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40 | JANUARY 2014 HCAMAG.COM
HR STRATEGY / LEADERSHIP
Australian businesses are increasingly looking to Asia to expand
operations. However, as Andreas Raharso reports, such expansion
requires a di erent set of leadership styles in order to leverage
the regions unique, increasingly well-developed and sophisticated
workforce
Selecting business leaders for Asia
RIGHT TIME, RIGHT PLACE:
The role of Asia in global business is increasingly taking
centre stage, and the faster MNCs prepare for this shift, the
better their chances of succeeding in the region. According to fi
gures from the United Nations Conference on Trade and Development,
East and Southeast Asian economies received a combined $336bn in
foreign direct investment from offshore investors in 2011, a 14%
increase over 2010. 1
Further, despite a 14.96% decline in the number of projects in
the Asia-Pacifi c in 2012 in line with global trends, it was still
the leading world region, attracting 3,740 projects with a 31.72%
global market share.2 There is no denying that MNCs are expanding
into Asia in greater numbers, and as the rapid pace of
globalisation churns out greater numbers of cross-border business
units, the role of corporate leadership in this region takes on
a
greater signifi cance for both senior HR executives and top
management.
THE TROUBLE WITH MNC EXPANSION IN ASIA Large corporations
traditionally operate under a centralised structure controlling all
foreign operations and offi ces directly from corporate
headquarters (HQ) to allow for better oversight of the entire
organisation. However, its overseas subsidiaries often get mired in
slow decision-making processes and a lack of local responsiveness
due to geographical distance. As globalisation forces companies to
be more agile in order to capitalise on growth opportunities in
Asia, corporate HQs are increasingly decentralising control and
transferring regional authority to regional headquarters (RHQs). In
fact, a strategy to expand operations into Asia
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HUMAN RESOURCES DIRECTOR
almost mandates that the growing MNC set up an RHQ to
effectively oversee offshore operations of its business units and
subsidiaries. Essentially, the RHQ acts in the stead of HQ and has
the singular and delicate task of achieving global objectives
through a local approach.
Unfortunately, Hay Groups analysis of over 30 years of data
regarding RHQ performance has shown that this decentralisation
often fails. When HQ makes the decision to give more authority to
its RHQ, the RHQ again faces the same tensions between
centralisation and decentralisation when trying to manage its
regional offi ces. This then prompts HQ to intervene and institute
a swift return to centralisation, which restarts the problems of
slow decision-making and lethargic local responsiveness.
Given that the RHQ operates with near autonomy when controlling
its regional offi ces in Asia, it functions in a similar manner to
the corporate HQ. Yet, while MNCs are perennially concerned about
the leaders who will form the top management team in corporate HQ,
the emphasis on RHQ leadership is not given equal weight or as
rigorously evaluated. Instead, MNCs tend to simply reassign leaders
from its Western or European offi ces to head RHQs, who may
exacerbate the ineffectiveness of the RHQs as they lack the
appropriate competencies to manage across cultures.
MNCs need to accept that the current wave of Asian-led growth is
not a result of managerial wizardry by Western and European
leaders. With the global economic turmoil in Europe and the US,
demand for goods and services from the West has plummeted, and it
is Asian consumers themselves who are at the forefront, driving
Asias growth engine with their unique and increasingly
sophisticated demands, changing the way companies create, design,
and market products. Today, ensuring the success of an RHQ to drive
Asian growth requires Asian leadership.
WHERE HAVE ALL THE ASIAN LEADERS GONE? But accepting that we
need to select a new generation of leaders from Asia is only a
small part of the problem. According to leadership research by
Korn/Ferry International in 2010, Asia has a scarcity of leaders
with the right competencies required to support the growing number
of businesses in Asia.3 In the study, the pool of executives from
China and India were compared against the global best-in-class
executives (based on four leadership styles identifi ed by
Korn/Ferry Institute). It was found that only 1% of Chinese
executives and 8% of Indian executives were ready to lead the next
wave of growth in Asia. A further 10% and 13% of the managers from
China and India, respectively, possessed the qualities that could
be developed further into sound leadership for success.
