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Asian-Pacific Companies are Looking for Home-Grown Leaders

Leadership development is on the rise throughout the Asia-Pacific region, which will account for 45% of the world’s Gross Domestic Product in 2015, compared with 20% for the U.S. and 17% for Western Europe, according to the International Monetary Fund.

Of the 55 Asia-Pacific organizations surveyed for a recent report from The Conference Board, “Leadership Development in Asia-Pacific: Identifying and Developing Leaders for Growth,” 79% are seeking to accelerate talent development in the region. During a period when many indirect/nonoperational budgets are being reduced, organizations are maintaining (47%) or increasing (47%) financial resources for leadership development initiatives.

Many international companies are trying to reduce the number of expatriates and international assignees who are occupying longer term (as opposed to developmental) leadership roles.

The report finds that firms in Asia-Pacific believe that home-grown executives can have a greater impact on company performance than expatriates and do not cost the company nearly as much.

Why Locals Are Favored
“One reason for reducing expatriates and international assignees is based on the premise that in the lifecycle of most businesses, the localization of leadership has a positive impact on performance,” says Andrew N. Bell, Program Director for the Asia-Pacific HR Council and author of the report. “This positive impact results from a range of factors in which local leadership is more likely to have a deeper understanding and familiarity with the needs and expectations of local consumers and clients, local business infrastructure such as distribution channels and external relations, including with the government and media. Also, language may be a critical factor. An inability to work in the local language can be a serious impediment in some aspects of business operations.”

Expatriates Are Too Costly
Another factor spurring the reduction of expatriate numbers is the cost attributed to their assignment. Expatriates receiving salary supplements and additional benefits, such as home leave, school tuition and a housing subsidy, can cost the business at least double what a local executive would cost.

Both multinational corporations and fast-growing local businesses have a mutual interest in developing talent and ensuring the supply of quality leaders available across the region, but they face two related challenges:
  • Local supply limitations.  The supply of local leaders is seriously limited, creating severe competition for talent. Shanghai and Bangalore have turnover rates in some sectors that reach greater than 40% per year. Salary inflation is also significant. Absolute salary levels for some talented executives in Shanghai are equal to or greater than their counterparts in Singapore or London.
  • Expatriate proliferation.  During initial investments in a new market or a significant expansion and large-scale capital investments, it is essential for many organizations to import leadership competence and technical expertise into Asia-Pacific. The first wave of imported leadership capability normally is followed by a phased reduction, as locals are trained and developed as successors. This process often takes longer than planned.

Why Asia-Pacific Is Unique
A majority of survey participants believe Asia-Pacific is different from other regions in terms of leadership development. In addition to the need to understand and lead in countries with a wide variety of socioeconomic challenges and culture differences, survey participants say:

  • It is more difficult to expatriate talent within the region (71%)
  • Appropriate talent is not available in the company (62%)
  • There are fewer opportunities available for development (45%)
  • It involves greater costs to the company (38%)

The main competencies cited by survey participants as relevant to success in Asia-Pacific are cultural understanding, adaptation, collaboration, teamwork, communication, alignment across borders, people development and coaching.

Actions that survey respondents are taking to develop a stronger leadership pipeline include:

  • Identifying talent gaps and company requirements (92%)
  • Improving talent assessment (91%)
  • Involving the CEO in talent development (91%)
  • Placing priority on developing and retaining high potentials (90%)
  • Reinforcing accountability of leaders for development (84%)
  • Developing specific Asia-Pacific development programs (76%)

Survey participants say their companies are using the following techniques to develop business leaders:

  • Internal management development programs (44%)
  • Company training programs (40%)
  • International assignments greater than two years (36%)
  • Mentoring and/or coaching (33%)
  • Participation in cross-functional international teams (33%)
  • Action learning assignments (26%)

Barriers to developing leaders in Asia-Pacific mentioned by companies include the capabilities of HR professionals in some locations; mismatches between location of talent and business opportunities; preservation of established company cultures, networks and behaviors; low mobility within region for some and competition for talent leading to high turnover and escalating salaries.

The Conference Board report includes case studies from BP plc, Credit Suisse Group, MTR Corporation and Philips.

For more information, contact The Conference Board Customer Service Department at (212) 339-0345 or by visit The www.conference-board.org.