You are on page 1of 8

Articles in our Leadership & Talent series address key issues companies face in creating effective talent

management strategies—to identify, develop and retain successful leaders and leadership teams.

A Russell Reynolds Associates’ Series: Issue 3, 2010

Building a Global “A” Team: Challenges for Asian


Multinational Corporations
More and more Asian companies are making their way onto the global stage. In this paper, Louise Goss-Custard
explores the steps that Asian multinational corporations should take to ensure they establish successful international
operations from the outset.

T he march of Asian companies to expand across


the world appears to be accelerating. Starting with
Standard Operating Procedure
the Japanese companies in the 1980s and the Korean We see the pattern repeat itself again and again in
companies in the 1990s, we now have Indian and, slightly different ways but all with the same result.
increasingly, Chinese giants looking to build a global
footprint. In this paper, we look at the challenges faced A market leader from Asia comes to Europe or America
by Asian multinational corporations (MNC) in attracting to open new markets and compete on the larger stage.
and retaining a top-level senior team in Europe and in Asian companies send trusted executives from their home
the United States. operations—as part of their professional development—
to head up overseas outposts. Those executives often
Deepening globalisation may have wrought a are paid less than comparable executives in the new
borderless business environment, but that does not country, and, restricted by home country pay scales,
mean that expanding internationally has become any they are unable to hire talented managers to work for the
less of a cultural minefield. The challenge of adapting organisation. As a result, they create a team made up of
established business and management practices to the “B” and “C” players, which then underperforms relative
unique requirements of a specific overseas market is to the “A” team competition. In addition, the senior
extraordinarily difficult for Asian companies. We have executive usually does not understand the local market
witnessed some remarkable successes and some in detail, and performance deteriorates further. Just as he
spectacular failures. (almost always he) is getting a grip on the local market,
his tour of duty ends, and a new executive is rotated in,
Interestingly, what Asian companies are doing now
who makes the same mistakes.
is the mirror image of how Western MNCs have
approached expansion into Asia in past decades— Sometimes, Asian MNCs bite the bullet and hire a local
sending expats to build the brand whilst struggling executive to run the local operation, but that executive
to attract and retain the best talent locally—and struggles to communicate with headquarters (HQ)
we witnessed the same remarkable successes and due to language, management style, mutual cultural
spectacular failures in that direction, too. incomprehension or all three. The level of distrust grows,
and the executive is unable to secure the investment
In this article, we share our observations of Asian
he needs to modify products for the local market or
MNCs’ most common missteps, as well as our advice
invest at the level needed to recruit the “A” team. As
for getting the expansion equation right.
the business underperforms, he loses the trust of HQ.

Russell Reynolds Associates


He is fired and is replaced by an expat from the home teams in order to have any shot at all at the big league
country once again. stakes. Likewise, in media and investment banking,
the company probably will need at least one local
Sometimes, Asian challengers will try to buy market rainmaker on the team just to gain entry to the game.
position by acquiring a European or U.S. company,
but, inevitably, they get derailed by similar issues. A highly connected and effective rainmaker in Europe or
The company either replaces the senior management in the United States will be expensive—outrageously so
team with Asian executives who may not understand to many Asians’ eyes—but the returns in new business
the local market or it retains the acquired executives opportunities that such an individual will produce are
but doesn’t empower them and doesn’t support the likely to more than justify the initial investment.
necessary investment or change in strategic direction.
The company underperforms, and the vicious cycle Asian organisations that look to acquire companies
of deteriorating performance gains intensity until the overseas for market entry should consider conducting
Asian company pulls the plug on what it sees as an leadership due diligence. A thorough assessment of
ill-fated venture or withdraws back to the home market. executive capabilities (by a third party) will enable
them to build a shadow team (at least for critical roles)
It does not have to happen this way. By giving that includes a mix of talent from both organisations.
more credence and a higher priority to preparation, This shadow team should be approved by the board
establishing robust people processes and globalising and will ensure that an “A” team is in place to run the
initiatives, Asian companies can position themselves company from day one post-acquisition.
for success in the global market.

