SURVEY - MASTERING MANAGEMANT: Cultural answers to …



SURVEY - MASTERING MANAGEMANT: Cultural answers to global dilemmas

Conflicting values are made more acute by cultural differences. Yet Fons Trompenaars and Charles Hampden-Turner find they can be integrated

Financial Times; Jan 15, 2001

By CHARLES HAMPDEN -TURNER and FONS TROMPENARS

Recent research reveals that the leaders of global corporations are beset by a series of dilemmas. These are pairs of conflicting propositions, each of which clamours for the allegiance of the decision-maker. Successful leadership depends on the capacity to integrate such propositions and create strategies that unite both aims.

For example, the leader is expected to set universal rules of applicability, yet treat each culture, or way of working within the company, as a special case of diversity. The leader is expected to originate strategy worthy of Alexander the Great, yet listen attentively to an astonishing variety of inputs. He or she is expected to analyse, yet to create from the resulting mass of statistics a coherent, purposive plan.

Cultures and ideas

No doubt leaders of all companies face such dilemmas. So what is so special about global companies? The answer is that worldwide operations render these dilemmas more acute, since the values of whole cultures may put varying priorities on one or the other side of a dilemma. In some cultures, for example, stock markets dominate the supply side, in others banks. In some, shareholders own and can dispose of under-performing assets, in others cross-shareholdings makes this much more difficult.

Through a variety of studies and interviews with, among others, 21 chief executives, researchers at the Judge Institute, Anglia Business School and the Trompenaars-Hampden-Turner Group discovered that "transcultural competence", the capacity to integrate seemingly opposed values, was among the most important skills of the corporate leader. These leaders scored significantly higher on this criterion than a general sample.

Take, for example, the dilemma of globalism against localism. How do leaders reconcile these conflicting imperatives? In several ways. One way, sometimes celebrated as "think global, act local", is to encourage local initiatives, but then globalise information about these activities. Typically, the corporate headquarters has some form of scoreboard monitoring its operations around the world. Any local success could have global implications and might be applicable worldwide. More usually, local adaptations stay local. For example, Shell gave help to pig farmers in the Philippines, which protected its pipelines from sabotage by insurgents.

Another way of integrating cultural diversity is to decentralise "centres of excellence" to those cultures that do the job best and most cheaply. Hence Motorola has made Bangalore in India its software headquarters, drawing on the skills of some of the world's best software engineers. Sony sources its software in the US. Apple found Singaporeans so good at high-quality computer assembly that they now instruct Apple's factories around the world. The automobile of the future may be designed in Italy, with engines made in Germany, safety systems from Japan and so on. Global excellence is a synthesis.

Dell Computers

Michael Dell of Dell Computers was a relative latecomer to a maturing industry. Yet he has succeeded in solving one of that industry's major dilemmas: is it possible to serve both a mass market, with all its economies of scale, while focusing on a niche market of customers who have very special needs?

Dell was the first to do both at the same time. It also pioneered direct-selling over the internet. Dell sells computers to a wide range of corporate customers, but gives each client "premier pages" on the web, consisting of detailed, private information about the purposes for which computing power is mobilised and how the customer might best use the hardware. Such systems combine confidentiality with transparency. The customer's strategy is confidential, but suppliers have access to inventory levels for just-in-time delivery, without ordering. Never have so many customers received standardised components in so many combinations.

Dell is a good example of the "clicks-and-mortar" businesses even now surviving the decline of dotcom stocks. It harnesses neither the old or new economies alone, but clever combinations of both: high-quality computers enhanced with information supplied by the internet.

McDonald's

An example of how even mass-market suppliers are heeding cultural diversity is illustrated by the experience of McDonald's chairman Jack Greenberg. The Big Mac is so quintessentially American that "McWorld" has become an epithet for the homogenisation of world tastes by the US. But Greenberg was to discover that the global popularity of the McDonald's product was increasingly qualified by exceptions.

The international division sustained McDonald's throughout much of the 1990s. Domestic sales were in trouble and it was the company's local adaptations, introduced by franchisees and national co-ordinators, which showed the most sales success, registering 15 years of sustained revenue growth. More importantly, the autonomy first ceded to foreign operators now became the policy of the whole corporation.

When the Indonesian currency collapsed in 1998, potato imports became too expensive. Rice was substituted and later maintained. In Korea, roast pork was substituted for beef, while soy sauce and garlic were added to the bun in much of south-east Asia. Austria introduced "McCafes", a variety of local coffee blends.

When Greenberg examined the sources of recent innovations he found these had come from regions in the US. The Egg McMuffin had started from local initiatives in San Diego. Big Mac originated in Pittsburgh. The McFlurry, a soft ice-cream with candy, spread from Florida. Yet in key respects of quality, cleanliness, speed and branding, McDonald's will remain uniform. "Decentralisation does not mean anarchy," said Greenberg. "Those things aren't negotiable."

Heineken

Another dilemma involves reconciling the self-interest of the corporation with its obligations to customers and community. While free enterprise is by definition self-interested, a crisis can help businesses recognise the importance of social reality. In 1993, when Heineken's bottler mistakenly left ground glass fragments in the bottom of bottles supplied to the plant, chief executive Karel Vuursteen withdrew every bottle in the entire sales area, at a serious loss to Heineken.

