IMD International

Three main factors are positioning globalizing mid-caps to win the war for customers and talent

Freedom, connectivity and C-suite stewardship are key, a new Amrop/IMD study finds

October 17, 2014

Large public companies (and, increasingly, state-owned enterprises) occupy a significant proportion of global assets and the attention of business academics and consulting firms. At the other extreme, start-ups are all the rage in the new economy, attracting ambitious graduates and 'emigrés' from major corporates. What about those in the middle? So far there has been limited work on globalizing mid-caps, especially on vital leadership, talent and cultural aspects.

"Welcome to the Flight Deck," a new study by global executive search partnership Amrop and top-ranked business school IMD, explores this missing link. It draws upon 83 live, confidential interviews with C-suite leaders from every continent, according to a structured framework designed by researchers at IMD and rigorous content analysis. Lasting up to two hours, the interviews were conducted by Amrop Partners.

Three main factors are positioning globalizing mid-caps to win the war for customers and talent, the study finds:

1. Freedom – key functions and talent are given space to shape the organization. Boards are given freedom by shareholders and stakeholders, passing it on (or reconfirming it) to CEOs and operating teams. Talent is free to act, fail, and evolve.
2.  Connectivity – boards have their finger on the pulse of the business, and know the key market players and customers. Talent is exposed to new ideas and perspectives. Boards are connected internally and externally, as custodians of growth and globalization. Executives ensure talent is involved in innovation and informal learning, moving across functions, divisions and geography.
3. C-suite stewardship – mid-cap leadership means proximity, articulating in person a mission touched and felt throughout the organization. As "pilots," leaders evoke their human touch: customer contact, direct stimulation of innovation and entrepreneurship, the live communication of mission, and the surfacing and development of high potentials.

Could mid-caps inhabit a "vitality zone"? Analyzing four mid-cap size bands, from 5,000 employees and under, to 25,000 employees and over, the study finds that these three factors are by no means limited to the lower end of the size spectrum. This suggests that the full range of mid-caps may be small and informal enough to allow these features, yet large and systematic enough to make the most of them across a global footprint.

The study also finds that:

1. Successful mid-caps take an ambitious, long-term view. Growth and globalization are high on the agenda, fuelled by stretch targets, sheer determination and a sense of 'no limits'.
2. 79% of mid-caps in the report study the successes and failures of other companies. These relate to growth and globalization strategies, culture, human capital development, innovation and entrepreneurship. Some 21% have no role model, and several believe themselves to be unique.
3. Many mid-caps already have a successful international business, but only 9% feel truly ready for globalization.
4. Managerial and cultural capacities for globalization are top-ranking critical issues. These closely follow concerns regarding global operations and production, and market, economic and trading conditions.
5. Mid-caps strike a compelling balance between local autonomy and corporate influence. To reconcile consistency and agility, they are centralizing processes (e.g. HR, ICT) and decentralizing decisions, particularly in market-facing areas.
6. Globalizing mid-caps have powerful employer branding to attract leadership talent. This includes high-visibility, internal talent pools; mobility between functions, divisions or geographies; competitive financial and cultural incentives; and world-class learning and development.
7. Many mid-caps are ideally positioned to be innovation and entrepreneurship champions. Manageable size and global reach can enable broad-spectrum innovation, networks characterized by intensive cross-border information exchange, and the freedom to experiment, fail and learn in local markets.
8. Mid-cap boards are tailoring themselves for globalization. CEOs and boards manoeuvre freely, while being positively challenged by objective, independent voices. Board composition is shifting to reflect globalization – via national, functional, and sectoral diversity.

Maury Peiperl, Professor of Leadership and Strategic Change, who led the study on behalf of IMD, summarizes: "The findings from our systematic examination of this data speak directly to the issues on the minds of mid-cap leaders, "telling it like it is" and raising questions for all who work in, or with, these enterprises."

"We have long suspected that globalizing mid-caps had special cultures and ambitions," concludes Ulrich Dade, Chairman of the Executive Board, the Amrop Partnership. "In our day-to-day interactions with senior executives we experience a wide spectrum of leadership talent needs and are witnessing significant shifts in board composition and functionality. In helping us to build our first hypotheses, this study is the first step on a thought-provoking journey."

You can download the executive summary here.

*Participating mid-caps were selected on the basis of a market capitalization of US$1 bn -10 bn. (Where not publicly listed, company asset base – as determined by public, or if unavailable, private sources – was used as a rough equivalent.) The majority of the sample were selected for high growth - greater than 10% average revenue growth over 2010, 2011 and 2012. Most had around 30% of revenues, assets, and/or employees overseas. Where not, the ambition to globalize was high on the agenda. Companies were chosen to represent a wide spread of home countries from all regions of the world, in close proportion to their region's contribution to the global economy.

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