Leadership transformation powers growth for firms in Asia by Korn Ferry

Leadership transformation powers growth for firms in Asia

November 2011 The economic shift towards Asia created new demands for corporate leaders. Cultivating a sustainable pipeline of learning agile talent that can drive innovation and operate in a global, multicultural environment is crucial to success in this region. Only by making talent development the top agenda will companies be able to reap the enormous opportunities.

As the center of economic gravity shifts to Asia, the region’s corporate leaders have come under the spotlight—and under the gun. Competition for talent is fierce, and good senior management is hard to find. The demands placed on those managers, meanwhile, are rapidly changing as Asia moves up the value chain. Cultivating leaders that can drive innovation is now critical to success. Chief executives and human resource leaders from a diverse group of companies, including Johnson & Johnson, Sony Electronics, Aviva, SAP, Estée Lauder, Google and The Dow Chemical Company, delved into these issues at Korn/Ferry International’s annual Leadership Transformation conference, held for the first time in Singapore in August. The conclusion: pursuing ‘talent management by accident’ will prevent companies from riding Asia’s trajectory. Asia is now the engine of global growth and human resource executives play a critical role: they must have a solid game plan in place to develop the human capital needed to fuel their company’s growth. “The economic shift to Asia has critical nuances for leaders,” said Charles Tseng, President, Asia Pacific, for Korn/Ferry. “Companies need leaders who have the capability to lead innovation, have capability in people and culture, and who can really tap into the consumer in Asia.”

A new breed of leaders are needed in Asia 2.0 For decades, Asia served as the workshop for the world and exports drove growth; that was Asia 1.0. The nature and role of Asia’s economies has now dramatically changed. Asia’s consumers now drive growth, a role that has become pivotal as the rest of the world enters a second slowdown in the wake of the global financial crisis. Asia has entered a new growth model which Korn/Ferry calls Asia 2.0, and it’s marked by several fundamental shifts: companies are now focusing squarely on Asia’s increasingly powerful consumers, particularly as Western consumers pare spending. R&D investment is also moving to Asia as companies strive to create and tailor products for the region’s diverse consumer base. With that comes a workforce shift: companies need creative talent who can drive that innovation. Asia’s new growth model requires a new breed of leaders. Today, they need the skills to craft strategies to generate new growth in underserved markets; they need to use disruptive innovation to create entirely new categories of products and services; and they must put together highperformance teams that can operate in a global, multicultural environment. Consider the challenges faced by The Dow Chemical Company, which is investing heavily to scale up both its research and production capabilities in the region. The company plans to grow Asia earnings to the point where revenue growth is double the respective GDP growth rate by 2015. That will represent more than a 60 percent jump in revenue from Asia over a five-year period. First, they need to develop their 2.0 talent to deliver to those mega ambitions.

Figure 1

Asia 2.0 – Asia’s new growth model

Market shifts

Asia 1.0 (1985 – 2005)

The impetus for change

Asia 2.0 (2006 – 2020)

Consumer shift

Made in Asia

- Reduced Western consumer spending - Emerging consumerism in Asia

Made for Asia

Innovation shift

The world’s factory and back office

- Shifting R&D investments - Asia’s drive to innovate - Asia’s need to move up the value chain

The world’s laboratory and knowledge office

Jobs shift

Cheap and productive workforce

- Unemployment in the west - Western companies Asianizing - Asian companies globalizing

Creative and innovative talent

“Our leaders have strong competencies and are successful in their field of expertise. What we want to do is elevate them to the next level,” said Melissa Kee, Asia Pacific Director of talent management and diversity and inclusion for The Dow Chemical Company. “We need more leaders who can manage with vision and purpose, and who can step up, take some risks and help define what the future will look like. That’s an area where there still are some gaps.” The hotel industry, meanwhile, offers a snapshot of the consumer shift. In 1990, 75 percent of guests in high-end hotels in Asia were from out of the region; today the opposite is true. Just 25 percent of hotel guests are not from Asia. The number of hotel rooms, meanwhile, has grown twelve-fold. Leaders must have the insight and expertise to tap into consumers in Asia, said Patrick Imbardelli, CEO of the Pan Pacific Hotels Group. “If we look at Asia 1.0 versus Asia 2.0, the biggest difference is that it’s now about Asia, for Asia. It’s no longer about Asia for someone else. We have to move the needle.” That has a profound impact on the kinds of leaders and employees companies need. Yesterday’s general manager needed technical and functional talent to ensure the business ran smoothly. Today’s GM has to be innovative and able to find new ways to distinguish the brand in the minds of local consumers. Pan Pacific wants to decentralize its leadership structure to put decisions closer to the customers—and needs local talent to drive those connections. “We are very much focused on acquiring and developing talent on a local basis, with a global mindset,” said Imbardelli.

