East meets West Leadership


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Towards a leadership model that incorporates the best of East and West

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East meets West Leadership

  1. 1.                    East meets       west The new face of capitalism                Towards a leadership model that incorporates the best of East and West >>     Globalization has altered competitive landscapes across The recent global economic crisis is an example of leadership markets, restructured supply chains across industries and failure. The US sub-prime crisis and the subsequent global redefined skill sets required of leaders to succeed. This financial meltdown exposed not only the gaps and weaknesses interconnected world has also called for a deeper appreciation in the supervision and regulation of financial institutions, of cross-cultural complexities and willingness to empathize, but also the bankruptcy of Western leadership not only with differences in local business contexts, but also principles that emphasized short-term gains at the expense of with different social values and beliefs. long-term value.    Yet, the understanding of such differences has not been There is a global leadership vacuum, which Asia can do a lot proportionally translated into actionable advice for leaders. to fill. Meet the new face of capitalism, which combines the What are the specific behaviors that can help them be more best from both Western and Asian practices and which effective? unifies individual performance with the long-term good of the team, company and society.  ©2009 Hay Group. All rights reserved 1
  2. 2.   East meets West: The new face of capitalism    Leadership: A cross-cultural perspective  Make way for the rise of Asia. The explosive growth of China, India and developing economies in Asia means that the demand for leaders will continue to rise, regardless of economic climate. As Asian companies become more active on the global stage, it is timely to look at some key success factors for Asian and Global leadership. What does it take to deliver sterling performance year after year? What are the key competencies of Western and Asian leaders in the global arena? What can they learn from each other?    A Hay Group study of successful top CEOs in Western executives transplanted into China,  India and China uncovered the unique skills where relationships seem to count for more The new face of that they have developed to manage the unique than legalese. capitalisam, which blends business situation that they confront.   values from different     Figure 1 shows the most common situations Leading for global effectiveness cultural and socio-political which leaders in India, China and the West backgrounds, demands a The new face of capitalism, which blends values face. Indian CEOs were focused on getting from different cultural and socio-political back- different level of permission from the government and launching grounds, demands a different level of competencies among something new; Chinese CEOs were concerned competencies among leaders who desire to be leaders who desire to be with raising or investing capital; while Western globally effective. From our study, a number CEOs were more focused on strategic talent globally effective. of key leadership competencies most associated management efforts like coaching, deployment with effectiveness among Chinese and Indian and recruiting.   CEOs were observed:   Hay Group’s research shows that Indian CEOs • Social responsibility and interpersonal are excellent at managing the complex web of approach external relations, especially with the govern-   ment and media, which is crucial to the success At its core, social responsibility involves of business in India. conducting business in a manner designed to   improve society in general and one’s own In China, where regulations are often industry in particular. In India, socially uncertain and conflicting, leaders were found to responsible competencies were most effective in rely on personal relationships and networking turbulent environments including turnarounds for success, rather than the terms and and start-ups, both of which required high conditions found in legal contracts. This is levels of adaptive thinking and excellence in often the point of culture shock for many execution. Indian CEOs demonstrated strong     Figure 1:     Most common Most Common Leadership Situations leadership situations faced by leaders in India China West India, China and the Getting permissions from Raising or investing capital Talent (coaching, deploying, West. government (23%) (32%) recruiting) (16%) Launching something new; Understanding the market Turnarounds (12%) innovations (23%) (13%)   Improving an established Reorganizing the business Turnarounds (21%)   business (11%) (9%) Improving an established   Negotiations and influencing Mergers (10%) business (16%) others (9%)  ©2009 Hay Group. All rights reserved
