On creative globetrotters, relocated headquarters, a business ethics pioneer, and more.
Passport to Creativity
William W. Maddux (firstname.lastname@example.org) and Adam D. Galinsky (email@example.com), “Cultural Barriers and Mental Borders: Multicultural Experience Facilitates Creative Thinking and Problem Solving,” International Association for Conflict Management (IACM) 19th Annual Conference. Click here.
Previous research suggests that some forms of diversity foster creativity. Teams made up of individuals from multiple ethnic and cultural backgrounds, for example, have been found to produce more imaginative solutions to problems. And in some studies, bilingual people have demonstrated a creative advantage over people who speak only one language.
Two academics from the Kellogg School of Management at Northwestern University, however, argue that the effect on creativity of another aspect of diversity has not been fully explored: time spent living or traveling in a foreign country. William W. Maddux, visiting assistant professor of management and organizations, and Adam D. Galinsky, associate professor of management and organizations, have conducted a series of experiments to fill this gap.
In one case, 205 MBA students were given a candle, a pack of matches, and a box of tacks, all placed next to a cardboard wall. Each was then asked to attach the candle to the wall so that it burned properly and did not drip wax on the floor. The most creative choice would have been to use the tacks to attach the box as a candleholder to the wall. Sixty percent of those who had lived abroad solved this problem, but only 40 percent of those who hadn’t lived abroad arrived at the solution.
In another experiment, a different group of students was asked to negotiate the hypothetical sale of a gas station. From the information provided, a financial impasse was clear: The minimum price that the gas station owner would accept was higher than the amount authorized by the purchasing company. To close the deal, a creative solution was needed — specifically, to offer the owner a job as the manager of the gas station after the sale to increase his financial security and convince him to lower his asking price. Again, the findings confirmed that living abroad increased the likelihood of completing the negotiation successfully.
The authors argue that traveling or living in another country enhances creativity because exposure to other cultures trains individuals to recognize that there is more than one way to look at behaviors and tasks. For example, leaving some food on your plate is regarded as a sign of great respect for your host in some cultures, implying that you’ve had enough to eat, but in other cultures the same behavior may be interpreted as an insult. Interestingly, the authors found that a minimum of six months in a foreign country is required to augment creativity, but the effect does not noticeably increase if an individual stays longer.
The findings have important implications for organizations. As the authors note, “It may behoove organizations to hire individuals with experience living abroad, or send employees on transfers or sabbaticals to foreign branches if creativity is particularly valued.”
Julian Birkinshaw (firstname.lastname@example.org), Pontus Braunerhjelm (email@example.com), Ulf Holm (firstname.lastname@example.org), and Siri Terjesen (email@example.com), “Why Do Some Multinational Corporations Relocate Their Headquarters Overseas?” Strategic Management Journal 27: 681–700 (2006). Click here.
Anecdotally, it appears that corporations are no longer shy about moving their corporate headquarters, sometimes even from one country to another. Examples include Massey Ferguson’s relocation from Canada to the United States; Tetra Pak’s move from Lund, Sweden, to Lausanne, Switzerland; the relocation of four South African companies (Anglo American, Investec Bank, Old Mutual, and SABMiller) to London; Viatron’s move to the Netherlands; News Corporation’s shift from Australia to New York; and a number of others. Julian Birkinshaw of the U.K.’s Advanced Institute of Management Research, Pontus Braunerhjelm of the Royal Institute of Technology in Stockholm, Ulf Holm of Uppsala University in Sweden, and Siri Terjesen of the Brisbane Graduate School of Business in Australia calculate that 23 of the Fortune 500 companies have set up HQs in a new country in recent years. Intrigued by this apparent trend, the authors examined 125 business unit headquarters and 35 corporate headquarters of Swedish companies to determine why some companies choose to relocate.
The research, based on a series of questionnaires and interviews, found that three types of stimuli lead companies to make a move. The first includes mergers and acquisitions. When companies join forces, they may seek a new corporate headquarters that has better access to capital markets and global competitors. AstraZeneca International, for example, was created by the 1999 merger between the Swedish company Astra and the U.K.’s Zeneca group. It is now headquartered in London, a hub for both finance and the pharmaceutical industry. Meanwhile, business unit centers tend to move to locations that are close to the merged operation’s multiple centers of gravity. For instance, after automation technology companies Asea AB and BBC Brown Boveri AG merged in 1990, the company’s process automation unit was relocated to Stamford, Conn., to be close to big industrial customers, whereas its metallurgy business remained in Sweden, to stick close to large Swedish steel companies.
