How global are you? Perhaps the best indicator of whether a multinational company is prepared to succeed globally is the range of nationalities and the degree of international experience among its senior leadership. A management team with little experience living and working abroad-no matter how smart, technically sound and politically astute-is unlikely to have the cross-cultural agility and credibility needed to earn the trust of partners, investors, employees and government officials around the world.
The expatriate employee population of U.S. companies has changed dramatically in recent years and continues to evolve. Over the past five years, the average number of employees of all nationalities working abroad for North American-based companies has risen by 39 percent. At the same time, the percentage of American expatriates has shrunk. In 1997, North Americans filled almost three-quarters of expatriate positions in U.S. and Canadian companies. Today, our research shows they account for just over half.
Meanwhile, the number of foreign nationals is steadily increasing among senior managers in American-based firms. That’s because, in addition to possessing business skills equal to their U.S. counterparts, these non-Americans offer essential cultural and political expertise. At Procter & Gamble, for example, five years ago 21 percent of the 33 top-level managers were born outside the U.S. Today, that figure is 39 percent, and will likely increase to more than 50 percent within five years. Ultimately, the company expects the diversity of its senior leaders to mirror the source of its revenue: one-third from the U.S. and two-thirds from other countries.
But reflecting your customer base is not the only rationale for building a multinational leadership team. Alcoa, which derives a majority of its revenue from sales within the U.S., has assigned 56 percent of its top management jobs to non-Americans-including CEO Alain Belda, who is from Brazil.
CEOs seeking to put together a global management team must take deliberate action not only to assemble the individuals, but also to create corporate systems that will cultivate and retain such leaders well into the future. Complicating the task are the changing assumptions of executives themselves. The pool of managers has become more diverse. Around the world, employers are seeing an increase in dual-career families and a growing demand for careers that permit time and energy for other aspects of life. At the same time, traditional managers who expected to move steadily up the ladder to senior positions may feel threatened by their more internationally experienced colleagues from outside the U.S.
Cost pressures, too, are putting stress on the mechanisms currently in place for managing international assignments. Each assignment is expensive, and when an individual fails or leaves the company at the end of the assignment, the investment is wasted. So CEOs need to think about global talent management from a systems perspective. Here are three strategies we consider best practice:
Organizational structure. Some companies have created a position in charge of global talent management. This person is responsible for setting up systems to identify potential leaders, track careers companywide, provide a variety of types of international experiences and structure and monitor assignments.
Communications. A CEO makes his or her vision clear not just through words but also actions, such as making global competence a significant criterion in selection and development of the leadership team. This includes emphasizing cross-cultural skills as a significant factor in evaluations and rewards, and assuring that the succession-planning program requires consideration and development of global, multicultural candidates.
Compensation philosophy. Many companies choose to structure pay differently for different types of international assignments and different employee categories. In doing so, they must avoid creating inequities that spark resentment. The CEO must help clarify the goals of the compensation system.
There is no one right approach. The important thing for any company aspiring to true globalization is to take the time to consider the implications for human resources management. The actual designing of systems for managing talent on a global basis can be turned over to a team including both HR and operational management, but the CEO’s vision must anchor the effort to the company’s ultimate business goals.
Robert Freedman is New York-based CEO of Organization Resources Counselors, which specializes in human resources management.