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Developing Leadership

Capabilities of Global
Corporations: A Comparative
Study in Eight Nations

Arthur K. Yeung and Douglas A. Ready

Changing competitive dynamics are influencing the leadership capability requirements


of global corporations. More than 1,200 managers from ten major global corporations in
eight countries responded to an international survey on the core capabilities required for
competitiveness. While the results highlighted six leadership capabilities that are globally
valued, a comparative analysis of the data shows that culture affects the relative impor-
tance given to a leadership capability requirement. The article also investigates the most
effective methods for developing each of the core leadership capabilities. Implications for
HR professionals are suggested as they devise strategies for leadership development.
© 1995 by John Wiley & Sons, Inc.

INTRODUCTION

An inescapable characteristic of the current global economic arena is


that most global corporations are undergoing revolutionary changes
(Fortune, 1993a) elicited by an unprecedented convergence of forces:
global competition of an intensity never before seen, exponential tech-
nological development, surging customer expectations, and vacillations
in the kinds and numbers of governmental regulations (Fortune, 1993a,
1993b, Kotter, 1991). Confronted by this nexus of circumstances, many
corporations are in the midst of radical transformations which will allow
them to respond simultaneously and effectively to meet heightened cus-
tomer requirements in quality, service, innovation, speed, and price; to
increase their flexibility in meeting new competitive conditions; and to
create frameworks that enable the corporations to engage in a continu-
ous process of regeneration and renewal (Ready, 1994). To ensure not
simply survival but success as well, many corporations, such as GE,
AT&T, British Petroleum, BT, Conrail, and Pepsi-Cola International, are
developing (and subsequently relying on) a new breed of strategic lead-
ers who have the ability to reinvigorate corporate competitiveness and
to masterfully lead their corporations through the inevitable waves of

Human Resource Management, Winter 1995, Vol. 34, Number 4, Pp. 529-547
© 1995 by John Wiley & Sons, Inc. CCC 0090-4848/95/040529-19
tumultuous change in the decades ahead (Bennis & Nanus, 1985; Kotter,
1991; Tichy & Devanna, 1986; Tichy, 1989; Vicere, 1992).
The primary focus of this article is to investigate and examine new
leadership capabilities that are identified by managers in eight nations as
crucial for their leadership effectiveness. Leadership capabilities refer to
the knowledge, skills, abilities, and attributes that leaders need to pos-
sess and demonstrate in order to perform their roles and jobs compe-
tently (Ulrich, Brockbank, & Yeung, 1989). Kotter (1991) argues that
leaders play three roles: setting a direction, aligning people, and mo-
tivating and inspiring. Nevertheless, the leadership capabilities that are
required to perform these roles effectively may vary in different corpora-
tions and countries.
An examination of managers' perceptions of new leadership capa-
bilities in different countries is significant for three reasons. First, it
allows a systematic cross-national comparison of how managers per-
ceive new leadership capabilities similarly and differently in different
countries. The findings bear direct relevance to the leadership develop-
ment strategies of global corporations as they attempt to reconcile the
dual imperatives between global consistency and local differentiation
(Bartlett & Ghoshal, 1989; Milliman, Von Glinow, & Nathan, 1991; Por-
ter, 1986; Rosenzweig & Singh, 1991). Second, managers' perceptions of
leadership capabilities, as opposed to top management's communica-
tions and/or company documents, provide another useful source of in-
formation for understanding future leadership capabilities within corpo-
rations. While corporations nowadays have launched so many programs
of the month that managers may ignore most of them, managers' per-
ceptions of leadership capabilities reflect what they understand, or what
they personally believe in, as essential leadership dimensions. Third,
even though managers' perceptions may represent ideal leadership ca-
pabilities rather than actual leadership capabilities, these perceptions
reflect their felt need to develop themselves along those dimensions. As a
result, they should constitute the foundation for their present and future
leadership development and shed light on the future leadership capa-
bilities in these nations.
To investigate the future leadership capabilities required of managers
in global corporations, we conducted an international study titled
"Competitive Capabilities Profile" in 1993 to examine the key organiza-
tional and leadership capabilities essential for effective global compet-
itiveness over the next three years. Over 1,200 executives and managers
representing ten global corporations in eight countries participated in
the study. Participating companies were AT&T, British Airways, Broken
Hill Proprietary, Daimler-Benz, EDF (Electricity of France), Fiat, Kao,
Siemens, Ssang Yong, and Union Carbide. The respondents were di-
verse, representing a broad sampling of nationalities and management
levels. This diversity enabled us to conduct a systematic comparative
study focusing on strategic leadership among eight nations. With the

530 / Human Resource Management, Winter 1995


resulting database, this article examines three issues critical to the identi-
fication and development of leadership capabilities within major global
corporations:

• What are the key leadership capabilities considered most important


by executives of major global corporations?
• What is the role of national culture in affecting the relative impor-
tance of these leadership capabilities?
• What are the best ways to develop each of these key leadership
capabilities?

