Klaus Meyer's Blog
On Global Business and Economics in Volatile Times
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The Apprentice and The Glass Ceiling [C16]
Sir Alan Sugar and the BBC show 'The Apprentice' provide interesting lessons about how businesses work, and plenty of examples how to get things wrong when you are aiming to land your dream job. Yet sometimes, Sir Alan gets things wrong too - at least in the view of the audience of "The Apprentice - You Are Fired" (in my view the better of the two shows). Why did Sir Alan get it wrong?
The audience obviously liked Liz, who had proven her competence in many tasks and even in yesterday's show sold twice as many tickets. Yet Sir Alan opted to retain the young boy, Stuart, who repeatedly was less competent, excessively boastful (even by the standards of reality TV), and frankly rather rude to colleagues and customers alike. Sir Alan's reasoning was that he saw him a rough diamond who might have great potential yet to be uncovered. Moreover, it seemed to me that there was something in Stuart that reminded Sir Alan of his own youth - and that shifted the arguments in Stuart's favour. I remember there being a rather similar situation last year, when (in my humble opinion) Sir Alan picked the wrong candidate. Sir Alan obviously is successful, so what is wrong with his selection?
As an individual decision, nothing much seems wrong with a leader picking a protégée in his own image as his favorite employee. This is a common practice (documented in psychology research), that can be highly problematic for organizations because if the key people are clones of the boss, this reduces the diversity of the leadership team, and narrows its vision. It also implies that it is harder for people who are "different" in some way to make there mark. It is a quite common - usually unconscious - bias of leaders to favour those younger colleagues with whom they have most in common. One consequence of his is - as on yesterday's Apprentice - male bosses favour male juniors as their likely successor and provide them more career support. If this becomes a frequent pattern, it re-enforces the glass-ceiling effect: For inexplicable reasons, some women find that their career doesn't progress even when objective criteria work in their favour. Sadly, by trusting his own intuition over objective criteria, Alan Sugar set a bad example.
Another bad practice is the repeated reference to the candidates age in the decision process - both by the candidate and by Sir Alan. New legislation in the UK and elsewhere is very clear now that age discrimination is prohibited. If this was a real job interview, probably an otherwise invisible rep from the HR department would call Sir Alan 'to order' over this issue, and the candidate dismissed might take legal advice.
The Economist in today's edition is featuring the work of one of my co-authors, Bernd Venohr, who is exploring and promoting the glories of Germany's mid-size companies, also known as 'Mittelstand'. He is following in the footsteps of Hermann Simon's work on 'Hidden Champions' by building a larger database, and by following companies over longer periods of time. Surprise, surprise many of the companies not only survive, but prosper. How? The main answer seems to be that they use their relative smallness and agility to define and exploit niche markets on a global scale. The Economists joins the praise without the criticisms it usually dishes out at both scholarly work, and for non-Anglo-Saxon business models.
The arguments extend the arguments in the joint work Bernd Venohr and I did a few years ago (links below). Internationally successful Mittelstand firms are combining the best of private ownership and professional management, of highly specialized workforce in Germany and of skills found worldwide, and identifying a global niche in which they can lead by relentlessly innovating the technologies, products and business models. Examples are now to numerous to mention; in our new International Business textbook we feature cleaning machine maker Kärcher. Can the business model be adopted elsewhere too? The Economist thinks yes, and I am tempted to agree.
It seems trivial to say that language competences are essential for succeeding in international business. Yet few students or business people seem to invest in learning languages - apart from everyone learning English. Of course, English is of paramount importance. Many companies switch to English as a corporate language, making English the language for all official communications, while educational institutions around the world reach beyond their own country by offering courses taught in English. Hence, for most parts, English is more important than any other language.
However, English is not enough, especially for native speakers. The spread of English around the world has reinforced a laziness in learning foreign languages in England and other countries where English is the native tongue. This is bad news, for many reasons. Let's focus on the business implications. First, when communicating with people in other countries, a lack of awareness and (at least basic) to the local language implies missing subtleties in communications - people may speak English-as-a-foreign language, but by much precise in doing so than when speaking their own tongue. Second, always falling back on your own language, you come across as arrogant and/or ignorant, and just may not be taken serious. Neither leadership nor marketing can be effective unless you earn respect with those your are leading, or selling to.
