Globalisation : Making the Case for Global Leadership Succession Planning
Trevor O'Hara is the founder and Principal of Renarc.
Prior to founding Renarc, Trevor spent over 20 yeas living and working internationally. Most of this time was spent as a senior executive in global-facing roles such as MCI, Nortel Networks, and Schlumberger Sema. Fluent in 4 languages, he was educated in Dublin, Oxford, Paris and Berlin.
A recent issue of The Economist (1) shows that the subject of succession planning is at long last being taken a lot more seriously by organizations. A recent survey by Korn Ferry, a search consultancy, found that only 33% of boards had a management succession committee in 1981, but by 2003, this figure had jumped to 73%, making it the second most important topic discussed by boards.
Despite this good news however, much work needs to be carried out in the area of Global Leadership Succession. The nature of today’s fast paced global environment makes it imperative that any organization seeking status as a global player will immediately realize the difference a globally experienced top management team can make. As legendary for GE CEO Jack Welch recently commented:
“The Jack Welch of the future cannot be like me. I spent my entire career in the United States. The next head of General Electric will be somebody who spent time in Bombay, in Hong Kong, in Buenos Aires. We have to send our best and brightest overseas and make sure they have the training that will allow them to be the global leaders who will make GE flourish in the future.”
Unfortunately, however, in a world where the demand for top quality leaders with exceptional global talent far exceeds supply, most organizations are still neglecting to develop comprehensive systems for identifying, selecting and developing global leadership talent. In addition, in a new book (How to run a Company: Lessons from Top Leaders of the CEO academy), Dennis Carey, vice Chairman of Spencer Stuart, highlights the fact that the average term of office for a Chief Executive has dwindled from 8 years to less than 5, leaving even less time to groom the next generation of leaders.
Another challenge is the amount of time, effort and dedication it takes to develop globally-minded executives. An executive doesn’t simply become globally minded just because he or she has successfully completed an expatriate assignment in one particular country and is now returning to headquarters (although that helps). The executive becomes globally minded when he or she uses that expatriate experience in the context of other global-facing learning environments such as additional expatriate engagements, continuous exposure to a culturally diverse environment, or leading, managing and negotiating in cross-cultural teams, either in situ, or remotely. Typically, global executives will have experienced some level of culture shock at various stages of their careers in order to stretch them beyond their own comfort zones – and then used these experiences to help them become proficient at interacting across cultures. All this of course takes years of practice.
So if it takes so long to develop global talent, why then the need for globally minded executives at all and why should businesses even be considering a global leadership succession plan ? Consider for the example, the recent survey carried out by PriceWaterhouse Coopers of the CEOs of the 441 product and service companies identified as the fastest growing US organizations. Of the CEOs surveyed, those who were the most apprehensive were leaders of businesses that had an international aspect. “About 39% of technology company leaders were uncertain about their ability, while 37% of CEOs of small companies doing business abroad saw themselves as a potential liability, compared with 27% of those heading domestic companies (2).”
Historically, both executives and organizations have been forced to “make do”, which is in itself a rather costly option, considering executives’ increasing exposure to the global environment. In a global context, it could be argued that the lack of any CEO or senior executive succession plan may have a direct bearing on the survival of the organization on the global stage. Consider for example, recent research carried out by Bain & Co, a consulting company, of the financial results of 729 organizations from 7 countries with revenues in excess of $500m. The results were astonishing: only 1 in 6 companies showed a growth in foreign sales and operating profits as rapidly as its domestic ones (3).
Whilst there is no conclusive evidence of any correlation between global leadership capabilities and the financial performance of global organizations, ultimately those organizations that seek to place a great emphasis on developing global leadership talent will ultimately ensure a pipeline of leaders for winning a competitive advantage over those organizations who neglect to have any sort of global leadership succession plan in place. In effect, the cost of NOT developing a global leadership succession plan may ultimately work out being more costly to the organization in terms of potential failure in global markets.
