Being humble, willing to learn , open to suggestions are necessary qualities for today 's CEO”- Gautam Thapar Chairman & CEO, Avantha Group
Companies need to shift their focus from training towards deploying talent to challenging assignments and providing active coaching support
Although the Asian economy is poised for unprecedented growth, the current leadership capabilities don’t meet the challenges envisaged for Asian growth. In conversation with Indranil Roy, Managing Director, Asia Pacific, Korn/Ferry International, People Matters explores what is next for Asian businesses and its implications on the Talent Management front
The last two decades have shown us an unprecedented growth in the Asia Pacific region despite a brutal recession where the Western economies have plummeted and only now they are slowly emerging from it. The three stable pillars of this Asian miracle have been: i) the Western consumer who has willingly imported products from Asia since the early 90s on experiencing a major downfall in his household savings; ii) the global supply chain through large amounts of work moving to Asia and lifting its GDP growth; and iii) the lower cost of labor and resources in Asia that led foreign businesses to depend on its production facilities and giving rise to jobs and income here. If Asia has witnessed a frenetic business activity, it has come to it from the two conduits of its Out-bound and In-bound businesses. The former sought to replicate the local success into developed or under-developed markets. Examples of such Out-bound business are Samsung, LG, Tata Group, Infosys, Huawei etc. Conversely, In-bound businesses from companies in the West, or other developed markets such as Japan or Australia, have attempted to establish their presence in Asia to take advantage of lower production costs or availability of skilled labor and have, in return, brought it earnings. Some of such In-bound businesses have come from Cisco, IBM, Novartis, HSBC, Unilever, GE et al. While both these business strategies have been to Asia’s benefit, a common thread that has impacted them significantly has been the talent used by them. Both the categories of businesses have had to target the same gene pool of Asian leaders thereby necessitating such leaders who have high appreciation for different economies, multiple stakeholders and diverse cultures. This realization has created some disquiet as the talent available to lead has been in short supply.
What is Asia 2.0?
The concern of Asian companies is compounded on witnessing an increased pressure on the three pillars of Asian growth. Western consumer is deleveraging quickly, there are protectionist pressures on the global supply chain and the labor cost is no longer that low. This has called for a new growth model for Asia that researchers at Korn/Ferry International have christened as Asia 2.0. Korn/Ferry’s team interviewed executives across Asia and learned that this new growth model will be built much more around private enterprise than through government spending. Importantly, they uncovered the following three distinct shifts that will characterize the next 15 years of growth in Asia:
i) The consumption shift that signifies a move away from simply serving the western consumer with goods / services and instead understanding the emerging needs of the Asian consumer to serve local needs. The primary driver for this shift will be the advent of more than a billion people in the middle class.
ii) The innovation shift that sees building of local innovation capacity for new products and services for emerging consumers around the world. This shift is foreseen in three distinct themes of Global R&D, Frugal Innovation and Technology Leadership, thereby covering a range of business interests. China alone is home to more than 1,200 foreign invested R&D centers; high end technology and professional services like Accenture or Cisco are in the process of enhancing their presence in India.
iii) The workforce shift that foretells a move towards a skilled pool of talent to deliver new ideas and solutions from simply retaining a low cost workforce. Asian companies like Huawei, LG and Tata are fundamentally reshaping their talent management capabilities to attract and develop leaders so they have global management skills.
These shifts are underway already and their early signs can be noticed in the nature of Asia’s recovery from the global financial crisis.
Talent binds them all
As Out-bound businesses are acquiring brands in developed markets or assets in under-developed markets to build a global brand business and In-bound businesses are attempting to understand the Asian consumer and moving their global headquarter roles to Asia, it’s interesting to note that both seem to be targeting Asian leaders to further their growth strategies towards Asia 2.0. Examples of the trend are evident in Samsung Electronics hiring 50 non-Korean MBAs from the top 10 US schools in 2009, India-based Infosys and Tata Group beginning to recruit from Kellogg School of Management and other premier global MBA schools or Chinese Investment Corp and Tencent hiring at Wharton School of Business.
Is the talent Asia 2.0 ready?
This Asia-centric focus for talent management is seeking Asia 2.0 Leadership by building a new breed of Asian leaders because the current leadership capabilities don’t meet all the challenges envisaged for Asian growth. Among the four leadership styles of global leaders, Asia 1.0 leadership mostly focused on being Executors (directive, task driven and productive) or Controllers (logical, serious, data-driven and thorough). On the contrary, Out-bound and In-bound businesses have felt that it’s the next two leadership styles that need to be honed to attain success in meeting Asia 2.0 challenges. These are Energizers (openness, informality, humor and adaptability to lead) and Integrators (inquisitive, collaborative, involving and patient) models. While leaders do have a mix of all four styles and are able to use them in different situations, the predominance of the first two styles is fairly evident in most situations.
