Managing Asia-Pacific:                              Hard truths on                 ...
 
      Contents       Growth, interrupted                      2       Evolving from pricing to understanding   4       Ove...
2 Managing Asia Pacific                                                  Growth, interrupted                              ...
3                 “    The remuneration packages, benchmarked    to US rates, were pitched 60 percent above    the local m...
4 Managing Asia Pacific                                 Evolving from pricing to understanding                            ...
5                There are four hard truths that HR and line   • Companies are better off looking at how    managers must ...
6 Managing Asia Pacific                                Overcoming the talent shortage                            The lack ...
7          FIGURE 1: COMPARISON OF SALARY INCREASES FOR A SOLID (2-STEP) PROMOTION IN SELECTED MARKETS      100%          ...
8 Managing Asia Pacific                                    Throwing more pay at the talent shortage           But what if ...
9        
10 Managing Asia Pacific                         Square pegs, square holes                     One way of getting around t...
11                  FIGURE 2: TOTAL REMUNERATION PER DIEM INDEX (US = $100)          Total Remuneration Per Diem Index (US...
12 Managing Asia Pacific                            Cost aside, companies should also consider           For those of us w...
13          Case study: Privatization woes      In preparation for privatization, a water company needed to know how to   ...
14 Managing Asia Pacific                         Fitting the jigsaw together                     Now that a prospering eco...
15                   “Now I don’t worry so much, should the           acquisition purposes. An interesting finding    Vice...
16 Managing Asia Pacific                        Faster is not always better                       To counteract the shorta...
17                      Instead of accelerated development, other             their employer brand. Those with a sound    ...
18 Managing Asia Pacific                                See the big picture                            In summary, what we...
19              And so, unless organizations take steps to       These measures lend rigor to the ‘softer’    review their...
20 Managing Asia Pacific         About Hay Group Spectrum: About Hay Group’s Best    The next generation HR    Companies f...
  
Africa                         Frankfurt                       Charlotte                        Lima                      ...
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Managing Asia Pacific: Hard Truths

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A fresh look at the perennial challenges of managing people and business in Asia-Pacific.

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Managing Asia Pacific: Hard Truths

  1. 1.    Managing Asia-Pacific: Hard truths on human capital  investments                                     A fresh look at the perennial challenges of managing people and business in Asia-Pacific.
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  3. 3.    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
  4. 4. 2 Managing Asia Pacific        Growth, interrupted    Six years ago, as part of its aggressive growth strategy, an American high-end component manufacturer decided to start a production line in Singapore to capture market opportunities in the Asia-Pacific. Unfortunately, the 2007 global financial crisis forced a review of its globalization plan, bringing the Singapore operations to a grinding halt. Instead of building local capacities to lower overheads, the company started cutbacks and retrenchments – even before the new line could begin.      Of the local engineers and managers who Today, bitter lessons like this continue to By the time orders slowed were trimmed, many could not find similar expose weak points in human capital down, reactive measures jobs with matching paychecks. The cause? investments. “By the time orders slowed like salary cuts and lay-offs The remuneration packages, benchmarked down, reactive measures like salary cuts just wasn’t enough to save to US rates, were pitched 60 per cent above and lay-offs just wasn’t enough to save the the company the local market. Its cost-structure was company,” lamented the company’s former unsustainable and thus affected its ability to HR manager, now in need of a job. stay competitive in Asia.                      ©2011 Hay Group. All rights reserved
  5. 5. 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. ”
  6. 6. 4 Managing Asia Pacific        Evolving from pricing to understanding    Today’s companies in the Asia-Pacific have become more cost conscious than ever before. Despite the region’s astounding recovery from the downturn, they remain vulnerable to rising inflation and oil prices, talent shortage and employee attrition. Can a real understanding of work help solve these business challenges?    Fortunately, most companies in the Asia- Companies who allow themselves to get Pacific utilize some form of job analysis caught in the ‘wage race’ soon find their or sizing. But here’s the bad news: these salary bills unaffordable, much like the solutions are not always adding the value manufacturing company cited earlier. that they should be. Instead, companies need to look at the  return on their investment in people – which   means knowing what talent you are paying This is because many of these methods are for and, more critically, why. only useful for salary benchmarking – of limited use especially in emerging markets where the going rate changes overnight. ©2011 Hay Group. All rights reserved 
  7. 7. 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. ” 
  8. 8. 6 Managing Asia Pacific        Overcoming the talent shortage    The lack of experienced and competent managers in the region has beleaguered Asia-Pacific HR managers for years. Unfortunately, the dark cloud is not about to dissipate anytime soon.    According to Hay Group’s online investment? Unfortunately, in effect, what compensation and benefits platform, we have in emerging economies is best PayNet, there are some recurring trends in described as a “lemon” labour market Asia-Pacific (Figure 1): where salary inflation does not always  commensurate with increased competency  or improved organizational performance.    • The shortage of managerial talent has   consistently driven up their “asking price”, • High employment rate in developed especially in emerging markets like China, countries like Australia has put a high India, Indonesia, Thailand and Vietnam.  price on specialized skills, particularly  those with experience in the mining and  oil and gas sectors. The same can be said  • But paying more in emerging economies for financial sectors in Hong Kong and have not alleviated the shortage over Singapore.   the years. In fact, the opposite seems to   be true: talent now expect bigger salary • Thanks to better career and pay prospects increases as a matter of course. in neighboring Asian countries,  experienced managers from Australia and  • Note that the markets in China and India New Zealand are also pursuing expatriate are willing to pay up to 88 per cent and careers – a truth reflected by the number 70 per cent more base salary to lure and of professionals leaving home vis-à-vis promote middle and senior management the number of new entrants rising into talent. But are the talent worth that extra management ranks Down Under.  ©2011 Hay Group. All rights reserved
  9. 9. 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. 10. 8 Managing Asia Pacific            Throwing more pay at the talent shortage But what if there are few managerial talent has only resulted in a chronic case of talent- to be had locally? In the next section, we will go-round with questionable gains. Thus examine how jobs can be organized to fit the it is important for organizations to start available talent. from knowing the value of the work being done, knowing what we are paying for and not merely where we are paying against the market.     Is your organization in danger of burning out? Do you know how, where and why work is done? Does your structure align to your organizational strategy? Are the right people in the right roles? What is each role really worth to your organization?            “ The shortage of managerial talent has consistently driven up their “asking price”, especially in emerging markets like China, India, Indonesia, Thailand and Vietnam. ©2011 Hay Group. All rights reserved ” 
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  12. 12. 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.” ” 
  13. 13. 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. 
  14. 14. 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. 
  15. 15. 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. 
  16. 16. 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. 
  17. 17. 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 
  18. 18. 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 
  19. 19. 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 
  20. 20. 18 Managing Asia Pacific        See the big picture    In summary, what we need is a solid understanding of how work is done where within our organizations and how much we are paying for it. It has to look beyond job titles to expose the non-value adding roles, bridge the gap between pay and performance, and formalize operating structures.    Let’s take a step back. We often wonder • wasted time and resources redoing what why the simplest of day-to-day tasks seem someone else had done to take a disproportionate amount of effort.     We have all experienced these common   scenarios: Such wasteful activity can be traced to a lack  of real understanding of the nature of jobs • wasted time in irrelevant meetings  within the company, how they are connected • handling work below our level of to each other and the competencies required experience for doing those jobs. ©2011 Hay Group. All rights reserved 
  21. 21. 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 
  22. 22. 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 
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  24. 24. 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. 

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