There is a classical debate in global leadership: integration or customization, standardization or localization – how much should be the same and how much should be different in the global enterprise when it comes to products, processes and pricing?

One dimension of this classical dilemma which particularly interested the members of the Academy is how to deal with standardization and localization when it comes to the company’s values and core competences (comments and input from 12 visits to DI member companies in the period January-April 2009). As with so many other topics in global leadership, the evidence and opinions are divided on how much should be harmonized and how much room there should be for ”a thousand flowers to bloom”. Some people see corporate culture as a potential ”third way” which can bridge over a multitude of differences in the global enterprise and establish common ground; others focus on the possibility of capitalizing on local differences, and of ensuring that the corporate culture picks up new trends and facets in its encounters with new markets, institutions, customer groups and cultures with a view to strengthening its global outlook and competitiveness. In other words, a focus on exchange of values, or ascribing value to either integration or local customization.

As this example of standardization or differentiation in the corporate culture illustrates, the discussion often arises from a strategic choice that the company can usefully make on the basis of markets, customers and the position and quality of its competitors. Some factors pull towards integration, others push towards local customization, so the thing is to find the ”best fit” between the two extremes for the individual business. An often overlooked aspect of this debate, however, is that there are often individual differences and preferences which govern the way in which leaders handle and balance standardization and differentiation.

We can approach the task of global leadership in many ways and, depending on the context the individual leader has to succeed in, some approaches may make more sense than others. If global leaders are to choose their approach and develop the ability to balance and combine different approaches to a given context and situation, they need to be aware of the cards they hold. That is the purpose of this tool, as one of the research projects run for the Academy discovered two different leadership styles that characterize global leaders’ approach to the standardization/differentiation dilemma: the ”alignment-oriented” approach and the ”diversity-oriented” approach to global leadership.

Global leaders with an alignment-oriented approach focus on implementing general rules and common structures across national and organizational boundaries. Among other things, this means that the alignment-oriented leader strives for a ”one-size-fits-all” organization structure rather than making changes to fit the local (national) culture. This leadership behaviour has the advantage that it creates cohesion between different parts of the organization in terms of structures, processes, methods etc. However, the approach may be felt to be inflexible towards local conditions and cultures, and can impede organizational adaptation to the settings in which the business has to operate around the world.

Global leaders with this approach argue that the differences between countries and cultures are overstated, and in many ways regard global leadership as the same thing as ”normal” local leadership. That means that the global leader with an alignment-oriented approach believes that general management principles are applicable in most situations and can be used in spite of cultural differences. Alignment-oriented leaders do not see global complexity as anything particularly different from local complexity.

Alignment-oriented leaders advocate a strong supranational organizational culture which aims to supplant the local differences. At the personal level, global leaders with an alignment-oriented approach strive for consistency and do not change their behaviour when they meet with different people and situations.

Global leaders with a diversity-oriented approach believe it is important to constantly adapt various part of the business to the local context. That means that diversity-oriented leaders are always striving to adapt their leadership behaviour to the people and situations that they encounter in the organization.

The behaviour of the diversity-oriented leader may be described as inquisitive and flexible as it comes out in different cultural and organizational contexts. However, this behaviour may also be perceived as inconsistent because the leader focuses on the local ahead of the global, which may reduce the sense of coherence within the organization.

The global leader with this approach treats people differently according to their personality and cultural background, and handles teams differently according to the composition of the group. They see global leadership as something distinctly different from local leadership, and are aware of the increased complexity that arises from the many cultural contexts within the organization. Diversity-oriented leaders will see this sort of complexity as a strength rather than a challenge. So they use their behaviour to try to bring these cultural differences into the open to make them visible to all, and in this way they use the existing diversity to strengthen the business.

Global leaders naturally take different approaches to their leadership tasks and can be characterized according to the two descriptions above in terms of:

1. How much emphasis do they place on applying global rules and leadership principles?
2. How much emphasis do they place on individual and organizational/local attributes?

If we compare the two approaches, it is clear that they both have advantages and disadvantages and that they are opposed to each other in some areas. The advantages of taking an alignment-oriented approach are in the focus it brings to organizational cohesion. Consistency and standardization of procedures support a strong corporate culture and a shared understanding across the organization. They signal solidarity and similarity between individuals, groups and organization units. The drawback is the lack of adaptation to local contexts and cultural differences. This limited organizational flexibility may result in a form of disconnect between the local units and head office. Contrary to the intention behind an alignment-oriented approach, this may contribute to a sense of fragmentation within the organization. The local employees may also feel alienated in the face of the dominant corporate culture if it is perceived to be marked by cultural ignorance and perhaps even disrespect.

Against this, global leaders with a diversity-oriented approach may be able to adapt their rules and behaviour to support the local context and so exploit the advantages to be found in diversity within the organization. The disadvantages of this approach are that this leadership style may be perceived as inconsistent by the staff and as expensive and inefficient by their superiors when the global leaders are repeatedly obliged to adapt and modify their leadership style and systems to the situation and the context.

All leaders have their own mix of the two approaches, and the optimum combination of the two will depend entirely on the context and situation in which they are to be used. Whatever the situation and the context in which the global leader has to operate, it is essential to be able to navigate between the many differing interests in play in the organization and to keep a constant eye on how the manager’s leadership style can best support the aims of the business.

So it is not helpful to stick to one approach in preference to the other; rather, you need to be able to move flexibly between the two according to the type of leadership that is needed. The most crucial behavioural challenge for global leaders is thus to balance the need for global rules and procedures, to maintain internal cohesion and achieve economies of scale, while adapting the same structures and procedures to the local context to reap the benefits of diversity and local knowledge.

The model lists the leadership implications and differences/similarities in applying the two approaches: