Presenters: Nakiye Boyacigiller, Sabanc ı University Schon Beechler, Columbia University, USA

1. Global Mindset: People and Culture as the Key to Competitiveness in Global Organizations • Sabancı University • October 5, 2004 Presenters: Nakiye Boyacigiller, Sabancı University Schon Beechler, Columbia University, USA Additional Team Members: Orly Levy, Tel Aviv University Sully Taylor, Portland State University, USA Sponsored by NSF, SU Graduate School of Management and EDU

2. Workshop objectives • Explore how human resource management and organization culture affect the competitiveness of MNCs • Share results from a major NSF sponsored study of MNCs in 12 different countries conducted by the workshop leaders and their colleagues Sully Taylor and Orly Levy. • Discuss what it means to have a global perspective in today’s competitive environment

3. We hope that this workshop will… • Help you determine the ways in which you can mobilize HR, organizational culture and global levers to increase your firms’ global performance. • Strengthen the dialogue among HR and line managers on the role of the human organization in achieving strong global performance.

4. The paradoxes of the global business environment - Globalization - Localization - Efficiency - Responsiveness - Centralization - Decentralization - Competitiveness - Alliances - Differentiation - Integration - Control - Change - Hierarchy - Network - Analysis - Intuition - Function - Geography

5. The growing complexity of the global business environment has… • Highlighted the inadequacy of structural solutions • Increased the importance of the human dimension of organizations • Requires inherent complexity and flexibility of the human organization

6. Organizational Competitiveness Project Research Study The Organizational Competitiveness project was designed to study the roles of the human organization (organizational culture and human resource management) in creating and sustaining global organizational competitiveness.

7. How important do you think the following are for global organizational competitiveness? • Adaptable organizational culture • Clear and strong mission • Performance based HR focus • Global mindset • Ability to work across boundaries • Talent is rewarded, regardless of nationality

8. How would you describe your company? Adaptable organizational culture: Rigid-------------------------Very Adaptable Sense of mission: None----------------------------Clear & strong Human Resource Management Policies: Cost focus--------------------Performance focus Global mindset: None ---------------------------A lot Ability to work across boundaries: None---------------------------Very easy Talent is rewarded, regardless of nationality: Not true -----------------------------Absolutely!

9. Premise of the Project: Organization Culture and HRM Are Key Drivers of Global Organizational Performance Organization Culture Global Organizational Performance International HRM System

10. Research Methodology • Sample • 12 MNCs from US, Japan, Israel, UK, Chile, Mexico, Australia • Method • One-two hour structured interviews at HQs and at least 2 overseas affiliates (n=37 locations) with 3-5 senior line and HR executives in the US, Latin America, Europe and Asia-Pacific (n=226) • Questionnaire survey from at least 50 respondents per location (n=4000 plus) • Strengths • Multi-method; integrative & comprehensive .

11. What we have learned from our research?

12. Organizational Culture • Organization culture is a system of shared values (that define what is important) and norms that define appropriate attitudes and behaviors for organizational members (how to feel and behave). O’Reilly & Chatman, 1996: 160.

13. Organization Culture • Culture is a source of competitive advantage!! • Organizational culture is a particularly effective and flexible integration, coordination and control mechanism in the highly complex, interdependent and ambiguous global environment! • Unfortunately, studies of organizational culture are rare in the international context!

14. Denison’s Model of Organizational Culture External Focus Adaptability Mission Involvement Consistency Flexible Stable Internal Focus

15. Involvement: Building human capability, ownership, and responsibility • Empowerment • Individuals have the authority, initiative, and ability to manage their own work. This creates a sense of ownership and responsibility toward the organization. • Team Orientation • Value is placed on working cooperatively toward common goals to which all employees feel mutually accountable. The organization relies on team effort to get work done. • Capability Development • The organization continually invests in the development of employees’ skills in order to stay competitive and meet on-going business needs.

16. Consistency: Defining the values and systems that are the basis of a strong culture • Core values • Members of the organization share a set of values which create a strong sense of identity and a clear set of expectations. • Agreement • The organization is able to reach agreement on critical issues. This includes the underlying level of agreement and the ability to reconcile differences when they occur. • Coordination and Integration • Different functions and units of the organization are able to work together well to achieve common goals. Organizational boundaries do not interfere with getting work done.

