The guru of management has a message for American business: Your days at the top are numbered.
What’s more? Leaders who are too impatient, indifferent or arrogant to see the change coming will soon find themselves out of business.
That’s the bottom line of what author and management consultant Ram Charan calls “Global Tilt,” the subject of his latest business book published this year.
Increasingly, money flows not between New York and London but from Singapore to Sao Paolo, inexorably drawn in by the combined 1 billion people in India, China, Brazil and Indonesia who will enter the middle class in the next 10 years.
Economic shifts of this order occur very rarely in human history, Charan said, and it puts North American companies, used to sitting atop the global heap, in a tricky position.
On one hand, they have large, vital and prosperous business interests in their home market to protect. On the other, act too conservatively and they risk missing out on a once-in-a-generation opportunity to supercharge growth.
Business is being played on a field tilted away from developed markets to emerging ones in the south, and it’s not just big companies that need to learn the new rules of the game. The game is pulling in small and midsize regional companies in places like the Midwest, too.
‘The differentiating trait of a leader of the future is dealing with and anticipating uncertainty.’
“They need to be looking at the opportunities not just in Ohio, not just in [the] USA, but on a global basis,” Charan said. “The risk of not moving is the extinction of some of the businesses here.”
New competitors, often supported by their governments, wrestle market share away from established players. In some cases, they swallow them whole. Case in point: Anheuser-Busch, venerable American beer-maker, meet your new parent, Brazilian-born, Belgium-based InBev.
This shift in power is the biggest challenge most managers will face in their lifetimes, and many are not remotely prepared for it, Charan said.
It would be easy to discount the message if not for the messenger.
Charan is a 35-year business veteran and the author of 16 business best-sellers, including “Execution: The Business of Getting Things Done,” one of two books penned with Larry Bossidy, former chairman and CEO of Honeywell International Inc., as well as “The Game-Changer,” co-written with Procter & Gamble Co. boss A.G. Lafley.
He is the executive coach to Fortune 100 CEOs and strategic adviser to the board of multinational companies like General Electric Co. His past and present client roster includes global companies such as Bank of America Corp., Caterpillar Inc., DuPont and Novartis International.
Charan is also quite possibly the hardest-working man in business. His well-documented work ethic has him on the clock 365 days a year, occasionally making 6 a.m. wake-up calls to a CEO client with a piece of advice. An office and apartment in Dallas are the closest thing Charan has to a home, but he’s rarely there, instead living out of a suitcase as he crisscrosses the globe to work with clients in developing and developed countries alike.
Come to think of it, Charan is a walking embodiment of the economic shift he describes. Born in northern India to a large family of modest means, he worked in his family’s shoe shop before earning a degree in engineering and eventually an MBA and Ph.D. from Harvard Business School. He taught at Harvard and Northwestern University but found the ivory tower of academia too impractical.
“He’s an Indian guru who found his calling with consulting,” said Noel Tichy, professor of management and organizations at the University of Michigan and Charan’s co-author on “Every Business Is a Growth Business.”
“Ram is not some academic writing case studies,” he said. “Ram is a clinician first and foremost.”
Don’t Be Left Behind
The clinician’s diagnosis for U.S. businesses is a case of globalization. His prescription: Change the way you manage or you’ll find the world has left you behind.
“The differentiating trait of a leader of the future is dealing with and anticipating uncertainty,” Charan said. “Everything else has been written about leadership a billion times. It’s been packaged and repackaged — vision, inspiration, motivation, people, communication.”
With some exceptions, North American leaders are not quite ready for the volatility and uncertainty of the global market. “They are not prepared; they are not involved,” Charan said. “Their boards are not familiar with it. Many boards don’t want to invest the money because they hear things or read the newspapers.”
That fundamental lack of familiarity and knowledge with the new centers of global growth is made worse by a case of short-term-itis. The quarterly earnings drill, government oversight and uncertainty created by implementation of the Affordable Care Act limit executives’ ability to look long term, said Bill Conaty, former senior vice president of corporate human resources at General Electric and another of Charan’s co-authors, this time on 2010’s “The Talent Masters.”
“It’s taken a lot away from CEOs and leaders in North America to be bold and more strategic, be long-range thinkers,” he said.
It hasn’t escaped notice. People in emerging markets are hungrier, willing to work harder and in many cases better educated than their counterparts in developed countries.
“We now have larger growth in GDP among the countries in the south,” Charan said. “All of that is very crucial because the Internet enables anyone in the world to get information almost instantly and is democratizing the participation of people who were definitely not in it 10 years ago.”
It’s not a question of ability but of desire.
The Questions Are the Answer
To create the flexibility and adaptability needed for the shift in global business, Ram Charan recommended changing what he calls the company’s social system — the collective behaviors and actions of people — rather than a costly and disruptive organizational restructure. Focus on shifts in three areas:
- Power: what decisions are made by whom with what input and where.
- Resources: the allocation of leaders, experts and funding.
- Behavior: the attitudes, habits and rules of thumb.
He recommended creating a cross-functional team that includes people from the finance department, legal and human resources to address a few questions:
- Is the talent pool in developing markets strong and deep enough?
- Do budgets reflect growth priorities?
- Do key performance indicators and compensation reflect changes the organization is trying to make?
- What is blocking the exchange of information, technology and expertise?
- Are people, budgets and the business-review process helping make the shift?
- Are important business decisions being made in the right way?