Branding and the Employee Value


Planning Is Not Optional Proposition
In corporate life as in sports, you do not need a star Many Asian companies are accustomed to attracting
player in every position to build a winning team, but the very best in their home countries, but they have
you do need top talent in key roles. By performing a a much weaker employee value proposition (EVP) in
thorough market assessment in advance of setting the global marketplace. Attracting “A” players often
up shop overseas—in other words, by doing some is a challenge for Asian companies as the brand may
homework first—Asian companies can identify the not be well-known in Europe or in the United States.
roles most critical to the success of the business and One way to overcome this is to hire a leader with “star
invest in top players for those positions only. power” who has the ability to attract others to the
Having the right plan in place—and more significantly company’s brand. However, the company first has to
have the humility and appreciation to understand that
the right team to execute it—can increase the chances
its brand lacks the same pulling power internationally
of global success.
as domestically and then has to invest in a high-profile
executive to run the show. Another option is to hire
someone with his own strong international network from
Building the “A” Team which to draw. For example, some Asian companies
have recruited CEOs from world-renowned companies
Many companies, for example, need little more than to their boards to help attract senior talent to the team.
an “A” sales force management team to keep pace
with the global competition. Others require a different The global CEO must start with a clear vision of what he is
lineup or a broader bench of talent. Businesses that aiming to achieve internationally and be able to articulate
will be subject to stringent regulation (defense, media, that vision in language that is understood globally.
renewables, food and beverage, etc.) will need “A”
type regulatory people: lawyers, lobbyists, insiders, In addition, the Asian MNC must have a clearly
etc. Those industries that compete on innovation— defined and articulated EVP. This is critical for
pharmaceuticals, biotechnology or software, for recruiting the highest calibre individuals at the next
instance—will need “A” research and development level down and for earning their long-term loyalty. The

2
EVP will have aspects covering pay, development Invest in People
opportunities, work content, leadership and a
“compelling story”. This often can involve offering Another major bucket for consideration concerns
the opportunity to take on more responsibility earlier people processes. For Asian companies to prosper
in one’s career and the chance to make more of an in Europe and the United States, they must institute
impact, given the smaller scale of the operations in employee processes that emphasise the long-term
that market. professional development of employees and so earn
Asian companies frequently are surprised to learn their loyalty. By doing this, companies can build a
there is little negative impact of being seen as an pipeline of skilled, knowledgeable employees who
Indian or Chinese company—indeed, in Europe in will be able to step into “A” roles when needed.
particular, the opportunity to spend time in Asia can These processes include everything from training,
be especially attractive. development and mentoring to rotational opportunities.

There is no reason to feel defensive or insecure about The other important element relating to processes is
being an Asian company when looking to hire top global human resources management—companies
should use the same criteria (even forms), processes
talent. On occasion, such defensiveness can be a
and schedules across the globe. For example, all the
bigger issue than compensation.
top 400 executives should know that in November
and May, no matter where they are based, they will
get a formal assessment and face-to-face review.
Leading the “A” Team All executives should feel they are being fairly and
appropriately managed.
Once companies have identified the business-critical
functions and assigned “A” players to those roles,
they should give the teams room to manoeuvre and
exert influence at the strategic level. Asian companies
Localise the Operations
often will analyse market dynamics through a home
It should go without saying that localising the
country lens and disregard the counsel of their local
operations is of significant importance, yet many
colleagues. To ensure the local team can wield its
companies continue to export their home cultures and
influence, Asians must carefully consider the strategic
organisational structures to their global operations,
position of the European and U.S. outposts and
often with disastrous results. The need for local
align reporting hierarchies in support of business
contracts and benefit schemes in every country adds
objectives. In many corporations, Europe and the
cost and complexity from day one. Localising also
United States are organisationally positioned as sales
means accepting that parts of continental Europe take
operations two or more levels removed from the
long summer vacations. It means recognising the need
CEO. But if, for example, the United States is a key
for a U.S. operation to get involved in its local business
business driver, then the reporting structure should
network, as well as with local charities and other
support that importance.
not-for-profit activities. It means organising customer
Having strong local players can make a firm more events and other activities in accordance with local
competitive globally; however, hiring the best without norms rather than home country norms.
giving them the authority and resources to execute the
business plan is a waste of effort and will result only
in high rates of executive turnover.

