Expanding
into the developing world is not an easy game. John McKeown of Lucent
Technologies talks to Godfrey Golzen about the HR challenges he faced when the
company decided to move into emerging markets
Tech
stocks are not the investor’s favourites at the moment and Lucent Technologies,
whose $33.6bn revenues and 125,000 employees make it one of the giants of the
new economy, has taken a beating along with a number of other great names.
Stock market perceptions, however, deal in the short or, at best, the medium
term and although this is not to say you can ignore annual results, the
long-term realities of the IT industry remain in place.
These
realities, says John McKeown, VP of HR in Lucent’s Optical Networking Group,
are of a future more wired for optical, data and voice transmission than
anything we currently dream of. "Network traffic doubles every 100
days," says McKeown, and if it’s hard to envisage what that means in
practical terms, consider this. A driver taking me from Rotterdam’s world-class
business school to the airport last month was being given voice instructions on
the route through a transmitter linked to a satellite somewhere beyond the
stratosphere – the stuff of science fiction less than a decade ago. So what
comes next?
No
one really knows, but McKeown is one of those who sees a parallel between the
IT industry and that other great communications revolution of 150 years ago –
the dawn of the railway age. Management guru Tom Peters has pointed out that
this was full of hiccups, errors of judgement and crass technical blunders, but
it was only because it was being built at breakneck speed that the railway
network was able to transform global communications so quickly. Today’s
parallel is IT and you don’t have to look beyond the dot-coms to see examples
of tracks running to nowhere, which nevertheless do not invalidate the
underlying inevitabilities of what is going on. The big difference is that
whereas the railways were built with brawn, the e-economy is being built with
brains, and the global competition for people who have got the necessary skills
is ferocious. Â
Given
that half the world’s population has yet to get a phone and that the Internet
has yet to mature outside the US, Lucent is keen to exploit that global
potential by engaging in joint ventures with telecommunications companies,
especially those in the developing world. But to do that effectively needs
skilled talent both at home and abroad.
In
the hunt for current and potential talent in the IT sector, McKeown is in no
doubt that the crucial target areas are in Asia and Eastern Europe, with their
huge, under-used and increasingly well-educated populations. But because
Lucent’s competitors, not to mention other industries from the developed
countries, have come to the same conclusion, it’s a tough area for HR
management to operate in, especially when it comes to finding the right
marketing people.
"We
had the same problem at Campbell’s Soup, where I worked previously as head of
HR. In parts of Asia, it was hard to find consumer marketing talent who could
market food ‘the Campbell way’, in which rigorous market and consumer-based
research is translated into a compelling consumer proposition," he
recounts. "At Lucent the issue is integrating marketing ability with the deep
technical understanding that our customers expect of us. Plus our local hires
have to have a good grasp of English and be ready to accept our fundamental
values in the way we do business. People who can fit into that frame are in
tremendous demand – and they know it."
IT
itself, which makes transparent the comparison of pay and benefits globally as
well as locally, is a big factor here, and the age of low-cost software
engineers in places like Bangalore is already a thing of the mythical past.
India, says McKeown, is currently experiencing a 25% wage inflation in the IT
sector, although here, as elsewhere in Asia, he sees a huge potential skills
market, as yet untapped, among women.
"Equal
opportunities policies are a tremendous recruitment asset," he is
discovering. Even in a sophisticated market like Japan, on the whole, the
growing number of well-qualified women get a raw deal from national companies
and are turning to US and European multinational employers in preference to
local ones.
But
as far as men are concerned, what can a company like Lucent offer? Money, of
course, is a key concern. "You need to pay people aggressively," says
McKeown, who makes the point that the very large sums paid out in mergers and
acquisitions are in effect there to buy the people rather than the assets. In
the case of knowledge-based companies, many of whom are only a few years old,
the physical assets are usually minimal anyway. "We’re not just competing
with the giants," he says. "Young IT hotshots can make a fortune out
of share options or out of owning equity in an acquisition target."
Although
the bursting of the dot-com bubble has eased the situation slightly, the talent
shortage remains critical. McKeown and his competitors spend a great deal of
time thinking up pay and benefits packages for locals that will meet their
country’s tax regimes or at least legally avoid falling foul of them. This is
particularly the case in China, where Lucent has some very large operations. It
is also active in several former communist countries, which are good employment
markets for technology companies because, despite the economic follies of their
former governments, they did maintain high standards of technical training.
Continuing that theme, one benefit that is both particularly appreciated by
employees and highly cost-effective, is the chance to spend some time working
in the US. Techies are very much aware that their earning power is dependent on
them keeping up with the latest tools and techniques.
The
other big challenge for HR managers in emerging markets is to create brand
awareness. Lucent Technologies, which is actually a spin-off of the much better
known AT&T, has a problem here, especially as its aggressive acquisitions
policy has created a portfolio of subsidiaries whose businesses are sound but
which are not household names globally. The company is in the process of
rationalising this through selective divestments and spin-offs, but it also has
one major trump card. Its research and development arm is Bell Labs, arguably
the world’s most famous and innovative incubator of new ideas in electronics,
as witnessed by the 11 Nobel laureates it has produced since 1937.
"Everyone wants to get into Bell Labs," says McKeown. "So we
make it hard." The fact that Bell is extremely selective about who it
hires only adds to its attraction. So no problem there, but it’s a harder slog
to attract and retain talent for other parts of the operation.
A
key plank of HR strategy here is to build relationships with universities, both
with technical departments and with the business schools. "We target the
top academic institutions in each country and we talk to them several times a
year," explains McKeown. "It’s not just a question of making an
annual presentation to students. We build relationship with academics, provide
resources for research and hire students for internships. Recruitment is an
ongoing event." One reason for that is that it is important to catch
graduates as soon as they come out of university. "The speed of
development in our industry means that the knowledge you have acquired during
your studies is out of date within five to ten years," he says. A curious
consequence of that is a reversal of the pay pyramid. In certain cases, new
recruits with knowledge in a hot area may actually be paid more than those who
have longer service with the company.
