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E&Y CEO on what makes global leaders successful

Jan 24, 2011

Many corporate leaders believe diversity helps their global organizations, but too few of them actually put those beliefs into action by including foreign executives in their management teams.

By James S. Turley, CEO, Ernst & Young

The World Economic Forum put talk of diversity -- of which there is much in global organizations -- into action this year by requiring its strategic partners to bring at least one female member in their five person delegation to Davos. Certainly this was a large step in the right direction to strengthen our global conversations with new voices that may have been overlooked in the past.

Those of us in the private sector might do well to consider similarly proactive paths to generate inclusive outcomes that bridge not only gender issues, but geographical and cultural differences as well. The rise of emerging markets has created a business environment where growth and innovation can come from anywhere, which means that strong leaders must be open to ideas from everywhere. But a new study conducted by Ernst & Young shows the majority of companies struggle to put their beliefs into action.

In Ernst & Young’s latest survey on globalization, we found that the majority of respondents believe diversity of teams and experience improves both the financial performance and reputation of their organizations. However, there is a disconnect. Three out of ten respondents say they have no representatives on their management team or board from outside their home country. On a more positive note, diversity tends to increase in line with overseas sales and, among those companies that derive more than 10% of their revenues from other countries, the numbers look very different – just 22% say they have only home-country representatives on their management team.

Our research found that the leaders of successful organizations capitalize on the richness of their global workforce by seeking out and implementing ideas from a variety of individuals with different backgrounds, skills and experiences. And they are not afraid to experiment. As Muhtar Kent, Chairman and CEO of The Coca-Cola Company (ko) told us in our new report, Leading across borders, a vital component of inclusive leadership is to “place people far outside their comfort zones and get them working in areas of the business they’ve never had experience in, with people they don’t know and often in markets they have never visited before.” <!-- more -->

This strategy has paid off for Coke, and it is one of the most effective responses to the new reality. It does not attempt to remove uncertainty in the business world but rather to manage it in ways designed to obtain the best possible outcome. This is no easy task: it takes considerable energy and resourcefulness. But leading companies have fine-tuned the art of responding to volatility. Based on their experience, here are four tactics to consider:

Accelerate. In a rapidly changing world, responses and decisions must be swift. Leaders need to be able to turn on the proverbial dime, processing information quickly, incorporating multiple viewpoints and creating organizational structures that allow for rapid action.

Improvise. Be open to different market characteristics — some markets may grow more slowly than others, local policy environments may be different or expected legislation may not materialize. Leaders need to innovate rapidly and must seek to learn about other markets and other cultures. In emerging markets, strategies developed over months and years may have to be discarded — and new ones created — at short notice.

Select. Find time to sponsor and appoint rising leaders who don’t think, look, or act like you do. Adding diversity to your management team has long-proven advantages. It has been a truism for some years that local executives should run local operations. But a global talent management approach is more sophisticated. Savvy business leaders choose from a slate of diverse candidates with international experience and the ability to operate in markets at different stages of maturity.

Empower. Senior leaders must be willing to give their local market heads considerable authority and decision-making autonomy, but workplace culture and values are the glue that will hold the organization together. The traditional practice of transferring entire business models from one market to another, and running everything from a centralized headquarters far away, is no longer relevant in a shifting global marketplace where diverse customers, suppliers and stakeholders all have different needs.

The theme of Davos this year reflects the concern of many leaders that is important to find shared norms in a world that is interconnected but also conflicted. In a future that will pose immense challenges, leaders who forge positive responses to this new reality stand the best chance of creating lasting success for their organizations.

Also on Fortune.com:

2011 buzzword alert: Rebalancing

At Davos, tackling risks -- and making sure Davos doesn't risk its future

A female quota at Davos? Really?

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