Major companies based in the Asia-Pacific region are intensifying their search for executives who live in the area, rather than relying on expatriate executives who are brought in from other areas of the world, according to a report released by The Conference Board.
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 The Conference Board report, 79% are seeking to accelerate talent development in the region. During a period when many indirect/non-operational 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.
"One reason for reducing expatriates and international assignees is based on the premise that in the life cycle 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."
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.
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. To access the entire report: www.conference-board.org