Third, you may simple not be part of certain informal communications "by the coffee machine" that smooth many organizations. I recently heard the story of a dean of a business school in the Netherlands who had been brought in to raise the international profile. While he successfully implemented many initiatives, the second tier of the management continued to speak Dutch amongst each other, which inhibited the dean (who speaks several languages, but not Dutch) from getting a good "feel" for what was going on inside the organization, and to react to grumbles before they turn into resistance to change.
Finally, I believe the act of learning languages in itself is important for building an understanding of other peoples and cultures. Along with the language, learners pick up a bits and pieces of the other culture, and learn to see issues from the perspective of others. In fact, this learning process may enable to see ones own country from the outside, and thus critically engage with its strength and weaknesses. Thus, even rudimentary understanding of another culture can in many ways be important to build bridges.
Hence, for anyone contemplating a career in international business (or other professions with a lot of international interactions), language competences are essential to advance your career. For the English this means learning at least one foreign language, for other Europeans it means not to be limited to English as a foreign language.
In this context, it is very sad indeed that in England the demand for learning languages is in sharp decline, with fewer teenagers learning languages at school, and universities closing language departments due to lack of students. The Times Higher ran a series of articles last month that together make depressing reading. The reasons may in part be the (misguided) belief that English language takes you everywhere, and in part a reliance old-fashioned teaching methods focusing on what can objectively be examined (=grammar & vocabulary) rather than the skills needed to communicate effectively. Paradoxically, the lack of foreign languages competences makes the former imperial power of Britain look very insular, lacking understanding how and why the world is changing.
Copenhagen Business School send me their latest research report (vækstforum) offering their scholars views on contemporary issues of economic policy in Denmark (sadly, it doesn’t seem online). Seen from the UK, what is most remarkable is what is not there: there is no debate over budget cuts. Rather, the central themes are “growth”, “innovation” and Denmark’s position in the global division of labour.
It is recognized that most of larger and medium-sized Danish companies have most of their operations abroad; Torben Pedersen gives statistics suggesting that on average (!) over 80% of both sales and employment are abroad, yet most value added in these firms is created in Denmark because Danish units focus on early and late stage operations, i.e. research and development on the one side, and marketing and services on the other. This sets the agenda for other contributions; the main concerns relate to how to create capabilities that enable such high value creating economic activity. Hence, education (especially universities), research and development, attraction of talent to Denmark, and improving linkages from universities become central issues on the policy agenda.
These differences in the public policy debate are significant. In Denmark, the main concern is how best to invest in the future, to build a position for a small nation that allows maintaining a level of national income (and thus to be able to afford a rather generous but flexible welfare system). In the UK, all eyes are focused on the public debt, which jumped upwards in late 2007 and now is over 70% of GDP, almost twice what it was before the financial crisis. The budget deficit, which had been below EU averages for several years, jumped to over 14% – the highest in the EU – due to a combination of bank bail-outs, drops in tax revenues from highest income earners, and an (ineffective) economic stimulus programme featuring a temporary VAT reduction. Measures discussed by the current Conservative-led government focus on reducing the budget deficit by cutting the basic activities of the state across all departments (from education, to military, to social security and child benefits), rather than focusing on the causes of the jump in the deficit since 2007.
From a business perspective this is most peculiar. Every business knows that long term prosperity, growth and profits require investment – if you don’t invest you won’t be able to reap any profits. Yet, across the British elites – politicians and media alike – government spending is associated with consumption spending, no one seems to think of government spending as investment. Yet some areas of government spending are investments in the future of the economy, and thus the nation – in particular education and infrastructure. If Britain goes ahead with cutting core government activities, and fails to invest, then Britain may be able to reduce its debt burden in the short term. Yet, I am very worried about its long term future. How will Britain be able to compete tomorrow with countries like Denmark (not to speak of most Asian nations) that today invest hugely in their human capital?
For some, globalization is exemplified by the presence of the same consumer brands the world over. Yet, if you look closer, you will notice that the products are not really the same – they are subtly adapted to the local consumer. And even where the products look the same, consumers use them in different way, and value them for different reasons. Differences across countries persist, despite intensified communication and travel, for example in cultural values, status symbols, and how people decorate and use their homes.