LEADERSHIP CAPABILITIES AS
COMPETITIVE ADVANTAGE

While traditional literature in strategy and organization theory sug-


gests that organizational performance is a result of organizational adap-
tation to industry or market requirements (Hill, 1988; Porter, 1980, 1985),
recent research highlights the importance of organizationally "distinc-
tive competencies" in creating competitive advantage regardless of exist-
ing industrial or market constraints (Hamel & Prahalad, 1994; Lado &
Wilson, 1994; Pfeffer, 1994; Ulrich & Lake, 1990). Companies that are
able to leverage their distinctive competencies (such as people, technolo-
gy, and processes) can redefine rules of competition and create new
business opportunities for future growth (Hamel & Prahalad, 1994).
Leadership capability, one of the central components of organiza-
tionally distinctive competencies, is crucial to business success, as it
affects the organizational interpretation of the environment (Daft &
Weick, 1984; Dutton & Jackson, 1987), the articulation of business vision
and strategy (Bennis & Nanus, 1985; Hamel & Prahalad, 1989, 1994;
Prahalad & Bettis, 1986; Westley & Mintzberg, 1989), and the alignment
and mobilization of people toward common ends (Kotter, 1991).
Leadership capability is especially important for global corporations
in which organizational structures, processes, and systems are hardly
sufficient to cope with the ever-changing and highly complex business
environments in different parts of the world (Bartlett & Ghoshal, 1990;
Evans, 1992). In addition, the globalization of markets and the spectacu-
lar acceleration of information and communications technology drive
organizations to compete faster, better, and cheaper simultaneously. As
a result, the success and survival of global corporations is predicated on
the capacity of leaders to create and sustain tangible value for their
customers and to maintain the strategic agility required to respond to
new opportunities at a moment's notice.
In spite of its importance, the development of leadership capabilities
within global corporations is not an easy task, given the conflicting

Yeung and Ready: Leadership Capabilities / 531


demands these organizations are facing: between global consistency and
local differentiation (Bartlett & Ghoshal, 1989; Doz, Bartlett, & Prahalad,
1981; Rosenzweig & Singh, 1991) and between fit and flexibility (Milli-
man. Von Glinow, & Nathan, 1991). As a result, the new generation of
strategic leaders must skillfully balance the host of concerns that fall
within the category of business imperatives on the one hand and cultur-
al imperatives on the other. Business imperatives emphasize the key
leadership capabilities that corporations must possess in order to re-
spond effectively to customer needs and competitive threats. Cultural
imperatives refer to the sensitivities that are required in order to com-
pete and conduct business effectively within a given cultural context.
Researchers and practitioners (Adler, 1986; Hofstede, 1980; Linowes,
1993; Tung, 1988) are quick to point out that the historical and cultural
traditions of each country cannot be ignored in the development of
strategic leaders. The studies of Kluckholn and Strodtbeck (1961) and
Hofstede (1980) have highlighted the key cultural dimensions which
differentiate organizational and leadership practices of various countries
(Boyacigiller & Adler, 1991). Thus, even in the face of pervasive global
challenges and broadly shared market conditions, corporations in differ-
ent countries respond differently based on the cultural programming of
their leaders (Hofstede, 1980). Global corporations tend to emphasize
key leadership capabilities that are acceptable, legitimate, and feasible
within their cultural contexts (Schuler, Fulkerson, & Dowling, 1991). In
short, the contrasting cultural contexts of global corporations condition
the way in which they formulate their strategic priorities, envision their
future, and develop their leadership capabilities.
Although the business and cultural imperatives of leadership devel-
opment may, at times, appear to be contradictory, the importance of
balancing both imperatives has been recognized by researchers (Rosen-
zweig & Singh, 1991; Schuler, Fulkerson & Dowling, 1991). Neverthe-
less, what remains unclear is precisely how global corporations have
managed to successfully balance the two imperatives in developing their
strategic leaders. Findings gathered from the ten global corporations
included in our study elucidated the ways in which global corporations
operating in widely separated parts of the world have developed the
capabilities of their leaders.
While the identification of key leadership capabilities is the primary
focus of this paper, the specifics of how global corporations develop
their strategic leaders are also of interest. Previous research has revealed
four broad categories of developmental methods (Tichy, 1989; Robinson
& Wick, 1992). The most common approach is experience-based learning
(McCall, Lombardo, & Morrison, 1988); in essence, this method assumes
that experience is the best teacher. In being assigned to project and
process teams, special task forces, and turnaround situations, leaders
expose themselves to critical events and challenges which, in and of
themselves, become the means of professional growth. Research indi-

