Our business failure in Asia. John Menadue

Aug 1, 2013

In my blog of March 14 on Productivity and Skills I drew attention to the failure of Australian business to equip itself for Asia. PM Rudd in his address to the National Press Club on 16 July this year put it very clearly.

‘I am concerned that if you went through our business elites, you would not find a lot of the top 25 executives in each of our top 100 firms who have spent any of their career time serving in Asia – the engine driver of the global economy through until mid-century. Remember this is the Asian Century. The truth is Australia is much underdone in Asia.’

There are many reasons for our business failure in Asia. One is the continuing habit of company boards appointing people like themselves – Anglo-Celtic males, often from the same schools and with little knowledge or experience in Asia. Talk about the unions running a closed shop!

One other major obstacle in Australia and elsewhere to developing Asian skills in our major companies is their failure to align business and human resource strategies. Cross-cultural experience that are learned by appointing staff overseas are too often ad hoc and operational. Overseas appointments are not used as the catalyst to drive change in the organisation at home.

The most extreme example that I know of business failure to integrate business and HR strategy is Rio Tinto. It staffed its Shanghai office with local Chinese. Unfortunately some of them finished in goal. But the major failure was that Rio Tinto apparently had no plan to use postings in China to develop executives who would come back to Australia and use the experience gained in China to drive cultural and organisational change in Australia.

This failure is not just an Australian problem. A recent Global Mobility Effectiveness Survey, 2012, by Ernst & Young entitled ‘Driving Business Success’ highlighted the problem of so many firms sending staff overseas in a quite ad hoc manner and not using that experience learned overseas to enrich the talent pool of the organisation. (This survey covered 520 international countries including some from Australia.)

The survey said that business should take several crucial steps to improve its performance in overseas markets. It said that companies needed to ‘better align mobility strategy with business strategy … crucially talent-management and global mobility must be integrated.’

There is a lot of depressing reading from this survey.

  • Only 51% of companies surveyed have a global talent management agenda.
  • Less than a quarter of senior management have been on (overseas) assignment.
  • More than one in twelve countries had at least 11% of international assignees return before the end of their contracts – at huge cost.

I will write later about the disappointment of many executives who on return from overseas postings quickly leave their organisations. They often feel that the cultural experience overseas has changed them and their outlook on the world but the culture of the company back in Australia has not changed. It remained a closed shop. So they leave and the money invested in them is lost, at least to the company.

If there is any consolation in the Ernst & Young survey it is that Australia is not alone in failure to equip itself for Asia and new markets. But with our geographic position, we have probably more to lose by not properly equipping ourselves for our own region.

A key is clearly the integration of a business strategy for Asia and the human resources strategy – to steadily build on the experience of executives living and working in Asia, and when they return to Australia to use that experience to drive organisational change at home. We have a long way to go.

There is a lot of lip service by Australian companies about the Asian Century. They seem unable to grasp what is involved to change organisational culture and in the process drive productivity improvements and their long-term business prospects in our region.

The business and other opportunities in Asia is not something new. The spectacular economic rise of Japan started 50 years ago. It was followed by Korea. Now it is China. Where has our business sector been in the last 50 years? It has profited opportunistically but has not built the skill base we need for the long term.

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