Towards a leadership model that incorporates the best of East and West

1.
East
meets
west
The new face of capitalism
Towards a leadership model that incorporates the best of East and West >>
Globalization has altered competitive landscapes across The recent global economic crisis is an example of leadership
markets, restructured supply chains across industries and failure. The US sub-prime crisis and the subsequent global
redefined skill sets required of leaders to succeed. This financial meltdown exposed not only the gaps and weaknesses
interconnected world has also called for a deeper appreciation in the supervision and regulation of financial institutions,
of cross-cultural complexities and willingness to empathize, but also the bankruptcy of Western leadership
not only with differences in local business contexts, but also principles that emphasized short-term gains at the expense of
with different social values and beliefs. long-term value.
Yet, the understanding of such differences has not been There is a global leadership vacuum, which Asia can do a lot
proportionally translated into actionable advice for leaders. to fill. Meet the new face of capitalism, which combines the
What are the specific behaviors that can help them be more best from both Western and Asian practices and which
effective? unifies individual performance with the long-term good of
the team, company and society.
©2009 Hay Group. All rights reserved
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2. East meets West: The new face of capitalism
Leadership: A cross-cultural perspective
Make way for the rise of Asia. The explosive growth of China, India and
developing economies in Asia means that the demand for leaders will
continue to rise, regardless of economic climate. As Asian companies
become more active on the global stage, it is timely to look at some key
success factors for Asian and Global leadership. What does it take to
deliver sterling performance year after year? What are the key
competencies of Western and Asian leaders in the global arena? What
can they learn from each other?
A Hay Group study of successful top CEOs in Western executives transplanted into China,
India and China uncovered the unique skills where relationships seem to count for more
The new face of that they have developed to manage the unique than legalese.
capitalisam, which blends business situation that they confront.
values from different
Figure 1 shows the most common situations Leading for global effectiveness
cultural and socio-political which leaders in India, China and the West
backgrounds, demands a The new face of capitalism, which blends values
face. Indian CEOs were focused on getting
from different cultural and socio-political back-
different level of permission from the government and launching
grounds, demands a different level of
competencies among something new; Chinese CEOs were concerned
competencies among leaders who desire to be
leaders who desire to be with raising or investing capital; while Western
globally effective. From our study, a number
CEOs were more focused on strategic talent
globally effective. of key leadership competencies most associated
management efforts like coaching, deployment
with effectiveness among Chinese and Indian
and recruiting.
CEOs were observed:
Hay Group’s research shows that Indian CEOs
• Social responsibility and interpersonal
are excellent at managing the complex web of
approach
external relations, especially with the govern-
ment and media, which is crucial to the success At its core, social responsibility involves
of business in India. conducting business in a manner designed to
improve society in general and one’s own
In China, where regulations are often
industry in particular. In India, socially
uncertain and conflicting, leaders were found to
responsible competencies were most effective in
rely on personal relationships and networking
turbulent environments including turnarounds
for success, rather than the terms and
and start-ups, both of which required high
conditions found in legal contracts. This is
levels of adaptive thinking and excellence in
often the point of culture shock for many
execution. Indian CEOs demonstrated strong
Figure 1:
Most common Most Common Leadership Situations
leadership situations
faced by leaders in India China West
India, China and the Getting permissions from Raising or investing capital Talent (coaching, deploying,
West. government (23%) (32%) recruiting) (16%)
Launching something new; Understanding the market
Turnarounds (12%)
innovations (23%) (13%)
Improving an established Reorganizing the business
Turnarounds (21%)
business (11%) (9%)
Improving an established Negotiations and influencing
Mergers (10%)
business (16%) others (9%)
©2009 Hay Group. All rights reserved

3.