532 / Human Resource Management, Winter 1995


cates that about 70 percent of all development occurs through on-the-job
experiences, whereas formal training provides less than 10 percent of a
manager's development (Robinson & Wick, 1992).
Performance management is the second most widely used category of
leadership development. Through performance feedback and mentor-
ing, leaders can be coached in methods of inculcating key leadership
capabilities. A primary success factor in performance management is
pairing potential leaders with exemplary, seasoned leaders who can pro-
vide potential leaders with effective coaching and feedback that has been
gathered from supervisors, peers, subordinates, or customers.
The third category is classroom education—training which can occur
either in-house or through external educational institutions. Increas-
ingly, many companies are turning to in-company management devel-
opment programs that tailor their approaches to specific corporate needs
and address ongoing business problems (Ready, 1992). In addition, in-
company management development programs are used to leverage cul-
tural and strategic change (Tichy, 1989).
The fourth category of development is benchmarking, an approach
which serves two purposes. First, it is often used as a catalyst for organi-
zational change and improvement. For example, by visiting the best-
managed companies in the world and meeting with their managers,
leaders can visualize applications to their own companies. In this way,
they can begin the process of evolving strategies that they can imple-
ment within their own companies. It serves, in effect, as a springboard
to strategic planning and as a way of defeating the Not-Invented-Here
syndrome. Second, benchmarking provides specific standards and
methods for improvement. By participating in benchmarking efforts,
leaders are exposed to world-class standards and learn how the best-
managed companies have achieved their objectives. A classic case of this
is Xerox's benchmarking of L. L. Bean's distribution system. By studying
the warehouse management and distribution strategies of L. L. Bean,
Xerox's Logistics and Distribution unit has moved from 3 to 5 percent
annual productivity gains before benchmarking to 10 percent annual
improvements after adapting some of L. L. Bean's distribution methods
(Tucker, Zivan, & Camp, 1987).

RESEARCH METHOD

In order to examine key leadership capabilities and development


methods in major global corporations, a questionnaire (in six different
languages—English, German, French, Italian, Japanese, and Korean)
was distributed to executives in ten selected corporations. The two major
criteria for selection were the size and global complexity of the corpora-
tions (all except EDF were listed in Global Fortune 500 or Global Busi-

Yeung and Ready: Leadership Capabilities / 533


ness Week 1000 in 1993) and the selection of a diverse group of organiza-
tions at various points along the transformation continuum.
Based on the literature on leadership (Bennis & Nanus, 1985; Kotter,
1991; Tichy & Devanna, 1986; Vicere, 1992), a list of more than 50 leader-
ship capabilities was originally generated. The pilot version of the ques-
tionnaire was tested and completed prior to 1993 by 300 managers f^rom
the United States (US), United Kingdom (UK), and Japan. In the final
survey (see Appendix 1) conducted in 1993, the list of leadership capa-
bilities was refined and reduced to 45 items.
Through our initial correspondence, ten global corporations—AT&T,
British Airways, Broken Hill Proprietary, Daimler-Benz, EDF/GDF, Fiat,
Kao, Siemens, Ssang Yong, and Union Carbide—agreed to participate in
the study. Two hundred surveys were sent to our liaison in each corpo-
ration for distribution. A total of 1,213 executives and managers re-
sponded to our study, representing a response rate of 60 percent. To
examine the impact of cultural context on leadership capabilities, the
respondents' national citizenship—rather than the country in which
their corporations had its headquarters—was used to measure the cul-
tural differences.
Figure 1 indicates the nationality composition of the respondents.
German respondents were the largest group in the sample, followed by
US, Korean, and French respondents. Japanese and British respondents
were relatively underrepresented in the sample although both groups
still have more than 50 respondents. In addition, the study included 130
respondents from miscellaneous nationalities (i.e., Canada, India, and
Taiwan, among others). For the sake of simplicity, our analysis was
restricted to eight major nationalities. As a result, only 1,083 respon-

Australia f
Fr»Ke
i
Germany

Italy

Jspsn f
Konaa

UK. i
US.

Others i
10 12 14 16 18

Figure 1. Nationality composition of respondents.