The Korn/Ferry research team reviewed the results of 1,246 executive assessments and 642 managerial assessments in Asia in the last 12 months and found that the talent pool for Asia 2.0 leaders in Asia is shallower than expected before the study. In India, 8% of the assessed candidates matched the Asia 2.0 competencies, 1% in China and 4.5% in the rest of Asia. Competency mapping has highlighted the following top 10 weaknesses among Asian leaders, all of which are considered critical for leadership success in Asia 2.0: personal learning, dealing with paradox, managing through systems, motivating others, developing reportees, strategic agility, creativity, innovation management, conflict management, and managing vision and purpose. If research tells us that in leadership building, 70% of development happens through challenging assignments and experience, 20% through coaching and 10% through training, the report suggests that companies must shift their developmental focus away from training towards designing and deploying talent to challenging assignments and providing active coaching support.
"Being humble, willing to learn, open to suggestions are necessary qualities for today’s CEO” Gautam, Thapar, Chairman & CEO, Avantha Group
What is the type of leadership that companies in Asia require today?
It depends on where you’re anchored really as that impacts your leadership selection. For example, in the Avantha Group for our CEO search for Crompton Greaves, we looked globally. We have a defined strategy and need the best talent to do the job. The CEO should build an organization capable of executing at that level and drive the development of business with products and technology to take advantage of globalization. Talent development will be a big challenge in times to come. CEOs for businesses like IT, Financial Services, and Medical Services are considerably easier to find. For Manufacturing businesses, there is little talent available in India that can scale the business, deal cross-culturally or put a team together across geographies.
In your opinion, what makes for a successful CEO?
Increasingly, I look for people who are good listeners, not prescriptive by nature, are team workers, can manage cross-country and can travel. We don’t need a top down management style any more. Being humble, willing to learn, open to suggestions are necessary qualities for a CEO as people can walk away if they don’t like a company culture or management style, and good talent is difficult to replace.
You have undergone several mergers & acquisitions, how do you manage the culture integration? What is the role of the leader?
In all our acquisitions, we’ve believed that we’ve to earn the respect of the other side by listening to people. As an Indian company acquiring a Western company, there is an immediate attempt to insist that the Western technology and management style are superior, and the CEO has to manage that view. Knowledge is respected universally and if the CEO is knowledgeable about the industry and business, he would win respect of the acquired firm. We also do cross-cultural training but in the end nothing succeeds like success. Besides, we have to find the hook to see what succeeds in the new environment.
What factors allow a company to enter the global arena?
You have to figure out what allows you to play that global game. Intellect is not enough. Self-assessment of strengths is necessary to see if they are enough to go global. Most Indian companies target manufacturing to offer low costs consistently to get the domestic market share. Once you get that right, you have the first currency to operate globally.
How do you think will be the evolution of Indian family businesses in terms of governance and control?
Families need to know that their children need the leadership skills to be successful, that is to say that capabilities of families have to come up in managing talent. Incoming CEOs have to see if they can work with that structure. Families have to be able to identify talent, nurture it, work with it, and share responsibility, accountability and authority with it. If that isn’t done, family businesses will not reach the next level even though they may remain as players in their business.
“CEOs are more ready in India than elsewhere in Asia” Indranil Roy, MD, Asia Pacific Leadership & Talent Consulting, Korn/Ferry International
What factors are driving change in Asia? What are the implications for talent management?
We’re in the middle of an Asianization process, which will see significant investment, talent, and ideas shifting towards Asia. Companies around the world are seeking to gain competitive advantage from Asia 2.0. Two types of companies studied in this context were Out-bounds and In-bounds. The common thread binding them is a new breed of future leaders that are Asian and global at the same time. Three magic things need to come together for a region to enjoy growth: consumer, innovation and talent. The US enjoyed this magic circle over the last 20-25 years. The recession has changed this equation on the consumer’s front when the US spending became flat. In Asia, these three aspects are coming together: massive rise in the middle class income; increased innovation with examples of Nano in India or 50% of new computer chip patents belonging to Taiwan or China to overtake the US in basic patent filing over the next 10 years; and shift in talent to see senior, regional, international roles to be based out of Asia. Moreover, Asian companies such as the Tata Group and Bharti in India, LG in Korea, BYT in China are showing global ambitions by building a pool of talent at the top that is capable of running a global enterprise. The three factors of consumer, innovation and talent will contribute to a new growth model over the next 15 years with Asia at the cockpit of growth.
How will the DNA required of a CEO be different in Asia 2.0?
A new set of leadership capabilities and styles will be needed to meet the challenges of Asia 2.0. From the four leadership styles of global leaders as Executor, Controller, Energizer and Integrator, the first two have been in predominant use so far. Asia 2.0 would require leaders to have a mix of the next two styles that are characterized by being responsive to the market, using human interaction and networks, having social skills to build coalitions, and being team leaders of diverse teams and promote inclusion.
How ready is the Indian CEO? How is it different in China?
Research is telling us that we’re more ready in India than elsewhere in Asia. About 8% of the executive talent pool in India is 2.0 ready as it is found to lead in a global management style. Currently, China has 1% of such global leadership. These numbers are low, but if companies invest in building this talent over the next three-four years, they’ll bridge the gap. There is a massive focus from the Chinese government to attract talent of the Chinese origin currently elsewhere back into the country to take its growth forward. Companies must shift their developmental focus away from training towards deploying talent to challenging assignments and providing active coaching support to build Asia 2.0 leaders.
Jyoti Bhargava is the contributing editor at People Matters. Send your comments to firstname.lastname@example.org