Changing Role of the Asia Pacific CEO: Visible Management is the New 'Bottom Line' by Korn Ferry

changing role of the asia pacific CEO:Visible Management is the new â&#x20AC;&#x153;bottom Lineâ&#x20AC;? By Charles Tseng

ince early this decade, when compared to leaders in other regions, Asia Pacific leaders have been found to be “the most collaborative in their approach to leadership….This trend can be

explained at least partially by the rise of globalization, which positioned Asia Pacific as the ‘hot bed’ of global commerce. Asia Pacific organizations have successfully used their skills and knowledge toward collective leadership to open the door to multinational organizations.”1 “Hot bed,” indeed. Fortune’s 2008 rankings of the top 500 companies in the world revealed that the number of those based in Asia has more than doubled since 2005, while the number of the fastest growing companies in the world based in Asia has likewise nearly doubled during that time. The impact that such phenomenal growth in such a short period has had on the scope and nature of the Asia Pacific CEO role has been dramatic – not only greatly effecting how their businesses are organized but also fundamentally changing the way they organize themselves to deliver “success” on a whole new level.

The Changing Nature of Leadership, Center for Creative Leadership (2007)

These changes are expected to continue with even greater intensity as the macroeconomic climate becomes more volatile; and only those companies that adopt a mindset and readiness for transformation will outperform those that are less well-prepared. Pierre Cohade, President, Asia Pacific Region, Goodyear Tire Management Company (Shanghai) Ltd, has modified Goodyear’s business model in China twice in the last four years. “In order to capture changing market opportunities, fast footwork is needed,” says Cohade. Successful Asia Pacific CEOs are able to clearly anticipate both predictable and unpredictable events and quickly develop a well thought through change process that will deliver results no matter what the scenario. In a recent Korn/Ferry survey2, Asia Pacific CEOs of some of the most prestigious companies in the world shared perspectives on their evolving priorities against this background of a rapidly changing and uncertain global business environment. This paper summarizes their views and examines how “the talent imperative” is likely to force Asian executives in particular to redefine their interpretation of what it means to have “good people skills.” For while it is true that the region’s traditionally consensus-driven approach to leadership has served it well in the information economy, where over time less of an emphasis has been put on “big personality” leaders and more on “team players,” the findings of this survey and others reveal an urgent need for Asia Pacific heads to become more proactive about and open to engaging their staff on an even more personal level in order to develop the next generation.3 If they do not, the region’s potential will not be realized and their jobs will become even more challenging. 2 Korn/Ferry International in concert with the Economist Intelligence Unit conducted an online survey in May 2008 of APAC CEOs across industries. Over 50 executives responded. 3 According to a study conducted by the Gallup Organisation and The University of Nebraska’s Global Leadership Institute, “the absence of a strategic focus on leadership development made it even more difficult for the next generation of leaders in the region to successfully assume roles.”

About the APAC CEO Role There seems a slight change in reporting for the Asia Pacific CEO, with a greater percentage now reporting directly to the Board than three years ago. A large number of the CEOs who participated in our survey has always reported to and still reports to the Global CEO. In the past three years, half of the respondents have seen a structural shift away from regional strategies to global strategies. Of the CEOs who took our survey, 50 percent were based in Hong Kong, with Singapore being the next most popular regional hub. Interestingly, a few respondents were based in Dubai and have oversight for the “Asia Middle East” region – an indicator of the growing link between the two territories. Also noteworthy is the fact that the respondents’ companies were equally headquartered globally in Asia as they were in North America (36 percent for each), further signaling the region’s significance. 3

Global Nomads

The New APAC CEO: Globally Minded, Fiscally Savvy Change Agent…and HR Strategist?

Sixty-four percent of the executives who participated in the survey have worked in at least two countries during their career, with almost thirty percent working in up to eight countries, giving them the requisite exposure to multiple cultures needed to perform well in Asia’s diverse market.