534 / Human Resource Management, Winter 1995


Executive Offlcere

Vice President
t
Director
- ^ IZZZT3
w
Middie Manager
t
ndivlduai Contributor

Other

10 15 20 25 30 35 40 45
Percentage

Figure 2. Management levels of respondents.

dents were retained for subsequent analyses in cross-national compara-


tive study.
Figure 2 shows the management level of the respondents. The sample
deliberately focused on senior managers in order to shed light on this
specific group's perception of strategic leadership capabilities. About 73
percent of the respondents were at least at the level of director or above
(vice presidents or executive officers).
Among the list of 45 leadership capabilities, respondents were asked
to select the five leadership capabilities^ they considered to be most
important for their own leadership development over the next three
years. For each leadership capability identified, respondents were asked
to select the most effective method of developing that capability. Seven
learning methods (see Table III) based on the four broad categories of
developmental methods (discussed on p. 7) were provided for selection.
Leadership capabilities that were considered most important and that
were selected in the five choices were assigned " 1 , " while leadership
capabilities that were not selected were assigned "0" (i.e., dichotomous
variables). For each leadership capability, a mean score ranging from 0 to
1 was calculated based on the respondents in each country. The leader-
ship capability measure carries two different meanings in the interpreta-
tion of this study. First, it is a measure of importance. The score indicates
the extent to which the leadership capability is considered important by
respondents in each country. If multiplied by 100, the score indicates the
percentage of respondents in a country who considered a specific leader-
ship capability as most important. Second, it is a measure of consensus.
Given the forced choice method used in the survey (i.e., each respon-
dent was allowed to select 5 of 45 capabilities), the measure also indi-
cated whether respondents selected a relatively small, but commonly

Yeung and Ready: Leadership Capabilities / 535


agreed upon, set of leadership capabilities or a diverse set of leadership
capabilities about which the consensus level was low.
To assess cultural variations of leadership capabilities among the eight
countries, ANOVA was used in the statistical analysis. In addition, the
Scheffe test of multiple comparison was utilized to pinpoint which coun-
tries were significantly different from each other in their valuation of
specific leadership capabilities.
While national variations in the perceptions of leadership capabilities
may be confounded by variables other than culture (e.g., global corpora-
tions' strategic priorities, competitive environments and strengths, core
objectives, and so on), it is natural that national culture should partly
account for the variance for two reasons. First, previous research indi-
cates the importance of national cultures on leadership practices (Adler,
1986; Hofstede, 1980; Tung, 1988). Second, our sample drew deliberately
and systematically upon respondents from culturally and geographically
diverse background (i.e., Asia, Australia, Europe, and North America),
making cultural variation a significant factor in the study.

DISCUSSION OF RESEARCH FINDINGS

Similarities of Leadership Capabilities in Eight Countries

Table I lists 13 key leadership capabilities out of a total of 45 leadership


capabilities listed in the survey. These leadership capabilities have been
identified as among the top five most important capabilities by respon-
dents of at least one country. The findings in this table offer a number of
insights. First, a high degree of convergence exists around several key
leadership capabilities. Respondents from all countries (except Italy)
reached consensus that the ability to articulate a tangible vision, values, and
strategy is the most important leadership capability. This capability was
deemed the most valued leadership capability by Australian, French,
German, and British respondents and the second most valued leader-
ship capability by Japanese, Korean, and US respondents. Its wide-
spread importance to managers in both the West and the East suggests
that, amidst the rapid economic transformation of the 1990s, most global
corporations place great emphasis on setting a direction or developing a
guiding purpose (Kotter, 1991).
Other key leadership capabilities considered important by respon-
dents in most countries represented in the study were: being a catalyst for
strategic change, being results-oriented, empowering others to do their best,
being a catalyst for cultural change, and exhibiting a strong customer orienta-
tion.
These leadership capabilities, based on analysis of the overall data,
represent the leadership capabilities which respondents in the eight
targeted countries identified as the most important. The degree of

536 / Human Resource Management, Winter 1995


Table I. The Most Important Leadership Capabilities Selected by
Respondents in Eight Countries.^

Leadership Australia France Germany Italy Japan Korea U.K. U.S. Total
CaDabilitT (N=101) (N=158) (N=215) (N=130) (N=54) (N=177) (N=64) (N=184) (N=1083)
Be a catalyst/ .2« .23 3S .10 31 .32 .27 .32 .28
manager of (5) (2) (5) (1) (3) (2)
strategic chan&e
Be a catalyst/ .34 .38 .19 36 .06 .05 30 .29 .25
manager of (3) (2) (1) (4) (5) (4)
cultural chanse
Be fleuble and .11 .13 .24 .30 .19 .17 .16 .09 .18
adaptive (2)

Have a "global .19 .20 .14 .13 .39 .26 .13 .16 .19
mindset" (4) (4)

Articulate a .41 39 .41 .15 .46 .27 .41 .34 .34


taugible vision, (1) (1) (1) (2) (2) (1) (2) (1)
values & stratesv
Conununicate .18 .28 .31 .28 .09 .12 .22 .22 .23
effectively on a (3) (3) (4)
dav-to-day basis
Manage internal .09 .26 .09 .05 .09 .07 .08 .04 .10
and extemai (4)
networks
Think .19 .19 .13 .21 .41 .25 .13 .16 .19
integratively about (3) (5)
the total business
Have integrity and .13 .06 .23 .07 .19 .27 .13 .15 .16
trust (3)

