Saturday, March 14, 2015

On Leadership : Trust and Difference

Having worked in International Setting most of career, and having lived in four different countries and engaging in business in at least half a dozen others, one of most attractive conversation topic for me is - what makes an organisation effective globally?

In my work, I come across educational institutions which want to recruit students from all over the world, or businesses which want to trade, and indeed do, globally. I hear conference speeches and business presentations proclaiming global ambitions. I meet people dreaming of scale, globally. Yet, at the same time, I see the track record of global engagement to be one full of failures and disappointments, over-expectations and under-achievements. 

I believe the essential problem of constructing a really global organisation comes from the essential tension between trust versus difference. Any organisation wants to impose an uniform culture - and indeed, doing so is essential. Only by promoting an uniform culture can an organisation bring down the transaction costs between its various layers and functions, and become effective. However, it is important to see how this framework of culture is built. It is usually rooted in the trust between the founding members of the organisation, and this trust is built usually upon sameness. It is indeed extremely difficult to do it any other way.

However, on the other hand, handling global issues - markets, students, whatever it may be - need diversity of thinking and approaches. Drawing up Scott Page's now-famous observations, diverse teams often do better than teams made of similar members, because of their heterogeneous approaches. In case of a global business, such heterogeneity becomes crucial. 

So, my essential point is that one can not build a global organisation without being global inside first. But this poses a huge challenge to the requirements of cultural conformity that underlie the trust between the founding members. It may matter less to a large organisation, which has evolved over a long period of time and depends on a multi-layered decision making structure that combine a highly evolved framework of trust, an established culture and a structure that can manage the trade-offs that are necessary to take advantage of diversity. But for the start-ups and other smaller businesses, who are keen on being global, this trust-vs-difference tension is an almost insurmountable issue. One of the reasons I believe we are seeing the making of an enormous tech bubble (see here) because I see the investments backing the new global start-ups are insufficiently sensitive to the global culture issue. From a bankers vantage point - money indeed has no colour and flows much easily across the border than High Street businesses - such globalism may seem normal, but most start-ups stumble at it.

Finally, the trust-vs-difference trade-off is indeed one for leadership of an organisation to address. In fact, a crucial leadership task in today's world is to foster trust across difference. Yet too many leaders want to be culture-blind, and put their faith on technical rationality as embodied in financial models. And, this creates the difference between rhetoric and practise - and makes most businesses fall short of the global mindset they desperately need to succeed.

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