Cultivating a Global Mindset

Author(s): Anil K. Gupta and Vijay Govindarajan

Source: The Academy of Management Executive (1993-2005) , Feb., 2002, Vol. 16, No. 1,
Theme: Focusing on the Positive and Avoiding the Negative (Feb., 2002), pp. 116-126
Published by: Academy of Management

Stable URL: https://www.jstor.org/stable/4165818

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? Academy of Management Executive, 2002, Vol. 16, No. 1

Cultivating a global mindset

Anil K. Gupta and Vijay Govindarajan

Executive Overview
The economic landscape of the world is changing rapidly and becoming increasingly
global. For virtually every medium-sized to large company in developed as well as
developing economies, market opportunities, critical resources, cutting-edge ideas, and
competitors lurk not just around the corner in the home market but increasingly in distant
and often little-understood regions of the world as well. How successful a company is at
exploiting emerging opportunities and tackling their accompanying challenges depends
crucially on how intelligent it is at observing and interpreting the dynamic world in
which it operates. Creating a global mindset is one of the central ingredients required for
building such intelligence. In this article, we address the following issues: why mindset
matters, what a global mindset is, the value of a global mindset, and finally, what
companies can do to cultivate a global mindset.
X * v .. . .... .* * .- -- - . . .. v v .. - . * -. . . .. -...... e- e .. @ -. * * .. . . ..-- s - .- .. - . *X . . . --- -. . - -- v. . . vv . v . .. . . -- e- . . -- @ - . . . .. . . .? ?. . . -- . .

Heterogeneity across cultures and markets is a diffused mindsets, discuss why a global mindset is
pervasive feature of the global economic landscape. important in the business world of today, and
As illustrated by the initial failure of many American present guidelines regarding what managers and
firms in the Japanese market,' ignoring such hetero- companies can and should do to cultivate a global
geneity can be a costly mistake for any company mindset.
trying to build and successfully exploit a presence
across borders. Importantly, however, in dealing What Is a Global Mindset?
with heterogeneity across cultures and markets, go-
ing to the other extreme and becoming its prisoner The Concept of Mindset
can be an equally costly mistake. As Percy Barnevik,
In order to understand the meaning of the term
the architect of ABB and its first CEO, aptly observed:
global mindset, it is important first to achieve clar-
ity regarding the underlying core concept of mind-
Global managers have exceptionally open
set. Generically, the mindset concept has had a
minds. They respect how different countries do
long history in the fields of cognitive psychology
things, and they have the imagination to appre-
and, more recently, organization theory, where
ciate why they do them that way. But, they are
scholars have focused on the question of how peo-
also incisive; they push the limits of the culture.
ple and organizations make sense of the world
Global managers don't passively accept it
with which they interact.3 The basic research find-
when someone says, 'You can't do that in Italy
ings can be summarized as follows:
or Spain because of the unions,' or 'You can't do
that in Japan because of the Ministry of Fi- 1. As human beings, we are limited in our ability
nance.' They sort through the debris of cultural to absorb and process information. Thus, we are
excuses and find opportunities to innovate.2 constantly challenged by the complexity, ambi-
guity, and dynamism of the information environ-
As the previous observations suggest, how multi- ment around US.4
national companies and their managers perceive 2. We address this challenge through a process of
and interpret the global social and economic envi- filtration. We are selective in what we absorb
ronment around them has a major impact on the and biased in how we interpret it.5 The term
strategies that they pursue and the success of these mindset refers to these cognitive filters.
strategies. Building on this premise, our goal in this 3. Our mindsets are a product of our histories and
article is to explore the concept of global mindset, evolve through an iterative process. Our current
differentiate it from alternatives such as parochial or mindset guides the collection and interpretation

116

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 2002 Gupta and Govindarajan 117

of new information. To the extent that this new Integration in knowledge structures refers to the
information is consistent with the current mind- extent to which the person or organization can
set, it reinforces that mindset. From time to time, integrate disparate knowledge elements. For organ-
however, new information appears that is truly izations or people with low differentiation, integra-
novel and inconsistent with the existing mind- tion is not an issue; there is no need to integrate if
set. When this happens, we either reject the new the knowledge is not differentiated. Integration is
information or change our mindset. The likeli- a critical attribute of mindsets in those contexts
hood that our mindsets will undergo a change where differentiation is high.
depends largely on how explicitly self-conscious Each of us, at one time or another, probably has
we are of our current mindsets: the more hidden met someone who appears to swing from one po-
and subconscious our cognitive filters, the sition to another as a result of being heavily influ-
greater the likelihood of rigidity.6 enced by whoever the person happens to meet last.
4. Every organization is a collectivity of individuals. Using our terminology, such a person is exhibiting
Each individual has a mindset which continu- a combination of high differentiation coupled with
ously shapes and is shaped by the mindsets of low integration (High D-Low I). In contrast, a per-
others in the collectivity. How this shaping and son who seeks and values multiple opinions but
reshaping of mindsets occurs depends crucially then is able to develop an integrative perspective
on who has how much power and who interacts
has a combination of high differentiation and high
with whom, in what context, for what purpose, and integration (High D-High I).
so forth. Hence, how the firm is organized and how
decision-making power and influence are distrib-
uted within the organization play a decisive role Each of us, at one time or another,
in the shaping of the collective mindset. probably has met someone who appears
5. Organizational mindsets can change and evolve to swing from one position to another as
in four primary ways:7 (1) new experiences which
a result of being heavily influenced by
cause a change in the mindsets of organizational
members, (2) a change in the relative power of whoever the person happens to meet last.
different individuals, (3) a change in the organiza-
tional and social processes through which mem- At the organizational level, consider a team of
bers meet and interact with each other, and (4) a technical experts strongly focused on new product
change in the mix of members comprising the firm development. The mindset of such a team, operating
such that the mindsets of new members differ in the silo of its members' expertise, would be Low
from those departing. As illustrated by the mid- D-High I. Compare this team to a cross-functional
1990s shift from John Akers to Lou Gerstner at team whose composition includes experts from sev-
IBM,8 the need for a different mindset is one of the eral functional areas such as R&D, manufacturing,
most common reasons for involuntary changes in marketing, after-sales service, and accounting but
CEO positions. that has no strong leadership. The mindset of such a
diffused/unfocused team would be High D-Low I. Fi-
Mindsets as Knowledge Structures nally, consider another team that in addition to be-