Exhibit a strong 32 .15 .26 .28 .09 .19 .31 .31 .24
customer (5) (5) (4) (3) (4) (5)
orientation
Manage quality .12 .11 .04 . .16 .04 .14 .28 .05 .11
improvement (5)

Empower others .34 .16 31 .21 .50 .12 .19 .27 .24
to do their best (3) (4) (1) (5)

Get results - .37 .22 .18 .29 .15 .09 .31 .41 .25
manage strategy (2) (3) (2) (1) (3)
to action

' All leadership capabilities are significantly different among the eight countries at the .001 level.
The rank order of the top five leader^ip capabilities in each countiy is placed in parentheses.
Core leadership capabilities that are globally shared are in boldface.

convergence between globally valued leadership capabilities and those


which are more nationally valued illuminates the extent to which leader-
ship capabilities are driven by internationally shared business impera-
tives or by cultural imperatives. The percentage of overlap between the
top five nationally valued leadership capabilities and the six globally
valued leadership capabilities was as follows: Australia, 100%; United
States, 100%; Germany, 80%; United Kingdom, 80%; France, 60%; Italy,
60%; Japan, 60%; Korea, 40%. Korea was the only country that had less
than 50% overlap between the selected leadership capabilities and the
globally valued capabilities.
The degree to which managers from ten global corporations in eight
countries achieved a consensus on these key leadership capabilities was
higher than expected. This finding leads to two important questions:

Yeung and Ready: Leadership Capabilities / 537


Why is it so? and What does it imply for corporate competitive advan-
tage? The most logical reason for the high degree of consensus is the fact
that global corporations are facing similar challenges and opportunities
in the global market. As a result, these leadership capabilities are univer-
sally, not simply nationally, important as they enable corporations to
lead through tumultuous change, to refocus on key strategic priorities,
to reinvent management styles and processes, and to deliver value to
customers. Another possible reason for a high degree of consensus
among multinational respondents is the possibility that managers in-
creasingly learn from similar sources of knowledge through interna-
tionally renowned consultants, world-class educational/training institu-
tions, and best-sellers in management literature. Consequently, they
identify similar leadership capabilities.
If global corporations in different countries are developing similar
leadership capabilities, will corporations lose their unique competitive
advantage? Our answer is no, as leadership capabilities are hardly repli-
cable (Lado & Wilson, 1994; Reed & DeFillippi, 1990). To be effective and
efficacious, leadership capabilities need to be contextualized with each
company's unique organizational cultures, histories, technologies, and
socially complex interactions (Barney, 1991; Reed & DeFillippi, 1990). To
derive competitive advantage, it is clearly insufficient for corporations to
simply benchmark from high profile, successful companies. They must
define, develop, and measure leadership capabilities based on their
company-specific needs, challenges, and national cultures.

Variations of Leadership Capabilities in Eight Countries

The study also revealed that significant national variations exist in the
ways in which leadership capabilities are viewed. It is interesting to
note that no two countries selected identical priorities for their top five
leadership capabilities. ANOVA tests also indicated that respondents
showed significant differences in their consensus of all the leadership
capabilities listed in Table I. For instance, both Japanese and Korean
respondents ranked the ability to articulate a tangible vision, values, and
strategy as the second most important leadership capability. However,
while 46% of Japanese respondents considered this leadership capability
important, only 27% of Korean respondents ranked it as important. This
degree of consensus or shared perceptions regarding a particular leader-
ship capability provides another indication of its importance as per-
ceived by managers within a country.
To pinpoint the leadership capabilities that differed significantly
among the eight countries, the Scheffe test of multiple comparison was
used in ANOVA. Table II summarizes how each country differs from at
least two countries on a specific leadership capability. For instance, the
Australian respondents placed significantly more importance on the

538 / Human Resource Management, Winter 1995


Table II. Leadership Capabilities of Unique Importance in Each Country.

Leadership capabilities that are more Contrasting Countries


Focal Country
strongly emphasized in a focal country
(A) (B)
(A) than the contrasting countries (B)

Australia • Be a catalyst of cultural change • Japan, Korea

France • Manage internal and external networks • Australia, Germany, Italy,

Korea, U.K.. U.S.

• Be a catalyst of cultural change • Germany, Japan, Korea

Gcimany • Have integrity and trust • France, Italy,

Italy • Be flexible and adaptive . Australia, U.S.

• Be a catalyst of cultural change • Japan, Korea

Japan • Empower others to do their best . France, Italy, Korea, U.K.

