Recent Trends in Human Resource Management

Friday, June 26, 2009

Integrity with Global Talent Management

Integrity with Global Talent Management

The enormous cultural diversity in today's global economy makes evaluating, assessing, recruiting and managing talent a challenge - perhaps the challenge - for transnational companies. There are several key steps companies and their talent leaders can take to meet that challenge and build a global workforce that delivers high performance with high integrity.

First, contemporary corporations must explicitly establish high performance with high integrity as the foundational goal of the enterprise, recognizing that it should indeed be the goal of global capitalism.

High performance means strong, sustained economic growth based on superior products and services that provides durable benefits to shareholders and other stakeholders.

High integrity means:

a) Tenaciously adhering to the spirit and the letter of formal rules, both financial and legal.
b) Adopting voluntary global standards that bind a company and its employees to act in its enlightened self-interest.

Living the core values of honesty, candor fairness, reliability and trustworthiness, which infuse the creation and delivery of products and services, and guide internal and external relationships.

Combining high performance with high integrity must counter strong pressures to cut corners to make the numbers. It isn't just about avoiding evils and the potentially catastrophic impact of an integrity miss. It is also about creating strong, affirmative benefits for the company, the marketplace and the broader society. Such trust is needed to sustain corporations' enormous power and freedom - even under current regulation - to allocate capital, to hire and fire people, to drive productivity, to invest in new geographies and communities, and to innovate with new products or services.

This is not a frill or a nice-to-have. It is not the initiative of the month. The fusion of high performance with high integrity should be the foundation of an organization. This is especially so for companies seeking beachheads in difficult markets.

During my time at General Electric, whenever I was asked what I lost sleep over, my answer was always the same: emerging mistakes. For understandable reasons, multinationals have embraced the potential of significant new growth in the developing world, touting it at analysts' meetings and in public speeches. At the same time, they are quietly aware of the significant integrity minefields that threaten to impair performance and destroy margins: limited rule of law, endemic corruption, rampant conflicts of interest, erratic enforcement, money laundering, unscrupulous local competitors and hard-to-assess economic and political risk. To meet their dramatic growth projections, transnational companies must navigate treacherous shoals.

Second, corporations must adopt a uniform, high performance with high integrity global culture. Culture is the shared principles and practices that influence how people think and behave. The right culture is not punitive but affirmative. Such a culture only can exist when it flows from top leadership - when aspirations are matched by actions. Integrity principles and practices should be driven deep into business operations, without compromises for tough markets.

An important dimension of such a culture is the adoption of global ethical standards. "Globalization through localization" is one of the mantras of transnational companies. Localization, of course, includes adherence to the financial or legal rules of the specific national jurisdiction. GE's code of conduct, for example, begins: "Obey the applicable laws and regulations governing our business conduct worldwide."

But that's not always enough. In some cases, the answer to questions such as, "Is it according to GAPP?" or "Is it legal?" may not be adequate because formal rules don't address the broad problems facing a company. A corporation may find the best answer is to go beyond required duties and voluntarily impose a higher global ethical standard on itself and its employees.

An organized, systematic process is needed to decide whether to adopt such global standards. Once adopted, these standards should have uniform application and implementation across business units, product markets and geographies as formal financial and legal rules. Examples include ethical sourcing and building Greenfield plants in emerging markets to world, not local, standards.

Another important dimension is hiring "A" players in key leadership positions throughout the company and recognizing that driving performance with integrity into business operations requires resources. In most corporations, there is a constant struggle to find the right people and allocate adequate resources. Unless both happen, the merger of integrity and business processes isn't possible.

Hiring experts inside the corporation is vital and cost-effective for risk assessment and abatement. Inside experts know the company far better than any outsider, and they can act quickly. For example, Jack Welch encouraged me to hire outstanding experts in taxes and environmental programs, who had developed world-class expertise both in government service and private practice. Beyond minimizing and mitigating integrity risks, they also proved extremely valuable to the CEO in transactions and financial planning and in offensive and defensive public policy.

Questions about paying for the integrity infrastructure need to be faced candidly and systematically. There's no way around it: Funds must be found and spent to establish the fundamentals. Unless the CEO makes this a clear performance metric for business leaders, these costs inevitably get shoved to the bottom of the list.

This is a forward commitment, as well: When the company engages in the next round of "10 percent across-the-board cost-cuts," the CEO and other business leaders must fight the temptation to wield the ax in this sensitive area, and instead scrutinize the actual impact of reductions.

Third, performance with integrity education and training must come alive. It must be given the same commitment as training in business skills such as finance, marketing, sales and IT, and employees must be given a voice to raise integrity concerns.

The largest challenge: finding the people, message, method and evaluations that collectively constitute a culturally sensitive, yet globally effective set of communications in each market. Face-to-face sessions with employees unschooled in the company's global culture are essential; Web or paper training are second-best.

For example, GE Healthcare developed a short training case about the now famous but fictitious Mr. Vu, who faced multiple tough scenarios, such as hiring third-party consultants, approving travel and living expenses, dealing with customers' demands for bribes and the use of the GE mark.

Such learning by example isn't easy. Talent leaders will need knowledgeable trainers to develop trust and get the most out of illuminating discussions. GE often found it hard, given the exponential growth in Asian employees, to deliver live, in-context training. Too often, we had to settle for an interactive Web-based approach. This challenge is mirrored in the difficulty of finding multilingual, multicultural leaders who can help the corporation act with local sensitivity and global discipline in emerging markets, while also anticipating contingencies, diversifying operations and finding top talent.

One of the most powerful principles in creating a high performance with high integrity culture, and for ensuring accountability up and down the corporation, is to give every employee a voice. This means encouraging, and indeed requiring, the reporting of concerns about possible violations of financial, legal and ethical standards.

One channel for such voice is a company "ombuds" system that encourages employees to express their concerns, addresses those concerns promptly with professionalism and respect, makes failure to report itself an integrity violation and, of course, sanctions those who engage in retaliation. A vibrant, fair, trusted ombuds system not only detects issues early, before they can metastasize into huge problems, it also deters improper acts inside the company right from the start.

Another channel for employee voice is through the finance, HR and legal functions. These key staff members must reconcile dual, conflicting roles. They must be partners to business leaders and help accomplish performance goals. But they also are corporation guardians and must report legal, financial, ethical and reputation concerns to corporate staff leaders if they have problems raising and addressing them in their business units.

Finally, corporations must develop compensation regimes that do not just pay for performance, but pay for performance with integrity. We can measure integrity by looking at whether leaders have adopted the core performance with integrity principles, are implementing the key practices to achieve them, have created the affirmative culture - through employee surveys and 360 degree assessments - compare favorably to peer companies and have achieved annual performance with integrity goals and objectives. Similarly, the management development process should be aimed, in part, at training future leaders in the principles and practices of high performance with high integrity, especially in international markets.

[About the Author: Ben W. Heineman Jr. is senior fellow at Harvard's Kennedy School of Government and Harvard Law School and senior counsel to the law firm of WilmerHale. This article is adapted from his book, High Performance with High Integrity.]

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