Figure 2

Asia 2.0 leadership skill sets Asia is becoming the economic center of gravity in the world. This calls for distinct shifts in leadership skills. Korn/Ferry’s research and experience with organizations in Asia Pacific have found the competencies below represent the desired list of leadership skills to succeed in the Asia of today and tomorrow.

Creativity Breakthrough thinking Innovation management Personal learning Collaboration Dealing with ambiguity

Emotional intelligence Coaching/mentoring People and Inspiring others Innovation culture Cross-cultural savvy cluster cluster Building effective teams Learning agility

Influencing without authority

Customer and market cluster

Customer insight Managing vision and purpose Business acumen Silo-busting/integrating Building relationships

That kind of talent is in short supply. In China, just one percent of executives and one percent of managers are ready to succeed in Asia 2.0, according to a 2010 Korn/Ferry study. In India, just eight percent of both executives and managers have these skills. The gap stretches across the entire spectrum, from leaders to front line staff. A resounding 97 percent of participants at the Leadership Transformation conference said they are facing a talent shortage; 50 percent said it was ‘reasonably likely’ that key talent would leave their organization over the next six months. HR executives have a role to play in bridging this talent gap, said Korn/Ferry’s Tseng. They need to help their organization create a program to foster talent and build capabilities from within; they need to help create succession plans for key leaders and managers—and put programs in place to Learning agile individuals are f lexible, foster the kind of learning agility these leaders need to succeed in Asia today. adaptable, and resourceful [and] are best Learning agile individuals are flexible, positioned to deal with the complexities of adaptable, and resourceful; they excel at making and marketing products for absorbing information from their experiences and using that to navigate unfamiliar consumers across Asia’s diverse, situations. People with this core skill are best fragmented and fast-growing economies. positioned to deal with the complexities of making and marketing products for consumers across Asia’s diverse, fragmented and fast-growing economies. “Learning agility is the key to maximizing the changes going on in Asia, and dealing with these new complexities,” added Tseng.

Figure 3

Factors of learning agility Learning agility is a critical indicator of potential and should be used to differentiate talent. Korn/Ferry’s new self-assessment viaEDGE™ provides scores on:

> People agility—skilled communicator who can work with diverse types of people

> Mental agility—ability to examine problems in unique and unusual ways > Self-Awareness— extent to which an individual knows his or her true strengths and weaknesses

Learning agility

> Change agility—likes to experiment and comfortable with change > Results agility—delivers results in challenging firsttime situations

Talent management in Asia: the professional, portfolio approach Winning companies don’t manage their talent by accident. They create and deploy a professional talent management program to attract the best employees, get the most out of the people they already have, and nurture their high potential staff. All that adds up to a sustainable pipeline of talent. According to Pushp Gupta, Managing Principal with Korn/Ferry’s leadership and talent consulting business for Asia Pacific, “talent management has to be professional and it has to be integrated and aligned across the entire organization.” It also needs to be anchored in science. Assessment tools designed by industrial psychologists, like Korn/Ferry’s viaEDGETM, can help HR professionals gauge the skills, abilities, and learning agility of their talent pool. Armed with that data, executives can create a “talent matrix” to rate performance and learning agility, and create a portfolio of different types of talent that can be deployed in different parts of the business. An employee may be a subject expert, for example, but is not very adaptable – yet still highly valuable. Another might be earmarked as a budding talent with strong leadership potential, and needs to nurtured and coached. A thorough assessment might discover that another employee is in the wrong job entirely and could perform better elsewhere, with the right training. Managers can use this matrix to guide development programs to get the best out of each employee, pinpoint high-potentials, and create a talent pipeline from within. “You have to manage your talent like a portfolio,” said Gupta. “Different types of talent will result in different kinds of yields for an organization. Some represent a future dividend, and some a more present dividend.”

