The hierarchy and talent myopia

This week, I’ve hosted some meeting with some bank directors and Wharton students, as part as our college relationship program, presenting some IBBA banking operations. When we’re passing through some business data, it was impossible to notice that the way businesses are managed is only a small representation of the culture that business is in.

Banks in Brazil always focused large, high revenue clients. These clients demanded more sophisticated products, and also brought more revenues to banks. So the attention was almost fully direct to them. Small, “hyper middle” clients were caught sometimes by the stream, and Relationship officers couldn’t give all the attention they want to them (one, because plans of compensation generally focus on revenues, and two, because operations to large clients tend to be more complex and absorb more time).

In the middle of one business explanation like this one I’ve just made, a director asked a Wharton student:

“Do you have a check book?”

The Wharton student looked strangely, “Of course I have”.

“So” said the director, “know that in Brazil you couldn’t elect the president. In fact, none of us in the room could elect the president in a regular election”.

The explanation: in Brazil (and in other emerging markets), a HUGE amount of the population do not have bank accounts - if we look to the middle class, that represent a little bit more than 50% of the population (+- 100MM), only 25% of it (25MM) have bank accounts. Imagine poorer classes! This means that more than 70% of the population doesn't have a bank account, and this often-forgot public represent more society than we do.

And in a Marie-Antoinette-in-a-suite-way, (“If the population is hungry and don’t have bread, why don’t they eat brioches?”) businesses are managed taking as a base only a small amount of the population (in this example, people with bank accounts) as a reality, in a myopia that forbids you to see the potential of 75MM of customers without banking accounts that, with simple action, that could generate huge gains.

And the same goes for HR practices.

Expect to find HR policies with myopia. Practices are put in place generally considering three categories of professionals (that represent less than 20% of the organization, in general): director, managers and talents. “The rest” of the 80% of the employees tend to be forgotten when it comes to career, incentives, training, etc. And more: the leading team tends to place themselves in a pentatonic-lifestyle that only works to increase this myopia (so if you’re part of the leading team, be aware of it).

One may argue that “talents” are responsible for the great delivery of the organization, so that’s where they should focus. The same (error) as the example presented. Watch out! As a manager in emerging markets, don’t sub estimate the potential of the mass of employees that are not directors, nor managers nor talent, but are responsible to get things running.

The game changes in emerging markets! If you were a gambler in this game, where would you place your bet? If you have more examples (or counter-examples), feel free to share!

Best regards,

Alexandre Winandy

Related topics:

Talent risk

R&S in emerging markets - specialized workforce

R&S in emerging markets - non-specialized workforce

Good culture, bad culture

Edgar Schein, M&A processes and Integrating cultures

Emerging markets are getting mature, so M&A process increases in a consolidation process (many of them accelerated by the actual economic crises). Culture is always a main issue of this subject, so this topic may be handy.

Some weeks ago I was in an event and met Edgar Schein (still the thought leader when it comes to Culture - his Organizational Culture and Leadership is still my favorite organizational book). At a certain point of the event, I’ve posed the following question:

- In M&A processes, Cultural management has been one main critical factor for success. Is it really possible to integrate cultures, creating a third culture, or there’s always a prevailing culture that will suffocate the other?
His answer:

- Culture is a set of behaviors that a group of people learn as “right” or “wrong”. So culture is limiting. If the person responsible for the decisions related to one of the cultures (ex.: a CEO), there will be no cultural integration, because every decision this person makes will be limited by the culture of origin. The only way to integrate cultures is to have a balanced group of decision-makers (ex.: an integration committee balanced 50/50 with people of the two merging cultures) with power to decide and execute strategy. Companies often fail doing that because there’s always some “filter” to these decisions (ex.: the CEO, from one of the cultures, has the final word), or put together unbalanced integration teams (if you have a 60/40 team, the culture with more people will tend to prevail). You only change culture changing people who are responsible for the decisions.

So when integrating culture, people should be honest with their goals: the discourse of “getting the best of each culture” will only be possible if you have a decision-making-team with people from both companies (in a balanced ratio). If not, be aware that a “cultural takeover” may take place – a big risk when it comes to the value of this kind of operation.