The quality of Asia Pacific CEOs has increased significantly in recent years; most would have worked in at least two to four countries in their career and aspire to become a Global CEO before they retire. In the context of hyper-growth and incessant pressure for Asian organizations to deliver high margins even as the rest of the global economy waivers, it is not surprising that managing a P&L is still seen as the number one experience essential to preparing an executive for success in an Asia-based CEO role. Perhaps more interestingly though, possessing a background that includes creating human capital strategies ranked as the second most important, trumping launching a new product, turning around a struggling part of the business, and even running a country operation. The widely publicized shortage of specialist skills in every country in Asia was seen as the greatest challenge facing the CEOs here in the next three years and is no doubt contributing to this continued emphasis on people as much as profits. Local Asian companies in particular are inhibited in their global expansion plans because of insufficient talent.4

In addition, these seasoned professionals have held general management positions both at headquarters and across geographies and are well-versed in many operational and functional aspects of any business.

The most effective Asia Pacific CEOs have a clear, strategic view of their current and future talent needs – up to at least two to five years out. The best of the best have implemented a systematic talent management process to identify gaps at all levels of the organization and seamlessly integrate their business and talent strategies. And, as intra-Asian commerce becomes more complex, an accent has been put on developing local talent who understands the market nuances instead of relying primarily on imports from the U.S. and Europe. As a result, some believe that expatriate senior executives will eventually become “an endangered species” in emerging markets like Asia’s.5 One example of how A recent article in The McKinsey Quarterly citing a survey of Chinese companies reported 44% of executives in Chinese companies surveyed by McKinsey considered insufficient talent as the single biggest obstacle to their global expansion plans. 4

AESC Emerging Markets Survey (July 2008)

companies are now developing indigenous talent is Goodyear in Asia, which strives to ensure there are more Asians being developed on overseas assignments in North America and Europe than non-Asian expatriates are in Asia.

Redefining “People Skills”: Inspiring People vs. Influencing Peers

Staff management and development is ranked by the Asia Pacific CEOs as more time consuming than engaging with suppliers or customers and strategic planning. This is attributed to the need for them to be personally involved in keeping important projects on track, in part due to their “understaffed management team.” Not surprising, then, is the fact that most respondents listed “strong people development skills” as a key competency that will become more important for the Asia CEO in the next three years. This was seen as being as important, in fact, as strong strategic thinking, and as more important than the ability to work across cultures or drive change. Though this is becoming somewhat of a global trend, I see this as a fundamental shift for Asia in two ways: First, while in the past being a “people person” in Asia might have been primarily seen in terms of an executive’s ability to establish high-level “guanxi” with influencers in China, or to demonstrate appreciation for the loyalty of their long-time employees in Japan, today’s Asia Pacific CEOs need to develop personal relationships with their staff at all levels. Understanding the career ambitions and family and cultural situations of each employee creates lasting bonds and promotes stability and loyalty. In my years as an Executive Search Consultant, I have always found positive personal relationships with the boss a much stronger retention device than money – this has become more the case in Asia than ever before. Secondly, the Asia Pacific CEOs, recognizing the need to take a more participative approach to facing the challenges outlined earlier – which clearly require more than one person to solve - are becoming intimately involved in identifying high-potential employees and tailoring development and other programs to empower them. James Scott, Regional Operating Officer/Member of the Management Board for Metro Cash & Carry International

“That the Asia CEO needs to manage the P&L is a given. The critical imperative over the last three years has been the drive for growth.” Miguel Ko

President Asia Pacific Starwood Hotels & Resorts Worldwide, Inc.

Developing Asia’s Future Leaders In terms of planning for succession, the most popular strategies amongst respondents’ organizations are: n F ast-track programs within Asia for highpotentials; n B ringing global highpotentials to Asia; and n S ending Asian highpotentials on global assignments.

