Non-American CEOs are having a big impact at traditional U.S. companies.
April 1 2004 by Dale Buss
In the middle of winter, the fact that Carlos Gutierrez isn’t from the Midwest is evident in the contrasting appearance of the tall, debonair, Latin chief executive officer of Kellogg and the pale-faced natives who work for him in downtown Battle Creek, Mich. Occupying his inner sanctum are people like Executive Vice President King Pouw from Indonesia and a rugby player from Australia, CFO John Bryant. Clearly, it’s a globally spawned cast directing this iconic American company from their redoubt in the U.S. heartland.
But intriguingly, says the Cuban-born Gutierrez, he and his lieutenants have so far made the greatest impact revitalizing Kellogg’s U.S. operations, not its overseas divisions. Kellogg had lost the domestic market share lead in its core cereals business to General Mills and was bereft of significant new products before Gutierrez became CEO in 1999. He says his geographically diversified rÃ©sumÃ© helped him recognize an underinvested market when he saw one. “We were getting so caught up in the emerging-market craze that we were almost unconsciously taking money out of the U.S. and putting it in markets where the returns weren’t going to come for 20 or 30 years,” says Gutierrez, who joined Kellogg de MÃ©xico in 1975 as a sales rep. “The U.S. was still our biggest market, but we weren’t treating it that way. We had to win in the U.S.”
So it goes with the growing number of foreign-born CEOs of American companies in an arrangement that very often yields great benefit-but not always in predictable ways. Although evidence is only anecdotal, it’s clear that the number of non-native CEOs heading U.S. corporations in traditional industries such as food processing and heavy manufacturing is growing. They bring a fresh focus to long-festering challenges in the U.S. market as well as help for their companies’ international operations.
What they offer is a cultural sophistication that allows them to speak the languages of different constituencies and build support for change. “The competitive game now is: How rapidly can you develop and diffuse innovation?” says Christopher Bartlett, a professor at Harvard Business School and a ranking expert in the management of multinational enterprises. “Maybe the newest technology in your industry isn’t from America but from Germany or Japan. A new competitive threat may not be in your own backyard but in a less-developed country.
“So if you’re not sensing those things-using overseas markets as sensory mechanisms as well as delivery mechanisms-your company will be behind,” adds Bartlett, who resides part of the year in Australia. “Sometimes, if you’ve lived your whole life in the United States, you don’t have as much sensitivity to all sorts of opportunities.”
Cultural Conflict or Comfort?
To be sure, an international background isn’t enough to guarantee success. Witness, for example, Jacques Nasser, a Lebanese who was raised in Australia and crisscrossed the world for Ford Motor. He was sacked as CEO by Ford’s old guard in 2001 in the wake of the calamitous run of deaths and injuries in Ford Explorers equipped with Firestone tires. But the deeper issue may have been that he had scant regard for the prevailing culture at headquarters in Dearborn. So, clearly, there can be a risk in laying the mantle of CEO on someone who has spent significant time away from the core of the organization where values are transmitted, crucial relationships cemented and key cultural cues are internalized.
Fred Hassan seems to have sidestepped that pitfall. The Pakistan-born CEO of Schering-Plough relied heavily on his international experience and sensitivity to get an accurate read on the Kenilworth, N.J.-based pharmaceutical giant when he took over the company in April 2003 after Richard Kogan retired. Hassan received an engineering degree at the University of London and then moved back to Pakistan for a few years to work at a fertilizer plant before immigrating to the United States, getting a degree from Harvard Business School and spending most of his career in this country.
Hassan left his job as CEO of another drug company, Pharmacia, to try to rescue Schering-Plough from a downward spiral that had been set off by the loss of U.S. patent protection on its best-selling drug, Claritin. Late last year, Hassan took a whirlwind tour of Schering-Plough facilities worldwide to see what he had to work with. Only lightly accompanied, he visited France, Australia, New Zealand, Singapore and elsewhere. “I went into slices of the company that would be very unusual for a CEO to go into,” says the 58-year-old Hassan. “A global attitude allows you to cut through cultural barriers. People are more comfortable with you because you show you’re in tune with them.”
