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Published: January 6, 2009

 
 

It’s Getting Diverse at the Top

To take advantage of market growth in developing countries, U.S. multinationals are turning to non-Americans to head their operations.

Despite the deep economic fissures throughout the world, top management of major U.S. companies are more compelled than ever to go global. For one thing, many large companies, such as Alcoa, Colgate-Palmolive, Coca-Cola, and United Technologies, generate 60 to 80 percent of their sales outside the United States, and that trend seems certain to accelerate. Indeed, as Western economies contract, countries like India and China will see some slowdown in growth but are still projected to expand by at least 6 percent annually. Moreover, when the recession wanes, developing markets will have pent-up demand from a vast, product-thirsty would-be middle class, and thus will be the richest vein of new consumer enthusiasm for companies to mine. Consequently, CEOs and other top executives will need an ever deeper understanding of customers in developing countries. And that, in turn, will intensify multinationals’ desire to place executives from around the world in critical corporate positions. U.S. companies will need leaders with the cultural and language skills that many American executives, even those who have traveled extensively, lack.

The logic may be simple, but it’s not easy for U.S. companies to groom talent from other countries. It takes years to identify talented people working in a multinational’s offshore operations and develop them for positions that carry more authority and responsibility by transferring them to other postings. In some cases, companies have to modify their cultural norms to adequately assess these executives, and the culture at headquarters may have to become more welcoming to different nationalities. “American companies started the process a decade ago, but it only gathered steam three years ago,” says Umesh Ramakrishnan, vice chairman of search firm CTPartners and author of a new book, There's No Elevator to the Top: A Leading Headhunter Shares the Advancement Strategies of the Worlds Most Successful Executives. “We’re only about a quarter of the way to where we need to be.”

One of the clear leaders is Colgate, where Ian Cook, a British national, last year succeeded Reuben Mark as CEO. The company has a “process that encourages, rewards, moves around, provides incentives, and closely manages the careers of the best performers worldwide, no matter their national origin,” says John Wood, a partner at SpencerStuart who has conducted more than 70 CEO search assignments.

Aside from having an Englishman as CEO, Colgate (with 75 percent of its sales outside the U.S.) has eight non-native Americans in its brain trust of nine top operating executives — including people from India and Colombia. More than half of the 200 people in its senior management ranks, including those in staff and support roles, are not originally from the U.S., says Daniel Marsili, vice president for global human resources. These managers may have green cards or U.S. passports, but they were born outside the U.S. “They are citizens of the world,” Marsili says.

Marsili says that Colgate’s strategy has three elements. One is that the goal of developing executives of diverse nationalities was articulated from the top during Mark’s tenure and continues to be during Cook’s. The second is that the consumer products company has established accountability at senior levels in the organization for identifying and nurturing high-potential employees from around the world. “It’s not just HR’s responsibility,” Marsili says. Linking it to dollars and cents is key: Part of the long-term incentive compensation of the top 200 executives is tied to the company’s ability to attract and retain the most talented people. They get paid more if the company keeps 90 percent of its high-potential staff over a certain period of time.

Third, Colgate has an enterprise-wide information system linking its operations in 200 countries and it uses this to create a talent-tracking program. Colgate managers around the world are provided with relatively simple yet sufficiently detailed forms on the network to supply data about the capabilities and potential of key employees. The quality of an executive’s performance in a variety of tasks is logged into the system over time. “It gives us a global warehouse of data about our people systems,” Marsili says. “It’s important to us to understand equally the leadership pipeline in Vietnam and in Venezuela.”

 
 
 
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Resources

  1. Frank Birkel, Jonathan Harper, and Edward Speed, “The Changing Role of the Country General Manager in CPG Multinationals” (PDF), (SpencerStuart, July 2008): Details why local general managers are a logical pool of eventual CEO candidates in consumer products firms.
  2. William J. Holstein, “The Decline of the Expat Exec,” s+b Leading Ideas Online, 07/29/2008: Peter Felix, president of the Association of Executive Search Consultants, on the effort by U.S. multinationals to hire local executives in foreign locales.
  3. Umesh Ramakrishnan, There's No Elevator to the Top: A Leading Headhunter Shares the Advancement Strategies of the World's Most Successful Executives (Portfolio, 2008): Examines what it takes to rise to the top of major companies.
 
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