Leadership at the Future s Edge:

Transcription

1 Leadership at the Future s Edge: China and India Jazmine Boatman, Ph.D., and Richard S. Wellins, Ph.D. The Talent Management Expert

2 Revolutionize leadership, revolutionize your business.

3 Leadership at the Future s Edge: China and India Jazmine Boatman, Ph.D., and Richard S. Wellins, Ph.D. Development Dimensions International, Inc., MMXI. Pittsburgh, Pennsylvania. All rights reserved under U.S., International, and Universal Copyright Conventions. Reproduction in whole or part without prior written permission from DDI is prohibited.

4 ABOUT DDI For more than 40 years, DDI has helped the most successful companies around the world close the gap between where their businesses need to go and the talent required to take them there. Our areas of expertise span every level, from individual contributors to the executive suite: Success Profile Management Our process will quickly and accurately identify what success looks like for all of your critical roles. Selection & Assessment DDI offers the most comprehensive range of assessment, testing and behavioral interviewing tools in the world. Leadership & Workforce Development We provide relevant and challenging learning experiences for all levels from individual contributors and front-line leaders to mid-level and senior leaders. Succession Management Our consulting and tools will ensure a steady supply of ready-now leaders who will meet your business needs today and tomorrow. Performance Management DDI s comprehensive approach to performance management enables the execution of business strategy by creating alignment, accountability and focus. DDI s approach to talent management starts by ensuring a close connection of our solutions to your business strategies, and ends only when we produce the results you require. ABOUT DDI S CENTER FOR APPLIED BEHAVIORAL RESEARCH The is part of the continuing series of trend research conducted by DDI s Center for Applied Behavioral Research (CABER). CABER s publications cover a wide range of talent management issues and are designed to keep HR professionals in touch with best practices and trends. CABER also conducts dozens of evidence-based research studies with DDI s clients that show the relationship between their talent management practices and changes in workforce and organizational performance. CABER s research, including this report, is available at CONTACT INFORMATION Jazmine Boatman, Ph.D. Manager, CABER Development Dimensions International 1225 Washington Pike Bridgeville, PA Phone: jazmine.boatman@ddiworld.com Richard S. Wellins, Ph.D. Senior Vice President Development Dimensions International 1225 Washington Pike Bridgeville, PA Phone: rich.wellins@ddiworld.com 4

5 FINDINGS FROM THE 2011 GLOBAL LEADERSHIP FORECAST Until 1800 the geographies that contained China and India accounted for 50% of the world s wealth. Two centuries later, in one of the quickest economic transformations in history, these two countries are poised to overtake the world once again. Last year China surpassed Japan as the world s second-largest economy and over the next five to eight years China and India are likely to account for more than 60% of global GDP. LEADERSHIP AT THE FUTURE S EDGE: CHINA AND INDIA China and India have much in common. They both have populations in excess of one billion, and they both will experience high economic growth as they shift from being primarily export markets to servicing the untapped potential of their own local economies, due in part to a rapidly rising middle class. Most experts, however, seem to delight in highlighting the differences and tensions that exist between the two giants rather than their similarities. Article headlines like China vs. India: Will Rivalry Lead to War? (Time, November 22, 2009), or a more recent piece in The Economist (August 19, 2010) that called the competition between China and India The Contest of the Century. Who will be more powerful militarily? Who will grow faster? Which country will have a bigger population (as if either needed more people)? And, who will more quickly move up the chain from low-cost labor to world-beating innovation? These questions are all being hotly debated. A recent article adeptly titled China vs. India: The Hare and the Tortoise (Seeking Alpha, August 2010), positions India as the tortoise and China the hare. But in the article Russell Napier, an investment banker, warned us not to be fooled by the challenges that appear to define each nation as they move toward more powerful roles in the world order. Like in any other great race, talent will determine the outcome. Who will win global markets? Who will be able to capture customer loyalty? Who can accelerate their innovation curves to maximize quality? And what about the quality of the workforce, which is both tied to and driven by the quality of leadership? Who will have the advantage in that all-important realm? In this research brief we share data from DDI s new 2011 Global Leadership Forecast comparing China and India. The forecast is our largest ever, spanning some 2,600 companies in 74 different countries. The focus of the research is on organizational trends and best practices around building leadership bench strength. Here we will only compare and contrast India on a few of the dozens of key areas evaluated in our core research. For more information, check out the full global report as well as the separate reports for both China and India. All of these are available on 5

