The cost of understanding Global Leadership
What is leadership and how important is it? Most people in business often take leadership for granted. It’s something the boss does, but they don’t know if it is important. But Jan Ketil Arnulf, an associate professor at BI Norwegian Business School who is teaching in its China programme, tried to distil leadership because he saw so many differences between leadership styles in China and Europe. His findings were a revelation, and he started with etymology. Leadership did not exist as a word until 1850. Motivation came about then too, but leadership originated in a US shareholding company’s publication. For quite a long time after that, there was still no word for it in French, Italian, Spanish or Mandarin. With the rise of American companies, they used words such as authority, power, motivation and management to create a concept of leadership. But if a leader is just an authority figure, how much does that person really matter to a company? The researchers Lieberson and O’Connor undertook a 20-year study on whether a change in the chief executive changed the value of the company. They found over a three-year period, leadership accounts for 32% of the value creation of a company. Their work helped carve out a new definition for leadership as non-routine handling of situations. Why does all this matter? Because as more companies start to branch out abroad, connotations of leadership in various countries are going to affect how successful the companies are. Or as Mr Arnulf puts it, “Are you going to have German quality at Chinese prices or Chinese quality at German prices?”
Leadership did not exist as a word until 1850. Motivation came about then too, but leadership originated in a US shareholding company’s publication.
Companies are bound to stumble if they think they can transplant a leader from one country office to another, said Mr Arnulf, for a number of reasons. “The main problem is that humans are all ethnocentric, which means we judge other cultures solely by the values of our own culture,” he said. “This leaves us blind to the problems we might have operating in another country. “Another hurdle is that knowledge typically needs to be created in a new market by hand because it transports poorly, meaning a translated e-mail instruction is unlikely to have the intended consequence. In addition, leaders typically don’t receive enough cross- cultural training before they go to work in another country, which can exacerbate misunderstandings. And finally, leaders in new countries need to learn how to go out and make new relationships and reach out to deal with potential problems, because they can’t assume the employees will come to them.” Of course the examples of business faux pas due to cultural differences are legend, but Mr Arnulf prefers the case of the man who goes into two shops, one run by a German and the other by a Chinese producer. He says he wants 30 well-built products in six months. “To the German, this guy is not a customer,” said Mr Arnulf. “The German tells him, ‘We produce quality products here and you want a lot of products quickly, so you are not interested in quality.’ But to the Chinese, the customer is god. He accepts the order even though he knows he can’t do the job well. The Chinese man says, ‘Come in, have a cup of tea.’ “These differences extend to how these cultures deal with business problems. The Western style is more open to talking and debate. The German and English languages are very precise; our words allow us to be more precise because the truth is in the words. But my experience learning Mandarin has taught me that this language has stripped away much of the cognitive structure. In China, the truth is not in the language, it is in the relationship between the leader and the worker.” In Mr Arnulf’s studies of the differences between leadership styles in Norway and China, he came up with several characteristics to explain the wide gap in productivity between the two nations. Norway has high productivity, some 102% of the US’s level, while China has 17% of the US standard. Mr Arnulf cites a low power distance and flat hierarchies in Norwegian society as key to this chasm because workers in Norway feel comfortable bringing problems to their superiors and even questioning their bosses at times. Norwegian society also has high levels of trust and empowerment, meaning lower-level workers are trusted to contribute and participate so there are less bottlenecks in companies. He traces these Scandinavian leadership traits to the country’s ancestors, as Norwegians tended to be more educated than the maritime regions in Southern Europe. Norwegians were also able to figure out how to transport more tonnage on ships than several of their European neighbours, said Mr Arnulf. Most of Norway’s imports and exports are with countries that it finds easy to deal with because of similar languages and understanding, he said, such as Europe and the US. The lone exceptions are China and South Korea, while trade with Asia overall is increasing. Mr Arnulf wants to emphasise to business leaders that if individual leadership capabilities contribute 32% of the variation in company performance, this is a huge chunk and should not be taken for granted, especially when measured on a global scale. Indeed, leadership in a foreign market can make the difference between whether your business succeeds or fails, he said.
Asst. Prof. Dr. Jan Ketil Arnulf addresses the Norway-Asia Business Summit 2014.