The Fault Lines of Globalization and Management Teams
Jean-François Manzoni is the President of IMD, where he also serves as the Nestlé Professor. In conversation with Soumitra Dutta and Dan LeClair of GBSN, he discusses trust in governments, innovation in executive education, and leading in a crisis. This interview was conducted 10 weeks after COVID-19 was declared a pandemic by the World Health Organization. This is an edited transcript of their exchange.
Highlights from this interview:
We may have pushed globalization and the pursuit of competitive advantage too far.
There can’t be global coordination without trust in governments by the people.
The pandemic can force us to confront major issues, such as climate change.
We will have more technology in executive education, for effectiveness as well as efficiency reasons.
In a crisis, executives have to play offense as well as defense and manage themselves as leaders.
Dan LeClair: When you think about what we’re experiencing right now with coronavirus, do you think this is a global turning point for the world?
Jean-François Manzoni: We have had several instances before where we’ve said, that’s a turning point and there’s no going back. The reality is the world does forget and reproduce some of the same mistakes. This is not the first pandemic we’ve had. It happens to be worse, but we’ve had them before. I don’t know if it will be a turning point and that we will get the lesson. But I do hope so. I hope the world will indeed use this as the wakeup call that it is. And I do think it is a wake-up call on a number of fronts.
First, we may have pushed globalization and the pursuit of competitive advantage too far. We have built a world where we assume that there is peace and perfectly free and friction-less movement of people and goods. As soon as there is not free movement of people and goods, we have problems. Now we have countries that have no masks or testing equipment.
“I think the pandemic will force us to confront some important questions that have been with us for a while.”
Second, I think the pandemic will force us to confront some important questions that have been with us for a while. For example, on average people consume half of their lifetime health care costs in the final year of life. How long do we want to continue investing a disproportionate amount of resources on people with pathologies for which there is unfortunately no cure? I’m not just referring to COVID-19, where after two weeks patients are either turning left or turning right. We have healthcare system designed for certain types of activities and pathologies and not others. I hope that this crisis will lead us to ask ourselves, what is our healthcare system designed for? What is it supposed to pay for?
Third, on the positive side this crisis is helping us to realize that we can do a great many things without being face-to-face. I continue to think, and certainly IMD continues to think, that there is great value to having people being co-located and working together in physical proximity on issues. There will continue to be value to that. But we’re also realizing that some aspects of the value that’s created when people work on issues together can genuinely be reproduced virtually at a very limited cost.
Soumitra Dutta: You raised the point that we have taken globalization too far. What do you see happening in the way businesses operate, including their global supply chains?
Manzoni: We shouldn’t throw the baby out with the bathwater. Some people are saying that COVID-19 shows that globalization is bad. But over the last decades globalization has lifted hundreds of millions of people out of poverty. If you look over the last hundred years, the capitalist system combined with a globalized approach has resulted in a massive increase in life expectancy and in the quality of life. There’s no doubt that the economic system we have developed over the last decades has had a massive positive impact on the world.
There is also no doubt that these positive impacts have come at a price on a number of dimensions. One of those dimensions is ecological. We cannot continue to operate the way we have been operating and escape what’s increasingly obvious in terms of negative ecological externalities. That’s not a COVID-19 lesson. It is a lesson that some of us have been increasingly incapable of avoiding over the last few years. Now we have an accumulation of evidence that is not conclusive, but is starting to be darn convincing.
“There is also no doubt that these positive impacts have come at a price on a number of dimensions. One of those dimensions is ecological.”
What COVID-19 shows is we have incredibly atomized or fragmented supply chains and have underestimated the risks of failure in these supply chains. This system worked fine as long as the conditions necessary for it to function were present. When those conditions are no longer present, you realize this system is not very resilient.
Interestingly, Switzerland has insisted on nurturing a local agriculture. We have Swiss farmers. The world looks at that and asks “why do you have farmers in Switzerland? You don’t have a lot of valleys, you have mainly mountains, that’s not really a good basis for effective and efficient agriculture!” The Swiss are saying it may not be super-efficient, but if ever we can’t buy food from anyone else, at least we have our own. Some countries have always insisted on maintaining some form of autonomy and independence, at least in some key areas. A lot of other countries did not. Corporations have been part of this process where, again, we have fragmented the manufacturing process and the supply chains have assumed perfect movement of goods and people. Well, we just had one more reminder that sometimes you can’t have perfect movement.
LeClair: How does that play out with governments?
Manzoni: When this crisis started I told myself “this is going to be really hard because all the management teams I know are maxed out already, and that is even truer for governments!” I manage a small independent business school. It’s not General Electric! Yet, I was already maxed out in January. I recall thinking we can manage what we are doing now, but don’t add too much on top of that. Then suddenly, kaboom!
