Last week senior Hill+Knowlton practioner’s from around the world gathered in Los Angeles for as summit on global leadership. I was struck not only by the talent in the room but by the goodwill that was evident. People wanted to break down barriers to growth and be part of this powerful globalization trend.

Globalization has been with us for some time, I remember attending a similar conference at H+K twelve years ago when the enthusiasm for globalization was in equally high. While we have made some progress since then – it has not been enough. To break down barriers you need a commitment to communication, and more communication. One meeting every twelve years and an annual practice leader meeting are not enough. The cost of these meetings is  high, and understandably, during the recession budgets dried up. So with rates of staff turnover in excess of 25% annually it makes it very difficult to build a best team when you don’t even know who the players are.

The current movement towards globalization clearly extends far beyond H+K. This spring I watched my twitter account in awe as stories broke about the push for democracy in the Middle East. In front of my eyes news spread at the speed of light, whether through the internet and by text messaging. As Thomas Friedman said in his best seller the “World is Flat” “We used to live in a more centralized vertically organized world……but now individuals can easily access all the tools of collaboration and supreme power….the small can act very big without the instruments of state”. Low labour costs, the trend towards deregulation and third world tax havens have propelled offshore development. The economies of India and China will soon have middle classes to rival all the United States. No wonder there is institutional pressure to globalize!

But no sooner had we returned from our trip than our WPP Group Chief Executive, Martin Sorrell, circulated a report from the Futures Company on “The world in 2020”. It’s very evident that there are some cross currents to globalization at work:

  • The global financial crisis demonstrated limits to the free market. The highly networked financial service industry melted down two years ago because most countries raced to deregulate their industries. One of the exceptions was Canada, which retained very high standards of securitization and tough mortgage ownership policies. Those countries that resisted the trend to globalized standards of deregulation have ended up in better shape. Now other countries are busy reregulating both through the Basel II process and their own national regulatory regimes.
  • The era of cheap oil which drove the global economy is rapidly coming to an end. Conventional production may have already peaked, while demand increases in the fast growth economies of India and China. While a certain amount of demand can be met by offshore and oil sands development, the trend for increasingly more expensive oil has been set. With transportation costs becoming prohibitive, manufacturers will  begin to think twice about outsourcing to the developing world.
  • Our pre-occupation with climate change is also driving a new movement toward the localization of food and agricultural staples, as consumers are increasingly aware of the environmental impact of transportation.
  • The risk of global pandemics is affecting international travel. Both the SARS and H1N1 Crisis created global travel restrictions between countries to stop contamination. Similarly we are still living with the impact of 911 as the once invisible border between Canada and the United States is increasingly restricted.
  • Even cultural identity has re-emerged as political considerations have resulted in states re-asserting themselves in local markets. The Australian Governments rejection of Singapore’s purchase of its stock exchange, the US opposition to China’s purchase of Unocal, and Canada’s rejection of BHP’s potash bid were all manifestations of  concerns for  cultural identity. As the forces of globalization have become stronger – so too has the counter re-action!

While there is a clear rise in the role of transnational players and in the power of an individual to affect change, the nation state isn’t going anywhere soon. How H+K responds to these trends must be thought through carefully. The answers to these trends are not always straight forward.  Sounds like the topic of my next blog post.