HSBC and Stan Chart are ready. How about you?
By Alan Pang, Director, Aon Consulting Global Research Center
A strong relationship exists between successful business globalization and foreign work experience at the leadership level. This conclusion stems from recent research conducted by Aon Consulting's Global Research Center. The more assets that a company has outside of its home country, the more likely it is that the business's key executives will have foreign work experience.
Recently, Aon Consulting researchers analyzed the financial and human resource data of 60 companies they selected from the 2009 Fortune Global 500.1 (These 60 sample companies mirror the profile of the 2009 Global 500 composition with regard to distribution of company origin, industry and revenue size). Our research and analysis focused on three specific measures of business globalization: revenue growth overseas; the total percentage of assets overseas; and the total percentage of revenue overseas. These three measures were then correlated against nine indicators of human capital globalization.
The strongest correlation we found between business and human capital measures of globalization existed between the total percentage of assets overseas and the proportion of key executives with foreign work experience. That is, the larger the proportion of assets overseas, the larger the proportion of key executives with foreign work experience.
Our analysis showed that on average, 45% of the 60 companies' total assets are located overseas and 54% of their revenues are generated from outside of the headquarter country. And, in turn, 48% of their key executives have foreign work experience.
While the link between the total percentage of assets overseas and the percentage of key executives with foreign work experience appears to have the strongest correlation, other factors, such as the percentage of foreign nationals at key executive levels, and the percentage of foreign higher education degree holders, also exhibited a close correlation with percentage of total assets overseas.
To expand into foreign markets, companies need to understand the political-legal settings, macro-economics, business environment, and consumer behaviors in those markets. Relying on local executives who have not worked or studied abroad, or home country nationals with no prior overseas experience, appears to be a much less effective alternative. Both international education and work experience are critical, enabling leaders and managers to navigate effectively through the many subtleties of international business.
Having foreign nationals with international experience sitting at the top-level of management definitely helps a company better understand foreign markets, foreign employees, and foreign operations. Their lifetime experience and understanding of culturally sensitive issues helps a global company reduce the risks of operating in international markets.
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As a financial institution with the branding of "the world's local bank", Hongkong and Shanghai Banking Corp (HSBC) has embraced this belief. Its assets overseas are 47%, revenue generated overseas is 62%, and key executives with foreign work experience constitute 70% of its top leadership. Standard Chartered Bank, another one of the world's most international financial institutions, demonstrates a similar pattern. With overseas assets at 73% and oversea revenues at 91%, 50% of the bank's key executives are foreign nationals (only 20% for HSBC), 50% have foreign higher education degrees, and 83% have foreign work experience.
The leadership profile of these two successful institutions confirms that building a cadre of leaders with significant international exposure and experience goes hand-in-hand with successful business globalization.
In HSBC's case, its "world's local bank" strategy inevitably puts more of its assets outside of the headquarter country, and it secures a high proportion of its revenue from foreign markets. With such a large proportion of its assets in international markets, we can see that their strategy of reliance on a strong, diverse cadre of managers with international work experience has helped it achieve operational efficiency and innovative adaption to its local markets.
According to a recent interview in the Straits Times, Sebastian Arcuri, HSBC Head of Personal Financial Services (Singapore) and Head of Offshore Banking (South East Asia) says, "International mobility is a key differentiating factor for HSBC. International exposure is not perceived as the exception or something extraordinary. In fact, it has become a must for senior management because one must be able to operate in different jurisdictions and transfer the skills from one country to another."2
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What can you do?
How can HR practitioners ensure that their companies have the talent with the overseas education and work experience that is essential for a successful global business?
Foreign work experience at the key executive level can be either acquired or cultivated.
If the intention is to "acquire" the international experience, the company needs to align its corporate image with the international work experience that it aims to "procure." On top of that, HR needs to target talent with the necessary attitudes and aptitudes for an international career and make sure that screening and assessment tools are configured appropriately to identify and help select the right candidates.
If the intention is to "cultivate" the required foreign work experience from within, a company needs to clearly articulate its policies and align its career path planning, talent development, and workforce planning actions with this objective. International work experience and foreign education must become a major prerequisite for career advancement.
International workforce management and global competency management systems can support HR professional in this endeavor. International workforce management moves key talents physically around the geographies, whereas the global competency management captures and institutionalizes the knowledge, experience and capabilities thus acquired through the physical mobilization.
Our research is clear: foreign work experience is inextricably linked with business globalization. An organization that wants to be a successful global player needs to cultivate its human resource globalization. This means encouraging the cultivation of foreign work experience and foreign education among its aspiring leaders. Is your company ready for HR globalization?
Alan Pang is Director of Aon Consulting's Global Research Center, which is based in Singapore. The Research Center is dedicated to providing innovation and insights into human capital issues of concern to Board of Directors and Senior Executives. Our focus is in the areas of corporate governance, human capital risk and HR globalization. Please contact Alan Pang at email@example.com for further information.
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||The sample is composed of 2009 Global 500 companies (http://money.cnn.com/magazines/fortune/global500/2009/full_list/) from sectors of financial, Industrial, consumer-non-cyclical, consumer-cyclical, technology, basic materials and communications. The selection also covers headquarters (HQ) countries / regions of the U.S., France, the United Kingdom, Switzerland, Germany, Japan, the Netherlands, Korea, Taiwan and Finland. The financial and human resource data are from their fiscal year 2008 annual reports.
||"Putting the customer first", The Straits Times, 3 April 2010