Dynamic Talent for Dynamic Markets Part II
Challenges posed by the socio-political environment
We must not underestimate the importance of the culture fit in assessing executive appointments and how leadership pipelines are built.
Dynamic markets make a a significant contribution to global economic growth, offering growth potential for both homegrown and foreign multinational companies. The complexity of these environments, however, means that there are unique challenges posed not just in terms of the leadership but also in terms of the environment itself.
What are dynamic markets?
In our discussions with Dr. Lyal White, Director at the Centre for Dynamic Markets at GIBS, he explained that dynamic markets is more of a descriptive term as opposed to merely another category of countries.
A mentor empowers a person to see a possible future, and believe it can be obtained – Shawn Hitchcock
In other words, the term dynamic markets describes the inner-workings of markets and the factors and players that shape and drive them. This goes beyond size, growth and demographics and emphasises that when looking at this rich diversity of countries, it is important to go beyond single-factor theories to understand their institutions and institutional performance.
Challenges posed by the socio-political environment
Private sector organisations in the dynamic markets are increasingly being drawn into socio-political issues which have an impact on how they structure their businesses and the partners with whom they do business.
However, this is nothing compared with the depth and intensity to be found in some dynamic markets, where political leadership is often closely engaged with the business elite in positive and negative ways.
Business leaders in these markets need to be able to deal with complexity and high levels of social and business interconnectivity. The multi-disciplinary challenges these leaders face every day are riddled with complexity and uncertainty; they need to be able to navigate a range of social and environmental issues directly affecting their business and their licence to operate.
Since the financial crisis, business leaders, especially bankers, in many developed economies, have found themselves dealing much more closely with politicians. However, this is nothing compared with the depth and intensity to be found in some dynamic markets, where political leadership is often closely engaged with the business elite in positive and negative ways.
It goes without saying that the ability to read the political landscape and make the right calls in these politically complex markets may be the difference between success and failure for businesses.
Doing business in South Africa
In South Africa, for example, private sector companies increasingly have representatives from government agencies or public sector stakeholders serving on their boards. Companies need to find business partners that have a majority diversity ownership in order to qualify for government, and in some cases, large private sector tenders. The larger multinationals with operations in South Africa deal intensively with the government on a broad range of policy and legislative issues all the time.
It goes without saying that the ability to read the political landscape and make the right calls in these politically complex markets may be the difference between success and failure for businesses. For example, across the world, local political leaders are demanding a larger share, and even a controlling stake, in the operations of multinationals based in those countries.
Doing business in China
In China, the lines between the private sector and government are not clear, if they are defined at all. In addition, the business culture is very different.
For example, the key to achieving sustained success in China is to focus not only on strategic execution, as many companies do, but also on building a strong and unique culture. This is a critical leadership issue.
Companies that are able to simultaneously address strategy and culture are far more likely to achieve their goals and go beyond short-term results to cultivate organisational capabilities that will help them thrive in the future. It is interesting to note that company culture in China appears to be far more relational than in other countries.
Social connections come before results and there is a significantly greater emphasis on maintaining harmony inside the organisation. China stands out as an exception to a global benchmark which shows that most companies around the world consistently place results as their top cultural priority.
Business leaders in dynamic markets are continually bombarded by issues that can derail their planning. For example, wildcat strikes and the intimidation of workforces by militant unions; sudden fluctuations in currency exchange values; technology and communication breakdowns; logistical challenges, national security issues in some markets and the ever-present safety risks for executives and their families.
The integration of business activities with local social and environmental imperatives addresses sustainability head on. The conservation of scarce resources is now at the forefront of many leaders’ minds.
The biggest issue facing foreign-owned multinationals is the growing requirement by many governments in dynamic markets for locals to be appointed to management roles.
For example, the latest integrated global business strategy adopted by Paul Polman, CEO of Unilever, makes a direct link between the growth of Unilever and the well-being of the environment in which it operates. Unilever is re-evaluating its total value chain in the light of its impact on the environment. In order to drive this strategy, Unilever is now identifying new kinds of leaders and managers who can help drive social change at every level of the business. Values-based businesses are going to be of great importance to the next generation of employees and customers.
Sourcing talent and the expatriate appointment
The biggest issue facing foreign-owned multinationals is the growing requirement by many governments in dynamic markets for locals to be appointed to management roles. It is, therefore, critical that business leaders have the ability to identify and develop local executives.
Many multinationals are moving away from the practice of appointing expatriates to senior positions in their off-shore subsidiaries. Recent conversations with multinationals operating in Africa point to the fact that some are moving away from the expatriate appointment model to one where expatriates are only brought in for a short term, either because of their specialist technical skills or in order to establish a particular corporate culture or business model with the mandate to find a local successor.
This does not always work since many expatriates do not possess the cultural agility required to effect this kind of transition. Corporations are increasingly building leadership pipelines in their local operations and rotating their best people through stretch assignments across the globe as well as on short stints at head office.
Expatriate appointments can be very expensive and business performance is often driven by short-term bonus considerations with less emphasis on the long-term health of the business. Often, cultural misalignment between the expatriate leader and local staff leads to dissatisfaction, high turnover and low morale.
Getting this culture fit right cannot be over-emphasised. Spencer Stuart’s research, based on many years of client feedback, shows that when senior executives fail after moving to a new company, 60 percent of the time it is because of cultural misalignment.
This issue is even more important when executives move to foreign countries where they are required to show high levels of adaptability and self-awareness.
When we talk to business leaders who have experience in South America, Africa and Asia they tell us that they place great emphasis on the need for executives to be culturally and socially aligned with the countries in which they serve, to have a keen interest in the history and politics of those countries, and to be able to operate in high- or low-contact societies.
CEOs today frequently rank the acquisition and effective deployment of talent among their most important priorities.
When appointing people to leadership positions in the dynamic markets, CEOs need to assess them against a broader and more defined framework of leadership skills in order to ensure that they are successful in their new roles.
The role of HR in providing strategic insight, talent management and the right assessment methodologies is critical in assisting their CEOs to select business leaders. Their challenge is to find leaders who are not only comfortable with social, cultural, political and operational complexity and ambiguity, but are also committed to hiring and developing high potentials from within the local markets where they serve and who can grow into effective local leaders of these operations.
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My earlier article on this topic focused on the leadership capabilities and challenges of operating in dynamic markets.
Headline image courtesy Emanuele Vezzaro@freeimages.com