A few weeks ago I met with a diverse group of 30 senior executives and CEOs from across North America to discuss critical issues facing their organizations. Some of the usual suspects arose, such as the increasing speed of change, globalization and the inherent complexity of managing multiple cultural, political and regulatory jurisdictions. But what keeps them up at night is the challenge of managing across their enterprise — steering companies that are no longer the traditional hierarchical and stable organizations of the past.
Students graduating from business school today enter a world where the role of the organization is changing; consequently, the role of the leader needs to expand. Companies are no longer top-down and authoritative, instead they are increasingly enterprises where leaders need to manage and influence people — both within and outside the organization — over whom they have little or no authority.
The term "enterprise" encompasses not just a company. Rather the enterprise consists of a complexity of interdependencies both within the organization and between the organization and the environments — both public and private — in which it operates.
The Richard Ivey School of Business and other international business schools have recognized this new cross-enterprise reality and have significantly changed their curriculums in response. Through a business issues-based approach, the schools are producing thoughtful leaders who, even in entry-level roles, can understand how their decisions fit into the organization and how their organization fits into the global business environment.
Carol Stephenson is dean of the University of Western Ontario’s Richard Ivey School of Business. (PHILIP CHEUNG FOR THE GLOBE AND MAIL)
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Ivey, Yale School of Management and Stanford's Graduate School of Business have moved to teaching modules that address broad, relevant themes, building on functional skills and expanding beyond the traditional silos of finance, strategy, marketing, operations and accounting.
Both Yale and Ivey break their programs into themes, such as leading people and organizations; designing and executing strategies; the investor and the consumer; and state and society. Stanford recently unveiled a new curriculum to "examine questions that transcend any single function or discipline of management."
The Mattel toy recall is an example of these issues in action. Mattel might have seen outsourcing to China as simply a production decision to save costs. But what starts as a production decision needs a leader with foresight to see all the potential implications.
In making that decision, the production manager needs to take into account more than just the cost to manufacture overseas versus the cost to manufacture at home. The production issue becomes a marketing issue when the subcontractor doesn't have the same stake in the brand. By putting your name on a product that another company is making, you are guaranteeing their work. There are financial implications in that decision, including potentially the overall survival of the brand name and reputation of the company if there are problems.
There are also regulatory issues when subcontracting to a foreign country; their regulations may not be the same as the ones in your home country. There are issues of quality standards and safety as well. And broader political issues — if a company moves production overseas and closes a local manufacturing facility, managers need to be prepared for the political issues that raises.
Focusing on the consumers' needs, while also considering potential regulatory changes and keeping abreast of rapidly changing global conditions at the same time as conducting daily operations, can be a handful. Just ask managers at Indigo Books and Music Inc. who last week lowered prices considerably in light of an increasing consumer backlash over the higher prices that Canadians are paying for books compared with Americans.
Instead of being dragged to the parity party, managers at Indigo might have garnered some good press by staying in front of the story — finding ways to compensate customers for the price differences and giving incentives, thereby purchasing future loyalty.
The heart of this cross-enterprise approach acknowledges that a business decision such as a merger or acquisition cannot be approached solely from a financial point of view. Mergers and acquisitions are successful only if less-tangible aspects of the company — information technology systems, branding, organizational culture, corporate governance — are evaluated and integrated. It is in conducting due diligence and the post-merger integration that cross-enterprise leadership is especially needed.
Studies show that mergers and acquisitions overwhelmingly fail to meet initial objectives. A survey by the management consultancy Hay Group found that more than 90 per cent of deals fail to deliver on promised value — just 9 per cent are deemed "completely successful."
Those problems can be seen with such high-profile blunders as Daimler/Chrysler, Quaker Oats/Snapple and AOL/Time-Warner, which are immortalized on BusinessWeek's worst-deals-of-all-time list.
The recently announced combination of the U.S. operations SABMiller PLC and Molson Coors Brewing Co. shows cross-enterprise leadership in action. The plan is to trim $500-million in costs annually by 2010, with savings coming from reduced shipping distances, economies of scale in brewing and reducing duplication in corporate and marketing services.
But that's just the start for a cross-enterprise company. The next step is to create a cross-enterprise team of people from both organizations that will represent both cultures and the functional expertise of both companies. Leading this kind of team requires cross-enterprise leaders, executives who can simultaneously lead from multiple perspectives, putting together the right resources without regard for geographic, corporate or functional barriers.
The best business schools are changing their approach to learning to ensure that solving complex business issues, rather than tackling simplistic functional problems, is at the heart of the learning process. After all, we know business is messy. It does not present itself in neatly packaged functional silos. Future business leaders must know how to think, act and lead in a cross-enterprise fashion.
Carol Stephenson is dean of the University of Western Ontario's Richard Ivey School of Business.