Figure 2:
Most characteristic Most characteristic interpersonal approaches
interpersonal approaches India China West
used by leaders in India,
China and the West
Influence for mutual benefit
• Subtle influence strategies Building organizational
Inner Strength to get the desired out- capability
• Taking business risks based come; but also to preserve • Aligning disciplines,
the relationship and systems & structure
on what is good for India
dignity of the counterpart. strategy
• Emotional maturity: inner
resources to draw on Social responsibility Developing others
during difficult times • Business ethics: supporting • Coaching and mentoring
fair practices & a healthy others, often one-on-one
industry
entrepreneurial drives and a single-minded support of the same situation – often the one
focus on growth that not only related to their that the leader sees as best.
companies, but also to their country. Their
willingness to take risks is based on altruistic Considering the lack of reliable business
concerns for national welfare, tailoring frameworks in China, it was no surprise that
affordable products, services and rural seeking harmony was the Chinese leader’s
initiatives targeted at rural populations. way of working with evolving legal and
Above all else, the Indians exhibited a regulatory systems. In fact, influencing for
distinctive “inner strength” in transcending mutual benefit was their basis for guanxi –
oneself, even if it meant settling for lower the popular concept of relationship building
margins and growth targets for the business. in China – so that no party “loses face” or is
seen as compromised in a business situation.
Likewise in China, the concept of social
responsibility was evident, as can be seen For executives schooled in Western business
from the philanthropic practices of Chinese principles, a shift in mindset may be required
leaders who endow schools, hospitals and to view the business landscape from an Asian
other social projects as they find success (and perspective; that is, to recognize business as a
not at the tail-end of their careers). This social good.
expression of ethical values both internally Hence, a Western-style CEO who is
and externally, and tremendous self-disci- proposing a joint venture project or a market
pline in business practices has its roots in entry mode in either China or India might
Confucianism. increase his chances of success by emphasiz-
Given the perception that Chinese businesses ing how the project will benefit the country
tend to be corrupt, it may be surprising to or community. Western-style leaders would
some that social responsibility emerged as a also do well to observe how Chinese CEOs
key success factor among Chinese leaders. craft mutually satisfactory options to create
Evidently, in the face of emerging laws and long-term working relationships (Figure 2).
evolving government policies, Chinese CEOs • Business Thinking
too, have found a way to deal with difficult
leadership situations by searching for social In terms of business thinking (Figure 3),
meaning and contribution to society outside Indian CEOs were highly adaptive in their
monetary rewards. thought processes and able to quickly relate
changing technologies or business models to
Complementing social responsibility in meeting India’s needs.
China is the ability to seek harmony in
business relations – a highly distinctive Chinese CEOs demonstrated a business
competency among Chinese leaders. It perspective that manifests in understand-
involves negotiation in a way that influences ing and predicting the developments of the
for mutual benefit. Chinese CEOs would industry as well as in acting to help shape
construct and present several alternatives industry regulations.
in a way that eventually brings everyone in
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4. East meets West: The new face of capitalism
Western CEOs, on the other hand, showed Yet, when we compared the specific dimensions
strategic insights, which helps give strategic for employee engagement and enablement (a
direction based on understanding the market measurement of organizational support for
and competitors as well as market trends and success) between Eastern and Western leaders,
changes in paradigm. Asian organizations lag behind on all
dimensions, compared to their Western
• Responding to contexts counterparts (Figure 5).
With regards to distinctive business contexts What is happening here? In the era of rapid
(Figure 4), networking to obtain information growth, Asian CEOs have been focusing so
In the era of rapid growth, was the Indian CEO’s response to the highly much on managing external issues such as
Asian CEOs have been regulated business environment. Indian capitalizing on market opportunities, expan-
focusing so much on leaders network in a bold, targeted way which is sion into new businesses, and securing the
managing external issues focused effectively on tackling the specific very necessary financial capital, that they have
that they have overlooked challenges that they and their organizations overlooked the importance of building internal
face. organizational strengths for future sustainability
the importance of build-
ing internal organizational Self-criticism, on the other hand, was an and continued success.
strengths for future attribute nurtured in the Chinese business It is akin to growing a bigger body without
sustainability and context, fostering the willingness not only to building the corresponding muscle strength.
