Large Asia-Pacific companies are intensifying their search for local executives, rather than relying on expatriates from other areas of the world, a report by The Conference Board found.
Seventy-nine percent of companies surveyed are seeking to accelerate talent development in the region. During a period when many indirect/non-operational budgets are being reduced, organisations are maintaining (47%) or increasing (47%) financial resources for leadership development initiatives.
Many companies are trying to reduce the number of expatriates occupying longer term (as opposed to developmental) leadership roles. “One reason for reducing expatriates is that in the lifecycle of most businesses, the localisation of leadership has a positive impact on performance,” says Andrew Bell, programme director for the Asia-Pacific HR Council and author of the report.
“This positive impact results from a range of factors in which local leadership is more likely to have a deeper understanding and familiarity with the needs and expectations of local consumers and clients, local business infrastructure and external relations, including the government and media. Also, language may be a critical factor. An inability to work in the local language can be a serious impediment in some aspects of business operations.”
Local talent can also be hired for a fraction of the cost of most expatriates. Benefits, such as home leave, school tuition and a housing subsidy, can cost companies twice as much a local executive would.
However, companies face serious challenges in their quest for home grown talent. The supply of local leaders is limited, creating intense competition for talent. In Shanghai and Bangalore for instance, turnover is as high as 40% per year in certain sectors. Salary inflation is also significant; absolute salary levels for some executives in Shanghai are now greater than their counterparts in Singapore or London.
Other difficulties have also cropped up on a regular basis like the capabilities of HR professionals, geographical discrepancies between supply and needs of talent, poor infrastructure, and clashes between company and country cultures.
But most companies have taken on a very proactive attitude to find local, skilled executives: 76% have now developed specific Asia-Pacific leadership development programmes, and 90% see retention of their high potentials as top of their priority list.
Watch out for our article on China’s war for talent in the May issue of World Business, out on 27 April 2006.
Source: Leadership development in Asia-Pacific: identifying and developing leaders for growth
The Conference Board, March 2006
Review by Emilie Filou