Instead of looking for correlations then, one way of weighing up the overall investment in global leadership succession planning would be to bear in mind the ultimate bottom line impact on the organization’s globalization strategy by using experienced global executives and leaders over “domestically minded” executives. Ultimately, CEOs and boards should expect higher Investment Returns on Internationalisation (Inv-ROI) through a well thought out global leadership succession plan, than if it were to continue to rely purely on domestic executives with little or no global experience.
- Time to global markets $_____________
- Cost to global markets $_____________
- Overseas revenue growth (by country) $_____________
- Profitability $_____________
- Cost of failed overseas venture $_____________
- Cost of failed overseas assignments $_____________
- Global customer satisfaction $_____________
- Turnover of key global talent $_____________
- Missed global market opportunities $_____________
- Other $_____________
- TOTAL $_____________
Global organizational success therefore will depend more and more on the degree to which an organization starts to build its corporate global mindset. Only the CEO can ensure that good global people are gaining exposure to the global environment, and that the organization is learning from their experiences. Only a CEO can ensure that global leadership succession planning is drilled down so far into the very heart of the company that it touches how even bright young graduates with high potential global talent are being recruited for future top global leadership positions.
The problem however is that many CEOs may be reluctant to develop a global leadership succession plan. For some, CEO status is the last rung on the ladder before retirement, and grooming somebody who may one day be filling the CEO’s shoes can come a little too close to comfort. Secondly, it can be a hard pill swallow for any globally inexperienced CEO to be developing bright young globally experienced talent for navigating the organization into deeper global waters, coveting their role just a little too early.
In developing a global organization however, it is not just the CEO’s role where succession planning is critical. Across all functions of the organization, top global talent is required. This means that it is the CEO’s responsibility to develop a cadre of global executives across the organization, thinking 20 years out, no matter how difficult it may be too imagine the shape of the organization then.
So what are the key steps and how should they be implemented ? Just as there is no single answer to global organizational success, there is equally no single panacea for developing a global leadership succession plan, but the following steps may prove helpful :-
Alignment with Vision and Strategy
The organization’s strategy is critical in determining the outcome of any global leadership succession plan. A global strategy will ultimately effect the structure of the business, and in turn, will decide how many executives of one type or another will be required ( e.g. functional managers, country managers, global business managers etc. ), and by when. It will affect the type of global work to be carried out, where in the world it is to be carried out, as well as the numbers of executives required to carry the work out, and the transitions they need to make in order to stretch them beyond their narrow areas of expertise. For example, if the global strategy dictates that the business will remain locally ( as opposed to relocating its headquarters overseas ), then the question will be how to expose local managers to the global strategy. Conversely, sending expatriates to run local operations will require the development of expatriates to run businesses in other cultures.
Global leadership succession planning requires continuity – which means signing up to a high degree of commitment. Starting at board level and CEO level, senior management needs to be constantly and actively engaged in the succession planning process as well as define criteria for selecting and developing the global leadership team.
One way of getting senior management to take global leadership succession seriously is to create a financial incentive. In this way, part of the criteria for a senior executive’s salary will be his or her significant engagement in global leadership succession planning. One example of this will be how he or she builds in rewards and incentives for developing global leadership skills with direct reports.
Carry Out a Global Leadership Audit
Paying close attention to the organization’s global strategy, organizations should identify the specific global leadership behaviours and competencies that global leaders will need in order for them to succeed globally within the organization. They should also track where existing global knowledge and competencies exist, as well as identify the gap between present and future business requirements.
Use Competency Tools That Support Global Leadership Development
A wide variety of tools, assessment centers, 360-degree feedback mechanisms, interviews and tests exist for facilitating the decision making about global leadership placement and development. Some of these instruments may be appropriate for some generic areas of global leadership development, but may be insufficient for developing specific global skills. Ensure that the combination of tools and instruments you eventually use are designed specifically with aspects of global leadership development in mind.
Use of a Database Management System
If a system is already in place, it should incorporate a strong global element that identifies potential global leaders, tracks global careers and assignments across the organization and exposes a plethora of global-facing scenarios. The system should hold key global leadership criteria, such as personal bios, critical global leadership skills and global leadership succession requirements as well as identify potential future leaders with succession in mind.
