Leadership transformation powers growth for firms in Asia

As the center of economic gravity shifts to Asia, the region’s corporate leaders have come

under the spotlight—and under the gun.

Competition for talent is fierce, and good

senior management is hard to find. The demands placed on those managers,

meanwhile, are rapidly changing as Asia moves

up the value chain. Cultivating leaders that

can drive innovation is now critical to success.

Chief executives and human resource leaders from a diverse

group of companies, including Johnson & Johnson, Sony

Electronics, Aviva, SAP, Estée Lauder, Google and The Dow

Chemical Company, delved into these issues at Korn/Ferry

International’s annual Leadership Transformation conference,

held for the first time in Singapore in August. The conclusion:

pursuing ‘talent management by accident’ will prevent companies

from riding Asia’s trajectory. Asia is now the engine of global

growth and human resource executives play a critical role: they

must have a solid game plan in place to develop the human

capital needed to fuel their company’s growth.

“The economic shift to Asia has critical nuances for leaders,” said

Charles Tseng, President, Asia Pacific, for Korn/Ferry. “Companies

need leaders who have the capability to lead innovation, have

capability in people and culture, and who can really tap into the

consumer in Asia.”

November 2011

The economic shift towards

Asia created new demands for

corporate leaders. Cultivating

a sustainable pipeline of

learning agile talent that can

drive innovation and operate

in a global, multicultural

environment is crucial to

success in this region. Only by

making talent development

the top agenda will companies

be able to reap the enormous

opportunities.

A new breed of leaders are needed in Asia 2.0

For decades, Asia served as the workshop for the world and exports

drove growth; that was Asia 1.0. The nature and role of Asia’s economies

has now dramatically changed. Asia’s consumers now drive growth, a

role that has become pivotal as the rest of the world enters a second

slowdown in the wake of the global financial crisis. Asia has entered a

new growth model which Korn/Ferry calls Asia 2.0, and it’s marked by

several fundamental shifts: companies are now focusing squarely on

Asia’s increasingly powerful consumers, particularly as Western

consumers pare spending. R&D investment is also moving to Asia as

companies strive to create and tailor products for the region’s diverse

consumer base. With that comes a workforce shift: companies need

creative talent who can drive that innovation.

Asia’s new growth model requires a new breed of leaders. Today, they

need the skills to craft strategies to generate new growth in underserved

markets; they need to use disruptive innovation to create entirely new

categories of products and services; and they must put together high-

performance teams that can operate in a global, multicultural

environment.

Consider the challenges faced by The Dow Chemical Company, which is

investing heavily to scale up both its research and production

capabilities in the region. The company plans to grow Asia earnings to

the point where revenue growth is double the respective GDP growth

rate by 2015. That will represent more than a 60 percent jump in

revenue from Asia over a five-year period. First, they need to develop

their 2.0 talent to deliver to those mega ambitions.

2

Market shiftsAsia 1.0

(1985 – 2005) The impetus for change

Asia 2.0

(2006 – 2020)

Consumer shift Made in Asia - Reduced Western consumer

spending

- Emerging consumerism in Asia

Made for Asia

Innovation shift The world’s factory and

back office

- Shifting R&D investments

- Asia’s drive to innovate

- Asia’s need to move up the value

chain

The world’s

laboratory and

knowledge office

Jobs shift Cheap and productive

workforce

- Unemployment in the west

- Western companies Asianizing

- Asian companies globalizing

Creative and

innovative talent

Figure 1

Asia 2.0 – Asia’s new growth model

“Our leaders have strong competencies and are successful in their field

of expertise. What we want to do is elevate them to the next level,” said

Melissa Kee, Asia Pacific Director of talent management and diversity

and inclusion for The Dow Chemical Company. “We need more leaders

who can manage with vision and purpose, and who can step up, take

some risks and help define what the future will look like. That’s an area

where there still are some gaps.”