3
Compensation and Benefits Management Style and Cultural Fit
Cost is very important to many Asian companies—the Management style the world over reflects cultural
Japanese first succeeded abroad by selling cheaper differences, and the Asian MNC must be aware of its
products (and often lower quality goods) than local
own style and hire executives who are a cultural fit.
manufacturers. Remember what “Made in Japan”
used to imply? The Koreans did the same, and now For example, Chinese companies have a consensual
the Chinese are following in their wake. We have seen and less pressured style of running a company, which
the pattern of success: Companies gain a market usually sits better with European executives than with
foothold by being cheaper than the local competition American ones. Indian companies tend to be more
and then take the quality and service levels steadily conflict-oriented. Taiwanese companies are pragmatic
upwards. However, this focus on cost can make it and are prepared to act fast but lack forward planning
extremely difficult to attract the “A” team from the and a road map. Japanese, Korean and Chinese
very beginning. It is not just the compensation that companies all prefer to debate in private, find points of
matters but also the perks—the quality of hotels agreement and focus on saving face rather than having
where executives can stay when on business travel, open debate. They place high value on relationships
for example, bearing in mind that hotels and airlines in and may be less openly competitive. Most Asian
Europe and especially the United States offer far lower companies are very hierarchical and centralised, with
service levels than their equivalents in Asia. strong managerial and financial control from the centre,
which can rile senior executives in Europe and America
The pay issue is a difficult one, but getting it right is who are used to significantly more empowerment.
essential for success in the market. Asian companies typically have a longer-term view that
executives can learn to appreciate but which initially
Asian companies usually do not have the same pay,
may frustrate those coming from a more short-term,
bonus and stock incentives to which Americans, in
bottom line-oriented Western company.
particular, are accustomed to, and these firms often
characterise Americans as being too greedy. In Asia, Often, Asian companies have a decision-making
it is not common for executives to participate in structure that differs from the organisation chart that
the success of the company by being offered stock is in place. A CEO may have a “kitchen cabinet” of
options, whereas in the United States and increasingly trusted advisors, without whose say-so nothing gets
in Europe, this is expected. The Asians struggle to done. Or there may be informal hierarchies related
justify the need to pay their overseas juniors more to national politics that are not obvious to outsiders,
than themselves. The reality is that for “A” players, the particularly those from another culture. It is important
financial opportunities are vastly superior in the United for Asian companies to acknowledge these patterns
States, and this increasingly is the case in parts of and to open up the black box to enable non-national
Europe. For situations in which one needs to recruit a senior executives to navigate their way through the
senior-level executive, the solution is simple: Pay up corridors of power, or failure is almost inevitable.
or the firm will not get the necessary talent, and the
business will enter a vicious cycle. Occasionally, Asian When hiring senior talent abroad, Asian boards are
companies find outstanding European or American advised to understand their own culture and hire
executives with a strong cultural fit who are affordable; executives whose company cultural preferences are
however, the chances of this are low, so counting closest and who respect and want to learn about other
on an affordable “A” player is a risky strategy. Often, cultures even if they do not understand them. Some
successful Asian companies are paying their top companies succeed by hiring home country nationals
European or American executives more than their CEO. resident in the host country and who have extensive
“We had to wrap our heads around astronomical sums,” experience in that host country. These executives can
reported one Asian CEO. “Ring fencing” compensation help bridge the cultural divide and build trust between
in high-salary markets is a common solution. HQ and local operations.

4
Building a Global Culture Board Support
In parts of Asia, companies are successful as part To attract an “A” team, the board must believe in
of an ecosystem made up of the government and the need for it. Often, Asian boards are not willing
other companies (suppliers and distributors), as well to make changes that will affect individuals at home
as the local market situation. This allows them to be at the HQ. The compensation schemes that will
successful despite a relative lack of management attract top players, freedom and empowerment of
sophistication and without best-in-class business local management, and the globalisation of business
processes. But once they leave the comfort of this processes and culture frequently will negatively affect
ecosystem, life becomes much tougher. The most executives in the home country. The board must be
successful Asian MNCs have actively sought to build committed to see these changes through despite those
a global culture, including at home at the global implications and to actively explain to local leadership
headquarters. This starts with the obvious—using why these changes are necessary.
English as the working language so that executives
If the board doesn’t have a global mindset and an
from Europe and the United States can fully participate
in management discussions. But beyond that, it ability to work with a global platform, stay at home!
includes building a non-hierarchical decision-making
process, with flexibility in working hours, and,
increasingly, locating members of the leadership team Conclusion
in multiple locations around the world rather than having
all the executives co-located at the global HQ. Hiring The challenge of establishing successful operations in
the best talent regardless of location is something with foreign countries is hardly unique to Asians, of course.
which Western companies still struggle, but the Asian Any expansion into a new market requires a bridging
companies that are grasping this early on are seeing the of cultural and operational gulfs, and many businesses
results speak for themselves. have difficulty doing it well.

