MNCs eye local market hires, instead of expat pool, to drive strategic growth in S-E Asia

Singapore

MORE multinational corporations (MNCs) are increasingly turning to the local market, instead of the top expatriate talent pool, to find that special leader to drive their strategic growth in South-east Asia, and this is putting a premium on top talent in the rapidly growing region.

With South-east Asia's six leading economies - Singapore, Vietnam, Indonesia, Malaysia, the Philippines and Thailand - facing diverging fiscal paths in 2021, how companies look at regional headquarters is changing. Global recruitment and management consulting specialists said the complexity of managing across different economies and cultures cannot be underestimated.

"It is worth bearing in mind that the markets in South-east Asia are at different stages of development, some more mature and others emerging. It is a complex region, given the multiple languages, cultures, religions, compared to a single, more homogenous region such as China or India," Joanne Chua, regional client development director for Asia at Robert Walters, told The Business Times.

"We have certainly seen a steady increase in the hiring of South-east Asia general managers/managing directors based in Singapore in the past five years and we foresee this trend will continue," she said.

It is not just South-east Asia that has separated from Asia-Pacific (APAC) as a dedicated sub-region for the MNCs. "Asia-Pacific itself as a region has grown tremendously in the portfolios of these MNCs, with many often citing double-digit growth or highest growth potential as a region globally. As such, what these MNCs have done is to split up APAC into sub-regions, with dedicated heads to look after the regional markets. Besides South-east Asia, there is Australia-New Zealand, India, China, and North Asia," she noted.

Having a South-east Asia head in industries like finance, consumer markets and technology has been prominent in MNCs for over a decade. But beyond having a designated head of South-east Asia, there is a need for even more localisation from region to country, according to Dan Cullen, partner-in-charge of Heidrick & Struggles' Singapore office.

"We now see companies continuing to accelerate from "fly in and fly out" leadership models and towards hiring in-market talent. The current discussion is not around whether South-east Asia should be a separate block from APAC, but more around hyper-localisation within South-east Asia to extract the most value and growth from emerging markets outside Singapore," he added.

"Local market hiring in South-east Asia is becoming more important and this holds true even through the pandemic. As people could not fly, companies needed good in-market coverage," Mr Cullen said, noting that this has put a premium on top talent in South-east Asia, where relationships matter and there is a limited supply at the top end of executive talent.

Heidrick & Struggles has seen MNCs undertake heavy succession planning projects in South-east Asia through searching for locals who can play next generation leadership roles in countries such as Indonesia, Thailand, Vietnam, and Malaysia.

When it comes to the future of top management expats in South-east Asia, companies will need to consider their value and the role they will play. Mr Cullen reckoned that there will always be a need for interconnectors between a global MNC and local markets; or individuals with specific product or tech knowledge. MNCs also look to diversity in hiring - whether females or those with mindsets and cultural know-how for the local markets.

"What we predict is that the highest demand for MNCs will increasingly shift to top local talent instead of top expat talent," Mr Cullen said.

Changes in top hiring trends are different for each industry and have been "more evolutionary than revolutionary", observed Michael Di Cicco, senior client partner and global private markets Leader, Asia-Pacific at Korn Ferry.

Some consumer companies have done away with a South-east Asia structure, focusing instead on market clusters within the region. Others are building South-east Asia headquarters as the region grows in importance for them, while some are mulling whether it makes sense to shift more overall Asia leadership to the region and particularly to Singapore, Mr Di Cicco said.

"Senior hiring trends in South-east Asia really depend on the specific industries. For industries which are more impacted by the Covid-19 pandemic such as banking and consumer, businesses are consolidating to cut costs and refocus their strategy. This means that senior roles in these industries are likely to be combined as business units are realigned and streamlined.

"On the other hand, other industries such as life sciences and technology are growing. There is an increase in hiring activity in these industries, including executive roles," Mr Di Cicco added.

Ms Chua of Robert Walters has seen companies develop their footprint in pharmaceutical, medical devices, technology, fintech, professional service, industrial, chemical, e-commerce and logistics.

Over the course of last year, there have been departures among top expatriates from South-east Asia, primarily due to corporate consolidation and restructuring as the Covid-19 and economic climate forced companies to adjust.

But since the fourth quarter of last year, optimism has returned, and South-east Asia and Singapore in particular remain very attractive to top talent globally, consultants said. Mr Di Cicco cited Singapore's introduction of the Tech.Pass programme to attract global tech talent to the city-state. This, he said, will ensure that the country continues to get access to top-tier tech talent that will help develop its tech ecosystem.

"Singapore continues to grow from strength to strength as a regional hub for venture capital and private equity," Mr Di Cicco said, adding that growth in venture has been impressive over the past couple of years. "Core areas of interest this year across private markets span across healthcare, education, renewables and impact investing."

Lakshmi Murlidharan, sales director at Hays Talent Solutions in Singapore, noted that companies are focusing more on hiring experienced leaders who have the grit to "lead during uncertain and disruptive times".

"We still notice organisations are ready to pay out the right incremental compensations for the right leaders," she said, adding that Singapore's supportive policies for startups and tech companies have made the city-state a preferred choice for regional headquarters, "warranting a dedicated South-east Asia head, separate from Asia as a whole".

While cash used to speak louder in Asia when it comes to compensation, the next generation of leaders tend to be motivated by equity (pre-initial public offer) especially for start-ups working towards a listing, Mr Cullen said. This is especially true in markets such as Indonesia.

When it comes to tech talent, individuals like a chief technology officer who creates products or leads engineering, or heads of growth who create go-to-market strategies for companies, will command a premium. "We also anticipate a general compensation uplift across other functional roles as the idea of distributed leadership embeds in the region to a greater extent," Mr Cullen added.