However,
technical competence, vital though it is, is only part of the story as far as
management jobs are concerned. "For an HR head in a global company,
identifying people for expatriate assignments and then managing those
assignments has become a core skill," says McKeown, who spends two weeks
out of every four travelling to different parts of the world.
Lucent
has a cadre of 1,250 expatriate assignees, of whom 800 are from the US, the
balance being third-country nationals moving to a Lucent company in a country
other than their own. The task of expatriates is to hand over to local
management as soon as possible and their success in doing so is a key measure
of their performance. However, technology transfer is only one part of that
process, and because techies speak a common language, it’s the easier part.
Arguably the more difficult bit is to manage the "soft" cultural
issue of reconciling global practice with local sensitivities. "You have
to be pretty flexible about some things, although we have some clear sticking
points. We won’t tolerate racism, sexism or corruption anywhere," McKeown
says. But he admits that some issues remain unresolved.
"Take
360-degree feedback. That is an integral part of our HR practice at Lucent, but
it’s very alien to the Asian culture where superiors are beyond
criticism." He believes, however, that such differences will be resolved
over time and that a new generation of Asian managers, who will have done some
of their training in the US and possibly been educated at Western business
schools, will lead the way here. But education, he says, is a two-way process
for HR managers responsible for developing countries, in terms of the
"business" culture and the employment and social cultures. "You
can learn about some of the issues from afar and by using consultants, but you
really have to see things for yourself to get a full understanding of them."
But
what, one might ask, is a Brit doing working in a key position for one the US’s
most dynamic and fast-growing companies? British management, to be blunt, has
not in the past been seen as a role-model in the US, as witnessed by the
infinitesimal number of British management books that find a US publisher. But
globalisation has changed that, because knowing your way around the world has
long been an implicit skill for British managers. With a population of only 70
million, the British have always had to look to markets beyond their shores and
even in the days of the Empire there was hardly a middle-class family that did
not have some member working in one of its far-flung outposts.
"US
companies are aware of the importance of a global perspective and of the fact
that many of them still lack it," he thinks. "But they feel more
comfortable with Brits and with managers from northern Europe generally than
with those from other parts of the world. Language is an important factor, of
course, but there’s an underlying cultural understanding as well."
John
McKeown trained as a lawyer, a not unusual background for what used to be
called personnel, and worked for a number of blue-chip British firms before
moving to the US as head of HR for Campbell’s Soup. From there he was
headhunted to Lucent, for whom his British background was one of the positive
factors, even though there is, to put it mildly, no obvious connection between
soup and the cutting edge of IT. But the HR issues are generic and they are
crucial to a company like Lucent, which has a quarter of its workforce outside
the US, offices and distributors in 90 countries around the world, and which is
actively engaged in global mergers and acquisitions.
There
is also the strategic matter of managing expatriate assignments. It is becoming
clear that the qualities that make a successful expatriate are also those of
successful leaders in the economy: open-mindedness about other ways and values;
being able to function as a member of a global team; leveraging knowledge
management; rejection of the "not invented here" syndrome and its
numerous cousins; and actually getting things done.
Success
in an expatriate assignment is heady stuff, though, especially since such
assignments take place at a fairly early stage in a career – somewhere between
the mid-twenties and the mid-thirties. McKeown says that managing repatriation
is just as difficult as managing expatriation, because having experienced
autonomy, high visibility and the perks that go with a top job at an early
stage in one’s career, it can be difficult to rejoin the corporate ranks. But in
these days of up-and-down corporate careers, personal experience of their
vagaries and uncertainties may provide the skills in followership that
successful people often lack, but which are increasingly recognised as implicit
in the job of leadership.
The
really significant aspect of global HR management, therefore, is that doing it
is nothing less than developing the next generation of corporate leaders.
Lucent
facts
–
New Jersey-based Lucent Technologies is a leading supplier of communications
networking equipment.
–
Revenue: It made over $33.6bn in the fiscal year 2000.
–
Employees: Lucent has approximately 125,000 employees worldwide. Around 25% of
its staff are based outside the US.
–
Locations: Lucent has offices in more than 90 countries worldwide.
International
experience
John
McKeown is a seasoned international HR executive with over 24 years’ experience
in diverse world-class organisations.
US:
1997-2001
He
has worked at Lucent Technologies Inc in NJ since 1997. From July last year, in
his role as vice president HR in the Optical Networking Group, he has been
dealing with key issues such as recruitment, retention, development,
compensation and culture change for 10,000 employees globally.
He
was formerly vice president of international HR services where he was
responsible for 300 HR professionals, providing HR services to 36,000
associates in 55 countries. He was also responsible for Lucent’s international
assignee management (1,400 assignees).Â
The main challenges in this role included: building HR infrastructure
(systems and processes) to support international growth and direct major
staffing activity (10,000 new hires in two years). In addition, 29 acquisitions
were made.
US:
1994-1997
Between
1994 and 1997, McKeown was employed by Campbell Soup Company, Camden, NJ, US.
In his role as vice president international HR, his main challenges included:
supporting the company’s international growth with major emphasis on
acquisitions (Europe and Asia),Â
non-core divestitures and strategic executive staffing.
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UK:
PRIOR TO 1994
He
started out at Campbell in 1992, where he held senior HR posts both in the UK
and Ireland. Before that, McKeown worked in various HR roles at Grand
Metropolitan PLC, British Leyland/Rover Group and ICI.