  3. 3.    Figure 2: Most characteristic Most characteristic interpersonal approaches interpersonal approaches India China West used by leaders in India,           China and the West    Influence for mutual benefit         • Subtle influence strategies Building organizational  Inner Strength to get the desired out- capability  • Taking business risks based come; but also to preserve • Aligning disciplines,  the relationship and systems & structure  on what is good for India   dignity of the counterpart. strategy   • Emotional maturity: inner     resources to draw on Social responsibility Developing others   during difficult times • Business ethics: supporting • Coaching and mentoring  fair practices & a healthy others, often one-on-one  industry       entrepreneurial drives and a single-minded support of the same situation – often the one focus on growth that not only related to their that the leader sees as best. companies, but also to their country. Their   willingness to take risks is based on altruistic Considering the lack of reliable business concerns for national welfare, tailoring frameworks in China, it was no surprise that affordable products, services and rural seeking harmony was the Chinese leader’s initiatives targeted at rural populations. way of working with evolving legal and Above all else, the Indians exhibited a regulatory systems. In fact, influencing for distinctive “inner strength” in transcending mutual benefit was their basis for guanxi – oneself, even if it meant settling for lower the popular concept of relationship building margins and growth targets for the business. in China – so that no party “loses face” or is  seen as compromised in a business situation. Likewise in China, the concept of social   responsibility was evident, as can be seen For executives schooled in Western business from the philanthropic practices of Chinese principles, a shift in mindset may be required leaders who endow schools, hospitals and to view the business landscape from an Asian other social projects as they find success (and perspective; that is, to recognize business as a not at the tail-end of their careers). This social good.   expression of ethical values both internally Hence, a Western-style CEO who is and externally, and tremendous self-disci- proposing a joint venture project or a market pline in business practices has its roots in entry mode in either China or India might Confucianism. increase his chances of success by emphasiz-  Given the perception that Chinese businesses ing how the project will benefit the country tend to be corrupt, it may be surprising to or community. Western-style leaders would some that social responsibility emerged as a also do well to observe how Chinese CEOs key success factor among Chinese leaders. craft mutually satisfactory options to create Evidently, in the face of emerging laws and long-term working relationships (Figure 2).   evolving government policies, Chinese CEOs • Business Thinking too, have found a way to deal with difficult   leadership situations by searching for social In terms of business thinking (Figure 3), meaning and contribution to society outside Indian CEOs were highly adaptive in their monetary rewards. thought processes and able to quickly relate  changing technologies or business models to Complementing social responsibility in meeting India’s needs. China is the ability to seek harmony in   business relations – a highly distinctive Chinese CEOs demonstrated a business competency among Chinese leaders. It perspective that manifests in understand- involves negotiation in a way that influences ing and predicting the developments of the for mutual benefit. Chinese CEOs would industry as well as in acting to help shape construct and present several alternatives industry regulations. in a way that eventually brings everyone in  3
  4. 4.   East meets West: The new face of capitalism    Western CEOs, on the other hand, showed Yet, when we compared the specific dimensions strategic insights, which helps give strategic for employee engagement and enablement (a direction based on understanding the market measurement of organizational support for and competitors as well as market trends and success) between Eastern and Western leaders, changes in paradigm. Asian organizations lag behind on all  dimensions, compared to their Western • Responding to contexts counterparts (Figure 5).    With regards to distinctive business contexts What is happening here? In the era of rapid (Figure 4), networking to obtain information growth, Asian CEOs have been focusing so In the era of rapid growth, was the Indian CEO’s response to the highly much on managing external issues such as Asian CEOs have been regulated business environment. Indian capitalizing on market opportunities, expan- focusing so much on leaders network in a bold, targeted way which is sion into new businesses, and securing the managing external issues focused effectively on tackling the specific very necessary financial capital, that they have that they have overlooked challenges that they and their organizations overlooked the importance of building internal face. organizational strengths for future sustainability the importance of build-   ing internal organizational Self-criticism, on the other hand, was an and continued success.   