What I’ve noticed with my own management team is that the crisis has accelerated the realization that there are fault lines within the team. It also reveals the character and the potential of people. Some thrive and stand up while others wither. They don’t go away. They just stick around. Taking this at the level of a government, which is a lot more complex, it becomes very difficult.
There is a video circulating that shows French public officials between January and early March explaining why “this virus isn’t going to be an issue. There is going to be no contamination. We’re going to be fine. We’re super ready.” Unfortunately, the way this crisis is being managed by national governments is going to further contribute to the lack of confidence that citizens have in their governments in most countries.
I profoundly believe that there cannot be progress without the acceptance of delayed gratification. If you think about it, any form of progress requires people to accept delayed gratification. But people will not accept delayed gratification, if they have no trust in their elite. That’s one of the secrets of Singapore’s success. The Singaporeans trust their government and their elite, less than they did 30 years ago but enormously more than in most if not all other countries. So right now, the governments in Europe with the possible exception of Germany are not looking very good. The crisis has made governments look unready and will nurture the confidence crisis. And that is quite unfortunate because it leads people then to vote for individuals who sound self-assured and have no clue. In other words, it favors populists’ parties and that’s not helpful.
“Any form of progress requires people to accept delayed gratification. But people will not accept delayed gratification, if they have no trust in their elite.”
Dutta: To address a pandemic like this, you need global coordination and there has already been criticism about how the US and China haven’t coordinated. Even within Europe there hasn’t been much coordination. How do you see all this evolving? Will global coordination further disintegrate or will there be pressure for greater success in doing it?
Manzoni: Let me preface by saying that neither God nor the major governments of the world whisper in my ear at night, so I don’t know how this will evolve. It seems to me that one of this crisis’ positive outcomes has been that scientists are cooperating more. My impression is that the scientists basically said “let’s ignore the governments and instead talk and collaborate with one another, because otherwise this is not going to go fast enough.” That’s positive.
Europe is made up of very heterogeneous entities, some of whom have hated one another for hundreds of years. Why would they cooperate? They would cooperate if a) they develop enough of a sense of shared destiny—that is, somehow, we mean something together—and if b) there is a sufficient amount of confidence in the institutions that are created by this heterogenous group. I don’t know that there is a massive sense of shared destiny among European countries right now. Nor do I have the impression that there is an enormous amount of confidence on the part of the population in the institutions. Brexit is an illustration of that lack of confidence. In the middle of last year, if there had been a vote in all European countries on whether to stay or leave the EU, the Brits would not have been the only ones choosing to leave. Meanwhile, the U.S. government is puzzling the whole world. Thank God there are checks and balances. How do you expect cooperation to come out of this?
Governments have not been particularly at their best—people were swamped, overwhelmed. Crisis doesn’t necessarily bring out the best in people. Crisis brings the best out of people who are ready and they’re ready because they prepared. The world did not prepare for this.
Dutta: We have been talking about the rise of Asia, and China in particular, for quite some time. Do you think this will accelerate as a result of what is happening?
Manzoni: Yes. A week ago I sent my three sons a long article. I took an hour and a half to write them a note. I started by reminding them that I had this feeling after September 11, 2001. On the 12th of September, I took some of my kids to school. And I said to them, “your world just changed last night. In my world, there were poor and disenfranchised people but they just stayed poor and disenfranchised and didn’t bother the rest of us. In your world, the poor and the disenfranchised now are saying: we’re going to come in and we’re going to mess you up.” I remember being very clear that day. The world had changed, not because of the deaths and the horror, which were of course terribly sad, but because of what it meant.
A week ago, I had exactly the same ‘aha’ moment. China and Asia will come out of this crisis stronger. Unfortunately, I doubt that Europe will come out of this much stronger. I said unfortunately, because I live in Europe.
Dan LeClair: Switching to business and management education, IMD is not the typical business school. It’s very heavily weighted towards executive education. How do you see the future evolving between non-degree executive education and degree education? What are the potential implications for business education beyond 2020?
Manzoni: At IMD we are currently about 15% degree programs and 85% non-degree programs in terms of activities. Is this an optimal mix? It depends for what and for what period of time? In periods of very high economic expansion, 85% non-degree is okay. When you enter an economic downturn, non-degree activities tend to be more volatile because they represent a relatively easy saving for corporations. In addition, about 90% of our revenues require someone to travel (they travel to us, we travel to them or both of us to travel to a third place). When you cannot travel across countries or within countries and you can’t have more than five people in the same room, 90% of your revenues are at risk, which is a bit scary. .
