Contents Growth, interrupted 2 Evolving from pricing to understanding 4 Overcoming the talent shortage 6 Square pegs, square holes 10 Fitting the jigsaw together 14 Faster is not always better 16 See the big picture 18
3 “ The remuneration packages, benchmarked to US rates, were pitched 60 percent above the local market. Its cost-structure was unsustainable and thus affected its ability to stay competitive in Asia. ”
5 There are four hard truths that HR and line • Companies are better off looking at how managers must face when operating in Asia- jobs can be designed to fit available talent. Pacific: • The leadership gap in Asia-Pacific must be closed but not solely through fast-track • The talent shortage will not go away. If promotions. anything, it will get worse. • Pay is a blunt weapon in the talent war. “ Companies who allow themselves to get caught in the ‘wage race’ soon find their salary bills unaffordable, much like the manufacturing company above. ”
7 FIGURE 1: COMPARISON OF SALARY INCREASES FOR A SOLID (2-STEP) PROMOTION IN SELECTED MARKETS 100% 88% 80% 70% 63% 60% 60% 54% 40% 37% 33% 31% HONG KONG SINGAPORE 32% MALAYSIA CHINA 20% JAPAN INDIA USA GER UK 0% Middle / Senior Management 100% 80% 73% 61% 60% 48% 46% 40% 40% 30% HONG KONG 34% SINGAPORE 27% MALAYSIA 24% CHINA 20% JAPAN INDIA USA GER UK 0% Junior Management Source: Hay Group PayNet, 2010 “ Unfortunately, what we have in emerging economies is best described as a “lemon” labour market where salary inflation does not always commensurate with increased competency or improved organizational performance. ”
10 Managing Asia Pacific Square pegs, square holes One way of getting around the talent shortage in the Asia-Pacific region is to move managers and skilled professionals from mature markets to emerging ones. A consideration for such a move is cost. A sampling However, there is more at stake than cost: managerial of total remuneration costs across Asia-Pacific talent is somewhat thin on the ground in developing revealed that China is no longer the cheapest option nations like Vietnam, and this is not likely to change (Figure 2). Based on the total remuneration costs in the near future. One solution is to recruit managers per day, Vietnam has emerged as a better alternative from sources like India ($45), Malaysia ($52) and for low-cost talent – i.e. for every $100 paid to a possibly, New Zealand ($65). middle manager in the US, it would cost $48 for someone to do the same job in Vietnam. “ For those of us working in more mature markets, hiring two people to do the job of one may seem unproductive and even wasteful. However, as pointed out by our client, “in China, if you don’t over-staff today, you will be short of staff tomorrow.” ”
11 FIGURE 2: TOTAL REMUNERATION PER DIEM INDEX (US = $100) Total Remuneration Per Diem Index (USA=$100) 160 140 120 100 80 60 40 20 0 JAPAN HONG KONG AUSTRALIA THAILAND SINGAPORE CHINA INDONESIA KOREA NEW ZEALAND MALAYSIA VIETNAM INDIA Production 136 41 84 14 51 16 14 57 53 22 13 11 Clerical 151 55 95 24 64 26 17 60 60 30 17 15 Middle Management 127 115 110 86 83 78 74 74 65 52 48 45 Source: Hay Group PayNet, 2010 How to read this chart: The chart is only comparable within job levels across countries. It is not comparable within countries. For instance, for every US$100 that a US middle manager is paid, his peers in Japan and Australia get US$127 and US$110 respectively.
12 Managing Asia Pacific Cost aside, companies should also consider For those of us working in more mature the nature of the jobs. What Figure 2 markets, hiring two people to do the job of does not take into account is workforce one may seem unproductive and even wasteful. productivity or the availability of required However, as pointed out by our client, “in skills. China, if you don’t over-staff today, you will be short of staff tomorrow.” The tight labour market in Australia has prompted employers to look towards So while the challenge in mature markets is to neighboring New Zealand as a fertile source design jobs so that it can be done by fewer of managers. Superficially, it looked like a people, the opposite is true in emerging viable solution: lower employment costs, markets. This begs the question: how can you cultural similarities, and easy migration efficiently design jobs so that it can be done by across the Tasman Straits. However, a closer more people to mitigate the risks that arise from look might reveal that smaller-sized New high attrition? Zealand companies are less likely to produce managers with the depth of experience or performance levels which global corporations A good place to start is for companies to in Australia have come to expect. know what jobs need to be done (that is, work measurement) and match them with the talent available within (that is, role-fit). At a glance, Furthermore, what if the company is on a managers will intuitively be able to see the gaps management localization trek? Take the case in tasks versus competencies. In other words, of an engineering client in China. After a which square pegs are in round holes, which fruitless two-year search for a HR Director holes are empty (Case study on “Privatization locally, they split the job and redesigned woes”). it as two managerial-level positions. These positions, requiring less experience, were easier to fill in talent-scarce China. It is their So far, we have considered the work to be done hope that out of the two managers, one and the person doing it. In the next section, we will eventually emerge to be Director-level will consider the trickier question of how does material. all the work align with business objectives.