Research in cognitive psychology has also re- ing multifunctional has a strong leader who helps
vealed that mindsets exist in the form of knowl- the team synthesize the diverse perspectives. The
edge structures and that the two primary attributes mindset of such a team would be High D-High I.
of any knowledge structure are differentiation and
integration.9
The Concept of Global Mindset
Differentiation in knowledge structures refers to
the narrowness vs. breadth of knowledge that the Building on the language of differentiation and inte-
individual or organization brings to the particular gration, we define global mindset as a High D-High
context. Consider, for example, the proverbial I mindset in the context of different cultures and
functional expert with almost no exposure outside markets.'0 More concretely, we would define a global
the functional area. In colloquial terms, we would mindset as one that combines an openness to and
say that this person has tunnel vision-a classic awareness of diversity across cultures and markets
case of low differentiation in knowledge structure. with a propensity and ability to synthesize across
In contrast, a manager with significant experience this diversity.1' The simultaneous focus on develop-
in multiple functional areas has a more highly ing a deep understanding of diversity and an ability
differentiated knowledge structure and is unlikely to synthesize across diversity is illustrated well by
to exhibit the tunnel-vision syndrome. Home Decor Inc. (disguised name), a U.S.-based

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 118 Academy of Management Executive February

household accessories company. Founded barely it faced two challenges: first, to develop a better
five years ago, the company is one of the fastest understanding of how the needs and buying behav-
growing manufacturers of household accessories, ior of American customers differed from those it had
with a five-star customer base that includes some of served in the past, and second, to synthesize this
the most prestigious retail chains in the United understanding with its beliefs and competencies
States. The CEO, an immigrant from China, summa- pertaining to the furniture business. Without the
rizes the company's strategy succinctly as "combin- former, the company would continue to suffer from a
ing Chinese costs with Japanese quality, European misalignment between its product and service offer-
design, and American marketing. There are other ings and market needs; without the latter, it would be
Chinese competitors in the market, but along with unable to develop competitive advantage over in-
Chinese costs, what they bring is Chinese quality. cumbent players. For Ikea, the shift from a parochial
On the other hand, our American competitors have to a more global mindset required an understanding
excellent product quality but their costs are too high. of differences between Europe and the U.S. and,
We can and do beat both of them." equally important, also a commitment to synthesize
As depicted in Figure 1, it is useful to compare and these differences and develop a more integrative
contrast a global mindset (High D-High I situation) perspective on the global fumiture retailing industry.
with two alternative mindsets regarding the global
economic environment: a parochial mindset (Low D-
High I situation), and a diffused mindset (High D-Low For Ikea, the shift from a parochial to a
I situation).12 As an illustration of a parochial mind- more global mindset required an
set, consider the situation at Ikea, the world's largest understanding of differences between
furniture retailer. Until as recently as a decade ago, Europe and the U.S.
Swedish nationals constituted virtually the entire top
management team of the company. Fluency in the
Swedish language was considered essential at the In contrast to a parochial mindset, we have ob-
senior levels. And, when the company entered for- served a diffused mindset most often in the case of
eign markets, for example, the United States, it rep- professional service firms (e.g., in accounting, ad-
licated its traditional Swedish concepts such as no vertising, and management consulting). These
home delivery, a Swedish cafeteria, beds that re- firms are often structured as networks of local
quired sheets conforming to Swedish rather than U.S. partner-owned organizations. In such contexts, the
standards, and so forth. In short, Ikea saw the world power of the CEO and even the senior manage-
through a Swedish filter; it was almost blind to al- ment team is severely constrained. While certain
ternative views of market reality. Not surprisingly, individual executives at the top may have highly
the outcome was a very disappointing performance developed global mindsets, the firm as a whole
and unambiguous feedback that this mindset would behaves as if it has a diffused mindset. The appre-
be a major barrier to success in the U.S. market. ciation for and understanding of local issues and
As Ikea re-examined its format for U.S. operations, local differences is great, but often the ability to
see the bigger global picture is inadequate.'3
Figure 2 presents sets of diagnostic questions
that managers and organizations can use to assess
the extent to which they have a global mindset.