Cultural comfort often produces results. “Information flows more easily than if you’re seen as someone from corporate who’s out there and they’re just focused on impressing you,” says Hassan. In Singapore, he met with both the nation’s deputy prime minister as well as workers on Schering-Plough factory lines. “I’m not an expert on Singapore’s culture,” Hassan says. “But you just learn to sense people better if you’re multicultural.”
Such broad sensitivities also come in handy, Hassan adds, in defusing culturally based conflicts within a company. Shortly after he became CEO of Pharmacia’s predecessor company, Pharmacia & Upjohn, in 1996, for example, an American manager came to him alleging that an Italian associate was connected with the Mafia and had issued a “contract” against the other man. “Having been in situations around the world, I didn’t overreact or treat it conclusively,” he recalls. Instead, Hassan sorted through the mess and determined that the Italian couldn’t have made good on such a threat and had made it as a way to win an intra-office power struggle with the American.
Multilingual CEOs have a special advantage in that they can read more than just the nuances of body language. “Speaking different languages is important, because even if you’re not speaking them well, people know you’re trying to stay close to them,” says Paolo Monferino, CEO of CNH, the Chicago-based company that owns some of the strongest brands in the American breadbasket, such as Case and New Holland agricultural equipment. The Italian-born Monferino is “workable” in five languages and spends much of his time talking with farmers and ag-equipment dealers in the company’s primary North American, European and Latin American markets, meeting with a total of 50 or 60 dealers each month in two or three separate sessions.
One reason foreign-born chiefs are also effective globally is that they understand in a more visceral, firsthand way than American-born counterparts that their companies must let go of the notion that international operations are simply extensions of the U.S.-focused strategy. “In the early history of multinationals, in the ’60s and ’70s, they usually took a U.S. product or strategy and tweaked it, seeing overseas markets only as places to gain incremental revenues,” explains Bartlett. “So, often companies sent people overseas who were late in their career or slowing down a step, and they took the same approach with products.”
Who else but a CEO who went to college in Turin, headed tractor-manufacturing in Brazil and worked in Chicago for 20 years, for example, could view continental variations in agricultural topography so holistically? The 57-year-old Monferino says his background helps him “tailor decisions” about CNH’s product development. In North America, for example, farmers require plows that are long because of the relative vastness of their fields, but they don’t need to dig too deep into the relatively new topsoil; but in Europe, where farmers have worked the same smaller plots for many centuries, cultivating equipment requires more power and torque so it can dig deeper.
In fact, foreign-born CEOs believe that one of their greatest strengths is being able to survey what their companies are doing across the globe and spread the best practices to new markets. Schering-Plough in Singapore, for instance, now is developing an Asian version of a new drug that, until Hassan’s visit there last fall, was assumed to be appropriate only for the U.S. and Europe. “Asia was being treated as a separate product center and not as part of a global product flow that we should have been thinking about,” says Hassan. “There was a product that was very attractive for the whole world.”
The savviest American-born CEOs, of course, demonstrate some of the same strengths, especially if they’ve had experience abroad. In fact, it’s often such a chief, recognizing the value of global comprehension, who is opening doors for foreign-born successors and protÃ©gÃ©s. One such mentor is A.G. Lafley, the CEO of Procter & Gamble, who has revitalized the Cincinnati-based consumer-products giant in large part by opening the product-development cupboards to wider possibilities abroad. Lafley spent nine years with overseas responsibilities.