6 THE LEADERSHIP INDEX DDI s Leadership Index includes three separate measures: current quality of leadership, confidence of leaders to ensure future success, and strength of leadership supply to critical roles over next three years. TABLE 1 LEADERSHIP INDEX INDEX FACTOR (% of leaders rating their organization favorably) CHINA INDIA Current quality of leadership 25% 51% Confidence of leaders to ensure future success 49% 65% Strength of leadership supply to critical roles over next three years 24% 45% As Table 1 shows, the ratings for neither country are stellar; however, for two of the factors India surpasses China up to twofold. While China s ratings are not only lower than those of India, they also are considerably below our global norms. India, on the other hand, consistently hovers above the global norms. For both countries, confidence in the future rises with the level of leadership (e.g., senior leaders are more optimistic than other leaders). The biggest gap between the two countries is in the frontline leadership level. Here India s confidence rating was 59%; China dipped below 38%. This difference should be concerning to Chinese companies as that level of leadership is not only a highly critical one, but often constitutes the pool from which future higher-level managers emerge. 6

7 TALENT MANAGEMENT SYSTEM Our 2011 Leadership Forecast Global Report shows a strong correlation between the effectiveness of a number of talent management systems and overall leadership quality. How do China and India stack up? The effectiveness ratings of each system as evaluated by HR professionals are shown in Table 2. LEADERSHIP AT THE FUTURE S EDGE: CHINA AND INDIA TABLE 2 LEADERSHIP TALENT MANAGEMENT SYSTEMS FACTOR (% of HR rating their organization as effective) CHINA INDIA Leadership, selection, and promotion systems 24% 44% Succession management 24% 32% Performance management 41% 45% Leadership development (frontline) 30% 33% Leadership development (mid-level) 37% 30% Leadership development (senior) 47% 39 % The major difference is not found in the effectiveness of development, even though in senior leader development China has almost a 10-point edge. Instead, the big disparities are around selection and succession. Both of these systems deal with making the right leader decisions: placement, promotion, or external hiring. It is often difficult to compensate for poor decision making in these areas with bolstered training. There are just too many critical leadership attributes (e.g., risk taking, honesty, tolerance for ambiguity), which are more ingrained than they are trainable. One way to minimize the risk is to use scientifically validated assessments as a basis for hiring or promotion decisions. Yet, only one in three Chinese companies deploy validated tests to make leadership selection decisions, compared to 44% of Indian organizations. Another concern: only 27% of Chinese companies use a systematic talentforecasting system to determine the quantity and quality of leaders needed for the future. In the India sample, the number is nearly double. 7

8 FUTURE SKILLS: WHO IS MORE READY? We asked leaders what skills would be most critical to their future success. The top five for China and India are listed in Table 3, below, in rank order of importance. TABLE 3 FUTURE LEADERSHIP SKILLS CHINA INDIA RANK % Leaders Effective/Very Effective RANK % Leaders Effective/Very Effective 1. Driving and managing change 56% 2. Fostering creativity and innovation 56% 3. Identifying and developing future talent 71% 4. Executing organizational strategy 72% 5. Coaching and developing others 73% 1. Driving and managing change 71% 2. Identifying and developing future talent 76% 3. Coaching and developing others 74% 4. Fostering creativity and innovation 62% 5. Building customer satisfaction and loyalty 81% Four of the top five are identical in importance for both India and China, with some differences in their order. In China, however, execution made the top five, while in India customer loyalty was identified as a priority. China has always placed a premium on execution. Companies there tend to be disciplined in their business processes. India s boom, unlike China s, is mostly attributable to service-based industries making customer focus a key. Future critical leadership skills are only part of the equation. The big question is how effectively do leaders feel they are using those skills? Overall, India is ahead again. In every one of the top-five skill areas, 60% or more of the Indian leaders who responded rated themselves effective/very effective. In China, just two skills are in the 50% range: innovation and change. 8