High Parochial mindset Global mindset

Integration
(Ability to
The Value of a Global Mindset
integrate
diversity The central value of a global mindset lies in en-
across cultures abling the company to combine speed with accu-
and markets)
rate response. It is easy to be fast, simplistic, and
Low Not applicable Diffused mindset wrong. It also is easy to become a prisoner of
diversity, get intimidated by enormous differences
across markets, and stay back, or if the company
does venture abroad, to end up reinventing the
Low High
wheel in every market. The benefit of a global
Differentiation mindset derives from the fact that, while the com-
(Openness to diversity across cultures and markets)
pany has a grasp of and insight into the needs of
FIGURE 1 the local market, it is also able to build cognitive
Alternative Mindsets: A Conceptual Framework bridges across these needs and between these

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 2002 Gupta and Govindarajan 119

Assessing Individuals Assessing Organizations

1. In interacting with others, does national origin 1. Is your company a leader or a laggard in your
have an impact on whether or not you assign equal industry in discovering and pursuing emerging
status to them? market opportunities in all corners of the world?
2. Do you consider yourself as open to ideas from 2. Do you regard all customers wherever they live in
other countries and cultures as you are to ideas the world as important as customers in your own
from your own country and culture of origin? domestic market?
3. Does finding yourself in a new cultural setting 3. Do you draw your employees from the worldwide
cause excitement, or fear and anxiety? talent pool?
4. When you are in another culture, are you sensitive 4. Do employees of every nationality have the same
to the cultural differences without becoming a pris- opportunity to move up the career ladder all the
oner of these differences? way to the top?
5. When you interact with people from other cultures, 5. In scanning the horizon for potential competitors,
what do you regard as more important: under- do you examine all economic regions of the world?
standing them as individuals or viewing them as 6. In selecting a location for any activity, do you seek
representatives of their national cultures? to optimize the choice on a truly global basis?
6. Do you regard your values to be a hybrid of values 7. Do you view the global arena as not just a "play-
acquired from multiple cultures as opposed to just ground" (i.e., market to exploit) but also a "school"
one culture? (i.e., source of new ideas and technology)?
8. Do you perceive your company as having a global
identity with many homes, or do you instead per-
ceive your company as having a strong national
identity?

FIGURE 2
Assessing the Global Mindset of Individuals and Organizations

needs and the company's own global experience dictable and often favors local over foreign enter-
and capabilities. prises. The market's sophistication level lags a few
These benefits can manifest themselves in one years behind that of the more economically devel-
or more of the following types of competitive ad- oped countries, but this gap is closing. And, the use
vantage: of Chinese characters requires, at the very least, a
major adaptation of the software's user interface and
. An early-mover advantage in identifying emerg-
possibly even the internal code. We would contend
ing opportunities;
that when Microsoft formulates and reformulates its
* Greater sophistication and more fine-grained
strategy for China, it will not be successful if its
analysis regarding the trade-off between local
mindset vis-c&-vis China is lacking along either of the
adaptation and global standardization;
two dimensions: if it is shallow in its understanding
* Smoother coordination across complementary
of what is happening in China and/or if it is not
activities distributed across borders;
sufficiently able to see events in China from a more
? Faster roll-out of new product concepts and tech-
integrative global perspective. China is not the only
nologies; and
country where Microsoft faces dedicated pirates, nor
* More rapid and efficient cross-border sharing of
is it the only one with a nationalistic public-policy
best practices across subsidiaries.
regime.
As an illustration of how valuable a global mind-
set can be, let us examine how its presence or ab-
sence might affect Microsoft's strategy regarding the The promise of the Chinese market is
Chinese market. In China, there is obviously a huge accompanied by perils.
market for software today with an even larger mar-
ket tomorrow. However, the promise of the Chinese
market is accompanied by perils. Software piracy Can Microsoft bring to bear lessons learned from
has been rampant. Public policy tends to be unpre- other markets as it analyzes China? Alternatively,

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 120 Academy of Management Executive February

