The role of the leader as a culture-reader
Ambitious firms face global challenges, either by expansion or by talent hunting, borders are crossed and cross-cultural barriers show up. This scenario involves the importance of focusing on culture of the organization by creating processes in which the human being is considered the core of the strategy. When leaders are able to read the culture, the strategy-formulation takes the correct path from the root, it is under this criteria that the objectives, resources and personnel are aligned.
Globalization has brought cross-cultural challenges that have been faced and solved differently by the organizations. Some examples, (Minguet, et al., 2014, pp. 77-82), demonstrate how dissimilar strategies were applied to deal with the challenge.
One first example is brought by Luc Minguet, head of group purchasing at Michelin (France), who describes how the firm trains managers to adapt cultural understanding and flexibility. During the experience managing his staff, he was warned that American and French people behave completely different from each other; thus, the experience was crucial to develop a cultural training for managers to teach the importance of a sensitive cultural managing approach that helps foreign employees to feel comfortable, and get a faster social adaptation; nevertheless, training is not the only useful tool to consider, it is important to highlight that it is a complete mind-set that must be reinforced every day.
Another case has been explained by Eduardo Caride, regional director for Spanish-speaking countries in Latin America at Telefónica, who gives a picture of how the fast worldwide growing of his firm caused a cultural challenge that was controlled by creating a strategy based on moving managers across borders. As a result, there are three basic benefits of this strategy; firstly, there is an important cross-cultural knowledge transfer; secondly, the cross-cultural ties redound to the benefits of the organization; finally, the change management helps decrease the resistance of local employees to new ideas.
The next case, brought by Takeo Yamaguchi, corporate officer for human capital at Hitachi (Tokyo), explains how the need of creating a conglomerate that served global costumers service and beat competitors required standardization of the HR practices for 948 companies. The decision aimed at improving the HR practices. The huge challenge started with the creation of a global database which contained the characterization of all employees that included name, functions, title, grade, pays, and performance history. After that, they started to compare regional conditions to pay managers performance similarly, by implementing a system focused on business results. The standardization of this system brought was a need for the firm since it was almost impossible to achieve goals without and appropriate alignment of the HR functions.
Finally, Shane Tedjarati, president and CEO, global high-growth regions at Honeywell (Shanghai-based), describes how the globalization inspired them to implement an expansion strategy to emerging markets as China, India, Vietnam, and Indonesia which was carefully planned and progressively introduced to new markets considering different strategies according to cultural diversifications. Their first step was breaking into Chinese market, where the initial strategy was to hire sales staff. Since they firm wanted to enter, not only as local players but also as real competitors, they gradually started hiring Chinese managers and manufacture their products locally. The second priority was India, the strategy was different, and soon, Indians teamed up their Chinese counterparts to produce inexpensive products for the local market. For smaller markets as Vietnam and Indonesia, the strategy consisted in investing less by creating small teams as business representatives for each country. As it can be seen, the strategy to enter emerging economies has been adapted according to the country. Flexibility is the key to success for Shane Tedjarati.
It is noticed how leaders gave the necessary importance to each context for building every single strategy that led the organizations to success.
The role of the leader as a strategy-player
The last scenario, but not the least important, responds to the strategy formulation itself. Making tough decision is why leaders are paid for. It is a huge responsibility senior managers have in terms of decision making when they are hired by a corporation. Their roles in the organization, basically, deal with making tough decisions under a high degree of uncertainty (Courtney, et al., 2013, p. 64).
Three studies have reflected and suggested ideas to take part in the strategy-formulation.
Research one, conducted by Courtney, Lovallo and Clarke, recommends leaders to make decisions cleverly and reliably, by using and combining decision making tools properly to reduce the risks. After proposing several sets of decision making tools, they suggest leaders to ask themselves two important questions:
The question one is ‘Do I know what it will take to succeed?’ Which means that it is compulsory the knowledge of a casual model; in other words, authors suggest asking if you have a clear understanding of the critical success factors and economic conditions that will lead to success. And the question two is ‘Can I predict the range of possible outcomes?’ that emerges when the correct tool is being selected; although sometimes it is impossible for executives to precise outcomes or their probability, it is a need to know if they can get to predict one or several outcomes.
Once having understood the previous concerns, it is mandatory to have a pure scenario of the possible decision support tools or tool combinations to be applied according to singular circumstances.