There are no universal right answers, he said, but whatever actions are determined must be clear, specific and easily communicated with accountability and rigorous follow-through. The results can be a powerful cultural interchange that helps both developed and developing markets, said Kevin Wilde, General Mills Inc.’s vice president and chief learning officer.
“That magic is not only orienting your talent machine — your talent formation processes — for what we call the developing markets, but it’s also the cross-play, the interchange — the exciting entrepreneurial stuff we see coming out of Brazil and China and getting that mindset into Canada, getting to the U.S.,” he said.
“For big global companies, the big play isn’t just grow the talent for emerging markets but leverage the talent mindset around the world.”
“The largest concern I have isn’t whether North American leaders are capable of winning the battle,” said Marc Effron, former head of talent management at Avon Products Inc. and president of management consultancy The Talent Strategy Group. “It’s whether they’ll show up for it. I’m not sure many Americans understand the hunger for success that their Indian or Chinese counterparts bring to the table.”
Unlike their emerging market colleagues, many North American executives are unwilling to relocate internationally. “North American leaders can compete with leaders anywhere in the world, but that requires that they actually go to the same places that others are willing to go,” he said. “It would be sad if our very Western concern for work-life balance is what ultimately destroys our ability to compete.”
Like Charan, Effron sees the positive in North American leaders, including a strong desire to win, resilience in the face of setbacks and good management education. But what they’re lacking is exposure to global markets early in their career, ideally before they are 30.
Living and working in emerging markets is the gold standard for global management development, said Kevin Wilde, vice president of organization effectiveness and chief learning officer at food-maker General Mills Inc. But that shouldn’t come at the expense of the development of local teams.
“It’s going to be this wonderful blend of building the true globalist that can go around the world but also building regional talent and in-country talent,” he said. “What’s really good in one market may not work in the next. The best leaders are aware of that, and they know how to get that local feel.”
For most of its century-plus history, General Mills operated primarily within the United States. But the past 10 years have brought a global transformation of the company. After a series of acquisitions, General Mills is now one of the largest food companies in South America. Along with a French partner, General Mills runs Yoplait, the No. 2 yogurt company in the world. Chinese customers are developing a hankering for the company’s Haagen-Dazs brand. The Minneapolis-based company now has approximately 41,000 employees, half of whom work outside the U.S.
“There are a lot of very talented and promising leaders in each of these markets, and if we’re going to be a truly global enterprise, it’s not just leveraging talent around the world by moving them but growing within,” Wilde said.
Coming to terms with the global talent pool is critical for HR leaders, Charan said. It’s no longer confined to one community, one region or one country. Global business, enabled by technology and spurred on by demographic shifts, respects no boundaries.
“The business — whether they are domestic or not — is global,” he said. “Competition is global. They need to build a leadership pipeline from a global pool from the lower levels to the higher levels.”
That requires segmenting employee populations and localizing benefits and compensation where appropriate rather than centralizing. It also requires a more flexible talent management approach. Wilde points to General Mills’ individual development plan process as a case in point.
“For 10 years we’ve built an annual season where people have very robust and useful conversations with their boss about how they’re going to grow and develop,” he said. “The first time we tried to export that it didn’t work well as we tried to apply all the practices we honed over 10 years. In stepping back, we readjusted the program to better fit the need and readiness stage of each location.”
To Charan, flexibility is important — but so is speed. The global tilt requires a shift in how companies practice HR, putting people before strategy and evaluating needs more rapidly. “Create experiences of a critical few people who will learn how to do this, and do it every quarter, not wait for the yearly talent plan,” he said. “The people in the south move faster.”
His own constant 24-hour pace is a direct reflection of that trend, although Charan quickly bats aside most personal questions. Asked why executives choose to work with him — a softball most consultants would use to swing for the fences — he said he’s simply focused on helping his clients do something better.
“Every day is a new day, and if you can’t add value, get out of the way,” he said.
Why are you the right person to deliver this message about global business? “This is a useful thing for practitioners, so let’s give it a shot,” he responded.
Charan makes it clear that he’s not interested in grand theories of business. Tichy, whose work with Charan goes back to the early 1980s when they set up the global action learning program for GE boss Jack Welch, said his real talent is his ability to help executives work through their options.
“Unlike a lot of academics who like to show off how smart they are, he works Socratically and leads them along and helps them discover things for themselves,” Tichy said.
Conaty, whose work with Charan started even before he became head of HR for all of GE in 1983, said when Charan called — and those calls could come any time day or night — he always grabbed a pen and paper.
“He would have no more than two to three points that he wanted to get across,” he said. “He’s the only consultant I know that doesn’t waste your time and always adds value. That’s a big thing. There are tons of consultants out there and everyone is trying to sell their niche.”
You’d be hard-pressed to find a business thinker to argue that globalization isn’t transforming business. But what sets Charan apart, Tichy said, is his ability to distill the point and uncover the leadership flaws of U.S. business while something can still be done.
“Who would you like to hold up as a role model? HP with four failed CEOs? How about Microsoft, where they totally screwed up and they’re half the market cap of Google, and they should have invented Google? There are very few examples,” Tichy said. “Just like the Olympics, there are only three medals that matter. There are some serious players emerging around the world, and we’re going to have to play even better than we have to stay in the medal part of the game.”
The challenge for leaders is to keep their eyes on the prize through the ups and downs of a tilted business world.
“Uncertainty is here, it’s going to continue to be here, and it’s going to increase,” Charan said. “So how do leaders make uncertainty a competitive advantage and create value?”
In typical guru fashion, the solution begins with a question.