In an increasingly globalized business world, we need global leaders. But Pankaj Ghemawat, a professor of strategic management at ESE Business School in Barcelona, says the skills those leaders need has been confused by misconceptions about globalization, and the fact that too many of the experts pronouncing on the topics are simply adapting their traditional leadership ideas to global leadership.
In the McKinsey Quarterly, he tackles five misconceptions:
While globalization is a powerful force, the extent of international integration varies widely across countries and companies and generally is more limited than is commonly supposed. Only 10 per cent to 25 per cent of the flow of trade, capital, information and people actually cross national borders – and even that movement is weakened significantly by geographic distance and national differences.
As Prof. Ghemawat notes: "An appreciation of how distances and differences influence international ties helps explain some of the organizational and other stresses that established multinationals are encountering as they accelerate their expansion to emerging markets."
If companies doing business in a range of countries are taken as a measure of globalization, the reality is that less than 2 per cent of firms on Fortune's Global 500 list of the world's largest companies derive more than 20 per cent of their revenues from three distinct regions. And most firms are quite domestically rooted in other aspects of their business, such as where they do their production or R&D or where their shareholders live.
This persistent rootedness of companies and their employees should be embraced rather than fought. Nurture your own roots and branch beyond them to connect with counterparts elsewhere who are also deeply rooted in their culture.
"This rooted-cosmopolitan approach also accords better with research showing that people can become 'biculturals,' with a truly deep understanding of two cultures, but probably can't entirely internalize three, which implies that four is out of the question," Prof. Ghemawat states.
It's "globaloney," he believes, to think you can develop cross-cultural leaders who can manage effectively anywhere in the world.
He dismisses the competency lists developed for global leaders (such as self-awareness, optimism, and empathy) as being no different from leadership skills for the home country. And competency lists that focus on cultural differences miss other factors such as economic, administrative and political differences that the global leader will encounter. As well, such lists promote a one-size-fits-all approach to global leadership, which he sees as wrongheaded.
Instead, he recommends including a geographic dimension that would prepare leaders to deal with challenges related to differences between places. "For example, a Japanese executive going to work in the United States would probably benefit from preparing for the higher level of individualism there. One preparing for China would … benefit more from understanding that 'uncertainty avoidance' is less pronounced there, so executives must be ready for faster-paced change and greater levels of experimentation," he writes.
Prof. Ghemawat notes that one survey indicated that only 14 per cent of companies have any mechanisms to track returns on international assignments, and most of those firms were only tracking business generated from an assignment. Given the costs involved in placing people in other countries – and the apparent damage it does to them in rising the corporate ladder – companies need to invest more in studying this area.