13 Case study: Privatization woes In preparation for privatization, a water company needed to know how to restructure its organisation, redesign jobs and redeploy people so as to be market-oriented and competitive. The newly privatized company would have the largest market share and wanted to maintain that edge. With nearly 10,000 employees affected by the change, doing it right was more important that doing it quick. Hay Group worked across the entire organization for an 18-month period: • re-defining job descriptions and job families • re-defining technical and behavioral competencies • re-evaluating jobs • assessing the capabilities of all employees at all levels and establishing overall bench strength • establishing a sound measure of the level of fit between people and roles • employee re-deployment based on revised roles and required capabilities • creating a new compensation scheme based on the new jobs and incumbent’s competencies.
14 Managing Asia Pacific Fitting the jigsaw together Now that a prospering economy has put Asia-Pacific companies back on their feet, organizations who previously downsized are once again in a situation where the “clothes no longer fit”. In the enthusiasm to ride the rapid upswing, roles become unclear, responsibilities start to slip through the cracks, jobs get duplicated, and worse, people are working against each other. Let us examine the simple case of a media the Vice-President of Regional Sales was company whose revenues hit a plateau after managing seven local managers directly. By a successful three-year streak. An analysis re-organizing the teams into three clusters, of the sales department showed that during each headed by a Sales Director, the company the economic boom, the sales force had was able to increase its market penetration grown in tandem with revenue and now and share exponentially again.
15 “Now I don’t worry so much, should the acquisition purposes. An interesting finding Vice-President decide to leave. In fact, I can was that the target’s R&D department even plan for his next internal career move was not a truly research and innovation because I’m assured that there are three centre, unlike our client’s. The target’s R&D contenders for his job,” confided his CEO. was focused on tweaking products and packaging to suit local tastes and helping out with market development. Our client Most managers will admit that the most commented that this was useful information frustrating item on their corporate agenda is to have at the pre-merger stage. If they had fitting the operating structure to the company taken the target’s organization structure strategy. The process can be time-consuming, at face value and combined both R&D confusing and often frustrating. departments, the result would have been “an unmitigated disaster”. And yet it need not be insurmountable if we start with the premise that jobs are The final point we have to consider is the the building blocks of organizations. Take importance of leadership and how it all fits the complicated business of post-merger into the matrix of jobs, people and structure. integration. On behalf of a food and beverage This is the topic of our next section. client, we recently analyzed a target for
16 Managing Asia Pacific Faster is not always better To counteract the shortage of managerial talent, top companies in Asia typically use fast-track promotions, as shown in a Hay Group study on Best Companies for Leadership in Asia (2010) (Figure 3). However, if you do not have a clear footprint like HSBC, Standard Chartered understanding of the roles you are sending etc, it embarked on an ambitious program them into, you run the danger of not giving to expand its product range as well as its employees the time they need to mature in geographical reach. To accomplish this, it their roles, before moving them on. As it is, promoted managers from within and hired managers in China and Vietnam are three to aggressively from the market. However it five years younger than their Singapore and soon hit a plateau, unable to grow its fees or Hong Kong counterparts, and up to 10 years customer bases as projected. What was the younger than their European peers (Source: primary cause of this? Hay Group PayNet). We audited the leadership competencies of In Asia, the eagerness to promote managers the top managers against the requirements of beyond their experience level is negated by their roles and found that they were at least the lack of personal coaching and feedback two, even sometimes three, steps below the vital to growth. At the end of the day, a solid competency levels required for their current leadership bench cannot be sustained by fast- jobs in terms of know-how, accountability track promotions and short-term rewards. and problem-solving skills. Part of the problem stemmed from having accelerated their managers too fast, before they have truly mastered their jobs. The other part came Take the example of a bank in South-east from not having a clear understanding of Asia. Determined to compete among more what those jobs required. established banks with a stronger global
