are running those delivery centers; others have moved out of their markets into bigger roles in the firm. It’s critical, I’ve learned, to grow leaders we identify in emerging markets by giving them platforms bigger than their markets, exposing them to people and leaders who operate in mature markets so they might learn from their experience and benefit from their sponsorship. We make a point, despite the cost, of rotating our leaders from small markets into bigger ones. From Romania, or from China, they pack their bags and move to India for a few months. That ensures, when they go back, that they have much better networks. You can’t insist that an emerging leader build a network when you haven’t provided the platform.
This holds true at the highest levels of our firm: each of my market leaders, irrespective of the size of their markets, has equal standing in the firm and equal voice at my table. On the face of it, this doesn’t make sense: for us, the US market is three times the size of the European market. But I’ve learned that to grow our client base in places like Europe, Japan, and Australia, I’ve got to bring in big leaders who’ve established sizeable networks there, make them my direct reports, and give them the stature and attention they need to grow those markets.
Our journey, with regard to growing our pipeline of global executives, is far from over. We are not as diverse as we should be, nor as I would like us to be. We have enough programs to provide women in emerging markets the ladder they need to grow into senior leader positions: 70 percent of my Chinese leadership team are women, as are 60 percent to 70 percent of my eastern European leadership team. The US and India, however, are proving more difficult. The next frontier for us is making sure more of our highly qualified women in these markets get the platform, the visibility, and the sponsorship they need to grow beyond mid-senior levels.
Yet in terms of our evolution to a truly global company—one that is poised to identify and act upon market opportunities—I think we have journeyed far. I don’t know what the world will look like in five years; I’m confident no CEO does. How, then, do I run the ship? I need to create nimbleness and agility, so that I can turn this ship on a dime in a nanosecond. Then, so I know in which direction to turn it, I am going to need an antenna, one that picks up signals one second before my competitors’ antennae. That’s all I need. And looking at Genpact today, I think we’ve got it: the culture we’ve built ensures our agility, and with our leaders sitting next to our clients, we have a finger directly on the pulse of the markets we serve. That’s the combination that I think will prove most successful—not only for us, but for global organizations of the future.
—“Tiger” Tyagarajan Chief Executive Officer and President Genpact August 2015
Introduction
In the wake of the earthquake that devastated Haiti in 2010, the American Red Cross collected $488 billion in aid worldwide—the largest outpouring of donations in its history. Its chief executive, Gail McGovern, unveiled plans to develop brand new communities as well as rebuild old ones; in the neighborhood of Campeche, the Red Cross pledged to build some seven hundred homes that would provide residents with basic sanitation, running water, and electricity.1
To date, as revealed by ProPublica and NPR in a joint investigation of the charity, none of the communities have taken shape. Campeche remains a garbage-strewn slum of rusted sheet-metal shacks. And of the one hundred thirty thousand homes the Red Cross claims to have built island-wide, only six can be documented.2 Managed from the US, with staff on the ground consisting largely of Americans, the Red Cross’ housing campaign foundered for lack of expertise, language skills, and experience in cutting through the red tape around land access. The $24 million Campeche strategy will be scuttled when the organization withdraws from Haiti in 2016.3
The squandering of $170 million in infrastructure capital, not to mention nearly half a billion in relief funding, underscores the single largest growth constraint on international organizations in the private as well as public sector: an anemic pipeline of locally sourced leaders. Emerging markets in the South and East stand poised to take center stage in the global economy within the next ten years, a shift that is expected to increase not just market potential, but also market competition.4 To be effective in these growth hubs, multinational corporatons (MNCs) need local leaders to help them navigate the red tape of local government and the labyrinth of local business channels.5 To wield a competitive edge for years to come, MNCs need talent with local market intelligence, men and women who can identify unmet needs because they’ve experienced them firsthand, and who can innovate solutions appropriate to meet them because they’re intimately acquainted with local customs, preferences, and living conditions.6
Indeed, to foresee challenges or nimbly respond to crises, MNCs need lieutenants on the front lines who are empowered to act on their local intelligence. The Red Cross had very few. Leadership roles went to expats, whose compensation cost the organization three times what hiring a local would have cost. Given the security situation, separation from family, and the demanding nature of the work, turnover among the expats was high, creating chronic vacancies that added to the organization’s paralysis on the ground. As one staffer observed, “Everything would take four times as long because it would be micromanaged from DC, and they had no development experience.”7
MNCs are well aware that the expatriate management model is ill-suited to growing their footprint and market share—not to mention stupendously expensive. Even before the global financial crisis of 2008, they were scaling back on the recruitment and deployment of this talent brigade, replacing them with local nationals, third-country nationals (executives who are neither nationals of the host country nor the country in which their MNC is headquartered), and returning nationals. According to a survey conducted by the Association of Executive Search Consultants of hiring activities in China, India, Brazil, the Middle East, and Russia, only 12 percent of senior executives in those markets were expats in 2008, compared with 56 percent in 1998.8 The decline of the expat has steepened in recent years—because companies now have to make social insurance contributions on behalf of their foreign workers, making hiring them prohibitively expensive.9 Little wonder that 76 percent of senior executives polled by the UN said their organizations should invest in developing global leadership capabilities in emerging markets.10
Multinational organizations that managed to get out in front of this talent trend—that developed local talent into leaders with strategic decision-making capability—have realized dramatic results in terms of local market penetration. General Electric (GE) was one of them. Up until 2001, GE abided by conventional wisdom: R&D was centralized at headquarters in the US, and innovation for the developing world consisted largely of simplifying a product that had been successful in the West in order to sell it at a lower price point. The resulting “innovation” was often entirely inappropriate for the markets the company hoped to capture. For example, GE’s cheaper, emerging-market version of the surgical C-arm—a heavy, high-cost imaging machine designed for use in hospital settings—fell flat in India, where the majority of healthcare is dispensed in rural clinics.11 But Omar Ishrak, a Bangladeshi who became CEO of GE Healthcare’s clinical systems unit in 2005, took a different approach: he empowered teams at the local level to innovate products attuned to the needs of clinicians operating on foot in remote areas where electricity couldn’t be relied upon, serving patients who could not afford to travel to city centers.12 The result: GE’s wildly successful low-cost Electrocardiogram (ECG) MAC 400, a handheld, battery-operated heart monitoring device that sent readings by cellphone. Developed specifically for the Indian market by a team of India-based engineers and designers, it demonstrated the competitive edge bestowed on MNCs that decentralized operations to make their subsidiaries in growth hubs more autonomous.13
Yet even in the burgeoning tech sector, international firms have not readily decommissioned the mother ship. GE’s headquarters continues to entrust execution, but not decision-making, to satellites in the developing world.14 MNCs based in the US and UK in particular struggle to develop and promote talent in the South and East beyond the director level.15 They also struggle to deploy and incentivize homegrown talent to win business and satisfy clients