One of his protÃ©gÃ©s was Fernando Aguirre. Recently named chief of Chiquita Brands International in Cincinnati, just a few blocks from P&G, the Mexican-born Aguirre spent the previous several years managing Latin American and other international operations for P&G. Under him, for instance, P&G selected Mexico as the first market anywhere for a new type of feminine hygiene pad. But unlike in the U.S. where it was developed to include a healing skin cream, Aguirre pushed to alter what was named Naturella for its Mexican debut by adding chamomile, an herb that is prized in Latin America for its salutary powers. “It was one of the most successful introductions that Procter & Gamble had had anywhere,” Aguirre says.
Chiquita’s board chose the 46-year-old Aguirre as CEO in large part because of his international pedigree, viewed by directors as a necessity for a badly needed expansion of the Chiquita brand abroad. His experience prepared him “to think of bigger goals,” Aguirre says. “Whereas people who only have worked in the United States think about expanding a particular project to eventually cover all of this country, the foreign-born executive will say, €˜OK, we can do that in the U.S., or we can also do things in China and Europe and Latin America and so on.’ Obviously, that gets you to much bigger goals.”
A Blend of Styles
Monferino’s background also prepared him well for his biggest challenge: forging the sundry elements of CNH into a unified corporation. The company was formed in 2000 from the merger of Case and New Holland and is owned by the Italian industrial giant Fiat. Americans number about 10,000 of CNH’s 27,000 total employees, but there are also 4,000 Belgians, 3,000 Italians and 3,000 Poles. Such diversity can be a “major advantage of having a global company,” says Monferino.
But, he says, it’s up to him to spearhead a blending of the “American or Anglo-Saxon management style, which is about organization, methods, sound leadership, communications and people involvement, and the Southern European approach, which is less organized or methodical but is about productivity, flexibility and an ability to lead in different environments.” To that end, in February, Monferino presided over a two-day convocation in Chicago of CNH’s 280 top managers from around the world. “The more we can integrate them, the more power and strength that we as a company have.”
For Gutierrez, the task has not been as straightforward. Almost from its founding in 1906, Kellogg sought markets worldwide, selling into Canada by 1914 and building a plant in Australia in 1924. Kellogg opened up operations in Mexico in 1951, nine years before Gutierrez fled Cuba with his family following Fidel Castro’s rise. The family bounced between South Florida and Mexico, and Gutierrez joined Kellogg at the age of 21. By 29, he would make his reputation, as general manager of Kellogg’s Mexican division. The operation had the lowest internal ranking of any in the company. But Gutierrez shut the plant down for three months to remake the facility and set new standards for productivity and cleanliness. Within two years, he had transformed the Mexican plant into a model.
The accomplishment launched Gutierrez into eventual consideration for top jobs. Between the late ’80s and mid-’90s, he ran European operations for Kellogg and then the Asia-Pacific region. In 1999, then-Chairman Bill LaMothe tabbed Gutierrez to be president and CEO, making him, at 43, the youngest chief in the company’s history.
Gutierrez credits his international experience for helping him get off to a fast start as CEO. One of his first steps, for example, was to select six foreign-born executives among his top eight. Their first major moves were to diversify the company by acquiring Keebler cookies and by making forays into the fast-growing natural-foods niche, including the purchase of veggie-burger processor Morningstar Farms.
Then the team took a new look at the business that remained Kellogg’s mainstay, the U.S. cereal market, which everyone had been assuming was moribund. Gutierrez determined that the company was focusing too much on its volume-market-share battle with General Mills and not enough on extracting profit from what it did sell. So Kellogg has introduced new products at a blistering pace and has beefed up marketing considerably. Gutierrez also had to make the painful choice of closing Kellogg’s oldest corn-flakes facility, a century-old plant in Battle Creek.
Gutierrez’s passion for revitalizing his lifetime employer stems in large part from the traumatic circumstances of his family’s departure from Cuba. “It taught me never to take anything for granted,” says the 50-year-old Gutierrez. “So when I joined Kellogg, I said that I wanted stability and to grow with the company, an opportunity that my father never had.” That’s the kind of drive and determination many foreign-born executives bring to the corner office.