The second mainspring of relocation is internal: either a change in the makeup of the business or a shift in the company’s global outlook. News Corporation’s move to New York from Melbourne, for example, recognized the fact that the company’s major assets had shifted to New York. Following its international customers and moving closer to financial markets prompted the decision by Autoliv, a Swedish manufacturer of seatbelts and airbags, to move some corporate functions to the United States in 1997. It then moved its corporate headquarters across the Atlantic in 1999. Finland’s Nokia has relocated its corporate finance function to New Jersey for similar reasons.
The final stimulus is what the authors label “an external threat from a host regime.” The packaging materials manufacturer Tetra Pak’s move from Sweden to Switzerland in 1981 provides an illustration. The company’s founders relocated after they became embroiled in a tax dispute with the Swedish government. And the brewing company SABMiller relocated to London from South Africa in search of a more stable business environment.
The authors note that cities and regions have the most to lose when corporations move out. Corporate and business unit headquarters attract business and money to an area, including professional services — banking, legal services, consulting, and accounting — and, of course, these enterprises contribute to local employment.
Aneel Karnani (firstname.lastname@example.org), “Essence of Strategy: Controversial Choices,” Ross School of Business Working Paper Series, Working Paper No. 1032. Click here.
Carly Fiorina, then CEO of Hewlett-Packard Company, wrote in a letter to shareholders in 2001 that “The merger of HP and Compaq is the best way to strengthen our businesses and improve our market position.” Walter Hewlett, HP board member and son of cofounder William Hewlett, openly disagreed. This very risky acquisition,” he wrote, “worsens the HP shareholders’ portfolio of businesses. It does not solve any strategic problems.”
Mr. Hewlett lost the argument. After a period of bitter wrangling involving an array of experts, investment bankers, management consultants, and stock analysts on both sides of the issue, the $25 billion HP–Compaq deal went ahead, and Walter Hewlett was stripped of his position on the board.
That high-profile case may have seemed vitriolic (and even more so for its aftermath of board-level wiretapping), but management disputes are actually not unusual. In fact, Aneel Karnani, associate professor of corporate strategy and international business at the Stephen M. Ross School of Business at the University of Michigan, has written that they are necessary. According to Professor Karnani, the nature of organizational decision making almost always involves conflict. Smart managers are bound to have opposing views, and differences of opinion should be encouraged because the ability to debate is a critical organizational skill. To make effective decisions, corporations must manage that conflict effectively.
The traditional strategic planning process hinders good decision making more than it helps, Professor Karnani argues, because in a typical company, strategic planning is driven by the calendar. “Managers initiate the process to analyze and formulate the company’s strategy — not because the firm faces a strategic choice, but because it is, say, June,” he notes.
A better approach is to first determine the strategic opportunities the company faces and then focus the analysis and debate on those choices. A U.S. building products company, for instance, began its planning process by identifying five key strategic options: whether to enter China, what to do with its current operations in Europe, how to best consolidate the company’s distribution channel, how to manage a move from products to services, and how to deal with large commercial customers.
Using this as a guide, the strategic debate was sharply focused on the pros and cons of the alternative choices under discussion. Generating differences of opinion among managers was a crucial part of the process. Two or three different strategic responses to the five options were established and a senior manager was assigned to make the case for each alternative, ensuring sufficient conflict to create a lively debate.
According to Professor Karnani, to use conflict to their advantage, managers should:
1. Be adept at generating different points of view, a recommendation that legendary General Motors CEO Alfred P. Sloan clearly embraced. After a brief boardroom debate, Mr. Sloan reportedly said: “So I take it we are now in complete agreement.” When his fellow board members nodded, Mr. Sloan retorted, “Well, then, I propose we come back and discuss this when we no longer agree.”
2. View the strategic planning process — and the conflict it provokes — as an intellectual debate and not a political dogfight. Differences must not be allowed to become personal, or discord to fester. Hewlett-Packard didn’t handle this step particularly well. The pro- and anti-merger debate became a personal feud between the CEO and the cofounder’s son that was never completely resolved. Consequently, within four years, Ms. Fiorina was dismissed after disagreements with the board. Strategic choices, such as her decision to combine the personal computer and printer operations into one business unit, took on political overtones.
3. Make certain that conflict is not allowed to poison the organization’s ability to move ahead. Much time and energy can be lost by boards or management groups seeking a unanimous decision. It is not necessary to reach a consensus that, in any case, is often the result of a poor compromise. Rather, once the decision has been made, everyone must be bound by it and support its execution.
The Responsibility Paradox
Gerald F. Davis (email@example.com), Marina V.N. Whitman (firstname.lastname@example.org), and Mayer N. Zald (email@example.com), “The Responsibility Paradox: Multinational Firms and Global Corporate Social Responsibility,” Ross School of Business Working Paper Series, Working Paper No. 1031. Click here.