• Have a "global mindset" • Germany, Italy, U.K.

• Think integratively about the total . Germany, U.K.. U.S.

business

Korea • Have integrity and tnist • France, Italy

U.K. • Manage quality improvement • Gennany, Japan, U.S.

U.S. • Get results-manage strategy to action • France, Germany, Japan,

Korea

ability to be a catalyst of cultural change than Japanese and Korean respon-


dents. Therefore, while Table I aims to highlight the importance of lead-
ership capabilities that are globally shared. Table II offers insights on
leadership capabilities that are emphasized differently within different
countries. This information is useful for global corporations as they for-
mulate leadership development strategies for their leaders operating in
different nations.
French respondents emphasized the ability to manage internal and exter-
nal networks more strongly than did respondents in six other countries.
Global corporations should obviously be sensitive to the need for this
leadership capability as they develop leaders for business operations in
France. Similarly, Japanese respondents emphasized the ability to em-
power others to do their best more strongly than did respondents in four
other countries. As a matter of fact, this is the most frequently selected
leadership capability among Japanese respondents. Given the overrid-
ing goal of regaining competitiveness and succeeding in a global market,
US respondents emphasized the ability to get results—manage strategy to
action more strongly than did respondents in four other countries. Sim-
ilarly, it is the most frequently selected leadership capability among US
respondents.
Two explanations may account for leadership capabilities being em-
phasized along national lines. First, cultural imperatives account for the

Yeung and Ready: Leadership Capabilities / 539


importance of certain leadership capabilities within a particular country.
That is, these particular leadership capabilities are crucial for leadership
effectiveness within a particular cultural context. Without these leader-
ship capabilities, a leader may be crippled in interactions with a coun-
try's customers, employees, suppliers, shareholders, or regulators. If
this explanation is true, it implies that leaders who are transferred to
another country should be sensitized to the specific leadership capa-
bilities most valued within the new host country. Moreover, these data
could very well suggest that perspectives on the importance of various
leadership dimensions are culturally anchored, meaning that they are
linked to much deeper beliefs, perhaps even rooted in societal and cul-
tural mores and values. For example, the authors believe that it is not by
mistake that the Japanese managers ranked the ability to empower others
to do their best as the most important dimension for leadership effective-
ness, given the clan orientation that exists in Japan and the focus on
consensus and team management, as well as a strong preference for
process excellence. It is also not surprising that the ability to get results-
manage strategy to action was ranked as the number one leadership di-
mension for the American respondents, given their orientation to revere
heroic models of leadership. As a matter of fact, American CEOs lose
their jobs more readily for not producing short-term results than do
chief executives from other cultures (Ready, 1994).
The second explanation could be that these leadership capabilities
have not historically been important within the country's cultural con-
text but that shifting business imperatives are making them more impor-
tant. If this explanation is correct, it has a completely different implica-
tion for global corporations. It suggests that local leaders, although
probably not global leaders or even leaders outside of a particular coun-
try, should be developed according to the country's unique leadership
capabilities. Our speculation is that both explanations are, in some part,
correct, and corporations should be careful in discerning between the
two.
On the other hand, Japanese and Korean respondents placed less
importance on their ability to be a catalyst of cultural change (in comparison
with respondents in Australia, France, and Italy). The finding suggests
that Japanese and Korean corporations may be relatively satisfied with
their existing corporate cultures. As a result, cultural change is not an
important requirement for future leadership effectiveness in Japan and
Korea.
The above summary points to significant national variations in the
perception of leadership capabilities in various nations. Clearly, while
global corporations achieved a consensus on the primacy accorded to the
six core leadership capabilities, significant variations among countries
existed with regard to the degree of consensus about the importance of
individual leadership capabilities.

540 / Human Resource Management, Winter 1995


Developing Strategic Leaders: How Leaders Learn?

Determining which leadership capabilities are most important is one


thing, while understanding how to best develop these capabilities is yet
another. We want to learn more about the most effective processes for
developing leadership effectiveness. How does one learn to become a
strategic leader? Are some learning methods more effective for develop-
ing certain leadership capabilities than others?
As summarized in Table III, our respondents supported the notion
that experience is the best teacher. Experience-based learning, defined
in this study as either a job assignment or participation in project or task
forces, was ranked either first or second as the most effective method for
learning each of the top leadership capabilities. This finding clearly sup-
ports prior research on experience-based development (McCall, Lombar-
do, & Morrison, 1988; Robinson & Wick, 1992).
Performance feedback was considered useful in developing leader-
ship capabilities aimed at getting results, empowering others, and exhibiting
a strong customer orientation. In-company management development was
ranked as the most effective method in helping leaders articulate a tangi-
ble vision, values, and strategy, whereas benchmarking was considered
useful in developing leaders who are a catalyst for cultural change. Univer-
sity executive education and mentoring were considered relatively less
effective in developing the core leadership capabilities.
The perception of the importance of university executive education in
developing strategic leaders was not as high as expected. This finding

Table III. Most Effective Learning Methods by Leadership Capabilities.


