Executive Interviews: Interview with Arthur Yeung on Managing Complexity
August 2008 - By Dr. Nagendra V Chowdary

Prof. Arthur Yeung
Philips Chair Professor of Human Resource Management,
Director of Centre of Organization and People Excellence,
and Associate Dean at China Europe International Business School (CEIBS), Shanghai,
and People's Republic of China.

• Recently when Nokia decided to shut down its German's plant, it faced (continues to face) severe opposition resulting in a (seemingly) diplomatic crisis between Germany and Finland. How do you characterize such a complexity an internal or external source of complexity? How do you think managers in such instances have to respond, balancing the company's diktats and the ground realities and yet not damaging the reputation of the company?
  This is part of the challenge global corporations need to deal with. I think the reason Nokia shut down its Germany's plant may be due to its cost disadvantage compared with plants in other countries. In countries like Germany, layoff of employees or shutdown of plants are always a challenging decision as many key stakeholders are involved including local governments and unions. One possible way to avoid such problem is to structure the operation with a clear operation timeline in the beginning (e.g., five years) so that when Nokia shuts off the plant after 5 years, its decision cannot be challenged. Another possible way is to sweeten the severance package so as to minimize resistance. The final approach is to spend more time to negotiate and persuade related key stakeholders. Show your sincerity to keep the plant with two or three improvement plans. If these plans fail, then shut it down. The damages created by negative publicity in such incidents need to be contained as much as possible. Hire a local lobbying firm or PR firm to help, if necessary.

• What do you think are the critical success factors for managing complexities? Are there any benchmark practices or bench-mark companies that are worth emulating?
  The most critical success factor to manage such complexity is through planned growth (i.e., growth with due consideration of the financial/ people resources and capabilities you have). Whenever companies increase its scale or scope, they all require adequate resources and capabilities to succeed. When a company stretches way beyond its resources, the risk of failure is very high as evidenced by some unsuccessful cases like TCL acquisition of Thomson's TV business, BenQ acquisition of Siemen's mobile phone division. If a company stretches beyond its capability and resources, the resulting crisis can create major setback in company's growth and shareholder value.

• After all, it's the people who have to manage complexities in global corporations. How do you think these managers should be trained? In what aspects do you think global managers should be trained, so that they become highly effective managers in leading global corporations?
  While we can develop and prepare global leaders through formal training programs to increase their awareness and knowledge, the best and the ultimate way to grow global leaders is experience-based learning. Overseas assignment, participation in crosscultural negotiation, involvement in cross-cultural project teams, benchmarking visits to leading global corporations in their related industries, are the best way to grow global leaders. Successful global firms like P&G, Colgate and Palmolive grow leaders by sending them overseas to small countries as functional leaders to begin with, then stretch them with additional responsibilities by either becoming functional leaders in bigger countries or generalmanager in small countries, and then finally to assume general management position in bigger countries. Stretch them continuously with expanded responsibilities and allow them to learn and mature through both success and failure.

• Do you think it's wise enough to train global corporations' managers in transnational institutions or transnational alliances like UNO and it's affiliates, NATO, any antiterrorist operation, etc., to sensitize them to the demanding nature of managing complexities and instill in them a sense of ever-preparedness?
  It can be a creative option. But the challenge is the nature of work may be too far away from the business operation. Another option is to assign them to work in businessrelated institutions like World Economic Forum, Asia Development Bank, etc., for 3 or 6 month internship. Another way to ensure the cross-cultural sensitivity of your managers is to hire people with such prior cross-cultural experience. Global corporations like GE hire a lot of managers who worked in US military before as these people were posted to different parts of the world before and are more culturally sensitive. Other firms like Samsung prefer to hire a lot of ABK (American born Koreans) who are familiar with both Korean culture/language and American culture.

• What is the role of culture (the national culture of a manager working for global corporation) in managing complexities in global corporations? Should it be made mandatory for such managers to grow through a rigorous understanding of multicultural issues, Hofstede's cultural analysis of countries, etc? Do you think such exercises would prepare them well for managing complexities in any global corporation?
  We were all raised up in a given national culture. As a result, our values and thought process are programmed in a certain way. For managers to be globally effective, they must be able to appreciate the cultural diversity that exists in different parts of the world as they strive to work effectively with colleagues and business partners from different parts of the world. While cross-cultural training can increase our awareness of cultural differences, I think the best way to learn about these cultural subtleties is to live overseas for an extended period of time (at least 6 months). If living overseas is not feasible, frequent international travel or vacations to different parts of the world can help.

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3. Case Study Volumes