The hotel industry, meanwhile, offers a snapshot of the consumer shift.

In 1990, 75 percent of guests in high-end hotels in Asia were from out of

the region; today the opposite is true. Just 25 percent of hotel guests are

not from Asia. The number of hotel rooms, meanwhile, has grown

twelve-fold. Leaders must have the insight and expertise to tap into

consumers in Asia, said Patrick Imbardelli, CEO of the Pan Pacific Hotels

Group. “If we look at Asia 1.0 versus Asia 2.0, the biggest difference is

that it’s now about Asia, for Asia. It’s no longer about Asia for someone

else. We have to move the needle.”

That has a profound impact on the kinds of leaders and employees

companies need. Yesterday’s general manager needed technical and

functional talent to ensure the business ran smoothly. Today’s GM has

to be innovative and able to find new ways to distinguish the brand in

the minds of local consumers. Pan Pacific wants to decentralize its

leadership structure to put decisions closer to the customers—and needs

local talent to drive those connections. “We are very much focused on

acquiring and developing talent on a local basis, with a global mindset,”

said Imbardelli.

3

Figure 2

Asia 2.0 leadership skill sets

Asia is becoming the economic center of gravity in the world. This calls for distinct shifts in leadership skills. Korn/Ferry’s research

and experience with organizations in Asia Pacific have found the competencies below represent the desired list of leadership skills

to succeed in the Asia of today and tomorrow.

Customer

and market

cluster

Innovation

cluster

People and

culture

clusterLearning

agility

Creativity

Breakthrough thinking

Innovation management

Personal learning

Collaboration

Dealing with ambiguity

Emotional intelligence

Coaching/mentoring

Inspiring others

Cross-cultural savvy

Building effective teams

Influencing without authority

Managing vision and purpose

Silo-busting/integrating

Customer insight

Business acumen

Building relationships

Learning agile individuals are f lexible,

adaptable, and resourceful [and] are best

positioned to deal with the complexities of

making and marketing products for

consumers across Asia’s diverse,

fragmented and fast-growing economies.

4

That kind of talent is in short supply. In China, just one percent of

executives and one percent of managers are ready to succeed in Asia 2.0,

according to a 2010 Korn/Ferry study. In India, just eight percent of both

executives and managers have these skills. The gap stretches across the

entire spectrum, from leaders to front line staff. A resounding 97

percent of participants at the Leadership Transformation conference said

they are facing a talent shortage; 50 percent said it was ‘reasonably

likely’ that key talent would leave their organization over the next six

months.

HR executives have a role to play in bridging this talent gap, said

Korn/Ferry’s Tseng. They need to help their organization create a

program to foster talent and build capabilities from within; they need to

help create succession plans for key leaders

and managers—and put programs in place to

foster the kind of learning agility these

leaders need to succeed in Asia today.

Learning agile individuals are flexible,

adaptable, and resourceful; they excel at

absorbing information from their experiences

and using that to navigate unfamiliar

situations. People with this core skill are best

positioned to deal with the complexities of

making and marketing products for

consumers across Asia’s diverse, fragmented and fast-growing

economies. “Learning agility is the key to maximizing the changes going

on in Asia, and dealing with these new complexities,” added Tseng.

Figure 3

Factors of learning agility

Learning agility is a critical indicator of potential and should be used to differentiate talent.

Korn/Ferry’s new self-assessment viaEDGE™ provides scores on:

Learning

agility

> Mental agility—ability

to examine problems in

unique and unusual

ways

> Self-Awareness—

extent to which an

individual knows his or

her true strengths and

weaknesses

> People agility—skilled

communicator who can

work with diverse types of

people

> Change agility—likes to

experiment and comfortable

with change

> Results agility—delivers

results in challenging first-

time situations

Talent management in Asia:

the professional, portfolio approach

Winning companies don’t manage their talent by accident. They create

and deploy a professional talent management program to attract the

best employees, get the most out of the people they already have, and

nurture their high potential staff. All that adds up to a sustainable

pipeline of talent.