Walking the Talk – Bridging the Gap between Good Intentions and Skill According to a technical report published in early 2007 by Lominger International, a Korn/Ferry Company, a review of thousands of professionals at 27 different companies identified international norms for their skill competencies as well as “skill importance,” i.e. – the value they placed on each competency.6 In Asia, while the competency “Developing Direct Reports” ranked 20th out of almost 70 competencies – even higher than in other regions -- their skill level, i.e., their ability to do so, ranked second to last amongst all other skills that were measured. Guangrong Dai and Kenneth P. De Meuse, “The 2006 International VOICES® Norms: North America, Europe, Asia, and New Zealand/Australia Technical Report,” Lominger International, a Korn/Ferry Company (February 2007) 6

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GmbH, calls this “visible management.” He takes time from his busy schedule to be involved in training workshops and to spend “one-on-one time” with his teams. Meanwhile, Miguel Ko makes it a point to meet each of his 100 designated highpotential staff in the region, allocating one hour per person every six months. For this region’s relatively “hierarchical” leaders, these are radical approaches that will take some getting used to, especially in places like India and China where more of a “command and control” style of driving performance has been the norm. To compensate for any gaps, a full 62 percent of respondents already rely on executive coaching to improve their ability to more effectively engage their staff.

What Lies Ahead

The role and voice of the Asia Pacific CEO is increasing and the Boards and CEOs they report to are turning to their highest potential managers to assume the position, while also taking the time to understand and evaluate the leadership bench strength within their Asia Pacific organizations for the long term. Turning to the next five years, Asia Pacific CEOs envisage their focus on the key developing markets of China and India to grow. Even more foresight and vision will be needed to enable them to work within an ever-changing landscape while differentiating their strategies to achieve long-term competitive advantage. Over the short to medium term it is not practical to imagine that even these seasoned professionals will be able to drive meaningful and strategic change that results in the profits demanded of them without the support of strong teams across every level of their organizations. Expatriate CEOs will necessarily become more focused on identifying and developing Asian talent as possible successors while Asian leaders must become more inclusive and warm and less formal in their approach to managing people. As the Fortune rankings indicate, Asia is becoming a formidable player in the global arena. The time is now for a new style of leadership that will truly make the region the heart of international commerce.

Charles Tseng is President, Asia Pacific of Korn/ Ferry International. Based in Shanghai, he oversees 18 offices in the region encompassing Greater China, India, ASEAN, Australasia, Japan and Korea. Voted by BusinessWeek in 2008 as one of the 50 most influential search consultants in the world, Mr. Tseng advises global companies and Asian groups, helping them define their organizational and talent management needs in the region. He focuses on “C-level” and regional head placements for multi-nationals and Asian conglomerates. Mr. Tseng has an MBA from The Wharton School, University of Pennsylvania, and an engineering degree from the University of Melbourne, Australia. Mr. Tseng can be reached at charles.tseng@kornferry.com and at +86 21 5260 4578. Korn/Ferry International Suite 3208, Citic Plaza, 1168 Nanjing West Road, Shanghai 200041, China

About Korn/Ferry International Asia Pacific

Korn/Ferry International, with more than 90 offices in 39 countries, is a premier global provider of talent management solutions. Korn/ Ferry was the first major U.S. executive search firm to operate in Asia Pacific when it opened its doors in Tokyo in 1973. Today it has 18 offices in key business centers throughout the region, including: Auckland, Bangalore, Bangkok, Beijing, Brisbane, Guangzhou, Hong Kong, Jakarta, Kuala Lumpur, Melbourne, Mumbai, New Delhi, Seoul, Shanghai, Singapore, Sydney, Tokyo and Wellington. Based in Los Angeles, the Firm delivers an array of solutions that help clients to identify, deploy, develop, retain and reward their talent. For more information on the Korn/Ferry International family of companies, visit www.kornferryasia.com.

About The Korn/Ferry Institute

The Korn/Ferry Institute was founded to serve as a premier global voice on a range of talent management and leadership issues. The Institute commissions and publishes groundbreaking research utilizing Korn/Ferryâ&#x20AC;&#x2122;s unparalleled expertise and preeminent behavioral research library. It also serves as an exclusive destination for executives to convene and hone their leadership skills. The Institute is dedicated to improving the state of global human capital for organizations of all sizes around the world.