Learning Methods Artkulite CntM\jat- Getting CaUlyst- Empower Exhibit
Vbion Strategic Resulb Cultural Olhere Customer
Chanse CtuDxe OricDUtioD

Experience-based Learning

• Job Assignment X X XX X XX

• Projectsn'ask Forces X XX

Performance Management

• Feedback XX XX X

• Mentoring

Classroom Education

• In-company management XX

development

• University Executive

Education

Benchmarking X

XX rcprcsenis the most crTccuvc method in develofniig a teadcnhip cspabiliiy


X represent the second mou cn^ective method in developing a leadoship capability

Yeung and Ready: Leadership Capabilities / 541


suggests that business-as-usual executive programs cannot meet the
needs of a rapidly changing business environment (Fortune, 1993c).
Such programs evidently have not proven to be sufficiently adaptive to
corporations' pressing needs.
In addition, global corporations need to strengthen their performance
management systems. Providing timely and accurate feedback to man-
agers is crucial in helping them to achieve their goals and, at the same
time, to empower others. Clearly, no single method is best for develop-
ing all leadership capabilities. Global corporations need to be versatile in
creating a variety of learning opportunities for managers and in offering
multiple learning methods.
When the respondents' answers to the question of effective learning
methods were analyzed by managerial level, however, another finding
emerged. Mid-level managers indicated that classroom training is the
most effective method for developing leadership capabilities. This belief
may be due to the fact that classroom training is often viewed as the
most visible manifestation of an organization's investment in a mid-level
manager's future. Given this perception among mid-level managers,
organizations would be wise to use in-company programs to send im-
portant messages about the company's future and to build critical net-
works necessary for executing strategic initiatives.
The respondents in our sample agreed strongly that each individual
should be responsible for his or her own leadership development. Also,
while the respondents indicated that business unit presidents played an
important role in the leadership development process, the human re-
sources department was not perceived as critical in this area in our
overall sample. This should signal an opportunity for HR executives to
clarify and redefine their role in building an organizations' competitive
capabilities.

IMPLICATIONS FOR HR PROFESSIONALS

CEOs place enormous emphasis on creating and sustaining value in


today's environment, and for good reason—customers demand it. In
the process, strategic frameworks are being reconfigured, organizational
systems revamped, and work processes reengineered. In order to lead
and strengthen these reinvented corporations, corporations are devel-
oping a new breed of strategic leaders. In that context, this article offers
both good news and bad news for HR professionals.
The good news is: Never before have HR executives had a better
opportunity to influence their organizations' competitiveness. Above
all, leadership development is viewed as important when it is linked
clearly with business strategy and pressing business needs. Strengthen-
ing competitive capabilities means that both individual and organiza-

542 / Human Resource Management, Winter 1995


tional development needs are taken into account and that development
planning is future-focused and targeted at critical gaps in human re-
source preparedness. In addition to cultivating critical skills and compe-
tencies, development must be seen as a vehicle for facilitating produc-
tive change.
The bad news is: HR was not perceived as important in leadership
development. Clearly, HR needs to redefine its role in leadership de-
velopment beyond the traditional focus on classroom training. With
such strong concurrence on the importance of learning on the job, HR
professionals would be wise to work with line managers to ensure
that as many job assignments as possible serve as learning oppor-
tunities for employees. This involves developing a deeper under-
standing of the learning challenges provided by particular jobs or job
clusters as well as placing more focus on matching learning oppor-
tunities with individuals identified as being able to gain more value
from experience-based learning approaches than other methods. Or-
ganizations would also benefit from placing a high value on line man-
agers who are capable of structuring jobs as learning opportunities
and providing these managers with the appropriate recognition and
rewards for their activities in this area.
Leadership development must be viewed as an ongoing process rath-
er than a one-time event, which means that linking management devel-
opment education with organizational systems such as performance
feedback, succession planning, and career management activities be-
comes critical to the impact of leadership development on organizational
performance.
This study also offers a number of insights for HR professionals seek-
ing to identify required leadership capabilities in different nations. Our
study indicates that a set of universally valued leadership capabilities
has emerged in most countries. These leadership capabilities encompass
the capacity to articulate a tangible vision, values, and strategy; to be a catalyst
for strategic and cultural change; to achieve results; to empower others; and to
exhibit a strong customer orientation. To respond to changing competitive
dynamics in a highly interdependent global economy, these capabilities
become fundamental to many corporations. To create a competitive ad-
vantage, however, HR professionals need to help their organizations
develop these leadership capabilities based on the unique cultures, his-
tories, industries, and technologies of their corporations. The cognitive
and behavioral manifestation of these leadership capabilities should
vary from one corporation to another. For example, if one were a human
resource development professional at PepsiCo, the art and craft of devel-
oping leaders for the company would necessarily take into account Pep-
siCo's industry, its corporate culture, as well as the national culture
where business is being conducted by the firm. It would be a great
mistake to design a generic initiative for the firm's global workforce