reflect and learn from experience, but also to
continued success
admit to mistakes. This competency seems to be Given the economic outlook, there is now
based on an awareness of their own greater need for Asian leaders to look at their
behavioral patterns, attitudes, moods and organization’s institutional strength and
limitations coupled with a desire to learn. intangible capital. As discussed in the previous
section, leaders in Asia tend to be highly
When Chinese CEOs took action towards self- entrepreneurial and less articulate when it
improvement and inspire others to do the same, comes engaging employees. They tend to
better business results ensued. Given the pres- communicate their visions and strategies less
sures of today’s fast-paced world, the Chinese than their Western colleagues. In other words,
leader’s competency for reflection and self- Asian leaders need to step up on employee
criticism seems almost surreal. It contrasts engagement by investing more time
sharply with the Western approach, where explaining and “selling” their visions and goals
interpersonal understanding would be matched to their employees.
with concerns for managing people.
Why is engagement so important? While CEOs
make promises about what their organization
Leading engagement & enablement can deliver to customers, shareholders and other
stakeholders, it is the employees who keep these
According to Hay Group’s extensive employee promises on their behalf.
research, leadership is very often the top driver
of employee engagement, that is, how much an Interestingly, Hay Group Insight – the
employee is committed to the organization and, employee and customer survey arm of Hay
hence the corresponding amount of Group – also found that 29 per cent of Asian
discretionary effort he is willing to put in. employees or close to one-third of the Asian
Figure 3:
Most characteristic
thinking exhibited by Most characteristic thinking
leaders India China West
Adaptive thinking Business perspective Strategic insight
• Changing technologies,
• Understanding and • Strategic direction based
methods, or business
predicting the develop- on understanding markets
models to meet India’s
ments of the industry & and competitors, market
unmet needs (usually the
acting to shape the regula- trends and changes in
lower half of the economic
tions of the industry paradigms
pyramid)
©2009 Hay Group. All rights reserved

5.
Figure 4:
Leadership
characteristics in Most characteristic responses to business environment
responding to business
environment India China West
Networking to obtain Interpersonal
Self-criticism
information understanding
• Continual, and often • Understanding
• Seeking practical public, self examination individuals: their
information by directly to find and admit perspectives, concerns,
asking people, often mistakes, areas for strengths, develop-
people with whom the growth, ways to do mental needs, in order
CEO had no prior contact better, learn, and to coach, influence or
match them to jobs
improve
Figure 5:
A comparison of
employee engagement Engagement drivers Asia West
and enablement bench-
Clear and promising direction 76% 77%
marks in Asia versus
the West (Source: Hay
Quality & customer focus 72% 77%
Group Insight, 2009) Employee Engagement
Confidence in leaders 61% 67% Asia = 68%
(West = 74%)
Respect and recognition 60% 65%
Development opportunities 55% 60%
Pay and benefits 40% 53%
Employee
Effectiveness
Enablement drivers Asia West
Collaboration 76% 77%
Performance management 73% 77% Employee Enablement
Asia = 66%
Authority and empowerment 72% 76%
(West = 71%)
Resources 61% 63%
Work, structure & process 54% 55%
Training 40% 54%
The figure above depicts a model of employee effectiveness that incorporates employee
engagement and enablement. Our research confirms that employee engagement and
enablement are distinct outcomes that are influenced by different factors. The drivers that greatly
impact engagement are best influenced at the strategic level. On the other hand, the enablement
drivers can effectively empower the managers to act upon the results at the local level.
Accordingly, leaders seeking to improve the effectiveness of their teams need to determine
whether their performance issues are the result of a lack of engagement, a lack of support or
both. Depending on the answer, the next course of action will differ.
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6. East meets West: The new face of capitalism
workforce were frustrated in their jobs – a figure (information, technology, tools and equipment,
that surpasses that of the United Kingdom and budgets). They are also able to focus on
(Figure 6). their most important tasks without having to
negotiate obstacles in the form of non-essential
Only 16 per cent of Asian workers see tasks or red tape.
