Situating production close to customers has always offered significant advantages. Now that some of the hottest growth markets are overseas, U.S. manufacturing is becoming decidedly more global.
Even before the financial shocks of 2008 tilted growth opportunities even further toward emerging markets like China, Brazil and India, the S&P 500 companies sampled in a major study by our firm reported international revenues growing at nearly twice the rate of overall revenues (24.6% international vs. 13.5% overall). For years now, international has been the fastest-growing slice of the pie.
Yet in the face of this clear and accelerating trend toward globalization, many U.S. manufacturers maintain a curiously parochial view on leadership. Few have seriously committed to developing a pipeline of globally savvy management talent. Instead, they handle each offshore leadership need as it arises, repeatedly making critical choices out of expediency -- almost as if "globalization" was catching them by surprise.
The reality, of course, is that U.S. manufacturers are very intentionally locating production in geographies where demand is growing and costs are low. They also know that resident capabilities are scarce in many of those markets, so they can clearly foresee a need to send many more leaders offshore to start up and run facilities.
Yet the executives U.S. manufacturers send to foreign markets often struggle to mold to the new environments, fail to produce the expected results, and are soon recalled or transferred. Usually, the leaders themselves are not to blame. Most haven't been properly prepared to lead in places where the cultural, political, regulatory and economic landscapes may all be radically different from what they already know. Still, they are expected to somehow navigate these strange waters on their own. Most try to apply what served them well in the past, learning the hard way just how much they must adjust to local norms. As these leaders struggle through the learning curve, the assets they were sent in to manage may experience one poor cycle after another.
This scenario, though hugely expensive, is remarkably common. The solution, of course, is to have a ready supply of tested global leaders. What is a global leader? The definition has changed. In the past, we often heard the term applied to executives who managed offshore operations from a company's domestic headquarters. More recently, as we prepare to conduct an executive search, we often hear clients often say: "Be sure you find someone with international experience." And when we ask just what that means, we increasingly hear: "Someone who has actually lived and worked abroad."
There really is no substitute for having lived in places that are foreign to you. Overseeing and visiting your company's offshore operations may be enlightening, but immersion in a foreign environment can be transformative.
For example, I once worked with a fine young engineering executive, an American, for whom we conducted an executive assessment in the U.S. When our findings suggested his leadership style was highly directive, controlling and not very collaborative, he agreed but didn't feel a compelling reason to change. This same executive later took a post in Finland. When we did a follow-up assessment, the people working around him there told us not only that he was performing superbly, but that his style was universally viewed as open and highly collaborative... the exact opposite of what we had heard from his colleagues in the States. I told him it seemed he was a different person since moving to Finland. He said, "I am different. I saw pretty quickly that I need to interact in a completely different way with the people here. My old way of doing things would be a formula for disaster in Finland." Of course, many leaders don't adapt quickly. Usually it takes repeated immersion in foreign settings for executives to effectively grasp the necessary adjustments and how to make them.
Another American executive we know successfully launched five plants in China for a U.S. company. When he decided he was ready to come home to the States, his company, which was convinced he was most valuable right where he was, said no. The executive then resigned, taking all the experience and insights he had garnered working in China out the door with him.
Can U.S. manufacturers really afford to continue such costly and shortsighted approaches? If you're serious about profitably capitalizing on global growth opportunities, you'll need to: A) Proactively develop a deep pool of global leaders, and B) Systematically institutionalize knowledge of how to manage assets in distant lands.
Start by assuming that the development paths your company has used to prepare leaders for domestic roles will not adequately prepare them to open a greenfield plant in China or optimize operations in Chile. Since you know that your company will send more and more executives into such situations, why keep subjecting them to baptisms by fire? There are less painful, more profitable ways to forge global leaders.
For example, each time you send an executive to live and work abroad, tailor an assimilation plan specifically for that leader. Among the key components of a sound assimilation plan:
- Situation Analysis: Help the executive foresee the specific challenges he or she will face in the new setting.
- Culture Diagnostic: Identify the key cultural differences, their implications, and how the executive must adjust his or her leadership style to succeed in that foreign environment.
- Stakeholder Map: Identify, profile and plan effective development of the key relationships the executive must focus on during the first 90 days.
- Team Snapshot: Anticipate team dynamics and define corresponding leadership tactics.
- Day One Decisions: Detail key actions to be taken upon arrival-messages to be delivered, connections to be made, and critical observation points.
- Early Wins: Identify opportunities to drive early results in line with longer-term strategy.
Acceleration Workshop: Plan for the executive to meet with his/her new team early on specifically to gather insights and respond to questions.
- 30-day Check: Have the executive and his/her superior review progress after month one and calibrate early impressions.
- 90-day Review: Provide the executive 3600 feedback after one quarter.
A relatively modest investment in ensuring each executive's successful assimilation into a new setting can prevent the enormous cost of your assets underperforming while the new leader struggles to adapt.
Another practical step is identifying the specific and distinct competencies leaders need to lead globally. In doing so, be sure to reference relevant external benchmarks as well as the cumulative offshore experience of your own leaders. You can then use these global leadership competencies to assess each of your current leaders and succession candidates for cultural fit and readiness to adapt, and apply the assessment findings to tailor individual executive development plans.
You'll also want to create and continually update a map of internal and external candidates who have the requisite global leadership competencies and are ready to embrace residing in foreign geographies as a key to reaching the apex of their careers.
U.S. manufacturing will clearly need many more leaders with practical international experience and deep, personal understanding of how to effectively manage assets in diverse, challenging settings. By taking a few simple steps now, your company can be much better prepared than most to quickly and effectively meet leadership needs as they arise, anywhere in the world.
Thomas C. Reynolds is head of the U.S. Industrial Practice of Egon Zehnder International, a global leader in Executive Search, CEO Succession, Leadership Strategy Services and Board Consulting.