might lessons from China be relevant in other mar-

kets? What does Microsoft's experience in other While a company does have some
countries say about the rate at which the sophisti- maneuvering room in further cultivating
cation of the Chinese market might evolve and curiosity among its existing employees,
about how quickly the company should bring lead- its greatest degrees of freedom lie at the
ing-edge products and services to China? Might
point of employee selection and in
China be one of the best global centers for Mi-
managing the company's demographic
crosoft's research into voice and character recogni-
tion technologies? Given a global mindset, these makeup.
are just some of the fundamental questions that
would be raised in the process of developing the In situations where a company has the luxury of
company's China strategy. In the absence of a hiring a younger workforce (e.g., Nokia, where the
global mindset, on the other hand, few if any of average age across the entire company is around
these questions would be identified or addressed. 30), it may be able to develop an inherent corporate
advantage in the degree to which its employees
will strive to develop a global mindset. In any
The Quest for a Global Mindset
case, every company has a good deal of discretion
In thinking about how to achieve a global mindset, in hiring people who are curious about diverse
it is critical to remember that the key word is cul- cultures and markets and in promoting those who
tivation and that the quest for a global mindset is have shown this desired curiosity.
a ceaseless journey. Living in a complex and dy- These considerations appeared to lie behind
namic world as we do, the extent to which one DaimlerChrysler's appointment of Andreas Ren-
could continue to explore the world's diversity as schler as the head of executive management de-
well as the linkages across this diversity has no velopment in 1999, a role which gave him broad
upper limit. No matter how developed the global power to help shape the careers of the top 2000-
mindset of a Nokia, a Toyota, or a Cisco Systems 3000 managers in the merged corporation. Ren-
may appear today, twenty years from now their schler came to this job not with a background in
current mindsets are, in relative terms, likely to human resource management but with a track
appear quite limited. record of having successfully managed the launch
Building on ideas from cognitive psychology of Daimler-Benz's M-class sports utility vehicle out
and organization theory regarding development of of a newly built Alabama car plant, a challenge
knowledge,17 we would contend that the speed that required effectively melding a team of man-
with which any individual or organization can cul- agers from diverse national and corporate back-
tivate a global mindset is driven by four factors: (1) grounds. According to Renschler, what he looked
curiosity about the world and a commitment to for was "people who were willing to change."'7
becoming smarter about how the world works, (2) Promoting people to senior executive levels who
an explicit and self-conscious articulation of cur- place high value on global experience and global
rent mindsets, (3) exposure to diversity and nov- mindsets sends strong signals regarding the im-
elty, and (4) a disciplined attempt to develop an portance of openness to diverse cultures and mar-
integrated perspective that weaves together di- kets. As an example, consider the case of Douglas
verse strands of knowledge about cultures and N. Daft who was appointed as the chairman and
markets. We shall explore these factors in turn. CEO of Coca-Cola Company in February 2000.
Born in Australia, Daft had worked outside the
company's U.S. operations for almost his entire
Cultivating Curiosity About the World
career prior to being selected for the CEO position.
Curiosity and openness about how the world Daft's predecessor, Douglas Ivester, was forced out
works reflect an attitude, an element of the indi- by the board partly because of insensitivity to di-
vidual's personality makeup. Like other elements versity issues both outside and within the U.S.
of personality, it is shaped heavily by early child- Reflecting his own background, Daft has started to
hood experiences and becomes more resistant to steer Coca-Cola strongly in the direction of a local
change with age. Thus, while a company does focus and greater regional- and country-level au-
have some maneuvering room in further cultivat- tonomy. The company's emphasis is more along
ing curiosity among its existing employees, its the lines of "think local, act local," hoping to take
greatest degrees of freedom lie at the point of em- advantage of country-level differences in areas
ployee selection and in managing the company's such as consumer preferences for carbonated soft
demographic makeup. drinks versus other beverages, the way products

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 2002 Gupta and Govindarajan 121

are sold and distributed, pack sizes, and the sov- had earlier believed to be some of the seemingly
ereign risk.16 "obvious" rules of this industry. In fact, this com-
parative-analysis approach resulted in the CEO
becoming a proponent rather than an opponent of
Articulating the Current Mindset
strategic alliances in this industry.
Mindsets evolve through a process of interaction
between people and the environment. Our cur-
Cultivating Knowledge Regarding Diverse
rent mindsets shape our interpretations of the
Cultures and Markets
world around us; in turn, these interpretations
affect whether or not our mindsets change or Companies can cultivate exposure to and increase
remain unaltered. Unless this iterative process knowledge of diverse cultures and markets in two
allows for new learning, it is easy to get trapped ways: (1) facilitate such knowledge building at the
in one's own mental web. A powerful way to level of individuals, and (2) build diversity in the
reduce the likelihood of this entrapment is to composition of the people making up the company.
cultivate self-consciousness about one's mind- These approaches complement each other: the
set. Doing so requires accepting the possibility former focuses on building cognitive diversity inside
that our view of the world is just one of many the mindsets of individuals, and the latter focuses on
alternative interpretations of reality. Accepting assembling a diverse knowledge base across the
this possibility significantly enhances the likeli- organization's members. Both approaches are essen-
hood of new learning.'8 tial for every multinational company. Cultivating a
How might an individual manager or team of global mindset at the level of individuals is a slow
managers cultivate self-consciousness regarding process that can take years of learning through ex-
their current mindsets? In our experience, two ap- perience in multiple cultures; thus, relying exclu-
proaches work best. The first approach is to ask sively on the globalization of individual mindsets
managers or teams to articulate their beliefs about would be woefully inadequate vis-a-vis industry and
the subject domain (e.g., at Hewlett-Packard, what competitive imperatives.
are our beliefs regarding the structure of the per-
sonal computer market in Europe?). In contrast, the
Companies can cultivate exposure to and
second approach is to conduct a comparative anal-
ysis of how different people or companies appear increase knowledge of diverse cultures
to interpret the same reality (e.g., at Hewlett-Pack- and markets in two ways: (1) facilitate
ard, how does our view of the European personal such knowledge building at the level of
computer industry compare with that of Compaq, individuals, and (2) build diversity in the
IBM, Intel, and Microsoft?). Since the comparative-
composition of the people making up the
analysis approach rests on the premise that any
company.
particular mindset is just one of several possibili-
ties, our experience has been that it is the more
effective of the two approaches for helping a man- Building on the widely accepted idea that people
ager, a team, or a company to uncover their often learn through both formal education and on-the-
deeply buried current mindsets. job experience, we describe and illustrate below
Consider, for example, the experience of one several mechanisms that companies can use to
company where we succeeded in persuading the cultivate literacy about and enthusiasm for diverse
CEO that, at least once every quarter, the agenda cultures and markets at the individual level.
for the board meeting must include a strategic
review of why a different competitor behaves the
Formal Education
way that it does. After a year of this relatively
simple exercise, the quality of discussions in the Formal education (language skills and knowledge
board meetings changed dramatically. It became building regarding diverse cultures and markets)
clear that the company's own perspective on the can take place through self-study courses, universi-
market potential of different countries and on ty-based education, or in-company seminars and/or
whether or not joint ventures were a sensible entry management development programs. For example,
mode in this particular industry were not necessar- at its Global Management Development Institute,
ily shared by some of the industry's key players. As South Korea's Samsung Group has routinely offered
a byproduct, board deliberations on action issues substantive courses in international business man-
facing the company became more comprehensive agement; country histories, cultures, and economies;
and even led to the abandonment of what the CEO and foreign languages. In-company programs have

