Several studies have indicated that a growing concern for CEOs is talent management, specifically the challenges in finding the right people for senior positions, as well as positions in international jobs.
The result, writes McKinsey’s Pankaj Ghemawat, is a scramble to develop “global leaders.” But many development initiatives, he says, are based on faulty assumptions. He explains, “At the core of my work lies the reality that, while globalization is indeed a powerful force, the extent of international integration varies widely across countries and companies and generally remains more limited than is commonly supposed.”
How can companies develop global leaders that meet their needs? According to Ghemawat’s report, it means taking a sober look at corporate needs and challenges internationally, and developing individuals with the right balance of localized and general global competence.
Ghemawat says that while many CEOs envision their companies as vast, globally interconnected forces, in reality, cross-boarder flows are more limited.
“To be sure, rapid growth in emerging markets, combined with a long-term outlook of lower growth in most developed economies, is pushing companies to globalize faster. But metrics on the globalization of markets indicate that only 10 to 25 percent of trade, capital, information, and people flows actually cross national borders.”
Additionally, he continues, most international flows occur between countries that are close together or share a language, where cultural differences are presumably smaller. “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,” he writes.
Finally, he writes, “Less than 2 percent of firms on Fortune’s Global 500 list of the world’s largest companies, for example, derive more than 20 percent of their revenues from three distinct regions.”
What this all boils down to is that perhaps CEOs are forecasting global growth a bit more broadly than the reality. So, he suggests, the need for vast global leadership competency training may not be as pressing as many leaders envision.
Instead, companies should focus on developing leaders with “rooted cosmopolitanism” – rather than trying to replace their leaders’ home customs and identification with a broad global identification, they should develop leaders who strongly identify with their home countries but also have an understanding and appreciation for one or two distinct cultures. “Indeed, studies of expatriate performance confirm that expats who identify strongly with both their home and host cultures perform better than those who identify only with one or with neither,” he writes.
Local or Global?
According to the report, the answer lies not in teaching general global leadership competencies or in drilling down on very narrow, but very deep specific cultural understanding. Ghemawat explains, “…standard lists of global-leadership competencies reinforce a one-size-fits-all view of global leadership that is inconsistent with the reality of globalization and the mix of work global leaders do.”
He suggests that companies develop rotation programs in order to equip leaders with deep cultural understanding in particular regions. Additionally, he said in order to prepare leaders for work in new countries, companies should offer paired origin-destination programs that take into account cultural biases one develops in his or her home country and how that might impact his or her leadership capabilities in a specific different country.
Companies should look into the concept of rotation for leaders – not just for those coming from a corporate headquarters but to an emerging market, but also for leaders coming from emerging markets to train in headquarters locations. “Rather than pure localization, firms should embrace the practice of rotation, which provides the foreign work experience—not just travel—essential to the development of global leaders,” he writes.
Finally, he adds, many CEOs fall into the trap of assuming that they will easily attract talented high performers in new markets – but, as companies headquartered in emerging markets grow in capability capabilities and attractiveness, qualified talent will become increasingly more scarce. Multinational companies must continue to stay one step ahead in attracting key talent in order to stay competitive, and that means ensuring that leaders in these regions have all of the opportunities as those in developed markets.