Both Human Resources and Operational Management should ensure that a Personal Global Development Plan is in place for high potential global executives, or incorporate a strong global development element within existing personal development plans. As part of the Global Leadership Development Plan, an assessment should take place that may involve a variety of instruments in order to take into account global developmental needs, in line with the strategy and culture of the organization. Based on the results of the assessment, a developmental review is prepared which should incorporate ongoing development. Additional training may be required, in conjunction with ongoing developmental global experiences. However the ongoing nature of the global leadership process may require mentoring and coaching – which is much more powerful area of global leadership skills development. Ensure however that mentors and coaches have requisite and specialised international management experience to help the executive develop effectively. Global Executive Coaching, or Coaching for Global Effectiveness is an emerging specialization within the field of executive coaching and mentoring specifically designed to develop global leaders.
Integration Global Leadership Succession Planning with Recruitment, Development and Retention
These 3 areas are critical for every global leadership succession plan. Organizations who place a great degree of emphasis on global leadership succession planning become attractive brands for new recruits, precisely because the global business provides opportunities for global exposure across the world, and because individuals are rewarded on their global competencies. At the recruitment stage, it is important to find candidates who clearly demonstrate an interest in global leadership as well as some of the qualities that reflect global leadership.
Equally, a global leadership succession plan must provide high potential global executives with challenging roles in order for them to develop along a clearly defined route. This will mean exposing them across a range of global-facing scenarios. Gone are the days when it was assumed that the only way of gaining global experience was to take the expatriate route. The global nature of business these days means that most roles are global facing in one form or another. It can even be argued that executives no longer need to step foot on a plane in order to be effective globally. But whatever the form of global interaction, it still requires a global mindset. And that is why executives should be provided with broad global exposure across the organization and across functions that will give them the experience and insight for leading the global organization at a much higher level.
Rotation, Rotation, Rotation
It is always easier to keep executives doing what they already do very well rather than to expose them to new environments. The danger of this approach over the long-term however is that it can create silos of specialization. If the incumbent executive suddenly gets hit by a car, then several well-qualified replacements will have been identified to take his or her place. That is why it is important to promote and move people onwards for developmental reasons and within an environment where it is safe to take on new stretch assignments and practice new things.
Keep it Simple
Developing a global leadership succession plan takes a long time. Consider starting small and focusing to begin with on the most important people within an organization.
An ongoing review of global leadership succession planning talent with senior management is crucial. First, the nature and complexity of the global environment means that organizations must be flexible enough to change. And change may have a direct impact on the strategic intent of the global business, as well on the structure that will determine the global leadership development opportunities. Secondly, regular reviews will help ensure a strong results-orientated environment that encourages accountability for development, measurement and reward. Finally, when potential successors are being put forward, reviews are an important part of identifying the overall experience and capabilities of each candidate.
To summarise, there is an argument whether global leaders are really needed at all in a world that is becoming increasingly exposed to the global environment. After all, it could be argued, if we are all in global-facing roles, then does “domestic” not become synonymous with “global” ? Thankfully however, globalization does not mean an end to cultural difference, although it does mean dealing with cultural difference will become ever more important.
Secondly, because cultural difference will become ever more important, global competitive advantage will go to the leader of the organization who takes cultural difference very seriously. And finally, the nature of cultural difference, combined with a rapidly changing, complex and often volatile world means that there will be less room for making mistakes than ever before. The difference between global organizational failure and success will be on those leaders who can make better and quicker decisions in this complex world. If they can understand that world a little better, it will give them the crucial edge.
That is why organizations should give more serious thought to the calibre of executive that will be driving their organization forward in tomorrow’s global markets by planning today.
© Copyright Trevor O'Hara, 2005
(1) Planning Corporate Succession. The Economist Magazine, December 11th 2003
(2) Wall Street Journal, July 15th 2001 (Startup Journal Edition). "More Entrepreneurs Seek Help From Top Coaches"
(3) Time Magazine, November 25th 2002. "Innocents Abroad. As US Firms Went Global in The 1990's, Most Failed To Prosper, Why ?"