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 122 Academy of Management Executive February

the added advantage that the learning occurs at make contact with the local Samsung office. While
multiple levels-not only in the classroom but abroad, they were even encouraged to use modes
through interactions with colleagues from other lo- of travel other than airlines, to achieve a deeper
cations around the world as well. immersion in the local culture. At the end of the
immersion period, trainees returned to headquar-
ters in Seoul and reported on their experiences
Participation in Cross-Border Endeavors
during a two-month debriefing period.19
Companies can participate in cross-border business
teams and projects. Consider, for example, a leading
Immersion experiences can range from
U.S. bank creating a "Euro" team to coordinate the
company's response to the introduction of the new two- to three-month training assignments
European currency. Should such a team be com- to more extensive cultural learning
posed only of selected managers from the company's programs.
European units, or should the team also include a
very small number of Americans from the company's
U.S. operations? The latter approach, in our view, can Expatriate Assignments
be extremely effective in building in-depth knowl- Multi-year expatriate assignments are by far the
edge regarding diverse cultures and markets-in ad- most intensive mechanism through which employ-
dition to the obvious benefits of byproducts such as ees can learn about another culture and market.
development of interpersonal ties. However, this mechanism can be the most expen-
sive for cultivating a global mindset-for the com-
Utilization of Diverse Locations for Team and pany and, given the increasing preponderance of
Project Meetings dual-career marriages, often for the individual. Ac-
cordingly, companies need to target expatriate as-
This approach has been used successfully by Veri- signments toward high-potential managers (as
Fone, a global market leader in the automation distinct from the common practice of selecting peo-
and delivery of secure payment and payment- ple that you don't want to see too much of) and also
related transactions. In the late 1990s, the company to ensure that their stay abroad fosters cultural
had nearly 3000 employees based at more than 30 learning rather than cultural isolation. As Gurcha-
facilities around the world. As one of several ran Das, former head of Procter & Gamble India,
mechanisms to become more attuned to the glo- observed astutely:
bal environment, the company's top-management
team instituted a policy of meeting for five days There are powerful ... rewards for an interna-
every six weeks at a different location around the tional manager on transfer overseas who
globe. This generic approach can be implemented chooses to get involved in the local commu-
easily at any level of the corporate hierarchy, from nity. When such people approach the new
the board of directors to a multinational R&D team country with an open mind, learn the local
within one of the business units. language, and make friends with colleagues
and neighbors, they gain access to a wealth

Immersion Experiences in Foreign Cultures of new culture.... Unfortunately, my experi-

ence in Mexico indicates that many expatri-
Immersion experiences can range from two- to ate managers live in 'golden ghettos' of ease
three-month training assignments to more exten- with little genuine contact with locals other
sive cultural learning programs. Standard Char- than servants.... The lesson for global com-
tered, a London-based global bank, has used the panies is to give each international manager
former approach, sending trainees recruited in a local 'mentor' who will open doors to the
London to Singapore and those recruited in Singa- community. Ultimately, however, it is the re-
pore to London. The Overseas Area Specialist sponsibility of individual managers to open
Course, initiated by South Korea's Samsung Group their minds, plunge into their local communi-
in 1991, is an example of an extensive program. ties, and try to make them their own.20
Every year, over 200 carefully screened trainees
selected one country of interest, underwent three
Cultivating Geographic and Cultural Diversity
months of language and cross-cultural training,
Among the Senior Management Ranks
and then spent a year in the chosen country de-
voted solely to understanding it. Trainees had no Notwithstanding the value of the various mecha-
specific job assignment and were forbidden to nisms discussed above, limits do exist on the speed

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 2002 Gupta and Govindarajan 123

