Julian Birkinshaw at the Asia Pacific Summit 2011

CULTURAL DIFFERENCES FOR MANAGEMENT ADVANTAGEProfessor Julian Birkinshaw

London Business School

Copyright Julian Birkinshaw 2011

A shift in perspective


From West to East:Largest Sovereign Wealth Foreign

funds 2010

Abu Dhabi Investment AuthorityGovernment Pension Fund of NorwaySaudi Arabia foreign holdingsSAFE investment company (China)China investment companyGovernment of Singapore investment companyHong Kong authority investment portfolioKuwait investment authorityNational social security fund (China)Russian national welfare fund

$627b

$415b

$289b

$228b

$147b

$443b

$347b

$248b

$203b

$143b


From West to East:Countries with the most

billionaires

USAChinaRussiaGermanyIndiaUKTurkeyHong KongCanadaJapan

422

65

52

28

24

66

57

30

25

22


From West to East:Countries with the most university

students

USAIndiaJapanChinaRussiaFrancePhilippinesItalyIndonesiaBrazil

14.2m

3.9m

2.6m

2.0m1.9m

6.0m

3.4m

2.0m

1.9m

1.9m


From West to East:Homes of Fortune 500 global

companies

USA+Canada

European Union

Japan

Korea/Taiwan

China

India, Russia, Brazil

Other emerging

201

104

156

12

12

150

71

170

21

46

21

3

2001 2010


How does this global power shift play out in the corporate

world?

What will be the role of management in generating competitive advantage for

companies in the west and the east?


How America led the corporate world (post WWII)

Advanced manufacturingFinance and Investment

Leading-edge technologyProfessional managersManagement thinking


Advanced manufacturingFinance and Investment

Leading-edge technologyProfessional managersManagement thinking


Hegemony

“A state of affairs where the dominant class impose their

world view as if it were natural, inevitable, and

beneficial to every social class”


HBR Blog NetworkNicholas Bloom, Rebecca Homkes, Raffaella Sadun, and John Van Reenen

Why American Management Rules the World 3:30 PM Monday June 13, 2011

After a decade of painstaking research, we have concluded that American firms are on average the best managed in the world. This is not what we — a group of European researchers — expected to find. But while Americans are bad at football (or soccer, as it's known as locally), they are the Brazilians of Management.

USGermanyJapanCanadaUKBrazilIndiaChinaGreece

http://blogs.hbr.org/

http://hbr.org/search/Nicholas%20Bloom,%20Rebecca%20Homkes,%20Raffaella%20Sadun,%20and%20John%20Van%20Reenen


CEIBS – China’s top business schoolManagement faculty and their PhD school

Doucet WhartonFernandez IESEKim N. CarolinaLee U. MassWierdsma TilburgXiao INSEADXin California IrvineYang S. CaliforniaYeung Michigan

Chen AucklandChen PurdueLiang IndianaMeyer LBSXu TorontoYip HarvardZhang HarvardZhang UBC (Canada)Zhu Shanghai


Is the American model of management really better?

For an Asian company trying to succeed on a global scale, is the best approach simply to imitate

the American model?

Some historical context is needed….


What problem was management invented to solve?

• How to routinise and standardise work?

• How to maximise employee discipline and diligence?

• How to organise complex work processes?


The architects of the American model


Motivating People

Making Decisions

The traditional American model

Bureaucracy

Hierarchy

Extrinsic rewards

Coordinating Activities

Defining Objectives

Alignment


Weaknesses in the Model

• It is ill-suited to deliver on the key strategic imperatives facing companies today

PURPOSE

AGILITYENGAGEMENT

INNOVATION




• It leads to alienation, discontent, and cynicism among front-line employees


How engaged are your employees?

0

20

40

60

80

USA

Germ

any

UK

Kore

a

Fran

ce

China

Indi

aJa

pan

Highly Engaged Moderately Engaged Disengaged


Who are you happiest with?