This creates a challenge for consumer goods manufacturers with ‘global’ ambitions: How do you create products that consumers in another country would want? Many major companies have shifted their marketing strategies over the past decade. Perhaps, it was appropriate a decade ago to advertise a product, say an electronic gadget or a cosmetic cream, along with an illustration how to use it – i.e. how they company thinks it should be used. Nowadays, companies try to look into ordinary peoples’ life and develop products that they would need?
A few months ago, an entrepreneur gave a talk at our university explaining how her company, Honest Films, tries to help companies understand their potential consumers. Working like anthropologists, her companies makes films following people in their everyday life – observing what products they buy, how they use it, and how others react to it. Short films like this provide a powerful complement, or even substitute, to conventional marketing reports based on statistics and consumer surveys.
An article in the FT today provides a wide range of example of major branded good manufacturers using similar techniques in their marketing research. Rather than asking consumers what they would like, they film volunteers in their daily life, or they embed their market researchers with social groups where they observe people like an anthropologist would. Is this just a new sales trick of the big companies? Well, to some extent it may be, yet it does help the companies to develop products that the consumers actually want, rather than fostering existing products ‘tried and tested in the West’ onto consumers who have different needs. In this way, it helps competing with local firms that may have a more intuitive understanding of local consumers.
"Where are you from?" may be a fairly obvious question to a new acquaintance, yet for some people this is not an easy question to answer. Once a upon a time, everyone associated with one country where they grew up, or perhaps with a place to which they immigrated. Only few would move from one place to another, as ambassadors or traders, becoming 'citoyen du monde' that felt at home in many places around the world.
In the age of globalization, such a personal journey around the world is no longer rare. In fact, in our MBA classrooms we meet many students who have been moving ever since they were a child, or with ancestors from multiple countries. Individuals with such diverse experiences often take on leadership roles in business and in academia (though rarely in politics; Nick Clegg is one of few exceptions).
A new book by Linda Brimm, a clinical psychologist and emeritus professor of INSEAD, explores the capabilities that such 'global cosmopolitans' develop, and why they often take leadership roles. Based on the personal stories of global cosmopolitans, many of them MBA students at INSEAD, she identifies five character traits that can be turned into assets in many professional careers (page 29): (1) global cosmopolitans see change as normal, (2) as outsiders to fixed cultural rules, they rely on creative thinking, (3) they reinvent themselves and experiment with new identities, (4) they are expert at the subtle and emotional aspects of transition, (5) they easily learn and use new ways of thinking. The diversity of experiences and ongoing need to adapt to new contexts broadens the mental horizon, and enables taking on challenges that may seem impossible to others.
However, in a world where most people identify themselves by their association with a particular country, global cosmopolitans face problems defining their identity, and getting accustomed to a more "settled" style of life. They may find it difficult to relate to people whose lives "happen" in more constraint spaces, sometimes including their own parents. Being subject to diverse pressure is not easy to handle, but Linda Brimm believes in the potential contribution of global cosmopolitans, especially to organizations spanning national boundaries. Somehow, many global cosmopolitans just keep moving.
Global cosmopolitans in leadership roles however also pose challenges for societies. For people who are used to move on from one place to another, and whose best friends are spread around the world, it is sometimes not easy to relate to the 'ordinary' people, whose main passion is not travel around the world but the local football, baseball or rugby club.
These days I have been reading placement reports by students who were out in the real world this spring. Apart from being impressed by the quality of our students (Bath is not for nothing ranked #3 for business studies), I was amazed to find how many reports dealt with organizational change issues triggered by the global crisis: from post-merger integration, to global centralization, to internal mergers of units, to the consequences of a recruitment stop. This sample of private and public sector organizations, large and small, is certainly not random, but some interesting issues emerge.
Sometimes, I wish managers would take Karl Marx more seriously. The more workers are alienated from their own work because they feel someone else controls their work to minutely, the more likely these workers will shirk, quit their job and go somewhere else, or (if exit is not an option) rise in revolution. I hear trade unions are gaining membership, now why might that be the case? Showing respect for people working for you will get a long way to keep them on board.
Note: C-numbers indicate links to chapters in our textbook Peng & Meyer, 2011, International Business, London: Cengage.
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