“You have to manage your talent like a portfolio. Different types of talent will result in different kinds of yields for an organization. Some represent a future dividend, and some a more present dividend.” Pushp Gupta Managing Principal, Korn/Ferry International

Taking a professional approach to talent management is quite critical in places like China, where supply is short and competition is fierce. “It’s the ultimate retention challenge,” said Lisa Alvarez-Calderon, Vice President Human Resources for Janssen Asia Pacific, the pharmaceuticals arm of Johnson & Johnson. “You can attract great talent, but you can’t rest for a minute, thinking they are locked in once they join you.”

Retaining talent According to attendees at the Leadership Transformation conference, the top factors that worked best in engaging and retaining key talent in their organizations were: > Compensation and benefits

Janssen worked with a HR consulting firm in Singapore to create a talent management program to address this trend. One prong was to promote learning and career development as part of its ‘employer brand.’ This also serves to counter the growing trend of Chinese employees turning to local private companies because of perceived better career prospects— particularly in the wake of the 2008 financial crisis, which hit many multinationals hard. MNCs, however, are widely viewed as offering better development programs, an area that global companies need to promote and make good on. Johnson & Johnson took steps to raise its profile as an employer of choice through university and MBA recruiting, highlighting the career and training potential, according to AlvarezCalderon.

> Development opportunities > Employer brand > Great work opportunities > Quality of leadership > Recognition

Attendees’ biggest focus in the areas of engaging and retaining talent were: > Career pathing

Research has shown that 10 percent of development comes through training, 20 percent through coaching, and 70 percent from experience. Johnson & Johnson has a strong e-university platform and coursework model in place to take care of the training; the next step in China was to work with front line managers to foster coaching and mentoring skills. “We believe that focusing on the front line manager is key to making this 10-20-70 formula work. It’s about the interaction, the coaching, and the feedback that happens after the skill building is done. We are spending a lot of time on this,” said Alvarez-Calderon.

> Coaching > Development opportunities > Employee engagement > Employer branding > Employer value proposition > Greater collaboration

The company also put a robust assessment program in place to map out employee’s competencies and skills. Janssen then created rotational assignments for high-potential employees to ensure they had a chance to develop and grow. “Transparency and visibility of career opportunity is a critical part of how we build our team at J&J,” Alvarez-Calderon added.

> Internal communication > Leadership effectiveness > Onboarding and mentoring > On the job stretch

Ignoring high-potential talent development is particularly risky in Asia right now; not only is there competition for talent, but the global slowdown will push individuals into the most secure jobs with the best future prospects.

> Succession planning

Putting transformation into practice A core part of talent management is leadership development—a task that is particularly challenging in Asia. Now, more than ever, companies need to make sure they have a pipeline of local leaders who can connect with this critical market—and are committed to the company. This is not easy to manage: many multinationals continue to be plagued by the ongoing economic turmoil in Europe and the U.S. and companies need a good game plan to keep leaders motivated during these volatile times.

Conference survey results Surveys find action learning, succession planning among the best leadership development practices Every company has what it takes to develop world-class leadersâ&#x20AC;&#x201D;they just need to know how to tap the resources and knowledge that already exist within, according to the findings of surveys Korn/Ferry conducted during the Leadership Transformation conference in Singapore. Action learning projects and one-to-one coaching are the two most impactful leadership development tools, according to more than eighty HR executives and CEOs who attended the conference (Figure 4, below). Leaders who act as teachers also have a high impact on the development curve. When asked to list the best practices in leadership development, over 80 percent of conference participants ranked succession planning as number one. Putting a coaching and mentoring system in place was the second best practice, followed by identifying high-potential employees. Assessments play a big role in helping executives identify, and nurture, the leaders of tomorrow. A quarter of conference participants cited 360 degree feedback as their assessment tool of choice (Figure 5, below). Psychometric personality tests and selfreports ranked second and third. HR executives widely agreed on a list of five core competencies they need in order to win support for talent management and leadership development programs: an effective HR change-agent is one who understands the business, communicates effectively, inspires others and acts with honor and character. HR executives who fail to build a team, or are unable to adapt to differences, are most likely to fail. Focusing a talent management program around the business process is critical to gaining that support, survey respondents said.

