companies have to be more like Genzyme and find ways to balance their huge global power with their assumption of global responsibility. I think that responsibility is going to be one of the big things that managers in the next decade or so will have to deal with.

Q: What else are you working on?

A: After Managing Across Borders (on which this Harvard Business Review article "What is a Global Manager?" was based), Sumantra Ghoshal and I wrote a book called The Individualized Corporation published by Harper Business Books (1997). It examined the massive transformation process of companies that began in the 1990s.

So The Individualized Corporation looked at the implications of this transformation. We concluded that the downsizing, de-layering, restructuring, reengineering, empowerment, and outsourcing were symptoms of companies undergoing the biggest and most fundamental change in the corporate model, the organizational form, and the role of management in seventy-five years. Globalization is one force driving it, but so too is the coming of the information age, deregulation, privatization, the service-based economy, the convergence of industry boundaries, and the knowledge revolution.

GE is the headhunters' favorite fishing hole.

Out of that has come another project. The big change that is going on now—and what's behind the massive corporate transformations—is that the scarce, constraining, and therefore strategic resource is no longer capital. The world is awash in funding. Most companies have got more financial capital than they've got great ideas to invest in. The main driver of the merger and acquisition boom is that companies can't create enough ideas internally, so they're buying growth. It was also a big contributor to the dot-com crash: an excess of capital chasing a scarce number of creative ideas and scarce expertise.

Today's scarce resource is the information, knowledge, and expertise that are embedded in people's heads and human relationships. But we've built companies to allocate and control financial capital, and now we've got to completely change them so they can develop and diffuse intellectual capital and manage human capital. That is what we're writing about now.

I just interviewed Jack Welch for a new case I've written on "GE's Talent Machine." GE is the headhunters' favorite fishing hole. It not only provides for its own needs, it also develops the CEOs for most of industrial America. What is it that companies like GE, Microsoft, McKinsey, P&G, and Goldman Sachs are doing, and how are they creating value by doing it? What secrets do they have that others don't? That is what we are playing around with now.

About the author

Cynthia D. Churchwell is a business information librarian at Baker Library, Harvard Business School, with a specialty in the international economy.