As Chinese, Indian and other Asian companies start playing on the global stage, it is timely to look at some key success factors for Asian leadership. What are the key competencies of Western and Asian leaders in the global arena? Are there areas for improvement? Hay Group looked at a decade’s worth of data on Fortune’s World’s Most Admired Companies1, to identify the traits of globally successful Asian CEOs.
KEY SUCCESS FACTORS OF CHINESE CEOS2
Social responsibility frequently features as a key success factor for Chinese leaders. At its core, social responsibility, as seen in the best Chinese CEOs, involves conducting business in a manner designed to improve the business environment, particularly in one’s own area or industry.
The Leader as the Creator of Friendships
Creating friendships is also crucial to the emergence of Hot Spots. Our research on cooperation has shown the creation of a culture of cooperation begins with the quality and depth of relationships the members of the leadership team have with each other. Poor-quality relationships have a profoundly negative effect on the capacity of the company to thrive. But more than this, they send out strong messages to the other members of the organisation about what is legitimate and what is not.
Sometimes, these friendships require real courage on the part of leaders. While the advertising agency OgilvyOne had been a friendly place under the direction of its founder, David Ogilvy, its original entrepreneurial culture had, by 1992, ossified into highly autonomous factions led by barons who were more interested in protecting their turf than in building the business. “The London office was horrible,” a senior manager told us, “with constant backbiting and a lot of bad blood.”
The change started with Charlotte Beers, the then CEO of Ogilvy, who invited all the business leaders to a two-day off-site meeting. Breaking with the norms, she began the conversation by asking direct questions: “How do we feel about one another? Why can’t we work together? Do we recognise what that is doing to our clients?” That meeting was the turning point. Initially, the discussions were very difficult. “We simply did not know how to talk openly to each other,” the same senior manager told us. “We were so used to being defensive and polite. It took two years and eight meetings—and some changes in the cast of characters—before we learned to deal with emotions and feelings, to be authentic. It’s only through that process that we learned the power of friendship.”
Complementary to social responsibility, the seeking of harmony in business relations is another competency of Chinese leaders. They are often faced with complex, multi-party negotiations involving other businesses and different parts of the local and/or national government—situations that demand effective negotiation skills. The best Chinese CEOs display a distinctive and effective way of negotiating these complex environments. They do so in such a way as to create a harmonious, mutually harmony beneficial result in which all parties are at least reasonably satisfied with the result.
Chinese CEOs have a marked appetite for continuous self-improvement. Hence, Chinese business leaders are more likely to request feedback and advice for improvement in their own skills and behaviour as much as in their business to the point of holding “self-criticism” sessions.
AREAS FOR IMPROVEMENT
The Chinese leadership style is predominantly paternalistic in nature. Chinese CEOs are less likely to give rationales for decisions and more inclined to issue directives. At the same time, Chinese leaders express a sense of caring for their people. They also often demonstrate concern for the education and development of their employees through “coaching”. Chinese leaders are much less likely to manifest a “visionary” style of leadership—involving the provision of a clear overall vision, direction and explanation. Nor do Chinese leaders much seek to involve their team in decision-making. This paternalistic style is not the most effective possible style for Chinese employees. The question of leadership styles is of particular importance as many Chinese companies pursue global expansion, which will mean leading international teams. Widening their range of leadership styles can help the Chinese leaders domestically and globally.
The rapidly growing Chinese economy is testament to the energy and high achievement drive of Chinese CEOs, as demonstrated, for example, in the ability of Chinese businesses to replicate processes and operations, adapting them in order to deliver improved efficiency and cost. However, in order to compete abroad, they can no longer rely on their highly developed skills as adaptors. In order to compete, they must generate value and/or differentiate—they must innovate. China’s struggle to innovate has been widely noted. Until now, with plenty of revenue to go around in sectors largely owned and controlled by government, profits have been generated simply through nurturing contacts and acquiring information as opposed to creatively responding to and serving markets. In addition, Chinese CEOs are less likely to seek information to shape that action than their Western or Indian counterparts. The seeking of new information, for example about social trends, new technologies, shifts in consumer trends, is crucial to the process of innovation.