strengths for future attribute nurtured in the Chinese business It is akin to growing a bigger body without sustainability and context, fostering the willingness not only to building the corresponding muscle strength. reflect and learn from experience, but also to   continued success admit to mistakes. This competency seems to be Given the economic outlook, there is now based on an awareness of their own greater need for Asian leaders to look at their behavioral patterns, attitudes, moods and organization’s institutional strength and limitations coupled with a desire to learn. intangible capital. As discussed in the previous   section, leaders in Asia tend to be highly When Chinese CEOs took action towards self- entrepreneurial and less articulate when it improvement and inspire others to do the same, comes engaging employees. They tend to better business results ensued. Given the pres- communicate their visions and strategies less sures of today’s fast-paced world, the Chinese than their Western colleagues. In other words, leader’s competency for reflection and self- Asian leaders need to step up on employee criticism seems almost surreal. It contrasts engagement by investing more time sharply with the Western approach, where explaining and “selling” their visions and goals interpersonal understanding would be matched to their employees. with concerns for managing people.     Why is engagement so important? While CEOs     make promises about what their organization Leading engagement & enablement can deliver to customers, shareholders and other stakeholders, it is the employees who keep these According to Hay Group’s extensive employee promises on their behalf. research, leadership is very often the top driver   of employee engagement, that is, how much an Interestingly, Hay Group Insight – the employee is committed to the organization and, employee and customer survey arm of Hay hence the corresponding amount of Group – also found that 29 per cent of Asian discretionary effort he is willing to put in. employees or close to one-third of the Asian      Figure 3: Most characteristic thinking exhibited by Most characteristic thinking leaders India China West Adaptive thinking Business perspective Strategic insight     • Changing technologies, • Understanding and • Strategic direction based methods, or business predicting the develop- on understanding markets models to meet India’s ments of the industry & and competitors, market unmet needs (usually the acting to shape the regula- trends and changes in lower half of the economic tions of the industry paradigms pyramid)  ©2009 Hay Group. All rights reserved
  5. 5.       Figure 4: Leadership   characteristics in Most characteristic responses to business environment responding to business   environment India China West    Networking to obtain Interpersonal Self-criticism  information   understanding      • Continual, and often • Understanding   • Seeking practical public, self examination individuals: their  information by directly to find and admit perspectives, concerns,  asking people, often mistakes, areas for strengths, develop-  people with whom the growth, ways to do mental needs, in order  CEO had no prior contact better, learn, and to coach, influence or  match them to jobs  improve              Figure 5:       A comparison of       employee engagement Engagement drivers Asia West     and enablement bench-   Clear and promising direction 76% 77% marks in Asia versus   the West (Source: Hay     Quality & customer focus 72% 77% Group Insight, 2009) Employee Engagement Confidence in leaders 61% 67% Asia = 68% (West = 74%) Respect and recognition 60% 65% Development opportunities 55% 60% Pay and benefits 40% 53%     Employee    Effectiveness Enablement drivers Asia West      Collaboration 76% 77%      Performance management 73% 77% Employee Enablement  Asia = 66% Authority and empowerment 72% 76% (West = 71%) Resources 61% 63% Work, structure & process 54% 55% Training 40% 54%   The figure above depicts a model of employee effectiveness that incorporates employee engagement and enablement. Our research confirms that employee engagement and enablement are distinct outcomes that are influenced by different factors. The drivers that greatly impact engagement are best influenced at the strategic level. On the other hand, the enablement drivers can effectively empower the managers to act upon the results at the local level. Accordingly, leaders seeking to improve the effectiveness of their teams need to determine whether their performance issues are the result of a lack of engagement, a lack of support or both. Depending on the answer, the next course of action will differ.  5