In the words of one Asian CEO: “Global leaders must In summary, if a company is to truly build an “A”
speak English, use best practice business processes, be team globally, a complete rollout programme—that
encompasses everything from basic due diligence
culturally sensitive and curious about other cultures, and
and fundamental human resources processes to more
know how to use their influencing skills across cultures”.
subtle and sophisticated ways of localising operations
Even the best performer in the local market may fail in the interest of preventing cultural missteps that can
when sent abroad. Many companies can cite examples thwart successfully going global—is required. Those
of sending a home country superstar to Europe or firms that have figured this out are not only doing well
America where he or she totally failed as a result of in the global marketplace but also are benefiting from
engaging with people in a way that made them feel having the “A” team’s leverage across the world.
uncomfortable. Investing in people early on in their
career by sending them abroad for a few years and
then bringing them back home is seen by many Asian
companies as a good way to build a global culture. To
date, though, this has had limited success because
once Asian executives are sent abroad, they often
want to stay there so their children can benefit from a
European or U.S.-style education.

5
Author About Russell Reynolds Associates
Louise Goss-Custard has been based in Asia Leadership. In today’s ever-changing global business
for a number of years and advises both local and environment, success is driven by the talent, vision and
international clients on senior-level executive and leadership capabilities of senior executives.
non-executive search and assessment assignments.
Russell Reynolds Associates is a leading global
executive search and assessment firm with more
than 300 consultants based in 39 offices worldwide.
Our consultants work closely with public and private
organisations to identify, assess and recruit senior
executives and board members to drive long-term
growth and success. We value teamwork, serving our
clients with a collaborative approach that spans our
international network of sector and functional experts.

Our in-depth knowledge of major industries and our


clients’ specific business challenges, combined with our
understanding of who and what make an effective leader
ensure that our clients secure the best leadership teams
for the ongoing success of their businesses. For more
information, please visit us at www.russellreynolds.com.

