Brazil and China share interesting ways of appointing business leaders.

Brazil and China share interesting ways of appointing business leaders.
Alfredo Behrens
Professor of Cross-Cultural Management with FIA, International MBA
ab@alfredobehrens.com
July, 2009

When it comes to business leadership, management textbooks do not question the practice of appointing managers by shareholders or their proxies. Because the practice has worked well where most of the management thinking has taken place, it is also considered the appropriate way to appoint leaders of subsidiaries. There, however, the workers may respond less effectively to managers chosen by people who do not share the national culture. There are interesting alternatives to the appointing top business leaders in China and Brazil.

Two decades ago Jack Perkowski realized that the Eastern Dragon was awakening and he had better be among the first to move in. He figured out that transportation was where the action would be and that taking part in the auto parts industry would be the accessible way to glide on the uplifting trend. With a Harvard Business School degree and some investing banking experience, Mr. Perkowski raised capital and in the mid nineties founded Asimco, in China.

Joint ventures were the rule then and not speaking any Chinese did not help Mr. Perkowski in spotting suitable local partners. But in at least one of his initiatives he got particularly lucky by investing in a company that came with a competent manager: Mr. Li Jienan. This man would eventually retire, opening the always hard-to-plan-for succession issue. That was when Mr. Li suggested the unthinkable to an HBS graduate: an election among the workers to determine his successor.

Mr. Perkowski still did not speak any Chinese and was at a loss to suggest an alternative to an idea that did not fit any management textbook. He took a deep breath and decided to trust the manager who had done so well for so long and agreed to his suggestion.

As it turned out, the man elected was whom Mr. Li would have chosen in first place. A perplexed Mr. Perkowski asked Mr. Li why go through all the fuss and the anxiety if the outcome would have been the same? Mr. Li replied that by proceeding to the appointment through an election, all the workers had been given a fair chance to decide who they would be run by, playing moot the argument that others candidates would have been equally or more deserving. Now ‘the new general manager can begin with a united factory,” said Mr. Li.

Mr. Li’s wisdom seems so obvious that one wonders why that decision is not practiced more often. Perhaps it is because the practical leadership of organizations has its roots in the management of armies, where soldiers could be expected to vote more emphatically for the promotion of generals less likely to send them to death in the battlefields.

Dying for one’s country is not how wars are won. General Patton knew it well when he argued that wars are won by making the other “poor damned bastard die for his country.” Yet, because the enemy is hard to persuade, dying for one’s country needs to be glorified to enlist soldiers to fight when they would rather not;2 the latter being the reason to appoint generals without asking for the soldiers’ opinion.3

When it comes to leadership, it seems that management literature leans to Mc Gregor’s X Theory, which implies that workers will, like soldiers, avoid work when they can, this being the reason for having the shareholders throwing CEOs upon workers, who can only vote with their feet and leave when they do not like the new boss.

That the Asimco case worked may be taken for a fluke. But perhaps it is not. That it took place in a collectivist society like the Chinese one is very telling, for it is in these societies that consensual decision-making and subjecting the interests of the individual to those of the group are more highly praised.

Brazil is also a collectivist-oriented society and the founding charter of the very successful engineering company Promon clearly asks its collaborators to put collective interests before their individual ones. This is why salespersons at Promon earn no commissions, they only earn the benefits that all do. At Promon the leader is also chosen by his workers. Not surprisingly, Promon’s CEO, Luis Ernesto Geminiani, was also chosen the leader that most MBAs, foreign or Brazilian, would like to work for, even though he was running against successful CEOs, such as those of
Southwest Airlines and Wal-Mart.

Perhaps there is a lesson to be drawn from this evidence, because the risk to appoint the wrong leader is the greatest when it comes to managing subsidiaries. There, a worker is less likely to share in the national culture that prevails at headquarters. A worker works more effectively under leaders better attuned with the workers’ culture than the leaders foreign owners would normally choose; unless they are foreign owners like Jack Perkowski, who might agree that his company could be better managed by a man appointed through an election.

2 we know the glory that is his,/ A glory that can never die. From Charles Sorley’s In Memoriam, 1915.
http://www.archive.org/stream/marlboroughother00sorlrich/marlboroughother00sorlrich_djvu.txt
accessed on July 20, 2009.
3 My friend, you would not tell with such high zest/ To children ardent for some desperate glory, / The old
Lie; Dulce et Decorum est Pro patria mori. From Wilfredo Owen’s Dulce

Read more in:
Perkowski, Jack. Managing the Dragon. New York, Random House, 2008.
Behrens, Alfredo. Culture and Management in the Americas. Stanford University Press, 2009. Also
available in Brazil.