Developing talent in transnational Enterprise

1. Break all the “local national” glass ceilings

The first, and perhaps most fundamental, step toward building a global H.R. program is to end all favoritism toward managers who are nationals of the country in which the company is based. Companies tend to consider nationals of their headquarters country as potential expatriates and to regard everyone else as “local nationals.” But in today’s global markets, such “us-versus-them” distinctions can put companies at a clear disadvantage, and there are strong reasons to discard them:

• Ethnocentric companies tend to be xenophobic — they put the most confidence in nationals of their headquarters country. This is why more nationals get the juicy assignments, climb the ranks and wind up sitting on the board — and why the company ends up with a skewed perception of the world. Relatively few multinational companies have more than token representation on their boards. A.B.B. is one company that recognizes the danger and now considers it a priority to move more executives from emerging countries in eastern Europe and Asia into the higher levels of the company.
• Big distinctions can be found between expatriate and local national pay, benefits and bonuses, and these differences send loud signals to the brightest local nationals to learn as much as they can and move on.
• Less effort is put into recruiting top-notch young people in overseas markets than in the headquarters country. This leaves fast-growing developing markets with shallow bench strength.
• Insufficient attention and budget are devoted to assessing, training and developing the careers of valuable local nationals already on the company payroll.

Conventional wisdom has defined a lot of the pros and cons of using expatriates versus local nationals. (See Exhibits I and II). But in an increasingly global environment, cultural sensitivity and cumulative skills are what count. And these come with an individual, not a nationality.

2. Trace your lifeline

Based on your company’s business strategy, identify the activities that are essential to achieving success around the world and specify the positions that hold responsibility for performing them. These positions represent the “lifeline” of your company. Typically, they account for about 10 percent of management.

Then define the technical, functional and soft skills needed for success in each “lifeline” role. As Ms. Major of I.B.M. notes, “It is important to understand what people need to develop as executives. They can be savvy functionally and internationally, but they also have to be savvy inside the organization.”

This second step requires integrated teams of business and H.R. specialists working with line managers. Over time, they should extend the skills descriptions to cover all of the company’s executive posts. It took 18 months for I.B.M. to roll out its worldwide skills management process to more than 100,000 people in manufacturing and development.

A good starting point is with posts carrying the same title around the globe, but local circumstances need to be taken into account. Chief financial officers in Latin American and eastern European subsidiaries, for example, should know how to deal with volatile exchange rates and high infiation. Unilever circulates skills profiles for most of its posts, but expects managers to adapt them to meet local needs.

Compiling these descriptions is a major undertaking, and they will not be perfect because job descriptions are subject to continuous change in today’s markets and because perfect matches of candidates with job descriptions are unlikely to be found. But they are an essential building block to a global H.R. policy because they establish common standards.

The lifeline and role descriptions should be revisited at least annually to ensure they express the business strategy. Many companies recognize the need to review the impact of strategy and marketplace changes on high-technology and R&D roles but overlook the fact that managerial jobs are also redrawn by market pressures. The roles involved in running an emerging market operation, for example, expand as the company builds its investment and sales base. At I.B.M., skills teams update their role descriptions every six months to keep pace with the markets and to inform senior managers which skills are “hot” and which the company has in good supply.

3. Build a global database to know who and where your talent is

The main tool of a global H.R. policy has to be a global database simply because multinational companies now have many more strategic posts scattered around the globe and must monitor the career development of many more managers. Although some multinational companies have been compiling worldwide H.R. databases over the past decade, these still tend to concentrate on posts at the top of the organization, neglecting the middle managers in the country markets and potential stars coming through the ranks.

I.B.M. has compiled a database of senior managers for 20 years, into which it feeds names of promising middle managers, tracking them all with annual reviews. But it made the base worldwide only 10 years ago. Now the company is building another global database that will cover 40,000 competencies and include all employees worldwide who can deliver those skills or be groomed to do so. I.B.M. plans to link the two databases by 2000.