with which a company can cultivate a global mind-

set among its employees, the number of employees A management team composed of seven
that it can efficiently target for this objective, and the people representing four nationalities
rate of success in cultivating their global mindsets. adds value only when the diverse
Accordingly, virtually all multinational companies
perspectives can be integrated into a
must also expand the cognitive map of the organiza-
coherent vision and a coherent set of
tion by creating geographic and cultural diversity
among senior management. Such efforts can be tar-
decisions and actions.
geted at many executive levels, from the composition
of the board of directors and the office of the CEO to In order to cultivate the ability to integrate di-
the composition of business-unit management verse knowledge bases, the organization needs to
teams. For example, in recent years, IBM elected act on two fronts: one, ensure that people will view
Minoru Makihara, the president of Mitsubishi, to its such integration as a rewarding endeavor, and
board, and General Motors elected Sweden's Percy two, ensure that people will be given ample oppor-
Barnevik, first president and CEO of ABB, to its tunity to engage in such integration as a part of
board. Similarly, in the early 1990s, of the 22 people their on-the-job responsibilities. The following are
on Dow Chemical's senior-most management com- some of the mechanisms that companies can use to
mittee, 10 were born outside the U.S. and 17 had had accomplish both of these goals.
significant international experience. At the level of
individual lines of business, Hoechst, the German Definition and Cultivation of a Set of Core Values
pharmaceutical company, serves as a good example Throughout the Corporation
of diversity. In the late 1990s, Hoechst's pharmaceu-
By definition, core values are those values that cut
tical business was led by an American CEO, a
French CFO, and a Canadian COO. across subsidiaries no matter where located. A set of
deeply ingrained and widely shared core values (as
in the case of companies such as Marriott, GE, Uni-
lever, and Honda) can serve as an organizational as
Location of Business-Unit Headquarters well as a social integrating mechanism. Belief in a
set of core values implicitly requires people to make
By dispersing business-unit headquarters to care-
sense of their local observations from the perspective
fully selected locations around the world, companies
of the company's global agenda. And, on a social
can also further the differentiation of their organiza-
level, shared values give people with diverse cul-
tional mindset (i.e., their knowledge about diverse
tural backgrounds and knowledge bases a common
cultures and markets). Among major corporations,
mindset on which to build a constructive rather than
ABB was perhaps the pioneer in dispersing the loca-
unproductive, conflict-ridden dialog.
tions of business-area headquarters away from the
corporate center. Other more recent examples would
include Eaton Corporation, which has shifted the Widespread Distribution of Ownership Rights on
worldwide headquarters of its light/medium truck a Global Basis
transmission business to Amsterdam, Holland and
Ownership rights in the global parent are a powerful
moved the world headquarters of its automotive con- mechanism to ensure that every employee, regard-
trols business to Strasbourg, France. less of location or nationality, will be inclined to look
at local opportunities, local challenges, and local
resources from a global perspective. Companies
Cultivating the Ability to Integrate Diverse such as Eli Lilly (which issues stock options to every
Knowledge Bases employee worldwide through the company's
GlobalShares program)2' significantly increase
Notwithstanding the fact that cognitive diversity the likelihood that every employee will be more
is critical for navigating in today's complex and cosmopolitan, more global in mindset.
dynamic global environment, it also can be par-
alyzing. A management team composed of seven
Cultivation of an Internal Labor Market Driven by
people representing four nationalities adds
Pure Meritocracy
value only when the diverse perspectives can be
integrated into a coherent vision and a coherent Companies such as Cisco, McKinsey, and Ford,
set of decisions and actions. Otherwise, what which are committed to using merit rather than
you get is conflict, frustration, delay, and at best nationality as the prime driver of career mobility
either a forced or a compromise decision. right up to the CEO level, create an environment in

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 124 Academy of Management Executive February

VeriFone was a market leader in the automation and delivery of secure payment and payment-related
transactions. Officially headquartered in Redwood City, California, the company was founded in 1981 and was
acquired by Hewlett-Packard in June 1997 for $1.29 billion. VeriFone's stated mission was "To create and lead the
transaction automation industry worldwide." In 1997, the company had 3000 employees based at more than 30
facilities in North America, South America, Asia and Australia, Europe, and Africa. Given below are highlights
of how VeriFone cultivated a global mindset among its people and more broadly at the level of the entire
company.

. Hatim Tyabji, VeriFone's CEO, disdained the idea of an all-powerful corporate headquarters and preferred to
view the company as a network of locations. He likened the company to a blueberry pancake where all berries
were created equal and all had the same size. Many corporate functions (e.g., human resource management
and management information systems) were managed in a decentralized fashion out of multiple global
locations such as Dallas (Texas), Bangalore (India), Taipei (Taiwan), and Honolulu (Hawaii).
* Virtually all employees of the company were provided with laptops and were connected to each other
electronically. Every company facility was also equipped with videoconferencing facilities. When employees
signed on to their email systems, a list of holidays and local times at various VeriFone locations automatically
appeared on the screen.
* The top-management team, consisting of the CEO and his ten direct reports, met for five days every six weeks
at a different location around the globe.
* The leadership was dedicated to instilling the company's core values (commitment to excellence, dedication
to customer needs, promotion of teamwork, recognition of the individual, a global mindset, and ethical conduct)
among all employees. The CEO wrote the corporate philosophy manual himself. It was translated into a
number of languages including English, Chinese, French, German, Japanese, Portuguese, and Spanish. When
the company rolled out corporate programs, senior managers traveled personally to various locations in order
to get local input and to provide guidelines regarding how the program could be tailored to the local context.
* Prior to its acquisition by Hewlett-Packard, VeriFone published the CEO's Letter to Shareholders (in its Annual
Report) in multiple languages.
* The company conducted recruitment on a global basis and instituted a uniform performance-assessment
system and incentive structure around the globe.
. One of the company's recognized core competencies was its ability to leverage know-how from various
locations in order to serve customers or pursue new opportunities. As an example, one of the company's sales
reps in Greece learned from a large customer that a competitor had raised concerns about VeriFone's expertise
in debit cards. The sales rep sent out an email request to colleagues within the company for information and
references on debit installations. Within 24 hours, he had 16 responses and 10 references, including the names
and phone numbers of established customers with debit-card installations. The next day, armed with this
information and able to say that VeriFone had 400,000 installations worldwide, the rep closed a major deal with
this customer. Stories such as this one not only provide a concrete illustration of VeriFone's already well-
developed global mindset but also serve to reinforce the notion of what constitute desirable attitudes and
behaviors within the company, thereby leading to a further deepening of the global mindset.

Abstracted from Stoppard, D. B., Donnellon, A., & Nolan, R. L. 1997. VeriFone, HBS Case No. 9-398-030.
Boston: Harvard Business School Publishing.