9 THE CULTURE OF MANAGEMENT In the 2011 Leadership Forecast, we asked a series of questions related to management culture. These questions were based on Gary Hamel s new book, The Future of Management. Dr. Hamel is a noted thought leader on management and a professor at MIT. He maintains that one of the most fundamental leadership problems is that while business models are rapidly changing the actual role of management has not changed. LEADERSHIP AT THE FUTURE S EDGE: CHINA AND INDIA We developed a series of questions with Hamel s think tank (MLab) to determine where leaders stand on a number of factors relative to management roles. Table 4 lists the top-three most relevant factors that get in the way of a more progressive view of management in each country. Next to each factor is the percentage of leaders who indicated that the statements are characteristic of their organization. Both China and India appear to be very top-down in terms of leadership power. They are both relatively autocratic. China s management culture may suffer a bit more from top-down decision making, which typically limits widespread efforts to foster innovation throughout the workforce. India, on the other hand, seems to be focused primarily on business goals (as opposed to a combination of business and social goals) and is more rigid in terms of organizational structure. TABLE 4 NEGATIVE CULTURE FACTORS CHINA INDIA RANK % Agree with Statement RANK % Agree with Statement 1. Decisions held by those in power 60% 2. Power to those who maintain the status quo 46% 3. Opportunity for innovation only available to select few 45% 1. Decisions held by those in power 55% 2. Structure rigid/bureaucratic 44% 3. Goals only focused on financial performance vs. more holistic goals, including social sustainability 42% 9

10 IMPACT If India is better at talent management than China, does this difference show up in key lead and lag business metrics? Table 5 shows a number of ratings related to outcome measures comparing India to China. Other than in the case of retention, India appears to get better results. As for the lack of leadership impact on retention, it is plausible that retention in red-hot economies is driven more by salary offers and promotion opportunities. TABLE 5 LEADERS WHO RATED THEIR ORGANIZATION HIGH MEASURE CHINA INDIA Business performance better than competitors 29% 47% Leadership engagement 64% 82% Retention of leaders better than competitors 51% 49% CONCLUSION There are two key conclusions we can draw from the forecast. First, in most cases, India is far ahead in nurturing future leaders. The quality of leadership talent does play a critical role in the future success of business and India has a clear lead. DDI works with CNBC on the Asia Business Leaders Awards. In support of the awards competition, we have interviewed dozens of CEOs from the top-performing companies in Asia. One of the key criteria in picking the winners is the quality of talent management initiatives. While there are isolated examples of progressive talent management initiatives in China, they are abundant in India (e.g. Tata, Larsen & Toubro, WIPRO, HCL), where CEOs of top Indian companies view high-quality talent as a business necessity and they have invested accordingly. The second conclusion is that neither country has bragging rights. Forecast results for both countries globally fall into the fair or poor category with little improvement over time in spite of billions invested in building stronger leadership capability. For both countries, however, there is one important difference from the rest of the world: The promise of growth for both India and China is three to four times greater than most other parts of the world. Thus, when it comes to preparing tomorrow s leaders, neither country can afford to just keep up, they must leap ahead! 10

11 ABOUT THE AUTHORS Jazmine Boatman, Ph.D., manages DDI s Center for Applied Behavioral Research (CABER), DDI s hub for research to support evidence-based management. Jazmine directs research that measures the impact of selection and development programs on organizational performance and uncovers new knowledge and information about global workplace practices and issues. With special expertise in measurement and evaluation, Jazmine has consulted with organizations in a wide variety of industries. Richard S. Wellins, Ph.D., is senior vice president at DDI. Rich is responsible for leading DDI s global research programs, launching new solutions, and executing DDI s brand and marketing strategies. During his tenure at DDI, Rich has authored five books on leadership and teams and written for more than 20 publications on global talent management. Rich has helped organizations around the world develop their senior leaders. He also serves as a judge for CNBC s Asia Business Leaders Awards, interviewing dozens of Asia s top CEOs each year. To start your leadership revolution and learn more about DDI s, please visit

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