According to Pushp Gupta, Managing Principal with Korn/Ferry’s

leadership and talent consulting business for Asia Pacific, “talent

management has to be professional and it has to be integrated and

aligned across the entire organization.” It also needs to be anchored in

science. Assessment tools designed by industrial psychologists, like

Korn/Ferry’s viaEDGETM, can help HR professionals gauge the skills,

abilities, and learning agility of their talent pool. Armed with that data,

executives can create a “talent matrix” to rate performance and learning

agility, and create a portfolio of different types of talent that can be

deployed in different parts of the business.

An employee may be a subject expert, for example, but is not very

adaptable – yet still highly valuable. Another might be earmarked as a

budding talent with strong leadership potential, and needs to nurtured

and coached. A thorough assessment might discover that another

employee is in the wrong job entirely and could perform better

elsewhere, with the right training. Managers can use this matrix to

guide development programs to get the best out of each employee,

pinpoint high-potentials, and create a talent pipeline from within. “You

have to manage your talent like a portfolio,” said Gupta. “Different

types of talent will result in different kinds of yields for an organization.

Some represent a future dividend, and some a more present dividend.”

Taking a professional approach to talent management is quite critical in

places like China, where supply is short and competition is fierce. “It’s

the ultimate retention challenge,” said Lisa Alvarez-Calderon, Vice

President Human Resources for Janssen Asia Pacific, the

pharmaceuticals arm of Johnson & Johnson. “You can attract great

talent, but you can’t rest for a minute, thinking they are locked in once

they join you.”

5

“You have to manage

your talent like a

portfolio. Different

types of talent will

result in different

kinds of yields for an

organization. Some

represent a future

dividend, and some a

more present

dividend.”

Pushp GuptaManaging Principal, Korn/Ferry International

6

Janssen worked with a HR consulting firm in Singapore to create a talent

management program to address this trend. One prong was to promote

learning and career development as part of its ‘employer brand.’ This

also serves to counter the growing trend of Chinese employees turning

to local private companies because of perceived better career prospects—

particularly in the wake of the 2008 financial crisis, which hit many

multinationals hard. MNCs, however, are widely viewed as offering

better development programs, an area that global companies need to

promote and make good on. Johnson & Johnson took steps to raise its

profile as an employer of choice through university and MBA recruiting,

highlighting the career and training potential, according to Alvarez-

Calderon.

Research has shown that 10 percent of development comes through

training, 20 percent through coaching, and 70 percent from experience.

Johnson & Johnson has a strong e-university platform and coursework

model in place to take care of the training; the next step in China was to

work with front line managers to foster coaching and mentoring skills.

“We believe that focusing on the front line manager is key to making

this 10-20-70 formula work. It’s about the interaction, the coaching, and

the feedback that happens after the skill building is done. We are

spending a lot of time on this,” said Alvarez-Calderon.

The company also put a robust assessment program in place to map out

employee’s competencies and skills. Janssen then created rotational

assignments for high-potential employees to ensure they had a chance

to develop and grow. “Transparency and visibility of career opportunity

is a critical part of how we build our team at J&J,” Alvarez-Calderon

added.

Ignoring high-potential talent development is particularly risky in Asia

right now; not only is there competition for talent, but the global

slowdown will push individuals into the most secure jobs with the best

future prospects.

Putting transformation into practice

A core part of talent management is leadership development—a task

that is particularly challenging in Asia. Now, more than ever, companies

need to make sure they have a pipeline of local leaders who can connect

with this critical market—and are committed to the company. This is

not easy to manage: many multinationals continue to be plagued by the

ongoing economic turmoil in Europe and the U.S. and companies need a

good game plan to keep leaders motivated during these volatile times.