  6. 6. East meets West: The new face of capitalism      workforce were frustrated in their jobs – a figure (information, technology, tools and equipment,  that surpasses that of the United Kingdom and budgets). They are also able to focus on   (Figure 6). their most important tasks without having to   negotiate obstacles in the form of non-essential  Only 16 per cent of Asian workers see tasks or red tape. Imagine, Asia achieved its themselves as being effective in their jobs –   phenomenal growth with implying that four out of five employees in a In other words, we need to not only motivate only 16 per cent of its work- company are potentially not productive at all. our employees but also enable them to force feeling effective. Can Imagine, Asia achieved its phenomenal growth channel their extra efforts productively. with only 16 per cent of its workforce feeling Engaged employees need to have confidence you imagine how much effective. Can you imagine how much more that the organization is not setting them up to more could have been could have been achieved if this rate was fail but “enabling” them to succeed by doing all achieved if this rate was doubled? it can to promote their success. No one enjoys doubled?   the experience of apologizing to our clients that This does not augur well for Asian companies in the “system” does not allow us to entertain their the wake of the economic recovery. This means extraordinary requests. that, about four out of every five employees in   your company right now could be more What is the bottom-line impact of such an productive. In the current recession, approach? Our research shows that companies organizations cannot afford to have so many that engage and enable their employees out- employees as passengers. performed their industry peers on both revenue   growth and profitability. However, engagement alone is not enough. To   get the most from employees, leaders must also In terms of growth, companies in the top ensure that organizational systems and work quartile on both engagement and enablement environments support individual and achieved revenue growth of 4.5 times, organizational effectiveness. compared to their peers in the bottom quartile.   In terms of profitability, companies in the top In short, employee enablement has two key quartile also exceeded industry averages in terms components. The first requires that employees of five-year Return on Assets, Return on Invest- be effectively matched to their positions, so that ment and Return on Equity by 40 per cent to their skills and abilities are effectively put to 60 per cent. This enhanced level of performance good use. is not to be sneered at, especially during the   The second is creating a supportive environment current economic recession.   such that they facilitate, rather than hinder, During the economic boom, Asian firms individual productivity. In a supportive enjoyed the luxury of importing foreign talent environment, employees have the essential to manage rapid expansion. However, a reliance resources required to get the job done    Figure 6: A comparison of   employee engagement Employee engagement and enablement in Asia versus the West. (Source: Hay Group   Low High   Insight, 2009)           Detached Effective Employee enablement High West = 28% West = 39% Asia = 35% Asia = 16%             Ineffective Frustrated Low West = 12% West = 21% Asia = 20% Asia = 29%   ©2009 Hay Group. All rights reserved 
  7. 7.                 on foreign talent has caused Asian leaders to the overhaul ten years ago following the Asian  neglect their vital role in grooming internal financial crisis. Reversing their long-held ethos  talent for future leadership. of free market capitalism, there lies a lesson for    Western leaders in Asian altruistic concepts of  If this phenomenon persists, Asian firms will  business philosophy that brings together greater increasingly have employees who are largely social justice, equitable principles and stronger   detached, frustrated and ineffective. Over the societal values into business management.  past several years, Asian leaders have gotten    away with “if we don’t have them, let’s buy Meanwhile, the global war for talent has made it  them” attitude during the good times. This is critical for Asian economies to double up efforts  simply not sustainable in the long run. to develop leaders to match economic growth     trajectories and to bridge deficits left by the It is time for Asian leaders to take a hard look at “brain drain” to the West. There is much that   their internal processes, remove unnecessary red Asia can learn from the West in terms of  tape, and provide adequate resources to set their business and talent management, particularly in  employees up for success. In this way, employee the areas of employee engagement and enable-  skills and abilities can be put to good use.  ment.         With international alliances and multicultural    Rewarding for long-term value and teams on the rise, a global leadership vacuum  needs to be filled. Evidence suggests that  sustainable performance Western leaders should learn from the Asian  While it is important during a downturn to approach to building stronger competencies  engage and enable people – especially highly  based on notions of social responsibility and the talented ones, recent controversies over Western spiritual “inner strength”; and for Asian leaders   compensation practices have shed interest- to nurture an altruism that unifies individual  ing insights for discussion. Although pay and performance with the long-term good of the  benefits accounted for the largest gap in our team, company and society.  study on employee engagement and enable-    ment, rewarding employees based on short-term     achievements is not something that Asian The new face of capitalism  leaders should try to emulate.   