Figure 4

Figure 5

Most impactful leadership development as ranked by Leadership Transformation conference attendees

Preferred assessments as ranked by Leadership Transformation conference attendees

Percentage of respondents

40%

25%

25% 21%

20%

18%

17%

17% 13%

11% 8% 6% 0%

18%

7% 4%

3% 0%

Dow Chemical, for one, had to work hard on this after it acquired Rohm and Haas in 2009, making it the world’s leading specialties chemicals and advanced materials company. The deal took place during the worst of the financial crisis and the HR team had to figure out how to help manage the integration, shed staff to achieve cost synergies, and bring the remaining staff and managers on board at the same time. Against this backdrop, the company moved quickly to assess whether it had the right leadership talent in the place to grow the business—was there enough ‘2.0-ready’ talent in the pipeline to achieve its Asia growth goals? “The question was: how do we assess them, and how do we create that self-awareness?” said Dow Chemical’s Kee. “It is not about telling a senior leader what to do; it is about them wanting to make that change.” So they embarked on an assessment of thirty existing and potential general managers which Korn/Ferry designed to benchmark a broad range of competencies and leadership skills. “We need a strong general manager capability: they need to be experts in their field, grow the business, lead with vision and passion, and have the ability to manage a team and motivate them, and drive collaboration at the same time,” said Kee. The company also wanted to increase the number of Asian managers who can better connect with local markets. Dow Chemical is now in the process of creating a ‘GM development curriculum’ to accelerate the learning of this core group. “Because they are a very senior targeted group, we recognize that their development needs may differ. Each one has different gaps. Our plan is to focus on their unique, individual development needs,” Kee added. In step with the leadership plan, the company also pinpointed a slate of high-potential staff and put a career development plan in place for each. A number of high-potentials are sent to head office in the U.S. to run projects and moved periodically around the region to build experience and visibility. Kee calls it “purposeful development intervention,” and this—more than pay—helps attract and retain high-caliber staff in Asia today. Figure 6

Dow Chemical’s general manager capability General management capability is a strong play to Dow’s future success. Build leadership capabilities and create development opportunities for existing and future General Managers.

Benchmark business and country leaders against industry best-in-class Customize development curriculum to meet individual leader's improvement needs.

The program is still a work in progress, but efforts have paid off. Today, two-thirds of the top leadership team in Asia Pacific consist of local talent, and more than 90 percent of critical roles have local talent who is ready now, or will be in two years, to step up to the plate. Two-thirds of the high-potentials, meanwhile, are slated into that succession plan. Dow is also putting a company-wide leadership effectiveness survey into play, which will ultimately hold managers accountable for developing their leadership skills. “We’re two years into our transformational journey, but we’re starting to see success. I’m already hearing leaders say ‘OK, I have to take this on board. The company is serious,’” said Kee. Two years ago, Estée Lauder Companies in APAC, gripped by the need to prepare the next generation of leaders, and to cope with the growth strategy of the region, created a leadership development program that was so successful that it’s being taken to other regions by the company. "With a challenging need to raise the skills of our leaders, and build a strong pool of ready successors for the sustainability of the organization, there is a real sense of urgency," said Figin Seng, regional director of learning and talent development, APAC, for Estée Lauder Companies. “We can buy capabilities and borrow people from other regions and New York, but this isn’t sustainable. In two to three years’ time, we may need to replace a number of key leaders. We need to build from within.”

“We can buy capabilities and borrow people from other regions and New York, but this isn’t sustainable. In two to three years’ time, we may need to replace a number of key leaders. We need to build from within.” Figin Seng Regional director of learning and talent development, APAC Estée Lauder Companies

Estée Lauder Companies, together with Korn/Ferry, created an intensive nine-month transformative leadership development program that its APAC future leadership team—including all the brand general managers, heads of departments and unit directors—must go through. So far, 60 of 180 senior managers have completed the course, with another 80 embarking on the learning journey this fiscal year. It's a steep investment: it costs $15,000 to $18,000 per person—including design and course fee, travel and accommodation, project expenses—but it’s already paying off. Three of these leaders have already progressed to more senior roles on the back of the program, and several role rotations have taken place to cross-pollinate top talent. “It’s a very tough journey,” according to Estée Lauder’s Seng. “But we’ve created interest, buy-in, and thirst. People want to get involved now.” While one of the core challenges companies in Asia face is creating an Asian leadership team with a truly global outlook and skillset, another challenge—particularly for Japanese companies—is globalizing a Japanese-dominated team. Sony Electronics, for one, has worked hard to diversify its senior management team in the Asia, Middle East and Africa region.