17. Adaptability: translating the demands of the business environment into action. • Creating change • The organization is able to create adaptive change. The organization is able to read the business environment, quickly react to current changes, and anticipate future changes. • Customer focus • The organization understands and reacts to the customer, and anticipates their future needs. It reflects the degree to which the organization is driven by a concern to satisfy the customer. • Organizational learning • The organization receives, translates, and interprets signals from the environment into opportunities for encouraging innovation, gaining knowledge, and developing capabilities.

18. Mission: Defining a meaningful long-term direction for the organization. • Vision • The organization has a shared view of a desired future state. It embodies core values and captures the hearts and minds of the organization, while providing guidance and direction. • Strategic Direction and Intent • The organization’s plan to “make their mark” in their industry. Clear strategic intentions convey the organization’s purpose and make it clear how everyone can contribute. • Goals and Objectives • A clear set of goals and objectives can be linked to the mission, vision, and strategy, and provide everyone a clear direction in their work.

19. Key learnings regarding culture • Companies with organizational cultures that are characterized by clear, compelling, and a well-understood mission have higher levels of organizational performance. • Companies with organizational cultures that value adaptability and flexibility have higher levels of organizational performance. • Companies with organizational cultures that are high on consistency, DO NOT HAVE higher levels of organizational performance. • Companies with organizational cultures that are high on involvement have higher levels of organizational performance.

20. HR: High Performance Work Practices • Research in U.S. organizations has shown that HPWP are related to higher levels of organizational performance.

21. High performance work practices • Careful selection • Commitment to long-term employment relationships • Emphasis on individual and team performance • High investment in employee development • Low levels of status differentiation • Empowerment and decentralization • Clear job expectations and performance assessment (HPWP based on works of Huselid, Pfeffer, Ulrich)

22. Key learning regarding HPWP • Our research corroborates findings in domestic US organizations that HPWP is related to higher levels of organizational performance. • HPWP Organizational Performance • We also found a positive relationship between HPWP and geocentrism, lending support to the idea that organizational practices must “fit” with each other. • HPWP Geocentrism

23. However organizational culture and HR are not enough…You also need GLOBAL LEVERS • Our research has shown that the impact of organizational culture and HR is strongly influenced by geocentrism, global orientation and boundary spanning policies and practices. • These are global levers - focusing on HR and organizational culture is not enough in MNCs; one needs these critical global levers as well.

24. Global Levers • Global Mindset • Geocentrism • Boundary Spanning

25. The Global Lever of Global Mindset: Definitions • “one that combines an openness and awareness of diversity across cultures and markets with a propensity and ability to synthesize across this diversity” Govindarajan & Gupta, 2001:11 • “The ability to develop and interpret criteria for personal and business performance that are independent from the assumptions of a single country, culture or context, and to implement those criteria appropriately in different countries, cultures, and contexts” Maznevski & Lane, 2003:4.

26. Top Management Team’s Global Mindset • Measured by the following index* • Top managers in our organization have a global outlook • Top management has a comprehensive awareness and knowledge of changes in the nature of global competition. • Top management is currently developing and implementing systems, processes and structures which will enable our company to successfully meet future changes in the nature of global competition and global markets. • Top managers in this organization view the global arena as not just a market to exploit but also an opportunity to learn. • * based on Ashkenas et al., 1995

27. Findings related to global mindset • Our findings suggest that the global mindset of the TMT plays a key role in shaping employee’s attitudes towards the company. • When employees see that top managers have an awareness and knowledge of the global competitive environment, employee’s commitment to company goals is stronger.

28. The Global Lever of Geocentrism • Geocentrism • measures the ‘openness’ of the global HR system* • Examples of items: • “A manager who began his or her career in any country has an equal chance to become CEO of my company.” • “In my company, nationality is unimportant in selecting individuals for managerial positions.” • * Measured with 5-item scale developed by Kobrin, 1994

29. Geocentrism is Important! • The adoption of geocentric staffing policies has positive effects on important organizational outcomes (commitment). • Employees in foreign affiliates do not see the same level of geocentric staffing policies as those at corporate headquarters. What can companies do to mitigate this? • Women perceive higher levels of geocentrism than men. Why? • Japanese MNCs have lower levels of geocentrism compared to their U.S., and U.K. counterparts. • Other factors, such as amount of training, can affect perceived geocentrism.