Yeung and Ready: Leadership Capabilities / 543


through the lenses of its New York headquarters office and culture
(Schuler, Fulkerson, & Dowling, 1991).
HR professionals should also be alert to the national variations of
leadership capabilities as perceived by our respondents. Global corpora-
tions may prefer to develop leadership capabilities based on a set of
globally valued leadership capabilities, adjusting for leadership capa-
bilities that are unique in different countries.
Clearly, the timing is ideal for HR professionals to add value to corpo-
rate competitiveness by preparing a new breed of strategic leaders that
powers the company forward. By collaborating and orchestrating with
line management, HR professionals should and can help corporations
create a compelling future.
The authors would like to acknowledge the sponsorship of Gemini Consulting in
this research study and the useful comments of two anonymous reviewers. The
generous participation of all executives and managers in this study is also grate-
fully acknowledged. Without their support, this study could never have been
completed.

Arthur K. Yeung is on the faculty of the University of Michigan's School of


Business Administration. He is also the founding Executive Director of the
California Strategic Human Resource Partnership, a consortium consisting of
the senior HR executives of 30 leading California companies.
His areas of teaching and research interest include HR process re-
design I reengineering, the transformation of HR functions, changing competen-
cies ofHR professionals, developing organizational learning capabilities, design-
ing high value-added HR practices, and managing cultural change. He is the
project manager of "Human Resource Competencies of the 1990s" which won the
1989 Yoder-Heneman Personnel Research Award presented hy the Society of
Human Resource Management.
Dr. Yeung is the author of three books and his articles have appeared in
numerous professional journals.

Douglas A. Ready is Founder and Executive Director of the International Con-


sortium for Executive Development Research, a collaboration of 50 global corpo-
rations and 20 leading business schools that conducts applied research and best
practices on innovative approaches to developing world class organizations and
leaders.
Dr. Ready's research interests include leadership and executive development.
He has recently completed the International Competitive Capabilities Pro-
ject, a worldwide study on the organizational and leadership capabilities critical
to global competitiveness. The findings of the study are reported in Champions
of Change—A Global Report on Leading Business Transformation.
Dr. Ready holds an M.P.A. in Management from Harvard University's John
F. Kennedy School of Government and the Ph.D. in International Human Re-
sources from the Cranfield School of Management in the U.K.

544 / Human Resource Management, Winter 1995


APPENDIX 1: QUESTIONS ON LEADERSHIP CAPABILITIES

To be an effective leader over the next three years, I must: (Circle only 5 capabilities)
1. be a calalyst/manager of strategic change
2. be a catalyst/manager of cultural change
3. beflexibleand adaptive
4. plan for changing human iesouice requirements
5. manage a crisis
6. deal with high ambiguity/uncertainty
7. manage natural tensions arising from culmral differences
8. live and woric outside my native country
9. have a "global mindset"
10. manage transnational teams
11. conduct negotialions across borders/cultures
12. have multiple language capabilities
13. negotiate with government leadeis
14. understand global economic, political, culmral. social issues
15. articulate a tangible vision, values, and strategy
16. manage strategic alliances
17. communicate effectively on a day-to-day basis
18. manage the media/press
19. have a sense of humor and social skills
20. influence others without authority
21. negotiate for resources
22. manage intemal and external networics
23. think integratively about the total business
24. make tough choices
25. process and distill large amounts of infonnation
26. leam how to learn
27. handle personal stress
28. have self confidence/strong sense of self
29. have integrity and trust
30. take risks/initiative
31. manage process/project teams
32. build customer/supplier alliances
33. exhibit a strong customer orientation
34. manage quality improvement
35. develop and coach otheis
36. empower others to do their best
37. be an advocate for entrepreneurship and innovation
38. manage a "fast-cycle" product development organization
39. manage a leaner organization
40. embrace new technologies
41. get results - manage strategy to action
42. manage a downsizing
43. demonstrate competence in financial management
44. demonstrate excellence infimctionalmanagement
45. balance woik. family and personal time

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ENDNOTES

1. There is no a priori reason for asking respondents to select five (instead of six
or seven) capabilities. It was simply deemed a convenient number to work
with.

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