Sony’s future goal: to have a broad mix of tier-one global senior management, from any nationality, running individual markets and regions. “At that point, we will be a truly global company with a Japanese heritage,” said Virendra Shelar, head of recruitment for Sony AMEA. To do that, the company has invested time and effort into identifying the top five percent of high-potential employees within the region, and deploying that cadre into roles and projects to develop their leadership capabilities. Taking leaders out of their comfort zone and putting them into situations where they have to innovate to adapt is a critical part of an integrated leadership development program, according to Jacqueline Gillespie, Managing Principal with Korn/Ferry leadership and talent consulting. “We really have to immerse and align leaders in a future world—they need to be immersed in the unfamiliar and pushed a little bit.” Executives learn 25 percent of their skills through hardship situations, yet most companies invest nothing in hardship support, and invest the bulk—80 percent—on training, with just 10 percent on deployment and 10 percent on coaching.

The innovation challenge in Asia The most valued leadership qualities in Asia today are creativity and the ability to drive innovation. These are the big differentiators for many organizations in Asia, and executives are looking to their human resources leaders for help on this, according to Jane Stevenson, Vice Chairman, Board & CEO Services at Korn/Ferry. Different types of innovation require different types of leaders, and a company also needs to pursue different types of innovation at the same time. There are four core types of innovation. Transformational innovations—like the Internet—that are big-risk, disruptive and change society as we know it. Category innovations cascade from that: eBay, for example, created a new online auction category that leveraged the Internet.

Marketplace innovations could include new packaging or ingredients that give an existing product a fresh appeal; and operational innovation is about doing things faster, better and cheaper. “Companies have largely focused on operational and marketplace innovations in Asia for years. Now they need to create new products and categories—and do it faster, cheaper and better too,” said Stevenson. Executives also need to understand which type of leader can best push these different levers. An inventor would make a good transformational leader—but might not be the kind of consumer-focused, team-oriented marketplace innovator a company actually needs to promote growth in a place like India, or create new categories in China.

HR, meanwhile, can support specific types of innovation by moving the right people across divisions, and help managers create cross-functional teams of people with the right skillset. It all comes back to assessing, developing and deploying your talent pool in the most effective way. “It’s about matching a portfolio of talent to a portfolio of innovation. Just as you would manage a portfolio of investments, you wouldn’t just have all bonds. You have a mix—that’s how you should think about this,” added Stevenson. “The more we have people focused on doing the right thing, the more we will be successful.”

Leadership development needs to be a lot more strategic—and Asia offers a competitive advantage to companies that want to pursue this. Learning experiences are everywhere in the fast-moving growth market: leading a cross cultural project team, for example, or managing a crisis provides future leaders these critical must-have skills. “In Asia, we have such an opportunity to develop leaders. It’s not hard to find a situation to test a leader: learning experiences are everywhere,” said Gillespie.

The road ahead The opportunities in Asia are extremely lucrative from a marketplace perspective. To make the most of them, organizations need to define what success looks like, manage talent, develop leaders and foster innovation. HR practitioners are expected to be at the forefront of this agenda. They need to up-skill themselves, their teams, and then deliver fast. All this has to be done professionally. There is no room for accidental talent management and development.

“In Asia, we have such an opportunity to develop leaders. It’s not hard to find a situation to test a leader: learning experiences are everywhere.” Jacqueline Gillespie Managing Principal, Korn/Ferry International

The future of talent management in Asia is a bright one...but only for the most prepared.

About the Korn/Ferry Institute The Korn/Ferry Institute generates forward-thinking research and viewpoints that illuminate how talent advances business strategy. Since its founding in 2008, the institute has published scores of articles, studies and books that explore global best practices in organizational leadership and human capital development.

About Korn/Ferry International Asia Pacific Korn/Ferry International, with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions. Korn/Ferry was the first major global executive search firm to operate in Asia Pacific when it opened its doors in Tokyo in 1973 and today has 18 offices in key business centers throughout the region. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, deploy, develop and reward their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute.com for thought leadership, intellectual property and research.

About the Leadership Transformation conference Korn/Ferry’s Leadership Transformation conferences and events present the Firm’s research and viewpoints on how talent advances business strategy. Korn/Ferry hosted the 2011 conference series in Singapore and Scottsdale, Arizona. The first 2012 conference will be in Madrid, Spain. Visit http://leadershiptransformationconference.com for more information.