Imagine, Asia achieved its themselves as being effective in their jobs –
phenomenal growth with implying that four out of five employees in a In other words, we need to not only motivate
only 16 per cent of its work- company are potentially not productive at all. our employees but also enable them to
force feeling effective. Can Imagine, Asia achieved its phenomenal growth channel their extra efforts productively.
with only 16 per cent of its workforce feeling Engaged employees need to have confidence
you imagine how much
effective. Can you imagine how much more that the organization is not setting them up to
more could have been could have been achieved if this rate was fail but “enabling” them to succeed by doing all
achieved if this rate was doubled? it can to promote their success. No one enjoys
doubled? the experience of apologizing to our clients that
This does not augur well for Asian companies in the “system” does not allow us to entertain their
the wake of the economic recovery. This means extraordinary requests.
that, about four out of every five employees in
your company right now could be more What is the bottom-line impact of such an
productive. In the current recession, approach? Our research shows that companies
organizations cannot afford to have so many that engage and enable their employees out-
employees as passengers. performed their industry peers on both revenue
growth and profitability.
However, engagement alone is not enough. To
get the most from employees, leaders must also In terms of growth, companies in the top
ensure that organizational systems and work quartile on both engagement and enablement
environments support individual and achieved revenue growth of 4.5 times,
organizational effectiveness. compared to their peers in the bottom quartile.
In terms of profitability, companies in the top
In short, employee enablement has two key quartile also exceeded industry averages in terms
components. The first requires that employees of five-year Return on Assets, Return on Invest-
be effectively matched to their positions, so that ment and Return on Equity by 40 per cent to
their skills and abilities are effectively put to 60 per cent. This enhanced level of performance
good use. is not to be sneered at, especially during the
The second is creating a supportive environment current economic recession.
such that they facilitate, rather than hinder, During the economic boom, Asian firms
individual productivity. In a supportive enjoyed the luxury of importing foreign talent
environment, employees have the essential to manage rapid expansion. However, a reliance
resources required to get the job done
Figure 6:
A comparison of
employee engagement Employee engagement
and enablement in
Asia versus the West.
(Source: Hay Group Low High
Insight, 2009)
Detached Effective
Employee enablement
High West = 28% West = 39%
Asia = 35% Asia = 16%
Ineffective Frustrated
Low West = 12% West = 21%
Asia = 20% Asia = 29%
©2009 Hay Group. All rights reserved

7.
on foreign talent has caused Asian leaders to the overhaul ten years ago following the Asian
neglect their vital role in grooming internal financial crisis. Reversing their long-held ethos
talent for future leadership. of free market capitalism, there lies a lesson for
Western leaders in Asian altruistic concepts of
If this phenomenon persists, Asian firms will
business philosophy that brings together greater
increasingly have employees who are largely social justice, equitable principles and stronger
detached, frustrated and ineffective. Over the societal values into business management.
past several years, Asian leaders have gotten
away with “if we don’t have them, let’s buy Meanwhile, the global war for talent has made it
them” attitude during the good times. This is critical for Asian economies to double up efforts
simply not sustainable in the long run. to develop leaders to match economic growth
trajectories and to bridge deficits left by the
It is time for Asian leaders to take a hard look at “brain drain” to the West. There is much that
their internal processes, remove unnecessary red Asia can learn from the West in terms of
tape, and provide adequate resources to set their business and talent management, particularly in
employees up for success. In this way, employee the areas of employee engagement and enable-
skills and abilities can be put to good use.
ment.
With international alliances and multicultural
Rewarding for long-term value and teams on the rise, a global leadership vacuum
needs to be filled. Evidence suggests that
sustainable performance
Western leaders should learn from the Asian
While it is important during a downturn to approach to building stronger competencies
engage and enable people – especially highly
based on notions of social responsibility and the
talented ones, recent controversies over Western spiritual “inner strength”; and for Asian leaders
compensation practices have shed interest- to nurture an altruism that unifies individual
ing insights for discussion. Although pay and performance with the long-term good of the
benefits accounted for the largest gap in our team, company and society.
study on employee engagement and enable-
ment, rewarding employees based on short-term
achievements is not something that Asian The new face of capitalism
leaders should try to emulate.
