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Leadership in the “Polycentric” World

By Melissa J. Anderson

A recent Ernst & Young report explains that today’s business word is “polycentric,” that is, with the rise of the emerging markets, there are many centers of business with different ways of operating, and they don’t necessarily fall in line behind one Western global headquarters.

The report explains, “Companies must now operate in a “polycentric world” in which there are multiple but divergent spheres of influence in both developed and developing markets.”

And that means a shift in the behavior and mindset of leadership. Ersnt & Young’s Chairman and CEO James S. Turley wrote:

“Navigating this new environment requires agility and know-how. That means taking a more networked approach to innovation — through decentralized innovation hubs or new external partners. And it requires creating and nurturing diverse leadership teams with strong global experience.”

As new markets rise in importance, driving growth and innovation for top companies, leadership will have to become more adept at managing global high performers – and leadership will have to become more diverse and culturally competent itself.

Empowering Regional Management

One of the main lessons global leaders have learned over the past decade is that the emerging markets are not simply a one way destination for products created or developed at home. The needs across developing regions are far from homogeneous, and as a result emerging markets are a hot spot for innovation. In order to keep up with these needs, regional management should be given more autonomy, Ernst & Young says.

The report explains:

“Rather than a top-down management style with decisionmaking centered on the corporate headquarters, these companies are empowering regional managers to develop plans and business models to suit local market dynamics. This ensures that products and services are relevant to local customers and enables the company to compete against nimble, and market-savvy, local competitors.”

Providing this agility will enable regional management to meet the demands of consumers and workers in the rapidly changing and increasingly complex developing world.

The report says:

“’The traditional pace of decisionmaking in a developed nation will be inappropriate in a developing nation,’ says Alexander Cutler, Chairman and Chief Executive of Eaton Corporation, a global diversified power management company. ’You just can’t ask people in emerging markets to have their daily decisions reviewed or you will miss opportunities.’”

By empowering regional management in emerging markets, corporate leadership can be sure they aren’t missing a beat when it comes to potential sources of revenue or innovation.

Polycentric Leadership

“Increasingly, homogenous management teams made up of individuals who have spent their entire career at corporate headquarters will no longer be fit for purpose,” says Ernst & Young.

But, the report continues, it’s easier for companies to agree on the value of diversity in senior management, than it is to do anything about it.

According to the report, “Three out of ten respondents say that they have no representatives on their management team from outside their home market and less than 10% have management boards where more than half the executives come from outside the home market.”

The report adds that homogeneous management teams can harm recruitment and retention in the emerging markets by sending the signal that “there is a glass ceiling for other groups that may be difficult to breach.”

Ernst & Young suggests implementing talent management programs to encourage diversity of experience, in addition to standard diversity programs. It also recommends that management ensure up and coming talent has a chance to “study abroad.”

It says:

“Postings to emerging markets, which may once have been regarded as tantamount to being sidelined, must now be seen as a crucial component of the senior manager’s toolkit. Equally, managers from emerging markets must be given the opportunity to spend time in developed markets as part of a structured career-management program.”

By ensuring future leaders have a broad base of experience to draw upon in an increasingly global marketplace, companies can be sure they are prepared for the next phase of the polycentric world.

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