Values, culture & global effectiveness - impact of corporate culture on international success - Panel Discussion

Chief Executive, The, April, 1998 by J.P. Donlon

Without a distinctive culture a company may lose its direction. Without a seamless culture it risks losing its global effectiveness.

How can CEOs find the right balance?

Everyone likes to talk about the global marketplace, but how many companies are truly effective in their global efforts? On the one hand, the opportunities for global business have never been better. International trade in goods and services is more than $6 trillion. World GNP is roughly equally divided among Asia, Europe, both West and East, and the Americas, North and South. The accumulated stock of foreign direct investment is more than $3 trillion, compared with $735 billion 10 years ago. The volumes of the New York, London, and Tokyo exchanges are about $1 trillion every, day, around twice the amount they were five years ago.

On the other hand, it's one thing to take one's successful international strategy in going global and another thing to integrate one's human capital effectively across borders to operate seamlessly. At minimum, globalization requires a higher degree of coordination of talents and skills to form effective relationships not only within one's company but externally with one's customers and suppliers.

Coca-Cola's Roberto Goizueta once said, "If this building [Coca-Cola's headquarters] burned down overnight and with it all our facilities and records, we could set up business the day after somewhere else as long as we had our people and the relationships they have with our customers." A boast, perhaps, but not an idle one. Few companies have the in-depth talent deployed across national borders that allows them to operate with a high degree of effectiveness anywhere in the world.

Globalization also has a way of deemphasizing the importance of nationality. British Airways, for example, has quietly removed the Union Jack from its corporate logo and now has international artists paint its aircraft tails with diverse symbols ranging from Chinese calligraphy to African desert art. Sara Lee's John Bryan refers to his organization as a centerless corporation, one of the key elements of which is the ability to lead through its values. The new model of leadership, he believes, must be rooted in trust, teamwork, and common belief, which must radiate from the top.

In the following roundtable, co-sponsored with Deloitte Touche Tohmatsu, CEOs explored what kind of corporate culture yields superior global performance. Which values enable or disable an organization's effectiveness? What are the cross-cultural growth enablers or incentives other than compensation that encourage alignment between an organization and its global strategy?

There is an evolving pattern in how companies can organize themselves to take advantage of cross-border opportunities. Global companies tend to have flatter organizations, reflected not only in the organizational charts, but in the minds of their people. This contrasts with the way companies organized themselves in the past with each local unit replicating the central headquarters in miniature.

Participants frequently cite the critical importance of spreading the culture gospel by using "disciples" who reinforce the correct message throughout a company's operations. BMW's Henrich Heitmann, who had extensive experience in Asia and Europe before coming to head the carmaker's North American operations, draws a distinction between cultural values that may differ from country to country and company values that embody "the way we do things here." Born in Ireland, Dermot Dunphy came to Sealed Air Corp, as CEO in 1971 and has been "reinforcing our culture of 'anyone can talk to anyone' ever since." Instilling the Sealed Air culture is an important part of its acquisition strategy, wherein someone at Sealed Air would be designated a "buddy" for each key person at the acquired company. A firm believer that employee share ownership improves company performance, Dunphy takes "a paternalistic, intrusive approach when employees want to sell their shares."

The greatest challenge for the evolving global company is to find the best and the brightest who will fit into one's culture. WPP's Martin Sorrell argues that CEOs have conceded by default the recruitment of the best to the investment bankers and management consultants. There's no reason why Goldman Sachs and McKinsey should skim the cream. This initiated the question of whether CEOs should be their companies' de facto human resources chiefs. DTT's Ed Kangas maintains that the CEO must "overcommunicate" the message of values and preferred behavior at every opportunity. "He must live and breathe it passionately."

- J.P. Donlon

CULTURE AROUND THE WORLD

Ed Kangas (Deloitte Touche Tohmatsu): We have found in the U.S. that being more of a value-driven firm has allowed us to decentralize much of our decision making in a very safe way; because, in fact, if we could get into the hearts and the minds of our people, they would behave exactly as we would at the top of the organization when they make decisions.