FIGURE 3
Cultivating a Global Mindset: The VeriFone Approach-Circa 1997

which all managers see themselves as global re- and knowledge about diverse cultures and mar-
sources. Such an environment goes a long way kets. If well planned, they also help cultivate an
toward removing the tendency to view local knowl- ability to integrate across this diversity. Consider
edge as idiosyncratic and of only local value, and the approach adopted by Nokia. CEO Jorma Ollila
building a global mindset. systematically and periodically switches the jobs
of his key managers right up to very senior levels.
In 1998 Sari Baldauf, formerly the head of Nokia's
Job Rotation Across Geographic Regions, Business
Asia-Pacific operations, was appointed the new
Divisions, and Functions
head of corporate R&D. Similarly, Olli-Pekka Kal-
Job rotations across countries have long served as lasvuo, the former head of Nokia's U.S. operations,
an effective mechanism to promote openness to became the new corporate chief financial officer.22

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 2002 Gupta and Govindarajan 125

From a management-development perspective, little-understood regions of the world as well. How

one major outcome of these shuffles is to cultivate successful a company is at exploiting emerging op-
a thorough understanding of diversity (through re- portunities and tackling their accompanying chal-
gional responsibilities for Asia or North America) lenges depends crucially on how intelligently it ob-
as well as an ability to integrate across this diver- serves and interprets the dynamic world in which it
sity (through global responsibilities for R&D or fi- operates. Creating a global mindset is a central re-
nance). quirement for building such intelligence. The con-
ceptual framework and mechanisms provided in this
article can guide companies in moving systemati-
Cultivation of Interpersonal and Social Ties
cally toward this goal.
Among People Based in Different Locations

Typically, the frequency and openness of interac-

tion between two people is a function of how The world's economic landscape is
strong their interpersonal and social ties are. Ac- changing rapidly and becoming
cordingly, the more successful a company is at increasingly global.
cultivating interpersonal and social ties among
people based in different subsidiaries, the more
effective it should be at integrating their diverse Endnotes
perspectives and knowledge bases. For instance,
'For example, see Gandz, J., Smith, M., Wali, A., & Conklin,
in France's Rhone-Poulenc Group, the top 50 man- D. W. 1992. Procter & Gamble Japan (A), HBS Case No. 9-391-003.
agers from across the world meet three to four Boston: Harvard Business School Publishing.
times every year to socialize as well as to discuss 2Taylor, W. E. 1991. The logic of global business: An inter-
view with ABB's Percy Barnevik. Harvard Business Review, 69(2):
business issues. In addition, people from various
93-105.
subsidiaries meet with each other through their
3 See Walsh, J. P. 1995. Managerial and organizational cog-
involvement in cross-border business teams. As nition: Notes from a trip down memory lane. Organization Sci-
observed by Peter Neff, the president and CEO of ence, 6(3): 280-321 for a comprehensive review of the literature
Rhone-Poulenc Inc., the company's U.S. operations: on managerial and organizational cognition that builds on the
work of pioneers such as Bartlett, F. C. 1932. Remembering.
Cambridge, MA: Harvard University Press; Festinger, L. 1957. A
I sit on the boards of three worldwide busi-
theory of cognitive dissonance. Evanston, IL: Row Peterson; and
ness groups, and the leaders of these groups Neisser, U. 1967. Cognitive psychology. New York: Appleton-
sit on the advisory board for the American Century-Crofts. Other classic works include Porac, J. F., &
company. These councils bring different per- Thomas, H. 1990. Taxonomic mental models in competitor defi-
nition. Academy of Management Review, 15(2): 224-240; and
spectives to major decisions, considering
Tversky, A., & Kahneman, D. 1986. Rational choice and the
such questions as whether a particular strat- framing of decisions. Journal of Business, 59(4): 251-278.
egy is viable, the nature of product and busi- 4See Argyris, C., & Schon, D. A. 1978. Organizational learn-
ness portfolios, and the potential for compet- ing. Reading, MA: Addison Wesley; Newell, A. 1990. Unified

itive leadership. They also decide on major theories of cognition. Cambridge, MA: Harvard University Press;
and Simon, H. A. 1955. A behavioral model of rational choice.
capital expenditures. And, finally, they are a
Quarterly Journal of Economics, 69(1): 99-118.
tool to facilitate socialization and alignment
'See Simon, H. A., op. cit.; and Starbuck, W. H., & Milliken,
within the leadership structure.23 F. J. 1988. Executives' perceptual filters: What they notice and
how they make sense. In Hambrick, D. C. (Ed.), The executive

Figure 3 presents a detailed and comprehensive effect: Concepts and methods for studying top managers. Green-
wich, CT: JAI Press.
example of how VeriFone, a Silicon Valley-based
6 See Walsh, J. P., & Charalambides, L. C. 1990. Individual
company, utilized a variety of mechanisms to cul- and social origins of belief structure change. Journal of Social
tivate a global mindset among its people as well Psychology, 130(4): 517-532.
as the company as a whole. 7 For research on how organizational-level cognitive sche-
mas can change, see Bartunek, J. M. 1984. Changing interpretive
schemes and organizational restructuring. Administrative Sci-
Emerging Opportunities and a Global Mindset ence Quarterly, 29(3): 355-372; Greenwood, R., & Hinings, C. R.
1988. Organizational design types, tracks, and dynamics of stra-
The world's economic landscape is changing rap- tegic change. Organization Studies, 9(3): 293-316; Hopf 1, H. 1992.
idly and becoming increasingly global. For virtu- Judgment and choice: The psychology of decision. New York:
ally every medium- to large-size company in de- John Wiley; and Lyles, M. A., & Schwenk, C. R. 1992. Top man-
agement, strategy, and organizational knowledge structures.
veloped as well as developing economies, market
Journal of Management Studies, 29(2): 155-174.
opportunities, critical resources, cutting-edge ideas, 8Austin, R. D., & Nolan, R. L. 2000. IBM turnaround. HBS Case
and competitors lurk not just around the corner in the No. 9-600-098. Boston: Harvard Business School Publishing.
home market but increasingly in distant and often 'See Nisbet, R., & Ross, L. 1980. Human inference: Strategies

