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back to index backASIAtalk November,  2005


Asia's evolving global role calls for more home-grown non-executive directors

Many of us are guided in our personal lives by the Golden Rule – treat others as you would like them to treat you. In business, a corollary applies – treat customers and partners as you would like to be treated in their place. Do this and you have a good chance of building a successful and sustainable business.

How do you determine what your customers want? One approach is to ask them, through market research surveys, focus groups and the like; another approach is to observe what they do (rather than what they say they will do) when they purchase and consume your product or service. A third approach is to embed in your company people who think and act like your customers. As none of these approaches is sufficient in itself, most companies practice some combination of the three. However, in our view, companies should be focusing more strongly on the third approach, namely the localization of management – and of the board.

High-growth manufacturer, high-growth market

In today's globalized world, where supply chains are getting longer and hierarchies flatter, the days of the one-stop, do-it-all corporation are numbered. Rather than have everything done in-house, companies today are looking to have functions performed by whoever can do so most cost-effectively, regardless of where they are located. This trend of outsourcing (paying someone else to do the work for you more efficiently) and off-shoring (performing the work away from where it is traditionally done) has fueled the rise of several Asian countries, notably India, China, and Taiwan.

Call centers in India are no longer a surprise; in fact, it is more surprising to find a company that does not have a call center in India. Taiwan is home to the world's largest electronics manufacturers, companies who may not sell their own branded products but provide research and development, production and support services for many of the household names in the PC and electronics industries. China is home to R&D centers of excellence which have been set up by every large IT manufacturer you can think of, while India has a similar claim to fame with its software companies.

The functions that support this (everything from supply chain management to supplier quality engineering) are also being set up in a process that attracts supplier companies that cluster” around the main factory and feed it with components, supplies and support. So besides being the production house to the world,” Asia is increasingly an integral part of the product design networks that determine which new products are created and launched.

Along with providing important back-office functions for the rest of the world, Asia is also home to two of the fastest-growing emerging markets of all: China and India. As with most rapidly expanding markets, there is a huge demand for (and increasingly short supply of) talented individuals who understand how to navigate the rapidly evolving Chinese and Indian markets.

From management to board localization

For someone from faraway headquarters, the view can be a little blurred. From a great cultural and physical distance, the promise of these markets is clear, but the way to tackle them is not. Should China be dealt with as a separate entity rather than report by lines of business like every other country? Should India report directly to HQ rather than to Asia Pacific? How do I balance the different leadership needs in India for a product development center, a business-process outsourcing global operation, and a local sales team?

At this point, some global leaders return to the Golden Rule and try to reflect the diversity of their customer and partner base within their own organization. While it is a truism that companies localize their management teams, this in itself is not enough, because corporate strategy is rarely defined in the field, and companies really need that same diversity at the most senior levels of the organization, including the boardroom.

Some major technology players, including Agilent, Infineon and Philips, have all now appointed Asians to their main boards, most probably partly driven by the recognition of the growing importance of Asia to their sales and business operations. However, they are in the minority. Today, less than 15% of the Fortune 500 have Asian non-executive directors, or A-NEDs.

What has been holding companies back from tapping this seemingly obvious talent pool? Part of the reason could be a lack of access (and insight) to where A-NEDs might be found. While one obvious pool exists in the senior Asian managers who have risen through the ranks of multinational companies over the past decades, another source would be Asian executives who have built up their own businesses. As these companies expand and grow beyond Asia, their senior executives will have gleaned invaluable personal experience of entering new markets and managing businesses that extend far from home base.

Today's Asian senior executive is well-traveled, globally aware and at home in the multinational operating system. The A-NED can help clarify the strategic issues that a company faces in Asia by leveraging his or her own knowledge and network, grounding these important debates on China, India or Vietnam, for example, in hard-earned personal experience rather than just numerical data.

In recognition of the growing importance of A-NEDs to its clients, Egon Zehnder International's Technology & Telecoms and Board Consulting Practices have together begun tracking potential A-NEDs; this complements the firm's existing Global Board Consulting Practice by creating a readily-identifiable sub-segment of NEDs who can provide high value for companies that are investing heavily in Asia.

The ability to evaluate Asian NEDs' suitability for various board roles aligns neatly with the expertise of Egon Zehnder International's long-standing Board Consulting, Executive Search and Management Appraisal Practices. The A-NEDs initiative provides our clients with access to and insight into this emerging but specific talent pool.

Source: Egon Zehnder International - GAI


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