In a recent note on the business implications of COVID-19, McKinsey & Company advised corporate leaders to forget about trying to conduct “business as usual” and focus instead on ensuring the safety of employees, creating cross-functional response teams, ensuring liquidity, stabilizing supply chains, staying close to customers, practicing disruption plans, and demonstrating purpose by supporting community response efforts.
We would add another piece of timely advice—don’t bet on things returning to normal, unless you define normal as the need to manage disruptions and change.
Once the current crisis has passed, it is only a matter of time before another disruption appears, be it social, political, environmental, or technological. “The world is growing more dangerous and less predictable by the day,” warned François Delattre when leaving his post as France’s ambassador to the United Nations last year. “While the tectonic plates of power are shifting under our feet, driven in no small part by the combined effects of a technology revolution and the rise of China, we are also witnessing the return of heightened competition among major national powers. We are now in a new world disorder.”
Simply put, today’s multinational businesses face unprecedented challenges. Unfortunately, one of the least understood obstacles relates to their managers.
Decisions about foreign sales and investment can make or break a firm’s competitiveness over the long term, so how they are made is a crucial management issue. These strategic decisions should be based on an impartial analysis of market intelligence that identifies potential returns on investment and other considerations affecting a firm and its stakeholders. Risk analysis, ethics, and corporate social responsibility come into play.
However, decisions about foreign sales and investments should not be overly influenced by the personal preferences of managers who inform or make them. And yet, as Ivey Business School research has found, many foreign investment decisions are not driven by data. Instead, location decisions are often heavily influenced by managerial cognition, biases, and previously experienced hassles associated with visiting certain locations.
When a company is looking to expand, it is only natural for the individual managers involved—including the CEO—to have preferences. In the age of populism, these preferences might be based on external and personal political opinions. But the issue is deeper than that. Indeed, nobody should discount the impact of travel hassles experienced by managers when visiting certain foreign investment or sales locations.
Think about Panama’s long rainy season or Vietnam’s tiresome visa application process or having to attend early-morning meetings after landing in Mumbai, India, past midnight. Dealing with these hassles is not pleasant in general.
Having experienced varying levels of travel hassles while visiting over 100 countries, Ivey Professors Andreas Schotter and Paul Beamish investigated how travel hassles influence foreign investment decisions and sales. Utilizing a complex multi-method multi-data-source approach paired with extensive executive interviews, they found a significant negative impact on the decision making of individuals and groups tasked with assessing potential opportunities. Further analysis revealed that the major drivers of this negative effect on foreign investment decisions and sales include the availability and quality of hotels, food and water hygiene, visa-processing bureaucracy, general health and safety risks, female executive travel safety, and the accessibility and quality of local transportation. The research also found that senior decision-makers are frequently influenced by personal preferences or anecdotes from peers when making foreign investment decisions.
Schotter and Beamish initially developed an 11-item measure of travel inconveniences that commonly lead to employee self-interest in decision making. Entitled “The hassle factor: An explanation for managerial location shunning,” the original research was published in The Journal of International Business Studies in 2013.
Since this costly phenomenon was identified, the Hassle Factor measure has been expanded to cover 180 countries, while additional data that measure each of the 11 Hassle Factor indicators in two-year increments have been inputted. Using these indicators, which are listed below (ranked high to low based on the latest data), Ivey’s International Business Institute now regularly updates an interactive world map that ranks nations by hassle level (see 2018 rankings below).
THE HASSLE FACTORS (Ranked high to low based upon 2018 data)
Female Travel Risk
Food Water Hygiene
NATIONAL HASSLE RANKINGS (Based upon 2018 data)
|Lowest Hassle Factor Countries||Highest Hassle Factor Countries|
|1. Netherlands||1. Afghanistan|
|2. United Kingdom||2. Central African Republic|
|3. Denmark||3. Somalia|
|4. Sweden||4. Yemen|
|5. Luxembourg||5. Syria|
|6. Germany||6. Chad|
The new open-access measure exists as a tool to help researchers, firms, policymakers, and students identify drivers of managerial biases related to international business and then react to them.
Even in the brave new world of disorder, multinational enterprises must pursue growth opportunities with the highest potential. But to do this, they must first overcome managerial biases and identify more champions willing to tackle location hassles in cases when an impartial assessment of business risks and opportunities indicates that a difficult market has the potential to generate a high return on investment—especially if the hassle factors of that market are keeping the competition away.
Similarly, many characteristics that are perceived hassles for managers of firms from traditional industrialized locations like Europe, the United States, Canada, and Japan are not necessarily seen as such by managers from rapidly internationalizing emerging-market firms headquartered in less developed countries.
Here are three actions to take to utilize and build on the Hassle Factor:
Awareness: Keep yourself up to date about managerial biases and on-the-ground location factors and keep your decision-makers informed.
Raise global strategic capacity: Make sure the entire organization understands why you are engaged in international business and why and how you choose locations.
Leverage a more diverse talent pool: Hire for a global mindset and not just for technical job competencies or single-location knowledge. Recognize that some of your otherwise high-performing managers may be ill-suited for roles involving high-hassle locations. A truly global business survives if its members understand that having multi-location firm-specific advantages boosts overall competitiveness.
The COVID-19 pandemic is currently putting the brakes on cross-border travel. But global connectivity and international business will continue because the human benefits are simply too great. Going forward, the biggest mistake that executives of global ventures can make is to universally deploy the strategies, tactics, and management practices used at home, ignoring vital location differences for opportunity development. In other words, to be truly successful, a much higher level of international business understanding is not only desirable but essential for executives in any industry.
A good manager executes on crisis mitigation, but a great manager adapts to the Age of Disruption proactively with a mindset that has already changed from “I know change is coming, but I can’t see the specific changes that might impact our organization” to “I see change coming, and I am prepared and already doing something about it.”