It was a difficult decision but the right one. Customers come first. Perhaps not first in economic philosophy, but first in the sequence of those who must be satisfied before profits can flow again. Heineken found, as Johnson & Johnson had before it, that customers accept that accidents and sabotage happen. What really concerns them is how a company behaves in such crises. Does it immediately protect its customers despite serious loss to itself? The sales of both Heineken and Tylenol rose after these incidents.

Lego

The process of innovation creates a tension between the individual and the group. Christian Majgard is marketing director of Danish toy company Lego. In the mid-1990s, he became concerned that, though staff were coming up with a large number of creative ideas, these ideas were not being accepted, shaped, improved, tested and successfully launched as finished products.

Majgard discovered that whether an innovative idea was accepted depended on the originator's status. Typically board members supplied ideas and junior staff worked on implementing them. This was doubly disadvantageous because the implementers had no personal stake in the ideas, while the "ideas men" neglected the details of making the innovation viable. There was a fatal schism between the ideal and reality, and ultimately the company's "realists" killed off the ideas.

Majgard made it a rule that anyone championing an idea must fight for it in the team, that the team's criticism be constructive and helpful, and that the whole team, not just the person responsible for the idea, be credited with successful innovations. He also found that teams with greater diversity of talents and roles were more successful at delivering innovations.

Majgard found that resistance to novelty did not cease, even after the successful launch of a new product. Lego had a "plastic brick culture" because of the celebrated success of its staple product. Even the most successful electronic toy or software game was not embraced as readily as plastic bricks at Lego's headquarters. Deciding to give new businesses autonomy, he put distance between them and corporate headquarters, until they were strong enough to stand up to the traditional culture and modify its values.

All too often, a company's problem is precisely what has made made it successful in the past. It overplays its winning combination and then needs an astute outsider to come in and diagnose the problems.

Club Med

In the 1990s the French holiday company Club Med was suffering from a surfeit of the strengths that had made it famous: lavish hospitality and conviviality. Those attending Club Med are encouraged to experiment with new identities, reminiscent of old-fashioned shipboard entertainment, in beautiful settings. The organisers facilitated the experience by planning costumed role-playing and creating an ambience of rare experiences.

Villages would compete with each other in cuisine, party-giving and even firework displays. The victims of this grandeur were costs, budgets and efficiencies. Club Med progressed royally into the red.

The dilemma was that the experience of a dream vacation had got the better of the requirement for counting costs. Philippe Bourguignon took over as chief executive in 1997. Having previously rescued Disneyland in Paris, Bourguignon acted swiftly. Each resort was given responsibility for its profits and losses, and had to stay within its budget. Prices were matched to seasonal demand, with the aim of fuller occupancy and seasons lengthened for the better use of assets. Bookings were streamlined and computerised. Options that were not often chosen were trimmed from the menu of food and activities.

Bourguignon had not only to control costs, but to demonstrate an understanding of Club Med's mission to provide profound experiences. He accordingly added intellectual experiences and artistic appreciation to Club Med's list of offerings. Woodland seminars in the US and an urban resort in Paris for would-be sophisticates broadened the company's range.

Club Med is back in profit, though some people complain that its former plan has been lost. However, most credit Philippe Bourguignon with another historic turn-around. The ambience is still there, but someone is now counting the costs.

Bupa

Val Gooding is chief executive of Bupa, the UK's largest private health insurer and provider. Her dilemma lies between these last two words "insurer" and "provider". Insurers are neutral, calculating, abstract, legal and retentive. Providers are comforting, supportive, personal, relational and compassionate. These values collide at Bupa's call centres, where people who have paid premiums all their lives may eventually seek help. Bupa employees need integrity, care and calculation in dealing with their customers.

Those manning the phones must discover within seconds the would-be patient's extent of coverage and arrange for care. Callers are often desperate, sometimes angry. Staff work in groups to give each other support, with "calming rooms" and counsellors for those suffering stress. But it is training that provides the "emotional muscle" staff need.

The approach is unusual. Instead of drilling staff in a form of words, decreeing what they should and should not say, training consists in staff expressing their own family experiences of illness, surgery, bereavement and bedside vigils. Rather than leaving the "private self" at home and engaging the "work self", everything in the lives of staff that bears on surviving illness is deemed relevant. Those whom trauma and crisis has made emotionally strong tell their stories. When a caller facing by-pass surgery needs help, a veteran with such experience is available to counsel.

Gooding seeks to integrate the roles of carer and insurer. It is a difficult task; call operators must identify with frightened customers, but must also know within seconds who the caller is and what his or her insurance covers.

Conclusion

Values are differences. They are not to be summed, but reconciled. Outstanding leaders take apparent opposites and integrate them, so that each value learns from the other, rules grow better through exceptions, and global products spread from a particular locality. These opposites might include rules and exceptions, globalism and localism, mass markets and customised markets, universal types and regional novelties, self-interest and service to customers, individual creativity and group dynamics.

Too often a company overplays its strong suit. The leader should act as a critic of the status quo, restoring balance between, say, dream vacations and paying propositions. We call this capacity "cross-cultural competence", because most of the values involved are weighted differently by different national cultures. Hence leaders must show respect for all cultures and all values if integration is to be achieved.

The authors can be contacted at info@7d-culture.nl

Fons Trompenaars is founder of Trompenaars Hampden-Turner Intercultural Management Consulting in Amsterdam.

Charles Hampden-Turner is a senior research associate at the Judge Institute, Cambridge University.

Copyright © Financial Times, 15 January 2001.

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