But should a wining (and strong) culture be really willing to change its formula just because of an M&A process? I have some doubts about this…

(Anyway, Schein proved to me that he’s still “the reference” when it comes to organizational culture)…

Best regards,

Alexandre Winandy

Related topics:
- The Leadership Code in Emerging Markets
- Entering Ethnocentric Cultures

Edgar H. Schein (born 1928), a professor at the MIT Sloan School of Management has had a notable mark on the field of organizational development in many areas, including career development, group process consultation, and organizational culture. He is generally credited with inventing the term corporate culture.

Hierarchy in emerging markets

Power is probably the biggest wildcard that a leader may find in an emerging market, and one entering this game can either profit from or face troubles when playing it.

In emerging markets, the distance is bigger between social classes – for example, social differences between the concepts of “Poor Middle class and Rich” are clearer than in emerging countries (ranging from differences in habits, social and education, etc). Moreover, those social distances corroborates to societies to achieve a higher “power hunger”.

This means that the climbing to reach “power” is generally higher, slower and more painful to those in developed countries. Nevertheless, when on arrive on the top, will do its best to maintain it.

This distance can be demonstrated in the behavior of the leader, but also in very concrete signs and symbols:
- Dedicated refectory, according to the level - I indeed worked in a company with three different lunchrooms: for directors, for superintendents, for managers – none for the public.
- “Badges” - in other company I’ve worked for, each hierarchical level had an ID Card in different colors, and every employee was obliged to use – so you would know exactly to who you were talking to).
- Different power signs – from specific tables and dedicated seats (ex.: at the head of the table) to rooms sizes related to hierarchical position (a manager who decided to share a table with his team, having a seat in the middle of his employees, to be pressed by his peers to change it seats).

The “power distance” also reflects in leadership behaviors:
- In general, leaders in emerging markets are more distant, autocratic and operational than leaders in developed countries.
- Franc, “straight-to-the-point” feedback or contradictory points of view may be seen as a treat lack of respect.
- People development is seen as a difficult task, so most leaders prefer to recruit “formed” talent in the market, than risking attributing more power to his/her employees in order to develop them,
- Careers tend to be less accelerated, with little (or none) focus in talent retention or succession planning.

When entering in corporate games in emerging markets, one must be aware of the role of power all and its manifestations – for using it to one’s favor, or for not falling in any traps.

This is probably the thickest – and higher barrier – that stands between people relation in emerging and developed countries…

The need of being Flexible

What is the first thing you can imagine when you receive your paycheck:

a) Paying your bills

b) Investing

c) Running to the supermarket to buy everything you can, because if you don’t do so your money will be worth only a half on the next day?

Answer “C” may seen strange, but happens (or happened) in several emerging countries in a

near past.

Can you imagine what “budget planning” means in a country like this? Where no plan can be follow, because things may change dramatically in a day-to-day basis?

On the one hand, this leads emerging countries to focus on the short-term thinking, but on the other hand, demands creative solutions and demands people to be (really) flexible.

This is also expressed in the working environment, where flexibility is not only expected, but demanded.

- Meetings won’t generally start on time (some minutes may be tolerated, ex.: In Brazil is generally accepted 15min of delay).

- A professional may be seen as too bureaucratic or rigid (even little creative) if tends to follow strictly the rules.

- If a boss just denies one demand of his/her employee because “it does not fit the policy”, he/she may be seen as unwilling to do something (not only follow the guidelines).

- Assertive, straight-to-the-point answers can be also perceived lack of goodwill (“you didn’t even consider an option!”) and even aggressive.

- If someone say to you a “no”, you can probably talk to other people and easily find who can obtain to you an “yes”.

Cultures are generally aspects perceived as true by a certain group, a set of expected behaviors that one may have. This means that there’s opportunities for professionals with a different profile (they can become a “white fly” in the company), but one must be really wise to not be classified in a pejorative way.

In uncertain economic scenarios, flexibility is a core competence. So learning how to direct this energy to achieve higher business results may be a great asset.

But the everlasting question: what is more desirable; a flexible “short-term-thinking-company” or a “not-so-flexible” but with strong planning systems?

Regards

Alexandre Winandy

The Leadership Code in Emerging Markets

Yesterday I went to a conference presented by Dave Ulrich. The conference was directed to a senior executive audience, eager to know about Ulrich’s leadership theory and experience.

There were nothing really different from the book, but when Ulrich asked one question, there was an example of leadership behavior in emerging markets!

He explained that there are mainly four types of leadership, in which we all have a certain predisposition towards:

-          Shape the future (the Strategist): to those who feels more comfortable setting strategies and planning scenarios.

-          Make things happen (the Executioner): to those who feels more comfortable executing and putting things into action.

