World class: non-American CEOs are having a big impact at traditional U.S. companies

Chief Executive, The, April, 2004 by Dale Buss

In the middle of winter, the fact that Carlos Gutierrez isn't from the Midwest is evident in the contrasting appearance of the tall, debonair, Latin chief executive officer of Kellogg and the palefaced natives who work for him in down-town Battle Creek, Mich. Occupying his inner sanctum are people like Executive Vice President King Pouw from Indonesia and a rugby player from Australia, CFO John Bryant. Clearly, it's a globally spawned cast directing this iconic American company from their redoubt in the U.S. heartland.

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But intriguingly, says the Cuban-born Gutierrez, he and his lieutenants have so far made the greatest impact revitalizing Kellogg's U.S. operations, not its overseas divisions. Kellogg had lost the domestic market share lead in its core cereals business to General Mills and was bereft of significant new products before Gutierrez became CEO in 1999. He says his geographically diversified resume helped him recognize an underinvested market when he saw one. "We were getting so caught up in the emerging-market craze that we were almost unconsciously taking money out of the U.S. and putting it in markets where the returns weren't going to come for 20 or 30 years," says Gutierrez, who joined Kellogg de Mexico in 1975 as a sales rep. "The U.S. was still our biggest market, but we weren't

treating it that way. We had to win in the U.S."

So it goes with the growing number of foreign-born CEOs of American companies in an arrangement that very often yields great benefit--but not always in predictable ways. Although evidence is only anecdotal, it's clear that the number of non-native CEOs heading U.S. corporations in traditional industries such as food processing and heavy manufacturing is growing. They bring a fresh focus to long-festering challenges in the U.S. market as well as help for their companies' international operations.

What they offer is a cultural sophistication that allows them to speak the languages of different constituencies and build support for change. "The competitive game now is: How rapidly can you develop and diffuse innovation?" says Christopher Bartlett, a professor at Harvard Business School and a ranking expert in the management of multinational enterprises. "Maybe the newest technology in your industry isn't from America but from Germany or Japan. A new competitive threat may not be in your own backyard but in a less-developed country.

"So if you're not sensing those things--using overseas markets as sensory mechanisms as well as delivery mechanisms--your company will be behind," adds Bartlett, who resides part of the year in Australia. "Sometimes, if you've lived your whole life in the United States, you don't have as much sensitivity to all sorts of opportunities."

Cultural Conflict or Comfort?

To be sure, an international background isn't enough to guarantee success. Witness, for example, Jacques Nasser, a Lebanese who was raised in Australia and crisscrossed the world for Ford Motor. He was sacked as CEO by Ford's old guard in 2001 in the wake of the calamitous run of deaths and injuries in Ford Explorers equipped with Firestone tires. But the deeper issue may have been that he had scant regard for the prevailing culture at headquarters in Dearborn. So, clearly, there can be a risk in laying the mantle of CEO on someone who has spent significant time away from the core of the organization where values are transmitted, crucial relationships cemented and key cultural cues are internalized.

Fred Hassan seems to have sidestepped that pitfall. The Pakistan-born CEO of Schering-Plough relied heavily on his international experience and sensitivity to get an accurate read on the Kenil-worth, N.J.-based pharmaceutical giant when he took over the company in April 2003 after Richard Kogan retired. Hassan received an engineering degree at the University of London and then moved back to Pakistan for a few years to work at a fertilizer plant before immigrating to the United States, getting a degree from Harvard Business School and spending most of his career in this country.

Hassan left his job as CEO of another drug company, Pharmacia, to try to rescue Schering-Plough from a downward spiral that had been set off by the loss of U.S. patent protection on its best-selling drug, Claritin, Late last year, Hassan took a whirlwind tour of Schering-Plough facilities worldwide to see what he had to work with. Only lightly accompanied, he visited France, Australia, New Zealand, Singapore and elsewhere. "I went into slices of the company that would be very unusual for a CEO to go into," says the 58-year-old Hassan. "A global attitude allows you to cut through cultural barriers. People are more comfortable with you because you show you're in tune with them."

Cultural comfort often produces results. "Information flows more easily than if you're seen as someone from corporate who's out there and they're just focused on impressing you," says Hassan. In Singapore, he met with both the nation's deputy prime minister as well as workers on Schering-Plough factory lines. "I'm not an expert on Singapore's culture," Hassan says. "But you just learn to sense people better if you're multicultural."