6
Russell Reynolds Associates | Global Offices

Americas New York


200 Park Avenue
New Delhi
A4, Tower A
Hamburg
Stadthausbrücke
Suite 2300 The Qutab Hotel and Apartments 1-3/Fleethof
Atlanta New York, NY 10166-0002 Shaheed Jeet Sing Marg 20355 Hamburg
1180 Peachtree St., NE United States of America New Delhi 110 116 Germany
Suite 2250 Tel: +1-212-351-2000 India Tel: +49-40-480-661-0
Atlanta, GA 30309-3521 Tel: +91-11-4603-4600
United States of America San Francisco  London
Tel: +1-404-577-3000 101 California Street Shanghai 24 St. James’s Square
Suite 2900 Room 4504, Jin Mao Tower London SW1Y 4HZ
Boston San Francisco, CA 94111-5829 88 Century Avenue United Kingdom
One Federal Street United States of America Pudong, Shanghai 200121 Tel: +44-20-7839-7788
25th Floor Tel: +1-415-352-3300 China
Boston, MA 02110-1007 Tel: +86-21-6163-0888 Madrid
United States of America São Paulo Calle Miguel Angel, 11
Tel: +1-617-523-1111 Edifício Eldorado Business Tower Singapore Seventh Floor
Av. Nações Unidas, 8501 2 Shenton Way 28010 Madrid
Buenos Aires 11º Andar #08-01 SGX Centre 1 Spain
Buenos Aires Plaza 05425-070 São Paulo - SP Singapore 068804 Tel: +34-91-319-7100
Manuela Sáenz 323  Brazil Singapore
Seventh Floor, Suites 14 and 15  Tel: +55-11-3566-2400 Tel: +65-6225-1811 Milan
C1107CBP Buenos Aires Via Mascheroni, 5
Argentina Stamford Sydney 20123 Milan
Tel: +54-11-4118-8900 301 Tresser Boulevard Level 40, Aurora Place Italy
Suite 1210 88 Phillip Street Tel: +39-02-430-0151
Chicago Stamford, CT 06901-3250 Sydney NSW 2000
200 South Wacker Drive United States of America Australia Munich
Suite 2900 Tel: +1-203-905-3341 Tel: +61-2-9258-3100 Ludwigstraße 7
Chicago, IL 60606-5802 80539 Munich
United States of America Toronto Tokyo Germany
Tel: +1-312-993-9696 Scotia Plaza, Suite 3410 Izumi Garden Tower 14F Tel: +49-89-24-89-81-3
40 King Street West 1-6-1 Roppongi
Dallas Toronto, ON Minato-ku, Tokyo 106-6014 Paris
8401 N. Central Expressway M5H 3Y2 Japan 7, Place Vendôme
Suite 650 Canada Tel: +81-3-5114-3700 75001 Paris
Dallas, TX 75225-4404 Tel: +1-416-364-3355 France
United States of America Tel: +33-1-49-26-13-00
Tel: +1-214-220-2033 Washington, D.C.
1701 Pennsylvania Avenue, NW Stockholm
Houston
600 Travis Street
Suite 400 Europe Hamngatan 27
SE-111 47 Stockholm
Washington, D.C. 20006-5810
Suite 2200 ­United States of America Sweden
Houston, TX 77002-2901 Amsterdam Tel: +46-8-545-074-40
Tel: +1-202-654-7800
United States of America World Trade Center
Tel: +1-713-754-5995 Tower H, 18th Floor Warsaw
Zuidplein 148 Belvedere Plaza
Los Angeles 1077 XV Amsterdam ul. Belwederska 23
11100 Santa Monica Blvd.
Suite 350
Asia/Pacific The Netherlands
Tel: +31-20-305-7630
00-761 Warsaw
Poland
Los Angeles, CA 90025-3384 Tel: +48-22-851-68-38
United States of America Beijing Barcelona
Tel: +1-310-775-8940 Suite 1320, China World Tower I Edificio Prisma Zürich
No. 1 Jian Guo Men Wai Avenue Avda. Diagonal, 613, 2˚A Löwenstrasse 28
Menlo Park Beijing 100004 08028 Barcelona CH-8001 Zurich
2500 Sand Hill Road China Spain Switzerland
Suite 105 Tel: +86-10-6505-2688 Tel: +34-93-494-9400 Tel: +41-44-447-30-30
Menlo Park, CA 94025-7015
United States of America Hong Kong Brussels
Tel: +1-650-233-2400 Room 1801, Alexandra House Boulevard St.-Michel 27
18 Chater Road Central B-1040 Brussels
Mexico City Hong Kong Belgium
Torre Reforma China Tel: +32-2-743-12-20
Paseo de la Reforma Tel: +852-2523-9123
115-1502 Copenhagen
Lomas de Chapultepec Melbourne Østergade 1, 1st Floor
México 11000, D.F. 15th Floor DK-1100 Copenhagen K
México Bourke Place Denmark
Tel: +52-55-5249-5130 600 Bourke Street Tel: +45-33-69-23-20
Melbourne VIC 3000
Minneapolis/St. Paul Australia Frankfurt
225 South Sixth Street Tel: +61-3-9603-1300 MesseTurm
Suite 2550 60308 Frankfurt/Main
Minneapolis, MN 55402-3900 Mumbai Germany
United States of America Unit 9(A), Grand Hyatt Plaza Tel: +49-69-75-60-90-0
Tel: +1-612-332-6966 Santacruz (East)
Mumbai 400 055
India
Tel: +91-22-6733-2222
© 2010 Russell Reynolds Associates, Inc.

RUSSELL REYNOLDS ASSOCIATES is a trademark of Russell Reynolds Associates, Inc.


Other brand names and marks referenced herein are trademarks of their respective owners.

RC:GATCA

www.russellreynolds.com

Russell Reynolds Associates