-          Engage today’s talent (the People engager): to those who feels more comfortable dealing and motivating the team.

-          Build the next generation (the Talent Developer): to those who feels more comfortable developing people and building on talent.

There’s also a nice division in short and long term:

Long term orientation: The Strategist and The Talent Developer.

Short term orientation: The Engager and the Executioner.

So, I was in a conference room with 800 directors and senior executives from emerging markets. Ulrich than demanded, “Think about what kind of leadership behavior you feel more comfortable, which is your predisposition”.

Any guess about the results?

60% chose “The Executioner”, while 30% chose “The Engager”. This means that 90% of this 800 sample of senior executives, examples of professional success, were short-term oriented.

Once the markets shifts quickly in emerging markets, this kind of leadership is more commun. Ask any executive in emerging markets to make a five-year planning process – they may laught at you! Not because they are “limited” (something I once heard from a Swiss executive), but simply because it’s almost impossible!

Economy is unpredictable (ex.: Brazil stock market is 45% up this year!), so fast REACTION and operational excellence (no mistakes allowed!) is strongly demanded.

So, expect to find “short-term” oriented leadership in emerging markets. And if you’re expatriated, even thou long-term competences are necessary, make sure to develop good deal your executioners competences!

Best regards,

Alexandre Winandy

Talent Risk

Talents in emerging markets suffer from the bullwhip effect – when the market in booming, they are booming amazingly. When things are going down, they are on free fall. The closer is the employee from the whip end, the stronger is the volatility (for good and for bad).

In a period of global crises as we’re nowadays, it’s really easy to retain talent (or better: to find the market flooded with it). The reason is pretty simple: talents are rarely in “hardcore- essential-areas”, but mostly in talent intensive areas– so the business won’t shut its doors if you fire them (incoherent? Let’s see…).

Let’s take a regular department (ex.: HR). You have one employee responsible for payroll and other responsible for long-term development. You have greater probability to hire a talent to do the long-term development of your company (because those competencies are harder to find and to be taught), in payroll talent plays a lesser role (those professionals need a great deal of specialization). But one will impact more on the long run, and the other in the short run (assuring that paychecks are ready to go!). If you had to downsize, who would you fire?

On the other hand, this is the best time to go to the market – one, because people is not hiring, and two, because you may find great, cheap talent in the market.

In emerging markets, market is more volatile, and so are talent cycles. The biggest challenge for one company is to identify those cycles, to:

a) Decide if it’s time to “buy”, “hold” or “sell” its talents.

b) Make sure that is not taking a short-term decision (such as not retaining or even firing a talent because market is going down).

In emerging markets market moves quickly. And whatever one’s decision, it’s better to be a conscious one.

Best regards,

Alexandre Winandy

Entering Ethnocentric Cultures

I’ve just gotten back from a training program in Intercultural Awareness. Pretty nice content, lots of behavioral activities to show how, must of the time, we can’t listen or face differences (even though you think we do it well).

For example, can you take a guess of the five most “Ethnocentric” countries (countries focused in its own culture and little openness to cultural exchange)?

First (and most ethnocentric) country of all: the United States of America

This may be an easy guess to most people. The US is well know in the world for “imposing” its own habits. Ex.: the terminology “Cultural Shock” was created by an American, to describe the difficult of Vietnamese to adapt to the American culture – even though it was the US who was in Vietnam (so, the “foreigners” where demanding the “hosts” to adapt to them).

But what about the other ethnocentric cultures? Here it goes:

- Brazil

- Russia

- India

- China

Ethnocentrism is the tendency to believe that one's own race or ethnic group is the most important and that some or all aspects of its culture are superior to those of other groups. Since within this ideology, individuals will judge other groups in relation to their own particular ethnic group or culture, especially with concern to language, behavior, customs, and religion. These ethnic distinctions and sub-divisions serve to define each ethnicity unique cultural identity.

That’s it; the so called BRIC is ethnocentric! This means that habitants of these countries do not only think that “my way is the right way”, but also tends to be more resistant to foreign practices!

When entering BRIC countries, watch out to try to really understand its culture. Do not assume that your practice is the best. And listen actively to map Cultural Dimensions and understand the differences. Trying to implement “standard people management practices” may be a mistake!

Best regards,

Alexandre Winandy

Other topics about National Culture:

- Culture, watch out!

- Good culture, bad culture

- The cultural code (in People Management)