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Asian Businesses Prefer Locals To Expats

Conference Board Report Finds 'Problems With Expatriates'

April 13 2006 - A new report from the Conference Board finds that major Asia-Pacific companies are searching more intensively for executives living in the region, rather than relying on expatriate executives brought in from other parts of the world.

55 organizations based in the Asia-Pacific region were surveyed for the report. Almost four-fifths (79%) are seeking to develop leadership talent within the region and equal percentages are either maintaining (47%) or increasing (47%) the financial resources devoted to leadership development initiatives despite widespread budget cuts elsewhere.

Respondents to the survey identified the following actions being taken to develop a stronger leadership supply:

  • Identifying talent gaps and company requirements (92%)
  • Improving talent assessment (91%)
  • Involving the CEO in talent development (91%)
  • Placing priority on developing and retaining high potentials (90%)
  • Reinforcing accountability of leaders for development (84%)
  • Developing specific Asia-Pacific development programs (76%)

Survey participants cited the following methods as those being used in their organizations to develop business leaders:

  • Internal management development programs (44%)
  • Company training programs (40%)
  • International assignments greater than two years (36%)
  • Mentoring and/or coaching (33%)
  • Participation in cross functional international teams (33%)
  • Action learning assignments (26%)

The report also shows that many international businesses are trying to cut the number of expatriates and international assignees occupying longer term (in contrast to developmental) leadership roles. Companies in the region are comming to the conclusion that home-grown executives impact more effectively on company performance than expatriates and cost less. In fact, with salary supplements and additional benefits, such as home leave, school tuition and accommodation subsidies, expatriates can cost at least twice as much as a local executive.

Andrew N. Bell, Program Director for the Asia-Pacific HR Council and author of the report said:

"One reason for reducing expatriates and international assignees is based on the premise that in the lifecycle of most businesses, the localization of leadership has a positive impact on performance. 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 such as distribution channels and external relations, including with 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."

Asia-Pacific businesses face two challenges:

  • Local supply limitations There is intense competition for the limited supply of local leadership talent. For example, in some sectors, turnover rates in Shanghai and Bangalore are greater than 40% per year. Salary levels can also be high. Some talented executives in Shanghai may receive absolute salary levels that are equal to or greater than their counterparts in Singapore or London.
  • Expatriate proliferation leadership competence and technical expertise may have to be imported during initial investments in a new market or periods of significant expansion and large-scale capital investments. The process of developing local replacements often takes longer than planned.

Survey participants identified the following competencies as being relevant to success in the Asia-Pacific region:

  • cultural understanding
  • adaptation
  • collaboration
  • teamwork
  • communication
  • alignment across borders
  • people development
  • coaching

Barriers to developing leaders in the Asia-Pacific region mentioned by companies included:

  • the capabilities of HR professionals in some locations;
  • mismatches between location of talent and business opportunities;
  • preservation of established company cultures, networks, and behaviors;
  • low mobility within region for some; and
  • competition for talent leading to high turnover and escalating salaries.

The report is titled Leadership Development in Asia-Pacific: Identifying and Developing Leaders for Growth Report #1387-06-WG, The Conference Board. Information about ordering this publication can be obtained from The Conference Board website at http://www.conference-board.org/.

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