Research two, (Beshears & Gino, 2015, pp. 52-62), highlights that decision making is a complete project that involves planning and solid reliable information to avoid weak decisions. Consequently, Beshears and Gino developed a framework which starts with the classification of two of thinking: System 1 thinking, related to the intuition and emotions, which is fast; and system 2 thinking, logical and deliberate, which is slow. Both can be used, but the first one may become a fake friend. Once the way decision making is understood, the second step is to define the problem. For this, the behavioral economics tools are useful, as long as the personal interest do not overlap the common interest; the human before is in the center of the concern, and the problem can be narrowly defined. After that, the decision maker should diagnose the underlying causes of the poor decision making, and choose from one of these two probable causes: insufficient motivation and cognitive biases. The answer is found by making 2 questions:
First, is the problem caused by people’s failure to take any action at all? If so, the cause is a lack of motivation. Second, are people taking action but in a way that introduces systematic errors into the decision-making process? If so, the problem is rooted in cognitive biases.
Subsequently, in the next step, three levers are recommended for a solution design: the first one is related to the system one thinking when it can be nourished with variables that enrich emotions, simplify the process or take advantages of biases.
The second lever involves a system 2 thinking improved with more information and evaluations that bring more opportunities for reflection and accountability, as well as, the adding planning reminders.
And the third lever permits the use of both systems at the same time. So that default information and instructions should be added so that the systems can shift automatically according to the complexity of the process.
Finally, solutions are to be tested. For this, it is a need to make strict measuring tests to avoid expensive mistakes. Then, identify the expected outcome, observe possible solutions, and focus on one, implement the solutions.
Sometimes, changing the way people think is not easy, a last recommendation is to try to modify the environment where people make decisions.
Finally, the third research, (Sull & Eisenhardt, 2012, pp. 68-74), gives examples of the implementation of simple rules as a strategy to act quickly when solving identified bottleneck events become mandatory.
During the Internet boom, challenging and fast-moving firms like Intel and Cisco trusted in simple and very specific rules to shape their complex strategies according to the need of the moment. It helped the firms adapt fast to the changing circumstances. After having detected a bottleneck that interfered with the firm performance, the simple rules and some guidelines came in handy to correct that process.
Out of the technology sector, one example that reinforces the success of simple rules implementation in very high uncertain environments has been observed at América Latina Logística (ALL), a Brazilian company in charge of one of the country’s eight freight lines. The new management had to face some negative circumstances related to the deplorable conditions of the trains and infrastructure, and the administrative practices adopted by “an organization that was bureaucratic, overstaffed, and bleeding cash” (Sull & Eisenhardt, 2012, p. 3).
The company aligned simple rules to its aims, and created clear guideless in order to reach the corporate objectives with a less than 10th of the funding requested by the managers. As the formulation of the simple rules was a coordinated work of heads of all departments, the friction between employees in different areas was mitigated. The understandings of the rules and the guidelines by the staff allow them to propose innovative ideas to deal with the challenge.
Contrary to other firms, ALL leaders decided to evade complex models to avoid adding new variable which could have made the decision-making process more difficult.
In conclusion, managers can involve everyone into the same strategy in three steps: “set the corporate objectives, find a bottleneck and create simple rules to give for managing strategic bottleneck” (Sull & Eisenhardt, 2012, p. 71). This strategy is involving and should invite as many heads as possible for the construction, this way, employees may feel motivated to create innovative ideas, and the strategy would become easier to understand.
Conclusions
A successful strategy-formulation demands leaders who can read different scenarios to get a global idea and make responsibly decisions at organizations. Environments, culture, and strategy-formulation are issues on which researchers have been focused recently.
A competitive leader should have access to updated information that involves these three variables to formulate a holistic strategy that responds effectively to real context threats, investments opportunities or administrative challenges.
A diversity of environments requires a multiplicity of skills, subsequently, leaders must know that people are the core of the organizations, and culture needs to play a relevant role to be carefully observed when the strategy-formulation is performed.
REFERENCES
Beshears, J. & Gino, F., 2015. Leaders as Decision Architects. Harvard Business Review, pp. 52-62.
Courtney, H., Lovallo, D. & Clarke, C., 2013. Deciding How to Decide. Harvard Business Review, November.pp. 63-70.
Groysberg, B., Hill, A. & Johnson, T., 2010. Which of These People Is Your Future CEO?: The Different Ways Military Experience Prepares Managers for Leadership. Harvard Business Review, November.pp. 80-85.
Minguet, L., Caride, E., Yamaguchi, T. & Tedjarati, S., 2014. Voices from the Front Lines. Harvard Business Review, September.pp. 77-82.
Reeves, M., Love, C. & Tillmanns, P., 2012. Your Strategy Needs a Strategy. Harvard Business Review, September.pp. 76-83.
Sull, D. & Eisenhardt, K. M., 2012. Simple Rules for a Complex World. Business Harvard Review, September.pp. 68-74.
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