17 Instead of accelerated development, other their employer brand. Those with a sound companies have taken different approaches. reputation for good leadership development In Australia, the best companies have realized and career planning are reaping the benefits of the importance of building and marketing being able to attracting and retaining their best employees. FIGURE 3: SUSTAINING THE LEADERSHIP PIPELINE Global Top 20 Global Asia Top 5 Asia 15 Fast-track promotions is one of the top 3 ways 25 36 my company uses to attract and develop leaders 25 100 My company has been successful in doing 58 succession planning 73 55 100 This organization actively manages a pool of 66 successors for mission-critical roles 80 72 100 My company’s top local leaders are not mostly 80 expatriates from headquarters 71 62 Source: Best Companies for Leadership in Asia, 2010
19 And so, unless organizations take steps to These measures lend rigor to the ‘softer’ review their jobs, people, structure, pay and aspects of HR (such as engagement, performance issues in an integrated manner, motivation and recognition) by providing they end up spending far more time, money clarity around the work that needs to be and goodwill than they should. After all, why done and how it can best be done. They also use one method for reward decisions, another create credibility for ‘hard’ aspects (such as for talent management and maybe even a accountabilities, job design and reward) by third for structuring work? grounding them in a proven understanding of people and how they interact within the context of particular jobs and structures. Yet, the concept of job evaluation is not something new. Fundamentally, it can and should be an objective way to align Ultimately, these measures hold the key to people to roles, rewards to performance, real transformation, helping organizations and organizational structure to strategy. not only to overcome the perennial and Unfortunately, today’s organizations are not niggling talent challenges in Asia-Pacific, but stretching their job assessment and evaluation also to unleash their true potential. methodologies to capture the full benefits. Unlock your organization’s full potential Develop targeted pay and reward programs? Optimize return on people investment by paying in proportion to contribution “ Evaluate people and jobs to match the right individuals to the right roles Define career progressions for individual roles across related job groups Analyze your organizational structure and identify ways to make it more effective
20 Managing Asia Pacific About Hay Group Spectrum: About Hay Group’s Best The next generation HR Companies for Leadership solution (2010) Hay Group Spectrum is an evolution of our Hay Group has researched the Best pioneering methodologies in Job Evaluation, Companies for Leadership since 2005. which have helped thousands of organizations The 2010 survey included responses from analyze, understand and measure the work 3,769 individuals and 1,827 organizations that occurs in their business. It brings worldwide. The survey was based on together fragmented inputs from job the organization’s response to an online evaluation and other assessment tools, and interrelates them questionnaire and peer nominations. in a strategic and holistic way with structural and people Respondents that completed the survey were from 96 dimensions of work. It allows leaders to see how, where countries, with 26.6 percent from North America, 23.4 and why work is done, tailor organizational structures to percent from Europe, 3.6 percent from the Middle East, 19.7 business strategy, identify the right people for the right roles, percent from Asia, 23.7 percent from South America, 2.6 and gain objective insights on the real worth of outputs and percent from the Pacific, and 0.5 percent from Africa. performance. To see the Top 20 list from 2005 through 2010, please visit To find out how Spectrum connects jobs with reward, talent the Best Companies for Leadership microsite at management and organizational structure, visit http://bit.ly/gqxFuX. www.haygroup.com/spectrum. To read Leading Asia: It’s time to change the rules, please visit www.haygroup.com/sg/downloads. Contact Sylvano Damanik Madeline Dessing Regional Director, Reward Practice Regional Director, Leadership & Talent Practice Hay Group Asia-Pacific & Africa Hay Group Asia-Pacific & Africa http://www.linkedin.com/pub/sylvano- http://www.linkedin.com/pub/madeline-dessing/8/306/86 damanik/0/9b5/8b9
Africa Frankfurt Charlotte Lima Managing APAC | July 2011 | Singapore Cape Town Glasgow Chicago Santiago Johannesburg Helsinki Dallas São Paulo Pretoria Istanbul Edmonton Kiev Halifax Asia Lille Lisbon Kansas City Bangkok London Los Angeles Beijing Madrid Mexico City Hong Kong Manchester Montreal Ho Chi Minh City Milan New York Metro Jakarta Moscow Ottawa Kuala Lumpur Oslo Philadelphia Mumbai Paris Regina New Delhi Prague San Francisco Seoul Rome San José (CR) Shanghai Stockholm Toronto Shenzhen Strasbourg Vancouver Singapore Vienna Washington DC Metro Tokyo Vilnius Warsaw Pacific Europe Zeist Auckland Athens Zurich Brisbane Barcelona Canberra Berlin Middle East Melbourne Bilbao Dubai Perth Birmingham Tel Aviv Sydney Bratislava Wellington Bristol North America Brussels Atlanta South America Bucharest Boston Bogotá Budapest Calgary Buenos Aires Dublin Caracas Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organize people to be more effective and motivate them to perform at their best. Our focus is on making change hap- pen and helping people and organizations realize their potential. We have over 2600 employees working in 86 offices in 48 countries. Our clients are from the private, public and not-for-profit sectors, across every major industry. For more information please contact your local office through www.haygroup.com.