If we can form an international leadership team
Even today, one year after the collapse of combining the Indian leader’s strong creative,
Lehman Brothers, excessive compensation innovative and adaptive thinking; the Chinese
There is much that Asia can packages in the West continue to be a bone of leader’s strong execution and negotiation skills,
learn from the West in terms contention between regulators, shareholders and sense of social responsibility in business
financial institutions. Hence, while it is gener- management and long-term view; and a Western
of business and talent
ally useful for Asian leaders to import some of leader’s consciousness of having to sell the
management, particularly vision to his own team and encourage their
the best employee engagement and enablement
in the areas of employee practices from their Western peers into their input in decisions on the execution, it would
engagement and own operating contexts, rewarding talents for enable today’s leaders to achieve so much more.
enablement. long term-value and sustainable performance
There is no doubt that the drive for
is something Asian leaders must continue to
achievement among Asian and Western
adhere to.
leaders have fuelled the meteoric growth of their
respective companies and countries. The
Leadership: Can East Meet West? question that remains is whether today’s leaders
can tap into the best of East and West to take
Today, leaders in Western economies can take a their rightful place on the global leadership
leaf from the restraint and vigilance of Asia’s stage.
financial regulatory framework, made robust by
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8.
East meets West: The new face of capitalism
Hay Group’s Competency Research Concept Formation: All the data is analysed and
synthesized in a five-day session to develop a
Methods
competency model that predicts outstanding
performance on the job.
Hay Group’s competency studies were conducted
according to rigorous methods pioneered by Dr.
David McClelland of Harvard University, working Performance Outcome Analysis: A recent
across Europe, US and Asia. These data was then innovation from the McClelland Centre, this
further developed at the McClelland Centre for process involves grouping the BEI stories
Innovation and Research (Hay Group’s research according to the business challenges faced by
division based in Boston). participants, and then sorting the stories by the
effectiveness of the results achieved, to identify
These methods include the following:
which competencies lead to success in specific
Criterion Sampling: Leaders who are outstanding types of critical situations.
– according to a clear set of criteria – are studied
and compared to a group who do not meet the
criteria. Each CEO who was studied intensively met Validation: During validation, the findings from
all of the following criteria: competency research are tested and fine-tuned
based on feedback from new groups of
• Heads some of the financially best performing
participants. Validation panels for this study
companies in India and China;
included relevant government ministers, business
• Is widely respected;
leaders, academicians and business students.
• Has sufficient tenure at the company to be a
credible leader there;
• Represents balanced sample across industries
and sectors.
Hay Group Insight
Behavioral Event Interviews (BEI): The core of the
competency method, the BEI is a two-to-three- Hay Group Insight, Hay Group’s survey research
hour, in-depth interview in which the participants division, is a global leader in employee and
provide detailed stories about their recent customer opinion research. Through customized
successes and failures, and what they thought, felt, survey programs focused on organizational
and wanted to accomplish in dealing with their objectives, we help organizations attract and
situations. retain talent, improve operating efficiency,
manage change more effectively, and enhance
customer loyalty and business performance.
Expert Panels: Structured discussions with groups
of industry experts and thought leaders provide
context and perspective on the challenges of the Since 1975, Hay Group Insight has assisted more
role and the necessary competencies to be than 4,000 organizations. The breadth of our
successful. experience enables us to identify best practices
for our clients, not only within their own industries
but also across industries.
Coding: The BEI interviews are transcribed and
the text is carefully compared and benchmarked
against a list of twenty-two universal competen- Hay Group Insight’s Engagement Survey database
cies in a structured coding process. In addition, is a sample of 646,000 employees collected over a
other behaviors unique to the individual or the period of 5 years around the world. In Asia, there
group are collected for qualitative analysis and were 347,000 employees from 90 firms.
possible inclusion in the final model.
About Hay Group
Hay Group is a global consulting firm that works with
leaders to turn strategies into reality. We develop
talent, organise people to be more effective, and
motivate them to perform at their best. With 86 offices
in 47 countries, we work with over 7,000 clients across
the world. Our clients are from the public and private
sector, across every major industry, and represent
diverse business challenges. Our focus is on making
change happen and helping organisations realise their
potential. Visit www.haygroup.com.
©2009 Hay Group. All rights reserved