If we can form an international leadership team   Even today, one year after the collapse of combining the Indian leader’s strong creative,  Lehman Brothers, excessive compensation innovative and adaptive thinking; the Chinese There is much that Asia can packages in the West continue to be a bone of leader’s strong execution and negotiation skills, learn from the West in terms contention between regulators, shareholders and sense of social responsibility in business financial institutions. Hence, while it is gener- management and long-term view; and a Western of business and talent ally useful for Asian leaders to import some of leader’s consciousness of having to sell the management, particularly vision to his own team and encourage their the best employee engagement and enablement in the areas of employee practices from their Western peers into their input in decisions on the execution, it would engagement and own operating contexts, rewarding talents for enable today’s leaders to achieve so much more. enablement. long term-value and sustainable performance There is no doubt that the drive for is something Asian leaders must continue to achievement among Asian and Western adhere to.  leaders have fuelled the meteoric growth of their  respective companies and countries. The Leadership: Can East Meet West? question that remains is whether today’s leaders can tap into the best of East and West to take Today, leaders in Western economies can take a their rightful place on the global leadership leaf from the restraint and vigilance of Asia’s stage. financial regulatory framework, made robust by  7
  8. 8.   East meets West: The new face of capitalism     Hay Group’s Competency Research Concept Formation: All the data is analysed and synthesized in a five-day session to develop a Methods competency model that predicts outstanding  performance on the job. Hay Group’s competency studies were conducted   according to rigorous methods pioneered by Dr.   David McClelland of Harvard University, working Performance Outcome Analysis: A recent across Europe, US and Asia. These data was then innovation from the McClelland Centre, this further developed at the McClelland Centre for process involves grouping the BEI stories Innovation and Research (Hay Group’s research according to the business challenges faced by division based in Boston). participants, and then sorting the stories by the effectiveness of the results achieved, to identify These methods include the following: which competencies lead to success in specific Criterion Sampling: Leaders who are outstanding types of critical situations. – according to a clear set of criteria – are studied   and compared to a group who do not meet the   criteria. Each CEO who was studied intensively met Validation: During validation, the findings from all of the following criteria: competency research are tested and fine-tuned based on feedback from new groups of • Heads some of the financially best performing participants. Validation panels for this study companies in India and China; included relevant government ministers, business • Is widely respected; leaders, academicians and business students. • Has sufficient tenure at the company to be a credible leader there;     • Represents balanced sample across industries and sectors.    Hay Group Insight Behavioral Event Interviews (BEI): The core of the   competency method, the BEI is a two-to-three- Hay Group Insight, Hay Group’s survey research hour, in-depth interview in which the participants division, is a global leader in employee and provide detailed stories about their recent customer opinion research. Through customized successes and failures, and what they thought, felt, survey programs focused on organizational and wanted to accomplish in dealing with their objectives, we help organizations attract and situations. retain talent, improve operating efficiency,  manage change more effectively, and enhance  customer loyalty and business performance. Expert Panels: Structured discussions with groups   of industry experts and thought leaders provide   context and perspective on the challenges of the Since 1975, Hay Group Insight has assisted more role and the necessary competencies to be than 4,000 organizations. The breadth of our successful. experience enables us to identify best practices  for our clients, not only within their own industries  but also across industries. Coding: The BEI interviews are transcribed and   the text is carefully compared and benchmarked   against a list of twenty-two universal competen- Hay Group Insight’s Engagement Survey database cies in a structured coding process. In addition, is a sample of 646,000 employees collected over a other behaviors unique to the individual or the period of 5 years around the world. In Asia, there group are collected for qualitative analysis and were 347,000 employees from 90 firms. possible inclusion in the final model.        About Hay Group   Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 86 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges. Our focus is on making change happen and helping organisations realise their potential. Visit www.haygroup.com. ©2009 Hay Group. All rights reserved