What do the two issues of Asias growth and the lack of Asian
leadership capable of capitalising on this growth mean for
Australia? Plenty. Like the US
300
350
400
450
500
550
600
2009 2010
FDI i
n o
ws
(US$
bill
ions
)
2011 2012 2013 2014
Forecast
2015
Source: United Nations Conference on Trade and Development
Asia refers to the following countries: West Asia (Saudi Arabia,
Turkey), East Asia (China, Hong Kong, South Korea), South Asia
(India) and Southeast Asia (Cambodia, Indonesia, Malaysia, Myanmar,
the Philippines, SIngapore, Thailand, Vietnam)
COUNTRY NUMBER OF PROJECTS
China 944
India 704
Singapore 348
Australia 307
Hong Kong 184
Malaysia 162
Indonesia 155
Vietnam 143
Japan 118
Thailand 118
Other 557
Total 3,740
Top 10 destination countries in Asia in 2012
Source: fDi Intelligence
FDI INFLOWS INTO ASIA*
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HR STRATEGY / LEADERSHIP
and Europe, Australias growth is greatly tied to the growth
model of Asia because of its strong trading dependencies with Asian
countries. According to a 2012 report by the Australian governments
Department of Foreign Affairs and Trade, over 71% of Australias
total trade in 2011 took place with member economies of the
Asia-Pacifi c Economic Cooperation (APEC) group, with seven out of
the top 10 two-way trading partners being Asian countries.4 If Asia
lacks the leaders to champion global economic growth, Australias
economy will take a hit as well.
UNDERSTANDING THE ASIAN RHQS ROLE IN VALUE CREATION At the heart
of the struggle to exercise effective leadership in RHQs the
constant vacillation between centralisation and decentralisation is
a failure to understand for what purpose an RHQ is set up.
Understanding this purpose from the outset by defi ning the type of
value that the RHQ is meant to deliver can greatly inform the type
of Asian leader an MNC needs to select to head its regional
operations. When a compatible match between value and leadership is
established, effective RHQ control over regional business units
will fl ow naturally. What do we mean by value? At the most
fundamental level, RHQs are meant to deliver value in three ways:
resources, synergy and learning.
Given the different types of value an RHQ can be tasked to
create, whether explicitly or implicitly communicated by HQ, there
are vast differences in the approaches required to control its
regional business units. Each approach requires that the
RHQs leaders are able to utilise a different leadership style.
In essence, the type of value to be created by the RHQ necessitates
a corresponding mix of the right leadership styles. No matter how
experienced or talented a manager is, if he or she exercises a form
of leadership that is not conducive to the particular type of value
creation activities mandated by HQ, the organisation as a whole
will benefi t little from its regional operations.
PICKING THE RIGHT LEADER By effectively taking on a particular
leadership style and approach to a given situation or environment,
a leader can meaningfully improve (or adversely worsen) employee
morale and performance and thus directly infl uence the value
creation efforts of employees in foreign subsidiaries. Our research
has identifi ed that leaders today have to understand six
leadership styles, and are required to effectively switch between
them in order to be more versatile and engage a broader spectrum of
employees.
Further analysis also shows that certain leadership styles are
best suited to certain types of value creation activities. While it
is also useful to note that leadership styles are situation-specifi
c and need to be regulated according to the personality of
employees and the organisational culture of the regional offi ce,
it has been consistently proven that certain leadership styles work
best for a specifi c form of value that the RHQ wishes to
realise.
Resources
Leverage/allocate
organisational resources
Resources: For RHQs whose primary goal is resource control and
allocation for its regional business units, a leader who displays a
combination of directive and
pace-setting leadership styles will allow the RHQ to achieve
results more effi ciently. In this type of RHQ, absolute obedience
is required from foreign offi ces, and resource allocation
decisions are not generally up for debate. Examples of such RHQs
include fi nancial or HR head offi ces that oversee support
functions across the region.
Synergy
Creation of organisational
synergy
Synergy: While an RHQ is not usually set up with the sole
purpose of identifying intra-organisational synergies, this is
still an important function for businesses
looking to expand and innovate in new markets. RHQs that hope to
identify opportunities for creating economies of scale or for
parallel implementation of innovation across products or
departments must have leaders who are visionary, participative,
and
APEC ASEAN10 EU27
13.4%
46.2%
14.5%
71.0%
OECD
Source: Department of Foreign A airs and Trade, Australia
OVER 71% of Australias total trade in 2011 took place with
member economies of the Asia-Paci c Economic Cooperation group,
with seven out of the top 10 two-way trading partners being Asian
countries
% SHARE OF AUSTRALIAS TWO-WAY TRADING PARTNERS (2011)
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HUMAN RESOURCES DIRECTOR
affi liative. This combination of leadership styles is found in
leaders with a macro-level overview of the organisation, its
business units and global markets.
Learning
Formation of new
organisationalknowledge
Learning: RHQs that have the role of creating centers for
excellence or a repository of best practices benefi t greatly from
coaching, participative, and
affi liative leadership styles. To enable innovative cultures in
such RHQs, these softer approaches to leadership ensure that
employees have the freedom to collaborate and experiment with new
ideas and concepts. Examples of such RHQs include R&D units or
corporate think tanks.