Unilever has practiced a broader sweep for the past 40 years. It has five talent “pools” stretching from individual companies (e.g., Good Humor Breyers Ice Cream in the United States and Walls Ice Cream in Britain) to foreign subsidiaries (e.g., Unilever United States Inc. and Unilever U.K. Holdings Ltd.) to global corporate headquarters. From day one, new executive trainees are given targets for personal development. Those who show the potential to move up significantly are quickly earmarked for the “Development” list, where their progress through the pools — company, national, business group and/or region, global, executive committee — is guided not only by their direct bosses but by managers up to three levels above. “We want bigger yardsticks to be applied to these people and we don’t want their direct bosses to hang on to them,” explains Herwig Kressler, Unilever’s head of remuneration and industrial relations. To make sure the company is growing the general management talent it will need, the global H.R. director’s strategic arm reaches into the career moves of the third pool — those serving in a group or region — to engineer appointments across divisions and regions.

To build this type of global H.R. database, you should begin with the Step 2 role descriptions and a series of personal-profile templates that ask questions that go beyond each manager’s curriculum vitae to determine cultural ties, language skills, countries visited, hobbies and interests. For overseas assignments, H.R. directors correctly consider such soft skills and cultural adaptability to be as important as functional skills. The fact that overseas appointments are often made based largely on functional skills is one reason so many of them fail.

4. Construct a mobility pyramid

Evaluate your managers in terms of their willingness to move to new locations as well as their ability and experience. Most H.R. departments look at mobility in black-or-white terms: “movable” or “not movable.” But in today’s global markets this concept should be viewed as a graduated scale and constantly reassessed because of changing circumstances in managers’ lives and company opportunities. This will encourage many more managers to opt for overseas assignments and open the thinking of line and H.R. managers to different ways to use available in-house talent.

5. Identify your leadership capital

Build a database of your company’s mix of managerial skills by persuading people to describe the information in their c.v.’s, their management talents and their potential on standard personal-profile templates. Jump-start the process by having your senior managers and those in the lifeline posts complete the forms first. Add others worldwide with the potential to move up. Include functional specialists who show general management potential.

Require over time that every executive join the global H.R. system. This makes it harder for uncut diamonds to be hidden by their local bosses. Recognizing that people’s situations and career preferences shift over time, hold all managers and technical experts responsible for updating their c.v.’s and reviewing their personal profiles at least once a year.

Companies should make it clear that individual inputs to the system are voluntary but that H.R. and line managers nevertheless will be using the data to plan promotions and international assignments and to assess training needs. Be mindful of the personal privacy provisions in the European Union’s new Data Protection directive and similar regulations forthcoming in Japan that basically require employee consent to gather or circulate any personal information.

6. Assess your bench strength and skills gap

Ask each executive to compare his or her skills and characteristics with the ideal requirements defined for the executive’s current post and preferred next post. Invite each to propose ways to close any personal skills gaps — for example, through in-house training, mentoring, outside courses or participation in cross-border task forces.

Compare the skills detailed in the personal assessments with those required by your business strategy. This information should form the basis for your management development and training programs and show whether you have time to prepare internal candidates for new job descriptions.

Unilever uses a nine-point competency framework for its senior managers. It then holds the information in private databases that serve as feeder information for its five talent pools. The company thoroughly reviews the five pools every two years and skims them in between, always using a three- to five-year perspective. In 1990, for example, its ice cream division had a strategic plan to move into 30 new countries within seven years. Unilever began hiring in its current markets with that in mind and set up a mobile “ice cream academy” to communicate the necessary technical skills.

I.B.M. applies its competency framework to a much broader personnel base and conducts its skills gap analyses every six months. Business strategists in every strategic business unit define a plan for each market and, working with H.R. specialists, determine the skills required to succeed in it. Competencies are graded against five proficiency levels.

Managers and functional experts are responsible for checking into the database to compare their capabilities against the relevant skills profiles and to determine whether they need additional training. Their assessments are reviewed, discussed and validated by each executive’s boss, and then put into the database. “Through the database, we get a business view of what we need versus what we have,” explains Rick Weiss, director of skills at I.B.M. “Once the gaps are identified, the question for H.R. is whether there is time to develop the necessary people or whether they have to be headhunted from the outside.”

7. Recruit regularly

Search for new recruits in every important local market as regularly as you do in the headquarters country. Develop a reputation as “the company to join” among graduates of the best universities, as Citibank has in India, for example.

The best way to attract stellar local national recruits is to demonstrate how far up the organization they can climb. Although many Fortune 500 companies in the United States derive 50 percent or more of their revenues from non-domestic sales, only 15 percent of their senior posts are held by non-Americans.