Friends

Parents/relatives

Spouse

My children

Co-workers

Clients/customers

Alone

Boss

3.3

3.0

2.8

2.7

2.6

2.4

2.2

2.0

(Rating is on a 1-5 scale)




• It leads to alienation, discontent, and cynicism among front-line employees

• It is increasingly losing its legitimacy as a “force for good” in society


Recent management melt-downs


How do you rate the honesty of the following professions?

Medical doctors

Police officers

Clergy

Journalists

Bankers

Lawyers

Business executives

Car salespeople

65%

63%

50%

23%

19%

13%

12%

6%


Alternatives to the American Model of Management: Sources of inspiration


Contrasting Models of Management

Defining Objectives

Motivating People

Making Decisions

EmergenceBureaucracy

Collective Wisdom

Hierarchy

IntrinsicExtrinsic

ObliquityAlignment



Emergence

Shared Space: An intriguing analogy


Emergence

Principles for managing “common” resources:

• Clearly defined boundaries • Rules adapted to local conditions • Collective-choice arrangements allow

all to take part in decision-making• Effective monitoring • Graduated sanctions • Mechanisms of conflict resolution are

cheap and easy to access • Self-determination of community is

recognized by higher-level

Source: Elinor Ostrom, Nobel Laureate


Collective Wisdom


Intrinsic Motivation

Flow: “being completely involved in an activity for its own sake. The ego falls

away. Time flies. Every action, movement, and

thought follows inevitably from the previous one, like

playing jazz. Your whole being is involved, and

you're using your skills to the utmost.”

Mihaly Csikszentmihalyi


Making work more intrinsically interesting at HCL Technologies

• Value is created by client-facing employees

• Managers and support functions serve them

– Open 360º feedback– Smart Service Desk– You & I


Obliquity

Goals are best achieved indirectlyIf you want to get to point A, aim at

point B

Don't aim at success — the more you aim at it and make it a target, the more you are going to miss it. For

success, like happiness, cannot be pursued; it must ensue, and it only does so as the unintended side effect

of one's personal dedication to a cause greater than oneself.

Viktor Frankl, Holocaust Survivor and Philosopher


Two perspectives on goal setting

“To create a better everyday life for

the many people.”

“We must continuously achieve superior financial

and operating results while simultaneously

adhering to high ethical standards.”


Cargills’ oblique goals

“serving the rural community, our customer and all other stakeholders through our core business, food with love, on the principles of

enhancing youth skills, bridging regional disparity, and reducing cost of living by enhancing local and global markets.”


Contrasting Models of Management

Defining Objectives

Motivating People

Making Decisions

EmergenceBureaucracy

Collective Wisdom

Hierarchy

IntrinsicExtrinsic

ObliquityAlignment



How prevalent and how promising is this alternative

model?1. Social and technological trends

make change more likely




make change more likely2. Cultural factors make the

alternative model more attractive in Asia


Dimensions of Culture

Individualism Collectivism

Short-term orientation

Long-term orientation

High power-distance

Low power-distance

USA

India

China

Sweden




make change more likely2. Cultural factors make the

alternative model more attractive in Asia

3. We see a coherent “India Way” starting to emerge


Inspiration from the Bhagavad Gita

• Greed is Bad. You should never engaged in action only for the desire of rewards.

• Be Fair. Enlightened leaders are compassionate and selfless.

• Act rather than React. Leaders accomplish excellence by taking action.

• Seek Higher Consciousness. Show sensitivity to multiple stakeholders.

Source: Pete Engardio, Karma Capitalism, Business Week, October 2006


The “India Way”

• Holistic engagement with employees

• Improvisation and adaptability

• Broad mission and purpose


What about a “China Way”?

• Rapid and effective imitation of Western business practices

• Increasing self-confidence and influence

• Opportunities for leading Chinese companies to play their own game, to build on thousands of years of cultural heritage (e.g. Confucianism)


Key themes

• Your Management Model is a conscious set of choices

• Build on what works, and have the courage to choose your own path

Education

Julian Birkinshaw at the Asia Pacific Summit 2011