Although there are differing views on how to best classify
leadership styles, many such studies conclusively show that Asia
requires a different set
of leadership styles in order to leverage its unique,
increasingly well-developed and sophisticated work-force. This
alone should be a wake-up call for fi rms that are currently
located or are planning to locate business units in the region, and
is a timely reminder that such fi rms must begin preparing their
existing human capital by leveraging two crucial levers, Asian
leadership and the right set of leadership styles, in order to
effectively ride out the current wave of Asian-led growth.
DIRECTIVE VISIONARY AFFILIATIVE PARTICIPATIVE PACE SETTING
COACHING
Mandating immediate compliance from employees
Providing long-term direction and vision for employees
Creating harmony among employees and between manager and
employees
Building concensus among employees and generating new ideas
Accomplishing tasks to high standards of excellence
Focusing on long-term professional development of employees
This style relies on directives rather than direction, and uses
very little dialogue. Close monitoring is supported by negative,
corrective feedback with an implied, if not explicit, threat. E
orts to motivate are focused mainly on the consequences of
noncompliance.
This style relies on dialogue with others as well as the
managers unique perspective on the business to establish a vision.
The manager keeps others engaged by assuring them that the
direction is in the long-term best interests of the group and the
organisation, and by monitoring performance toward established
goals.
This style is used to create harmony and avoid con ict. A
manager utilising the a liative style spends a lot of time
cultivating relationships. This style tends to reward personal
characteristics and avoid performance-related confrontations.
This style relies on the ability of employees to establish their
own direction and to resolve their con icts constructively. It is
typically characterised by a lot of meeting, a lot of adequate
performance, and little criticism of low performance.
Managers utilising the pace-setting style tend to lead by
modelling. They establish themselves as the standard/benchmark and
are apprehensive about delegating. Their concern with the immediate
task accomplishment makes them disinclined to collaborate with
their peers, except when they need to obtain or exchange
resources.
A manager using the coaching style helps individuals identify
their unique strengths and weaknesses. This typically involves
sitting down with the employee and conducting a candid, mutual
assessment of the employees strengths and weaknesses, as well as
providing ongoing support and feedback.
+ + + + + +
When used e ectively, the directive style draws immediate, and
for the most part willing, response from employees. In cases when
employees resist directions, despite the e ective use of the
directive style, employee termination is the next logical step.
When used e ectively, the visionary style motivates employees,
particularly new ones, by focusing their attention on the long-term
goals of the work unit and the way in which day-to-day e orts
support these goals.
When used e ectively, the a liative style motivates employees by
supporting them during either highly routine or stressful times. By
strategically and explicitly focusing on the human element of a
situation, this style succeeds in getting the job done.
When used e ectively, the participative style motivates
employees by empowering them to make decisions about their own work
processes and goals. It is designed to create teamwork and team
commitment to achieve those goals.
When used e ectively, the pace-setting style works for employees
who are completely self-motivated and understand their objectives.
It is also important for demonstrating that a manager can pitch in
with the troops when necessary.
When used e ectively, the coaching style motivates employees by
linking their daily work to personal long-term objectives. It helps
employees develop sound thinking strategies that build their con
dence in functioning more autonomously.
- - - - - -
When not used e ectively, over the long term, the directive
style draws passive resistance, rebellion, resignation, and in the
worst instances physical damage to an organisation or strategic
damage to major objectives.
When not used e ectively, this style fails to take full
advantage of the natural talents and ideas of knowledgeable
employees.
When not used e ectively, the a liative style leads to low
standards, a sense of favouritism, lack of clarity, and frustration
for many employees.
When used ine ectively, the participative style produces
confusion, delays, and con ict among employees and the manager due
to a lack of focus and direction.
This style is less e ective in times of organisational change
when an explicit discussion of the mission and employees roles is
warranted. Also, it can produce extreme stress as the manager takes
on more of the work of his or her subordinates.
When not used e ectively, the coaching style leaves employees
unsure about what they should be doing next and can result in
diminished standards and procrastination in regard to solving
problems.
VISIONARY
Source: Inventory of Leadership Styles (ILS), Hay Group
Contributing author Senthil Sukumar is a research and content
strategist, and Shakifur Chowdhury is an applied research analyst
at Hay Group.
About the authors
References:1. World Investment Report 2012, United Nations
Conference on Trade and Development:
unctad-docs.org/ les/UNCTAD-WIR2012-Full-en.pdf2. Global green
eld investment trends, The fDi report 2013:
investtoronto.ca/InvestAssets/PDF/Reports/The_fDi_Report_2013.pdf3.
Asia 2.0 Leading the Next Wave of Growth in Asia, 2010, Korn/Ferry
International:
kornferryasia.com/leadership/Asia2.0.pdf4. Trade at a Glance
2012, Department of Foreign A airs and Trade, Australian
Government:
dfat.gov.au/publications/trade/trade-at-a-glance-2012.pdf
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