In Asia, Locals Rise Only So Far at Western Firms; Multinationals Still Rely on Expatriates to Fill Top Jobs Decades After Expanding Into Region

August 13, 2013, 7:52 p.m. ET

In Asia, Locals Rise Only So Far at Western Firms

Multinationals Still Rely on Expatriates to Fill Top Jobs Decades After Expanding Into Region

MARIKO SANCHANTA and RIVA GOLD

HONG KONG—As Western multinationals ratchet up their operations in Asia, there is one glaring omission from the upper ranks of management: Asians. Asians are employed by multinationals in greater numbers than ever before at lower levels, but when it comes to the top roles, companies from food to finance tend to pick Westerners. When Western companies first started expanding to Asia, headquarters sent an executive to Asia to show employees how the business should run. Decades later, not much has changed. In part, that’s because leaders tend to promote people in their own image and culture, perpetuating a cycle of white, male bosses, according to consulting and executive-search firms. Many executive-search firms say their clients would leap at the chance to hire locally, but few firms are taking steps to develop and groom talent.“[Multinationals] in Asia often fall into the trap of overrelying on expatriates and headhunters as ‘easy’ ways to quickly fill vacancies,” notes a 2011 study by the Corporate Executive Board, a global business advisory. “But time to productivity is slow for outsiders who lack company or market knowledge.”

Having less diversity at the top can be bad for business. Expat executives may lack some of the skills needed on the ground, says Nicklas Jonow, a partner at Pacific Consulting Group, a consulting firm.

“For example, understanding consumer needs, trends, purchasing power, brand positioning—not just for luxury brands, and not just in Tier 1 cities—is becoming increasingly important,” he said in an email. “To fill those needs, multinationals have to shift their hiring practices to [local] talent who really understand these markets.”

Still, 40% more Westerners are placed in CEO-type roles in the region compared with other roles, according to Spencer Stuart, the recruiting firm. At the top 10 banks globally, only three out of 10 have Asian-Pacific CEOs who are Asian or of Asian descent (and two are co-CEOs); meanwhile, at the top 20 asset-management firms globally, only two CEOs are of Asian descent in the Asian-Pacific region, according to recruiting firm Heidrick & Struggles.

A Question of Culture

Companies tend to opt for leaders from places with which they are familiar and with which they have cultural affinity. “But we don’t see the benefits that other candidates might bring,” says Katharine Nisbet, head of diversity and inclusion at Hong Kong-based Community Business, which works with companies to promote corporate social responsibility.

Cultural differences in communication and leadership between Asians and their Western peers is another factor. For example, Asian culture stresses respect toward elders, age-based hierarchy and the importance of consensus, traits rarely seen in Western management styles.

Brad Adams, the CEB’s human resources research director, recently sat in on a meeting at a Singapore-based company, where a local rising star sat quietly and didn’t speak throughout the whole meeting.

“Afterwards, we talked to him [about] why he was so quiet. He said it is his job to sit on the sideline for 10-20 years listening, nodding and agreeing with the leadership until it’s his turn to lead,” says Mr. Adams.

A Talent Shortage?

Because Asia is still a relatively young market, many firms claim the talent has yet to mature.

Compared with the global average, Asian senior managers are younger (38 years old versus 43), have less work experience (16 years versus 22) and have less tenure with their current employer (eight years versus 10), according to nonprofit Community Business.

As the job of a leader changes, companies say that extra experience matters. In the finance industry, for example, those in charge of regional operations aren’t just charged with boosting sales but are expected to turn Asian-Pacific operations into multibillion-dollar businesses and deal with complex regulatory issues, says Steven McCrindle, partner at Heidrick & Struggles.

But many companies haven’t taken the time to groom local talent, either. Mr. McCrindle says it can be a challenge to have some Asians move around the world in global postings.

“Hong Kong citizens may study abroad, but they’ll come back to Hong Kong and do not want to leave. They don’t get exposed to different regions,” he says.

Many multinationals in the region are finally realizing that they have to aggressively work on cultivating local talent—especially given the demand for it.

But that requires a break from a traditional mind-set. “Traditionally, locals are hired for execution: delivering a growth plan, tactics, sales. Not many [firms] send executives to M.B.A. programs,” says Louisa Wong, founder of Bó Lè Associates, an executive-search firm in Asia.

Ms. Wong says there is also a desire to save the coveted Asian-Pacific slots for ambitious executives from elsewhere in the company as “experience in these markets is crucial preparation for future top leadership.”

A Turning Tide?

Wal-Mart Stores Inc. says it is actively grooming Asian talent. In Asia, the retailer launched its first Global Leadership Institute in June 2011 designed to help Asia-based leaders build the skills necessary to take more senior leadership roles.

At the same time, many companies are carefully reining in their use of expats, in part because they are expensive hires, says Trey Davis from Towers Watson, a recruitment firm. Local and foreign executives in Hong Kong may have the same actual base salary, bonuses and incentives, but expats also command costly housing and educational allowances.

“If I could find a top Chinese or Hong Kong-born or Asian woman executive, my clients would be over the moon,” says Nick Marsh of executive-search firm Harvey Nash. The search is on for the “best female and local talent,” he says.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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