Retaining talent

According to attendees at the Leadership

Transformation conference, the top factors

that worked best in engaging and retaining

key talent in their organizations were:

> Compensation and benefits

> Development opportunities

> Employer brand

> Great work opportunities

> Quality of leadership

> Recognition

Attendees’ biggest focus in the areas of

engaging and retaining talent were:

> Career pathing

> Coaching

> Development opportunities

> Employee engagement

> Employer branding

> Employer value proposition

> Greater collaboration

> Internal communication

> Leadership effectiveness

> Onboarding and mentoring

> On the job stretch

> Succession planning

Surveys find action learning, succession planning

among the best leadership development practices

Every company has what it takes to develop world-class leaders—they just need to know how to tap the

resources and knowledge that already exist within, according to the findings of surveys Korn/Ferry conducted

during the Leadership Transformation conference in Singapore. Action learning projects and one-to-one

coaching are the two most impactful leadership development tools, according to more than eighty HR

executives and CEOs who attended the conference (Figure 4, below). Leaders who act as teachers also have a

high impact on the development curve.

When asked to list the best practices in leadership development, over 80 percent of conference participants

ranked succession planning as number one. Putting a coaching and mentoring system in place was the second

best practice, followed by identifying high-potential employees. Assessments play a big role in helping

executives identify, and nurture, the leaders of tomorrow. A quarter of conference participants cited 360

degree feedback as their assessment tool of choice (Figure 5, below). Psychometric personality tests and self-

reports ranked second and third.

HR executives widely agreed on a list of five core competencies they need in order to win support for talent

management and leadership development programs: an effective HR change-agent is one who understands the

business, communicates effectively, inspires others and acts with honor and character. HR executives who fail

to build a team, or are unable to adapt to differences, are most likely to fail. Focusing a talent management

program around the business process is critical to gaining that support, survey respondents said.

25%

18%17% 17%

13%

7%7%

40%

20%

0%

25%

21%

18%

11%

8%

6%4%

3%

40%

20%

0%

Percentage of respondents Percentage of respondents

Figure 4

Most impactful leadership development as ranked by

Leadership Transformation conference attendees

Figure 5

Preferred assessments as ranked by Leadership

Transformation conference attendees

7

Conference survey results

Dow Chemical, for one, had to work hard on this after it acquired Rohm

and Haas in 2009, making it the world’s leading specialties chemicals

and advanced materials company. The deal took place during the worst

of the financial crisis and the HR team had to figure out how to help

manage the integration, shed staff to achieve cost synergies, and bring

the remaining staff and managers on board at the same time. Against

this backdrop, the company moved quickly to assess whether it had the

right leadership talent in the place to grow the business—was there

enough ‘2.0-ready’ talent in the pipeline to achieve its Asia growth

goals?

“The question was: how do we assess them, and how do we create that

self-awareness?” said Dow Chemical’s Kee. “It is not about telling a

senior leader what to do; it is about them wanting to make that

change.” So they embarked on an assessment of thirty existing and

potential general managers which Korn/Ferry designed to benchmark a

broad range of competencies and leadership skills.

“We need a strong general manager capability: they need to be experts

in their field, grow the business, lead with vision and passion, and have

the ability to manage a team and motivate them, and drive collaboration

at the same time,” said Kee. The company also wanted to increase the

number of Asian managers who can better connect with local markets.

Dow Chemical is now in the process of creating a ‘GM development

curriculum’ to accelerate the learning of this core group. “Because they

are a very senior targeted group, we recognize that their development

needs may differ. Each one has different gaps. Our plan is to focus on

their unique, individual development needs,” Kee added.

In step with the leadership plan, the company also pinpointed a slate of

high-potential staff and put a career development plan in place for each.

A number of high-potentials are sent to head office in the U.S. to run

projects and moved periodically around the region to build experience

and visibility. Kee calls it “purposeful development intervention,” and

this—more than pay—helps attract and retain high-caliber staff in Asia

today.

