ChiefExecutive.net

Cultural Capital in the C-Suite

April 22 2008 by Frank Brown

The corporate world is in an extreme state of flux. The sub-prime crisis, the incredible rise of parts of the developing world, developments in forgotten places like Africa and other factors are changing the game. At the same time, the markets continuously scrutinize the short-term performance of companies and CEOs. Can we make any suggestions about the future from all this? What emerging trends will be critical for lasting leadership in the coming years?

Global experience and a worldly perspective will become increasingly important for corporate leaders as the marketplace evolves. Consider Carlos Ghosn, CEO of Renault and Nissan. He successfully operated a French and Japanese company in parallel over the last several years-a feat due, in no small part, to his understanding of the people in the organization and what it takes to effect change in their cultures. He also has a great appreciation for talent and makes a genuine effort to really get to know his team.

Another good example is Sam Palmisano at IBM. He once ran IBM Japan, speaks Japanese and is highly credentialed in the Asian community. His global perspective and ability to operate across geographies helped build IBM’s business in Asia.

American companies are slowly starting to appoint more non- U.S. leaders and those with a more worldly perspective. NYSE CEO John Thain, for example, is an American and veteran of U.S. capital markets, but his role in bringing together NYSE Euronext is a great global credential. Citi CEO Vikram Pandit is of Indian descent and, while spending the bulk of his career in U.S. capital markets roles, has a worldly perspective due to his background. However, there is still a pressing need to infuse more cultural capital into the C-Suite.

CEOs will continue to be challenged and expected to operate with a deep understanding of other cultures and business environments. An example is the recent opportunity Citi had to get a much-needed investment from Abu Dhabi. The two executives reportedly most involved in this transaction were leaders who had spent time in the Gulf and knew the people and the environment very well.

As Dean of INSEAD, the international business school, I constantly emphasize the importance of developing transcultural leaders with acute insight into their global marketplace who are as comfortable doing business in Mumbai or Tokyo as in London or New York. It will also be essential for U.S. companies-which tend to have boards comprised predominantly of U.S. nationals-to begin populating their boards with more culturally diverse members.

The issue of succession needs to be addressed, as well. Obviously this wasn’t a priority at Merrill and Citi, and it hurt those organizations during their crises. It is incumbent on boards of directors, analysts, auditors and others involved in the corporate sector to challenge management to plan for succession and to advance diverse leaders to the upper ranks to create options for eventual succession. Any leader who surrounds him or herself solely with white Anglo males going forward will have some pretty difficult questions to answer.

As our economy becomes more global, the need for corporations to develop leaders who can navigate risk, expand into new markets and operate with an international perspective has never been more apparent. Corner offices will increasingly be filled with leaders from all over the world, and the DNA of management will change to reflect the type of transcultural leadership that has proven to drive lasting results for corporations.