There may be nothing to stop a local national from reaching the top, but the executive suite inevitably refiects where a company was recruiting 30 years earlier. Even today, many multinational companies recruit disproportionately more people in their largest — often their longest-established — markets, thereby perpetuating the status quo.

To counter such imbalances, a multinational company must stress recruitment in emerging markets and, when possible, hire local nationals from these markets for the middle as well as the lower rungs of its career ladder. Philips Electronics N.V., for example, gives each country subsidiary a target number of people to bring through the ranks for international experience. Some go on to lengthy international careers; others return to home base, where they then command more respect, both in the business and with government officials, as a result of their international assignments.

8. Advertise your posts internally

Run your own global labor market. In a large company, it is hard to keep track of the best candidates. For this reason, I.B.M. now advertises many of its posts on its worldwide Intranet. Unilever usually advertises only posts in the lower two pools, but this policy varies by country and by business unit.

Routine internal advertising has many advantages in that it:

• Allows a competitive internal job market to function across nationalities, genders and other categories.
• Shows ambitious people they can make their future in the company.
• Makes it harder for bosses to hide their leading lights.
• Attracts high-fiyers who may be ready to jump ship.
• Helps to break down business-unit and divisional baronies.
• Reduces inbreeding by transferring managers across businesses and divisions.
• Gives the rest of the company first pick of talent made redundant in another part of the world.
• Solidifies company culture.
• Is consistent with giving employees responsibility to manage their own careers.

There are also certain disadvantages to this practice: Line managers have to fill the shoes of those who move; a central arbiter may need to settle disputes between departments and divisions, and applicants not chosen might decide to leave. To prevent that, disappointed applicants should automatically be routed through the career development office to discuss how their skills and performance mesh with their ambitions.

I.B.M. used to hire only from the inside, but five years ago it began to recruit outsiders — including those from other industries — to broaden thinking and add objectivity. Unilever is large enough that it can garner a short list of three to five internal candidates for any post. Yet it still fills 15 percent to 20 percent of managerial jobs from outside because of the need for specialist skills and because of the decreasing ability to plan where future growth opportunities will occur.

9. Institute succession planning

Every manager in a lifeline job should be required to nominate up to three candidates who could take over that post in the next week, in three months or within a year, and their bosses should sign off on the nominations. This should go a long way toward solving succession questions, but it will not resolve them completely.

The problem in large multinational companies is that many of today’s successors may leave the company tomorrow. In addition, managers name only those people they know as successors. Third, the chief executives of many multinational companies keep their succession plans — if they have any — only in their heads. This seems to overlook the harsh realities of life and death. A better approach is that of one European shipping magnate who always carries a written list with the name of a successor for the captain of every boat in his fieet.

10. Challenge and retain your talent

Global networks that transfer knowledge and good practices run on people-to-people contact and continuity. Executive continuity also cuts down on turnover, recruitment and opportunity costs. As international competition for talent intensifies, therefore, it becomes increasingly important for companies to retain their good managers. Monetary incentives are not sufficient: the package must include challenge, personal growth and job satisfaction.

A policy should be adopted that invites employees to grow with the company, in every market. In addition, a career plan should be drawn up for every executive within his or her first 100 days in the organization. And plans should be reviewed regularly to be sure they stay aligned with the business strategy and the individual’s need for job satisfaction and employability.

Overseas assignments and cross-border task forces are excellent ways to challenge, develop and retain good managers. They can also be awarded as horizontal “promotions.” This is particularly useful since the fiat organizations currently in fashion do not have enough levels for hierarchical promotions alone to provide sufficient motivation.

Unilever has long had a policy of retentive development and manages to hold on to 50 percent of its high-fiyers. As an integral part of its global H.R. policy, it develops the “good” as well as the “best.” Unilever reasons realistically that it needs to back up its high-fiyers at every stage and location with a strong bench of crisis-proof, experienced supporters who also understand how to move with the markets.

Unilever bases these policies on three principles:

1. Be very open with people about the company’s assessment of their potential and future.
2. Pay people well — and pay those with high potential really well, even though it may look like a distortion to others.
3. Don’t hesitate too long to promote people who have shown ability.

Sometimes this policy involves taking risks with people. But the point of a good system is to enable a company to place bets on the right people.