From an industry point of view, it is probably true that the future of business education is non-degree if only because people are living longer. The world is changing ever faster and so whatever education we gave when they were 18 to 22 or when they were 26 to 32 isn’t going to last a lifetime. Statistically, in an aggregate way, non-degree activities will end up being more important than degree activities. However, when you start looking at it from an institutional point of view, living with the uncertainty of non-degree programs is not easy and is not for the faint of heart.
How is each going to change? On the degree program side, there are clearly some parts of the world where degree programs are still rising. We’re going to see a bimodal distribution where on one side, you’re going to have the inexpensive, high availability, high flexibility programs. On the other side, we will have the high touch, high cost, high brand sorts of programs. The schools with very powerful brands will remain. The folks who are able to propose good education largely online, whenever you want, from wherever you want, at relatively affordable prices, will survive. The folks in the middle will really struggle. That’s on the degree side, there will be a flight to quality and brand and then there will be the rest. If you can’t create value in an observable way, learners are going to take the cheap option.
We’re also going to see stackable credentials, more EMBAs that get obtained by taking two online courses at Wharton, one online course at Cornell, two online courses at IMD, and then two months on our campus before receiving the degree.
On the non-degree side, clearly what we’re going to see is a stronger use of technology. There are no ifs, ands, or buts, for two reasons. One reason is efficiency, meaning that studying from a distance is simply more flexible and takes less time! It also doesn’t require people to travel, when we’re going to get increasing environmental pressures on the CO2 footprint. The second reason is effectiveness. We now know that neurons that fire together, wire together. What this means is that if we want sustainable learning and if you want people to translate their learning into action, somehow the neurons need to fire together more often and over longer periods of time.
When they come to us for a week or two, the neurons just don’t fire together long enough and often enough. If we want more sustainable impact we need to have longer, more frequent exposure over longer periods of time. Except they’re not going to come to us for longer periods of time. We have to go to them and that’s where the technology will help us.
The second area where technology will help us is customization. Not many schools are there yet. In a lecture or class, the professor might have a main message and then people ask questions and do various kinds of loops to answer these questions. These questions are introducing some customization of the learning process.
But in a classroom setting, that customization is highly imperfect because when one student asks a question that is absolutely fascinating to him/her, another student thinks she already knows the answer. On the other hand, it is increasingly possible to design intelligent, pre-prepared educational packages that enable great customization. Very few people talk about that. We all talk about the efficiency aspect. But we should also think about the effectiveness aspect through not only the repetition – the ability to rewatch and redo over a long period of time – but also the fact that it can be customized.
Let’s take an example. Let’s assume I’m designing a learning module on handling difficult relationships. We get to a point and we give them a quiz. Then we say, “now there is an interesting nuance here on difficult relationships with people who come from a different culture with high power distance. Are you interested in this? If yes, click here, if not, move on.” There is a possibility for us to think intelligently about this material in ways that will enable customization and then you have increased effectiveness and increased efficiency. And that will be a very powerful combination.
We continue to believe that there will be benefits to people being together. Just last week I was watching a video on brain waves. The human brain generates brain waves that can be captured and measured. What we find is that when individuals are engaged in tasks that require coordination, we start observing synchronization of their brain waves
What you also observe is that in some activities, when there is synchronization there is also a greater enjoyment. My hypothesis is that when we have a group of people working together, we have certain moments of not only intellectual convergence, but also brain wave convergence. We can also influence one another and in ways that are harder to do, at least today, at a distance. So there will be continued power and value creation from having people working together face-to-face. But clearly, technology not only will but must intervene more in our world, because it is leading to greater effectiveness and greater efficiency.
Dutta: We have heard stories of people in Italy and Spain coming together, while in China divorce rates are increasing. Do you think this crisis is going to sort of get us to refocus on our family on humanity, human values or is this is going to create an opposite reaction? What’s your sense of the impact on the individual and on human values and society?
Manzoni: Those two possibilities are not mutually incompatible. There is this wonderful video, where the voice says you have a choice re: with whom you’re going to be confined: “a)” you can be with your family. And the guy immediately says “b.” I watch it three times a day and I continue to laugh at it! The lockdowns have been tough on families. What we have asked people to do from a confinement point of view has been hard for families and that is going to lead to domestic violence and divorces. By the way, I think this period has been disproportionately tough on poor families.