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 126 Academy of Management Executive February

and shortcomings of social judgment. Englewood Cliffs, NJ: culture and market, yet the organization as a whole lacks the
Prentice Hall; and Schank, R. P., & Abelson, R. P. 1977. Scripts, ability to synthesize across this diversity and therefore is un-
plans, goals, and understanding. Hillsdale, NJ: Lawrence Erl- able to reap the benefits of global scale and scope. Many
baum Associates. professional service firms structured as global federations of
10 Here we use the term markets broadly. Any particular local partnerships (e.g., KPMG in the early 1990s) serve as good
country or region can potentially be a market for the sales of the examples of organizations with diffused mindsets.
company's products and services, for accessing technology and One cell is labeled "not applicable" because an organization
talent, for tapping into higher-quality or lower-cost labor, for that is closed to diversity always has a highly integrated per-
the purchasing of raw material and components, and for the spective regarding the external environment.
sourcing of capital. 13 See, for example, Ibarra, H., & Sackley, N. 1999. Charlotte
" Our dual emphasis on cognitive diversity as well as inte- Beers at Ogilvy & Mather (A). HBS Case No. 9-495-031. Boston:
grative ability is fully consistent with the perspectives reflected Harvard Business School Publishing.
in Murtha, T. P., Lenway, S. A., & Bagozzi, R. P. 1998. Global 14 See Walsh, op. cit.; Argyris & Schon, op. cit.; Walsh &
mind-sets and cognitive shifts in a multinational corporation. Charalambides, op. cit.; and Murtha, et al., op. cit.
Strategic Management Journal, 19(2): 97-114; and Kobrin, S. J. 15 See Ball, J. DaimlerChrysler's Renschler holds job of meld-
1994. Is there a relationship between a geocentric mind-set and ing officials into cohesive team. Financial Times (London), 12
multinational strategy? Journal of International Business Stud- January 1999, B7.
ies, 25(3): 493-511. "6James, D. 20-26 September 2001. Local Coke. BRW. 70-74.
12 These classifications parallel Perlmutter's notion of geo- 17 This conclusion is consistent with research findings by,
centric, ethnocentric, and polycentric organizations. See Perl- among others, Eden, C. 1992. On the nature of cognitive maps.
mutter, H. V. 1969. The tortuous evolution of the multinational Journal of Management Studies, 29(3): 261-265; Mitchell, R. 1986.
corporation. Columbia Journal of World Business, 4(1): 9-18. Team building by disclosure of internal frames of reference.

An organization would be termed as having a global mindset Journal of Applied Behavioral Science, 22(1): 15-28; and Walsh,

when it demonstrates deep knowledge of diverse cultures and J. P., & Charalambides, L. C., op. cit.

markets as well as an ability to synthesize across this diversity. 18 See Govindarajan, V., & Gupta, A. K. Global mindset of
As an example of a company with such a mindset, see the Samsung. Tuck School Case Study. Hanover: Tuck School of

description of VeriFone in Figure 3. Business; and Dragoon, A. 1996. Samsung Electronics: Not acci-
An organization would be termed as having a parochial dental tourists. CIO, 9(19): 62.
mindset when it is blind to diversity across cultures and mar- 19 Das, G. 1993. Local memoirs of a global manager. Harvard
kets. Such an organization makes little, if any, effort to adapt its Business Review, 71(2): 38-47.

products and processes to local conditions in foreign markets. 20Flynn, G. 1996. Lilly prepares its people to take on the
As discussed in the text, Ikea appeared to have a parochial world. Personnel Journal, 75(1): 58.
mindset at the time of its entry into the U.S. in the mid-1980s. 21 Baker, S. Nokia: Can CEO Ollila keep the cellular super-
An organization would be termed as having a diffused mind- star flying high? Business Week, 10 August 1998, 54-60.
set when it behaves as a loose federation of geographic units 22 Neff, P. 1995. Cross-cultural research teams in a global
such that each local unit has a deep understanding of the local enterprise. Research Technology Management, 38(3): 15-19.

Anil K. Gupta is a Distinguished

Vijay Govindarajan is the Earl
Scholar-Teacher and Professor of
C. Daum 1924 Professor of Inter-
Strategy and Global E-business
national Business and director
at the Robert H. Smith School of
of the William F. Achtmeyer
Business, University of Maryland
Center for Global Leadership at
at College Park. He received his
the Tuck School of Business at
D.B.A. from the Harvard Business
Dartmouth College. He is also
School. His research interests fo-
the faculty director for the
cus on managing in the digital
Global Leadership 2020 Pro-
age, managing globalization,
gram. He is coauthor, with Anil
and the quest for synergy. He is
K. Gupta, of The Quest for
coauthor, with Vijay Govindara-
Global Dominance, published
jan, of The Quest for Global
by Jossey-Bass in 2001. Contact:
K: .^
Dominance. Contact: agupta@
[email protected].
rhsmith.umd.edu.

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