KEY SUCCESS FACTORS OF INDIAN CEOS3
Like their Chinese counterparts, Indian leaders also rank high on their sense of social responsibility, showing a striking, single-minded focus on growth, not just in relation to their own company but to their nation as well. Their willingness to take risks is founded on their concern for the development of their country.
Adaptive thinking & drive
Overall, when compared with Hay Group's competency database of the best international CEOs, outstanding Indian leaders show higher levels of adaptive thinking (i.e., adapting innovative methods and technology to one's needs) and entrepreneurial drive, but a lower level of excellence in execution.
Areas for Improvement Two factors inhibit the ability of CEOs to execute: stakeholder management and interpersonal understanding. At a time when three of the world's most successful companies are led by Indians—Arcelor Mittal by L.N. Mittal, Vodafone by Arun Sarin and PepsiCo by Indra Nooyi—this might appear to be a paradox. However, academics, CEOs, public officials and media professionals that Hay group interviewed were almost unanimous that Indian leaders were characterised by "great thinking but little execution". Their views reflect the experience of organisations who find their investments in India take longer than expected to pay back investments.
Our research showed that Indian leaders spend a disproportionate amount of their time coping with regulation and governance issues as well as dealing with government, quasi-government organisations and non-governmental organisations. While public sector organisations suffer this more than those in the private sector, even private-sector companies experience significantly more "stakeholder management" issues compared with their overseas peers.
In contrast, not one of international and Chinese CEOs had anything to say about their difficulties with government and regulators; whereas 50% of participants in our India study cited this as major problem.
IQ versus EQ
The social and business context in India sets a great deal of store by IQ. The Indian system is set up to deliver this: witness, for example, the rigorous entry standards for IITs and IIMs (the India Institutes of Technology and of Management).
As a result, outstanding Indian CEOs excel in analytic and strategic thinking. However, Indian leaders' excellence in intelligence and innovation is often matched by shortcomings in "tuning in" to others, i.e., emotional intelligence.
Seen as a foundational competency for the contemporary business leader, interpersonal understanding is consistently displayed in 75% of behavioural interviews with outstanding CEOs worldwide. Yet only 12% of outstanding Indian business leaders demonstrated this ability.
While a core group of Indian leaders has been exceptionally successful, our study suggests that as organisations become more complex and the competitive landscape more threatening, Indian leaders will need to balance their formidable intellectual and entrepreneurial skills with more interpersonal skills.
ASIAN LEADERS: WHAT'S NEXT?
There is no doubt that the achievement drive of Indian, Chinese and indeed Asian CEOs have fuelled to the meteoritic growth of their companies. Uniquely, they also have a strong sense of social responsibility. Can Asian leaders step up and combine these two aspects to help nurture the next generation of socially-conscious leaders for their companies and society? Would this be the way forward for Asian leaders?
ABOUT THE AUTHOR
Israel Berman is the Asia Managing Director of Hay Group and is also concurrently the Global Managing Director for Hay Group’s Building Effective Organizations Practice. A business veteran with over 23 years of experience, he brings in-depth global experience, including hands-on leadership of international teams to work on mergers and acquisitions, strategy implementation, and organisational re-structuring.
Madeline Dessing is the Asia Regional Director of Leadership and Talent Practice, Hay Group. She has particular expertise in leadership development, talent management, executive assessment, performance management and job design and evaluation across multiple industry sectors.
- “In a league of their own: How the world’s aost admired stay ahead of the game”, August 2007, Hay Group.
- “East meets West: Combining two great business cultures”, March 2007, Hay Group
- Spencer, Signe M., et al, The Indian CEO: A portrait of excellence ( New Delhi: Response Books 2007).