What are the biggest challenges that organisations in Asia are currently facing when it comes to sourcing high-quality leadership talent?

Countries in this region are growing at a rate of 5% to 6% GDP, which is much higher than what you see in, say, the US. That speed of growth has been in progress ever since I came out here in 2012. Despite the financial crisis in 2008 in more developed markets, Asia continued to grow – and it’s never let up.

As this growth has gathered steam, lots of companies that operate in Asia have begun to see the value of taking a more regional approach to leadership – indeed, the delay to that realisation has no doubt been to many companies’ cost.

We could call the older system a ‘hub-and-spoke’ model, whereby the HQ – based outside Asia – would parachute in a senior figure, who would then run the company’s operations in that region for several years. But the problem with that is it’s very costly. On paper, it may be good for succession planning – but the reality and challenges on the ground can be very different.

For example, when I worked in banking, my deputy had something like 11 lines in his salary budget, accounting for things such as schooling for his children, travel, car allowance, housing, domestic supplies and other expenses that are all part and parcel of hosting an accompanying family in an international placement.

That’s what’s known as the ‘General Electric model’: you spend three years running a regional outpost, then HQ moves you – and your entire household – on to pastures new for another three years, often in a very different industry sector. However, companies are coming round to the idea that this is not just expensive, but prohibitively so.

On another level, the ask – in terms of the insights that are required from leaders – has become much more specific. In pivoting away from the hub-and-spoke model to what we may call ‘regional hubs,’ company boards want leaders to have a more intimate grasp of local supply chains, costs of doing business, sanctions and geopolitics. But in parallel, they must also have a firm handle on environmental, social and governance (ESG) procedures, the wider sustainability picture and diversity, equity and inclusion: agendas that may not be front of mind in those countries.

So, even though the ‘smarts’ are waking up to the importance of playing regionally, there’s still a major challenge around perfecting that combination. It may have an ordinary ring to it – but in fact, getting the right leaders in the right place at the right time is key to the health of the entire talent pool. Not to mention the profitability of regional locations.

Does that spell the end of leaders making international moves?

The question for multinationals is that if you’re appointing new people from a very different background and culture to your own, how do you affirm consensus and trust? So, recruiting homegrown talent in the era of the regional hub may be easier – but it probably won’t be the whole solution. It’s not only about cost.  Indeed, if you’re hiring in a very competitive market, you will be using specialist head-hunters, who will look for regionally skilled talent when they conduct their search.

A friend of mine who is Asian and female was recently appointed to a board in Europe – which, by itself, is a very attractive story in terms of board positioning. Her recruitment was managed by a firm of leading-edge consultants, and even though she’s a well-known figure in the international marketplace, who has worked for a number of high-profile, global brands, the due diligence required to confirm her for the role took two years.

Naturally, the company wants to make sure that when they make a board appointment, you are the best fit for what they need – particularly from a diversity perspective. So, they’re trying to strike a tricky balance between diversity on one hand and board strength and competence on the other – while also looking for someone who can bring to the table something unique. And I think wanting something unique is proving the trickiest challenge for boards at the moment.

Companies are spending an enormous amount of time looking at people’s backgrounds – which, thanks to social media, is easier than ever. So, there’s a wealth of information out there about challenging scenarios that leaders may have faced and overcome. But companies will also carry out copious due diligence via their head-hunters.

For my part, I sit on the board of Emirates Institute of Finance UAE, as a technical expert – and, as it happens, I’m the only non-Emirati on the team. My selection process was a quite a challenge. But they were very clear about what they wanted, and the role fitted rather well with my own interests, too. I had not worked extensively in the Middle East but they were interested in my experience in China and South East Asia. So, it’s a delicate art of matching.

How do you see the hiring challenge developing over the next two or three years?

It’s going to be driven by a set of hot-button agendas: ESG, sustainability, diversity, equity and inclusion – and how those issues come together to drive corporate governance and change.

But on a wider level, geopolitical tensions will also have a considerable influence. In Europe, the spat between the US and China is probably not much of an issue as regards supply chains. But it’s a really big deal in Asia as China is a major trading bloc and accounts for significant foreign direct investment. A new prime minister in Taiwan, for example, may well have broader impact on US-China relations and trade tariffs, regionally. 

In addition, there are factors that probably don’t hit the headlines at all in the West, such as the dispute between China and the Philippines over territory in the West Philippines Sea.

Those issues could culminate in extensive disruption to supply chains, at a significant cost to business, in a region where alternatives to trading with China are extremely limited. So, the need to respond to such challenges will help to decide and shape the type of leadership talent that companies look for.

Looking at sustainability, are organisations by and large seeking executives who are true believers in the whole ethos and not just paying lip service?

I would say that’s true. We saw some interesting developments in the wake of COP 28 – for example, banks in the UAE pledged to invest more than $270 billion in green finance over the next six years. And it’s certainly on the agenda in Malaysia, Singapore and Thailand – the government here in Malaysia has set targets it wants to meet by 2030. But that’s some time in the future – and, as we know, governments can change and things may can get derailed, or policies will change. In fact, in that regard, we’ve seen quite a lot of goalpost-moving in the UK.

Given the prevailing mood, though, organisations are definitely looking for leaders to have a strong level of understanding. However, it’s important to bear in mind that in a country like Malaysia, 98.5% of GDP stems from SMEs, where levels of understanding may be variable and there is generally a view that regulation drives adoption.

However, I would say that in Asia as a whole, regulation is much more welcomed than it is in Europe. The clarity provided by regulatory arrangements is broadly seen as cheaper and quicker than leaving everything to the market’s interpretations.

 

Voices from our community: Raymond Madden PhD is a global leadership development consultant, board-level coach and Professor of Management Practice and Ethics, Edinburgh Business School, at the Malaysia campus of Heriot Watt University. He is also author of The Business of Ethics (Islamic Banking and Finance Institute Malaysia, 2016) and more than 30 South East Asia-based MBA case studies