Will it lead us to refocus on the on the essentials? I don’t know. At IMD, it has. On a micro scale, it is possible to use the crisis as a rallying cry. We’ve done a decent job managing internally and not disguising the criticality and the risks. And at the same time, we have maintained a sense of confidence and calm. If everybody does their job we’re going to be better off. I said something in an article in French. It became the title of this article and it has become a cult phrase within IMD. That phrase is “at IMD, we don’t get worried we get busy.” For us, the crisis has tightened the community. It has reinforced the sense of shared destiny and enabled us to re-energize the sense of collegiality and mutual support within IMD.
At the scale of France or Europe, I don’t see a lot of this solidarity. Maybe it will help human beings to refocus on the essentials, but COVID-19 has already been weakening people’s confidence in their leaders. I don’t think that’s very good for people. I don’t see an enormous number of positive consequences as of today at a macro scale, frankly. At a micro scale, yes in a strange sort of way IMD is a stronger, more alive, more cohesive, more confident institution than we were three months ago.
LeClair: As a leadership professor, can you offer two or three leadership lessons to carry forward from this crisis?
Manzoni: I can share two or three insights. I don’t know whether they’re universal lessons for the rest of the world.
We identified very early on that we needed to come across as a very aligned and unified management team. And so very quickly I stopped sending emails from my mailbox and we created an Executive Committee mailbox. So the first thing I would say is watch the top team and make sure that it works intelligently and cohesively, particularly in times of crisis. People are going to be quite scared and so they really need the sense of secure base coming from the top. It is a little bit difficult in an academic institution to ask people not to preoccupy themselves with complex issues, i.e., “just do your job and let me do the thinking.” You don’t say that. What you do is come across as a cohesive, intelligent, and insightful management team and that calms down the troops.
The second thing is that communication is super important. You need to increase communication at all levels. We have found in situations like this that managers talk to their staff pretty much every day. People need to be in touch. We initially conducted community sessions about once a week. Then we moved to once every two weeks. The need for and importance of communication is very high.
The third thing is that we want IMD to survive. But beyond surviving we want to come out of this crisis stronger and with forward momentum. During a crisis, with one eye you have to look at the super tactical. “How many weeks of cash do we have? Which programs do we cancel? What do we switch online?” And with the other eye you need to see where to invest. Immediately after the crisis started my board started saying we have to cut this and that. And I said, no; we’re going to cut a little bit of this, but we’re not going to touch that. And by the way, here I’m going to spend more, because this is an extraordinary opportunity for us to integrate more technology into our offering.
“You’ve got to manage the defensive and offensive side of the crisis.”
We had always known that we were going to invest more in technology. We had been doing quite a bit already on the technology front, but we’d grown 25% over the last two years and we were and hence extremely busy with our face-to-face activities. Well, guess what, in the coming months, I said at the time, we’re not super busy from a program point of view. So, we put in a massive investment of time and energy, as well as some financial investment, to ensure that we would progress as much in the next three months as we would have otherwise progressed in the next three years. That’s the goal we set for ourselves. You’ve got to manage the defensive and offensive side of the crisis. Playing defense, we reduce the salary mass, which is our number one cost, and we get financing. And we’re also playing offense on a number of elements. That’s the third thing.
The fourth thing is you’ve got to manage yourself as a leader. Even more than usual the demands are huge and you’re supposed to excel on multiple fronts. You’re expected to be cheerful, serious but empathic, patient, decisive but also incredibly compassionate. This job requires extraordinary amounts of patience, empathy and compassion. You’ve really got to work on yourself to make sure that you remain in that space. And it’s actually quite challenging to do, especially with all the additional pressures you face as a leader, including on the personal front as your own family may also be needing more from you.
If you want to be of help to your community, you’ve really got to be able to manage yourself in a way that keeps you in this very productive zone. And that’s really not trivial. It tests individuals and teams. Again, you will clearly see the fault lines in the teams. Some of your folks will thrive and step up, others won’t.
One of the things that helps leaders in these circumstances is to maintain a gratitude practice. Before you go to bed, sit down for three minutes and thank life for all the things that went well that day and all the manifestations of kindness that you received from people, all the folks around you who went the extra mile to support the organization. Yes, this is a very demanding period, but I have also never received as many positive emails from IMD faculty and staff as I receive now. If you manage to feel the gratitude for all the things that are going well and all the people who are stepping up, it is easier to remain patient about things that are not going well and compassionate toward people who struggle.
One last thing that helps leaders to stay at their best longer: Try to insert in your agenda some activities that you really enjoy! In my case, this meant recording a series of videos documenting some of my learnings during the crisis. Preparing these videos took two full week-ends, but I enjoyed every minute of it and I found it very energizing to be able to formalize and share my insights.
This interview was conducted by Soumitra Dutta, Chairman, and Dan LeClair, CEO of GBSN. This edited transcript was prepared by Shefali Rai, Research Associate, GBSN.