The concept of corporate social responsibility (CSR), defined in this paper as “actions a company takes that are not legally mandated but are intended to have a positive impact on stakeholders,” is long established. Gerald F. Davis, professor of management and organizations at the Stephen M. Ross School of Business, University of Michigan; Marina V.N. Whitman, professor of business administration and public policy at the Ross School of Business and Michigan’s Gerald R. Ford School of Public Policy; and Mayer N. Zald, professor emeritus of social work in the department of sociology at the University of Michigan, provide a condensed history of the concept, beginning with the utopian ideals of Pullman, Ill. (a company town created to support workers making railroad cars); through “welfare capitalism” early in the last century; to Howard R. Bowen’s influential 1953 book, Social Responsibilities of the Businessman; and up to the modern nderstanding of the term.
As the authors observe, CSR is now high on many corporate agendas. More than half of the world’s largest 250 firms produce regular reports on their social and philanthropic activities. Investment in socially conscious firms is on the rise. And the media, investors, and watchdog organizations are putting more pressure on organizations to behave in ways deemed to be more socially responsible.
The trouble, the authors note, is that CSR has traditionally been a limited activity. Organizations have tended to act responsibly in their own neighborhoods, primarily because stakeholders have typically clustered there, and they have shown less regard for issues of concern outside their local regions.
Yet, the business landscape has changed, and the authors point to three recent trends that may already be reshaping CSR. First, corporate boundaries are eroding. Manufacturing companies make products in factories around the world, or outsource the work completely to third parties in distant regions.
Second, corporations’ national identities are breaking down. American manufacturing, retail, transportation, and finance firms now sell more than 30 percent of their goods and services outside the United States; in 1985, that figure was 14 percent. Determining where a company is from has become more and more difficult. For example, Royal Caribbean Cruises is headquartered in Miami; registers its ships in the Bahamas, Ecuador, and Norway; and is legally incorporated in Liberia.
Third, the nature of employment is shifting. Jobs throughout the world are more fluid and flexible than ever before, with less security and greater mobility.
Together, these changes leave the modern multinational corporation that embraces corporate social responsibility with a dilemma: to be responsible to all of its many and varied stakeholders no matter where they are in the world, or to be beholden to its shareholders alone.
Professors Davis, Whitman, and Zald suggest that a new perspective on “global corporate social responsibility” will emerge, one that will likely be influenced by European practices. The European Commission has extensive experience in creating harmonized CSR standards that work effectively across borders. Consequently, the corporation of the future may benchmark its CSR standards against Europe’s, its corporate governance standards against American organizations’, and its production standards against those of the Japanese.
The Ethics of Mary Parker Follett
Domènec Melé (firstname.lastname@example.org), “Ethics in Management: Exploring the Contribution of Mary Parker Follett,” IESE Working Paper No. 618. Click here.
In recent years, the American management consultant Mary Parker Follett (1868–1933) has been rediscovered as a thinker of note, and one whose work touches on many of the issues that preoccupy contemporary managerial minds. Her research and theories about business ethics were particularly innovative, and it is these aspects of her work that Domènec Melé, professor of business ethics at Spain’s IESE Business School, explores.
When Ms. Follett wrote in the 1920s and ’30s, there was no notion of what we now call business ethics, a distinct moral code practiced by companies. But, as Professor Melé points out, Ms. Follett’s view of the organizational world had a decidedly ethical bent, even if she didn’t address ethics directly.
For example, she believed that organizations were made up of complex social relationships, she was the first to acknowledge what is now called empowerment, she regarded leadership as situational, she advocated managerial experimentation rather than regimentation, and she produced novel insights about conflict resolution. In short, she flew in the face of the management orthodoxy of the time, epitomized by Frederick Taylor’s theory of scientific management.
“I do not think we have psychological, ethical and economic problems,” Ms. Follett wrote. “We have human problems with psychological, ethical and economic aspects.” She held that compartmentalized thinking such as Taylor valorized was dangerous. Ethics, therefore, is not an isolated element of business, but one that must be considered in all decisions; this, suggests Professor Melé, is the clearest overall lesson from Ms. Follett’s work. The best management decisions are not made in one dimension or in isolation from the multitude of factors that affect businesses and individuals.
As a management theorist, Ms. Follett argued that managers should be loyal to their profession — its standards, principles, and body of knowledge — rather than to their companies. This connects managers to “the soul of our work. To that which is both in our work and which transcends our work. This seems to me the highest romance as it is the deepest religion, namely, that by being loyal to our work we are loyal to that which transcends our work.” Mary Parker Follett, Professor Melé concludes, wrote about business ethics after all.
Des Dearlove (email@example.com) is a business writer based in the U.K. He is the author of a number of management books and a regular contributor to strategy+business and The (London) Times.
Stuart Crainer (firstname.lastname@example.org) is a business writer based in the U.K. and a regular contributor to strategy+business. He and Des Dearlove founded Suntop Media, a publishing and training company providing business content for online and print publications.