By: Lilac Nachum
Much has been made lately of the lack of global expertise in the boardroom, a state of affairs that leaves the management of global companies unguided and diminish the effectiveness of boards of such companies. This has become a serious concern in the contemporary world whereby boards play an increasingly strategic role in the management of companies.
Through my work with thousands of executives around the world over the last two decades I have learned that the lack of global expertise in boardroom is particularly disturbing in three areas: the management of complexity; the creation of internal integration and synergies, and the proper approach to diversity. In what follows I explain what boards should do to get it right in these three areas.
1. Managing the global company requires expertise in the management of complexity
The global company represents a most complex organizational form. Effective management of complexity is essential for the ability of these firms to survive and create value. Boards’ qualities serve an important role in helping management effectively respond to these challenges.

Three such qualities stand out. The first is striking the balance among conflicting requirements and tensions that are inherent in complex systems. In the case of the global company, contradictions come from sources such as inconsistent demands of local stakeholders in different countries, conflicting needs of local affiliates and the global corporation, and the tension between pressures inside and outside of the organization. As outsiders, boards are uniquely positioned to objectively evaluate and balance conflicting pressures, and assist management confronting internal resistance to the settlement of these conflicts.
Second, as objective outsiders, removed from the details of daily activity, boards should help and challenge leaders to take the global view of their organization that is required in order to comprehend the system as a whole and see the ‘forest for the trees’. Such a view is fundamental for the ability to understand the sources of competitive advantage of the global company.
Lastly, boards’ long-term tenure and independence from such pressures put them in an optimal spot for challenging business leaders and opening their eyes to the potential benefits of the long-term. Advantages of complex systems are difficult to establish, and reaping their associated financial benefits takes time to materialize. Often the long-term horizon required for building a profitable global business is in conflict with the time frame of top management, and the pressure to show top- and bottom-line results overshadows the long-term opportunity.
2. Reaping advantages in a global world necessitates advice on the management of integration and synergies
A major potential source of competitive advantage of global companies lies in the integration and synergies among their multiple constituent parts that are spread around the world. The management of such companies requires the ability to see and understand the bigger picture of the entire portfolio and the interdependencies among individual parts. As outsiders who are removed from the daily requirements of running the business, boards are uniquely positioned to assist management putting in place the structure that fosters synergies and brings about the cross-sharing that holds the potential for competitive advantage.
Boards are also in an appropriate position to lift managers from the demands of individual subunits and help them take the requisite actions and assist them striking a balance between global and local demands and needs, a fundamental act for the survival and success of global companies. In their advisory capacity, boards are free from the difficulty of relinquishing control that often biases management decisions away from giving the autonomy needed to respond effectively to local demands. Boards are removed from internal resistance to shifting control, and that eases their role in assisting management in undertaking such decisions.
3. Creating value in a global world calls for guide in the management of diversity
Diversity is at the core of value creation of global companies. Global activity affords access to diverse cultures, knowledge, resources, and consumers, thereby enabling development of advantages based on learning and arbitrage across them. The diverse background of board members, with careers in different corporate settings and varying expertise, brings a plurality of views to the table that is instrumental in assisting global leaders turn diversity into an advantage.
Boards should use their inherent diversity to create an environment in which new and diverse ideas are welcomed and viewed favorably, and liberate management from a parochial, insular view that tends to dominate decision processes in homogenous settings, setting up the tone for global conversations. Internationally-experienced board members should leverage their expertise to link companies to diverse networks of global leaders, and to diversify the talent pool that an organization can access.
By increasing openness to differences, boards may also assist in managing the diverse global company. Imposing similar standards and norms of behavior on subunits of diverse origins and cultures that are based in different legal and political environments is fundamental to the survival and success of global companies, but it also represents a substantial challenge, as recent bribery scandals experienced by many global companies illustrate. Openness to diversity enhances the ability to anticipate sources of conflicts and respond to them effectively.
Boards that offer operational advice in these areas will be a strategic asset for their companies and a valued source of competitive advantage. To accomplish this, board members need to educate themselves on the sources of value creation in a global world and the nature of global companies. The stakes are high, justifying the effort.