8

Figure 6

Dow Chemical’s general manager capability

General management capability is a strong play to Dow’s future success.

Build leadership capabilities and create development opportunities for existing and future General Managers.

Benchmark business and country leaders against industry best-in-class

Customize development curriculum to meet individual leader's improvement needs.

The program is still a work in progress, but efforts have paid off. Today,

two-thirds of the top leadership team in Asia Pacific consist of local

talent, and more than 90 percent of critical roles have local talent who is

ready now, or will be in two years, to step up to the plate. Two-thirds of

the high-potentials, meanwhile, are slated into that succession plan.

Dow is also putting a company-wide leadership effectiveness survey into

play, which will ultimately hold managers accountable for developing

their leadership skills. “We’re two years into our transformational

journey, but we’re starting to see success. I’m already hearing leaders

say ‘OK, I have to take this on board. The company is serious,’” said Kee.

Two years ago, Estée Lauder Companies in APAC, gripped by the need to

prepare the next generation of leaders, and to cope with the growth

strategy of the region, created a leadership development program that

was so successful that it’s being taken to other regions by the company.

"With a challenging need to raise the skills of our leaders, and build a

strong pool of ready successors for the sustainability of the organization,

there is a real sense of urgency," said Figin Seng, regional director of

learning and talent development, APAC, for Estée Lauder Companies.

“We can buy capabilities and borrow people from other regions and New

York, but this isn’t sustainable. In two to three years’ time, we may need

to replace a number of key leaders. We need to build from within.”

Estée Lauder Companies, together with Korn/Ferry, created an intensive

nine-month transformative leadership development program that its

APAC future leadership team—including all the brand general

managers, heads of departments and unit directors—must go through.

So far, 60 of 180 senior managers have completed the course, with

another 80 embarking on the learning journey this fiscal year.

It's a steep investment: it costs $15,000 to $18,000 per person—including

design and course fee, travel and accommodation, project expenses—but

it’s already paying off. Three of these leaders have already progressed to

more senior roles on the back of the program, and several role rotations

have taken place to cross-pollinate top talent. “It’s a very tough

journey,” according to Estée Lauder’s Seng. “But we’ve created interest,

buy-in, and thirst. People want to get involved now.”

While one of the core challenges companies in Asia face is creating an

Asian leadership team with a truly global outlook and skillset, another

challenge—particularly for Japanese companies—is globalizing a

Japanese-dominated team. Sony Electronics, for one, has worked hard to

diversify its senior management team in the Asia, Middle East and Africa

region.

“We can buy capabilities

and borrow people

from other regions and

New York, but this isn’t

sustainable. In two to

three years’ time, we

may need to replace a

number of key leaders.

We need to build from

within.”

Figin SengRegional director of learning and talent

development, APAC

Estée Lauder Companies

9

The innovation challenge in Asia

The most valued leadership qualities in Asia

today are creativity and the ability to drive

innovation. These are the big differentiators

for many organizations in Asia, and

executives are looking to their human

resources leaders for help on this,

according to Jane Stevenson, Vice

Chairman, Board & CEO Services at

Korn/Ferry. Different types of innovation

require different types of leaders, and a

company also needs to pursue different

types of innovation at the same time.

There are four core types of innovation.

Transformational innovations—like the

Internet—that are big-risk, disruptive and

change society as we know it. Category

innovations cascade from that: eBay, for

example, created a new online auction

category that leveraged the Internet.

Marketplace innovations could include new

packaging or ingredients that give an

existing product a fresh appeal; and

operational innovation is about doing things

faster, better and cheaper.

“Companies have largely focused on

operational and marketplace innovations in

Asia for years. Now they need to create

new products and categories—and do it

faster, cheaper and better too,” said

Stevenson. Executives also need to

understand which type of leader can best

push these different levers. An inventor

would make a good transformational

leader—but might not be the kind of

consumer-focused, team-oriented

marketplace innovator a company actually

needs to promote growth in a place like

India, or create new categories in China.

