Answer to last month’s business dilemma

At some point in its growth, the most successful companies will need to face up to the people challenges of operating internationally, but what’s the best approach? 

In our opinion, a defining moment occurs as companies start to expand beyond their country’s boundaries. At that point in time, they must ask themselves what doing business across borders will really mean to their company and, of course, to their people.

Some companies minimise the impact on their talent of expanding to other countries. Others, while acknowledging that people implications exist, hope that the issues resulting from cultural differences will somehow resolve themselves as people from different countries begin to work with each other and get to know each other better. Or, in another common scenario, they hope that a strong corporate culture will easily align cultural differences.

Our perspective is that that companies need to deal with the complex issues associated with global diversity in a meaningful manner in order to do better than their counterparts.  Recent data supports this view. According to a new study by McKinsey (May 2008, Why Multinationals Struggle to Manage Talent), companies that excel in the following three areas had a 70% chance of achieving financial performance among the top third companies in the study:

• The creation of globally consistent talent management processes
• The management of cultural diversity
• The mobility of global leaders

So, what is the ideal path to take?  We believe companies that follow these broad guidelines have the best chance of success.

• Define - or redefine - what kind of company you need to be given your global aspirations

Will you be an ‘international’ company or a ‘global’ one?  The difference, many contend, is that a truly global company will adopt the best talent practices – and select the best people – regardless of national origin to help them succeed in their strategy.  International companies, on the other hand, have a headquarters in one country and therefore national (and corporate) culture tends to get imposed on the organisation outside of HQ.  While there is a phenomena recently described as “glocal” (meaning local flexibility is permitted, most often to ensure compliance with local employment laws) there is still an implied ‘insider’ versus ‘outsider’ scenario in most international companies.

• Understand the resulting people implications

In a truly global company, a third culture is often formed that is an amalgam of all the national cultures. Everybody has to adapt to some degree. In international companies, ‘outsiders’ frequently have to adapt entirely to the ‘insiders’ rules to be successful. This can translate into unintentional negative impacts that affect the working relationships between individuals and within teams. Who, for example, sets the time for conference calls? If the US team is always staying up until the wee hours to accommodate HQ somewhere in Asia, that can become a problem over time.  Which communication method (in-person, phone or email) is most effective and preferred between various cultures? Again, many organisational cultures have their preferred method which may be in contrast to other cultures’ norms.

• Know the cultures in which you operate

This means knowing your own country and organisational culture first, through the lens of how others will view and experience you. Then, ensure that all of your people working across borders are provided with the opportunity to build basic cross-cultural competencies.