Senior Executive-Life Issues

Insider: Thailand Examines Localization Issue

01 July 2000

Insider recently interviewed Edwin Sim, Country Head and Managing Director of the Korn Ferry Thailand to get an idea of where Thailand is headed in the new economy and just how the issue of localization is playing out.

As Thailand emerges from the Asian crisis, a myriad of issues confront its local business leaders such as attracting and retaining talent as a result of technology changes and competition that new economy companies are creating around the world. One sensitive issue currently debated within the Thai business circles is the issue of localization.

[I] Today the market is dictating how businesses are run and shareholders are becoming more and more demanding around the world. Do Thai companies have the necessary talent to meet the growing expectations of the shareholders.

[ES] We can honestly say that this country does not have a deep pool of management talent that can deliver shareholders’ expectations. We work for world-class corporations with extremely demanding shareholders, who have great expectations. To meet these expectations, we need to work through our people.

[I] What are the short-term implications of this lack of talent?

[ES}:In the real world, directors should direct and managers should manage. However, here in Thailand , CEO’s are spending far too much time “just doing” and very little time “directing.” CEO’s end up working longer hours, doing more work, and achieving less in the process.

[I] But how are companies progressing on these fronts?

[ES] :In the longer term, and I am taking about five years down the line, we must aggressively deal with human resources management issues. We must ask painful questions.
Will our leaders be deemed suitable to lead our organizations? Will we have a new generation of local leadership to drive our organizations?

[I] What do you see as the solution?

[ES] One possible solution is dumping the idea of choosing between “expatriates over the locals” or “the locals over the expatriates.” We should just pick the very best talent available to do the job, local or expatriate at all levels of management.

[I] Do you expect to see more expatriates taking up key positions in Thailand ?

[ES] I expect to see more expatriates taking up key positions in Thailand over the next several years. Promoting expatriates is a highly sensitive issue, socially and politically here in Thailand . However, in reality and in the short term, this is the realistic solution. In fact, several prominent Thai business families have told me that management depth is lacking in Thailand and the solution in the short term is an expatriate one.

[I] Can you give us an example?

[ES] Let us look at an example of a Thai company whose shareholders tried several years ago to implement this simple concept: The mission was to build an international class organization. There were nationals from more than ten countries in various top and middle management positions. The expatriates were assigned a simple set of objectives: To execute the short term business plan, to transfer knowledge and technology and to groom his/her successor. The experiment failed. Why? After arrival in Thailand , some expatriates fell in love with the country. Social networks were established. Some expatriates decided that they want to stay. However, the company had no long-term plans for them in Thailand . That is when the plan begins to have problems.

The post mortem: There were no long-term incentives for the expatriates to transfer knowledge or technology. Middle management was also frustrated by the perceived glass ceiling. As a result: Middle management under-performs; the expatriates do more work but achieve less. Shareholders were not satisfied. The expatriates were eventually removed. Another batch was brought in and the whole vicious cycle repeated itself.

[I] It does not look like bringing in expatriates is the best long-term solution.

[ES] I say we do not give up. True restructuring did not take place in this case. There are certain perceptions and issues inside the organization to account for this. Some expatriates viewed the locals as being impossible to develop. Some locals see this continuous rotation of expats as a long-term structural barrier to career advancement. Companies must bring in the best talent, local and expatriate. We create and nurture the environment within our organization to reward those who transfer knowledge and technology. We provide believable and tangible incentives for managers to bring up the talent.

I believe that just bringing expatriates into the country will not solve our problems in the longer term. However, if we bring in expatriates, we must ensure that they have well defined succession plans in place. These expatriates must work to eventually hand-over responsibilities to up and coming local managers. A simple concept but extremely difficult to implement. The question we should ask is “Does our organization provide the right incentives for us to implement these solutions.” If we don’t: How are we going to meet our shareholders short-term expectations? Who is going to lead our organization in the longer term? Are we going to have a job come this quarter, this year and five years down the road? How are we going to deal with the demand for talent in the old as well as the new economy?

[I] Lets talk about demand. Where is the demand for management talent coming from?

[ES] Demand for top-level management talent is coming from a number of business sectors including: financial services sector, consumer products sector, advanced technologies sector as well as the industrial sector. To be more specific:

Financial Services:

This year, the financial services sector offers promising opportunities for top managers driven largely by the ongoing wave of mergers and acquisition as well as various strategic alliances formed between Thai and international financial institutions.

Consumer Goods

The most significant change in recent times has been increasing importance of the major retailers in Thailand . Companies such as CRC-Ahold (Tops Supermarket), Lotus and Makro are increasingly important customers for the manufacturers such as Unilever and P&G. As such, the manufacturers required strong key account managers who can effectively service the major retailers.

Advanced Technologies:

The Advanced Technologies sector offers promising opportunities especially in the areas of Internet related businesses. We expect to see selected strong pockets of demand for special professionals. Companies with Internet based business models especially the ISP’s, the portals, and those who are developing business platforms for e-commerce including Internet banking and Internet stock trading will definitely need professionals.

Industrial Sector:

The auto industry is expected to be an important engine of growth for Thailand . The two biggest automakers in the world, namely General Motors and Ford have both made huge long-term strategic investments in this country. Additionally, many of the component suppliers have also established operations in Thailand to supply the automotive industry. As such, we expect continuing demand for management talent in this sector.

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