ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

In a time of near-constant disruption and tension, the urge to disconnect seems tempting. But people, companies, and societies are deeply interdependent. Even as the norms of and attitudes toward globalization continue to evolve, globalization isn’t going away; it just needs to be considered with fresh eyes. As a new year approaches, it may be a good time to ponder a new way of thinking about our interconnected world and how business leaders can enable global cooperation to benefit both their companies and the world at large.

AN IDEA

Rethink the rules of globalization

For four decades, the world economy has grown tremendously from the cross-border movement of trade, services, capital, people, data, and ideas: in other words, “globalization.” And for much of this time, multinationals have led the way in breaking through geographic and economic borders—benefiting greatly in the process. But “some analysts are now calling this paradigm into question,” say McKinsey’s Michael Birshan, Joe Ngai, Jeongmin Seong, and Olivia White. Cooperation has plateaued amid geopolitical conflict, supply chain disruption, and the broader discussion of who is benefiting (and who isn’t) from trends in trade. The challenge for leaders seems daunting, but the implications can’t be ignored. To deliver business value and enable future collaboration, the authors suggest three ways forward: raising the geopolitical fluency of leadership teams, rigorously assessing the interconnectedness between their businesses and the broader world (and the related risks), and diversifying organizations’ exposure to those risks.

A BIG NUMBER

25

That’s the minimum percentage of important resources or manufactured goods that every region in the world imports. “No region is self-sufficient,” say the authors of a McKinsey Global Institute report on global trade flows. Indeed, in many cases, this percentage is much higher. For example, while the Middle East and North Africa region is the largest net exporter of energy resources, it depends on other regions for more than 60 percent of its key food crops.

A QUOTE

“Developing organizational resilience is no longer just about maintaining cultural cohesion. It is also about sustaining a global ethos amid powerful centrifugal forces.”

That’s from McKinsey’s Andrew Grant, Ziad Haider, and Jean-Christophe Mieszala, who propose six ways to address the geopolitical risks that are shaping (and reshaping) globalization’s current state. One of these ways is building organizational resilience. Leaders can create organizational resilience through inclusive governance structures and open and honest dialogues with their people—by acknowledging the effect of global stresses on individuals, empowering colleagues to speak up, and creating a common sense of purpose. The McKinsey authors suggest that organizations “consider a range of targeted initiatives to promote connectivity and cohesion, from rotating colleagues in and out of geopolitically sensitive markets to sharing views.”

A SPOTLIGHT INTERVIEW

“Right now a lot of the conversations about trade are taking place between very sharp people, but oftentimes folks who are very focused on the technical details of things,” says trade economist Chad P. Bown in a conversation with McKinsey on the state of trade and globalization. “But they’re not thinking about whether that [focus] makes sense, given the challenges that are most important at this moment in time.” Given a growing list of problems that require global collaboration, Bown suggests that stakeholders take a step back. “The goal isn’t to maximize trade in the world,” he says. “We should see it as part of a bigger picture, and think about how we can use trade that enhances cooperation in the areas where we really need it: for reasons of cimate, public health, and increasingly, national security and global security.”

— Edited by Daniella Seiler, executive editor, Washington, DC

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