HR, meanwhile, can support specific

types of innovation by moving the right

people across divisions, and help

managers create cross-functional teams

of people with the right skillset. It all

comes back to assessing, developing

and deploying your talent pool in the

most effective way.

“It’s about matching a portfolio of talent

to a portfolio of innovation. Just as you

would manage a portfolio of

investments, you wouldn’t just have all

bonds. You have a mix—that’s how you

should think about this,” added

Stevenson. “The more we have people

focused on doing the right thing, the

more we will be successful.”

10

Sony’s future goal: to have a broad mix of tier-one global senior

management, from any nationality, running individual markets and

regions. “At that point, we will be a truly global company with a

Japanese heritage,” said Virendra Shelar, head of recruitment for Sony

AMEA. To do that, the company has invested time and effort into

identifying the top five percent of high-potential employees within the

region, and deploying that cadre into roles and projects to develop their

leadership capabilities.

Taking leaders out of their comfort zone and putting them into

situations where they have to innovate to adapt is a critical part of an

integrated leadership development program, according to Jacqueline

Gillespie, Managing Principal with Korn/Ferry leadership and talent

consulting. “We really have to immerse and align leaders in a future

world—they need to be immersed in the unfamiliar and pushed a little

bit.” Executives learn 25 percent of their skills through hardship

situations, yet most companies invest nothing in hardship support, and

invest the bulk—80 percent—on training, with just 10 percent on

deployment and 10 percent on coaching.

Leadership development needs to be a lot more strategic—and Asia

offers a competitive advantage to companies that want to pursue this.

Learning experiences are everywhere in the fast-moving growth market:

leading a cross cultural project team, for example, or managing a crisis

provides future leaders these critical must-have skills. “In Asia, we have

such an opportunity to develop leaders. It’s not hard to find a situation

to test a leader: learning experiences are everywhere,” said Gillespie.

The road ahead

The opportunities in Asia are extremely lucrative from a marketplace

perspective. To make the most of them, organizations need to define

what success looks like, manage talent, develop leaders and foster

innovation. HR practitioners are expected to be at the forefront of this

agenda. They need to up-skill themselves, their teams, and then deliver

fast. All this has to be done professionally. There is no room for

accidental talent management and development.

The future of talent management in Asia is a bright one...but only for

the most prepared.

11

“In Asia, we have such

an opportunity to

develop leaders. It’s

not hard to find a

situation to test a

leader: learning

experiences are

everywhere.”

Jacqueline GillespieManaging Principal, Korn/Ferry International

12

About the Korn/Ferry Institute

The Korn/Ferry Institute generates forward-thinking research and

viewpoints that illuminate how talent advances business strategy. Since

its founding in 2008, the institute has published scores of articles,

studies and books that explore global best practices in organizational

leadership and human capital development.

About Korn/Ferry International Asia Pacific

Korn/Ferry International, with a presence throughout the Americas, Asia

Pacific, Europe, the Middle East and Africa, is a premier global provider

of talent management solutions. Korn/Ferry was the first major global

executive search firm to operate in Asia Pacific when it opened its doors

in Tokyo in 1973 and today has 18 offices in key business centers

throughout the region. Based in Los Angeles, the firm delivers an array

of solutions that help clients to attract, deploy, develop and reward their

talent.

Visit www.kornferry.com for more information on the Korn/Ferry

International family of companies, and www.kornferryinstitute.com for

thought leadership, intellectual property and research.

About the Leadership Transformation conference

Korn/Ferry’s Leadership Transformation conferences and events present

the Firm’s research and viewpoints on how talent advances business

strategy. Korn/Ferry hosted the 2011 conference series in Singapore and

Scottsdale, Arizona. The first 2012 conference will be in Madrid, Spain.

Visit http://leadershiptransformationconference.com for more

information.

© 2011 The Korn/Ferry Institute