30. The Global Lever of Boundary Spanning • Boundary spanning is the linkages that integrate and coordinate across organizational boundaries. • The boundary spanner cuts across functional, geographic, and external boundaries in order to move ideas, information, decisions, talent and resources where they are most needed.

31. Boundary Spanning Structures and Processes • Boundary spanning structures and processes include: • Shared vision, strategy and values • Formal organization structure • Informal organizational structures and processes • Information-sharing and decision making approach • Measured with a 5-item index* * based on Ashkenas, et al., 1995

32. Findings re: Boundary spanning structures and processes • The most successful multinational corporations in our study have instilled widespread structures, processes to facilitate global boundary-spanning behaviors, not just among the very top executives but throughout the organization. • These corporations actively facilitate learning and information sharing through global teams, task forces, networks, information technology, and global responsibility allocation.

33. Case example: Lack of organizational boundary spanning structures “If there’s an innovative movement in one office, we should have a system for sharing the information and the best practice, Now we don’t….[why?]…Each office, each product division is responsible for making money…There is no reward system for sharing…The bonus is related to corporate performance as a whole, but it doesn’t motivate people to share information, because they believe if their division makes money it will increase corporate performance...” GM of one of the affiliates in our sample

34. Additional Insights from the Study • Clarity and consensus about what “globalization” means is critical. • Actual definitions and interpretations vary dramatically both across and within companies. • How globalization is interpreted affects how global strategy is implemented.

35. How would you describe your company? Adaptable organizational culture: Rigid-------------------------Very Adaptable Sense of mission: None----------------------------Clear & strong Human Resource Management Policies: Cost focus--------------------Performance focus Global mindset: None ---------------------------A lot Ability to work across boundaries: None---------------------------Very easy Talent is rewarded, regardless of nationality: Not true -----------------------------Absolutely!

36. Strategies for Success: Implications from the Organizational Competitiveness Research Study

37. Advice and Action Steps: Developing a Global Mindset • Companies need to select for and develop a global mindset in their TMT • Select for openness and awareness across cultures and contexts • Select for ability to integrate and synthesize • Importance of diversity in selection is critical

38. Advice and Action Steps : Developing a Global Mindset • Provide stretch assignments overseas and develop incentive systems that encourage qualified employees to accept an international assignment. • Allow individuals located around the world to have early and significant input into decisions and strategies . • Capitalize on expatriate manager’s knowledge upon reassignment . • Where are your senior executives located and why?

39. Advice and Action Steps : Enhancing Boundary Spanning • Shared culture and global mindset are key tools to enhance boundary spanning activities. • Leaders throughout the organization must model the desired behaviors. • Organizations must become increasingly sophisticated and design opportunities to actively facilitate learning and information sharing through global teams, task forces, networks, information technology, and global responsibility allocation throughout the organization.

40. Advice and Action Steps : Developing an Effective Culture • Organizations need to have a clear, compelling, and a well-understood mission. • Companies must be adaptable and flexible. • Diversity in culture can be effective. Don’t over-standardize. • Provide opportunities for involvement throughout the organization.

41. Advice and Action Steps :Building HPWPs • Carefully select employees, particularly those in leadership positions. • Provide clear job expectations and performance assessment. • Diminish status differentiation, empower employees and decentralize decision making to those who have the necessary information. • Provide a balance between commitment to long-term employment relationships and a strong emphasis on individual and team performance • Invest in employee development throughout their careers.

42. Advice and Action Steps : Increasing Geocentrism • Opportunities need to be culture-blind. • Perceptions matter! If everyone has the opportunity to be CEO, this needs to be well-communicated, not just at HQs but throughout the organization. • Provide training, as well as opportunity, to increase perceptions of geocentrism and enhance commitment to the organization. • Women may be key targets for geocentric policies.

43. Advice and Action Steps: Developing Global HR • The HR function must be seen as a critical organizational asset, and must become less ‘stand alone’. • HR’s capability must match the strategic requirements of the business. • HR policies and practices must reflect the strategic priorities of the company’s desired future rather than legacies from the past.

44. Advice and Action Steps : Developing Global HR • Make sure your organization is developing employees with the skills and perspectives necessary for you to be a successful global competitor. • How can these skills be developed?

45. Advice and Action Steps: Developing Global HR • Make sure that HR is as global as your strategy • Hire the best people into HR • Provide cross-functional teamwork, cross-cultural training, international assignments, and global forums and meetings for HR professionals

46. Thank You!