Many Western companies have operated blue-collar manufacturing sites in Asia for a long time. Now, as the region grows in importance, the most senior white collars of some of those companies are spending more time here than ever before.
Kasper Rorsted — leading the German corporate giant Henkel, the maker of Loctite glue and Persil detergent — just spent nearly six weeks working in Asia, an unusually long time for a chief executive to be away from headquarters.
“You get a very good feel for what’s going on in the region,” Rorsted said by telephone from Shanghai this month before heading back to Duesseldorf.
His trip spanned nine countries and involved nearly 100 meetings.
“You get a lot of appreciation from the customers when you take the time to meet them here,” he said, and you “send a very important signal to your own organization about the importance of the region.”
Rorsted’s visit is a reflection of the critical role that Asia now plays for many Western countries. Henkel makes 14 percent of its sales and 20 percent of its profit in the Asia-Pacific region. About 18 percent of its 48,133 employees are based in the region, but Rorsted expects a third of the company’s staff to be located there in a few years.
While other parts of the world are struggling to regain momentum after the turmoil of the last few years, most of the Asia-Pacific region — outside of Japan — is enjoying rapid economic expansion. The populations of developing Asian countries are growing and becoming more affluent and better educated.
As a result, the region has become not just an important destination for Western-made products, but an increasingly important location of product development prowess and local business partners.
At Cisco Systems, the network equipment giant, what started as a research and development center in the Indian city of Bangalore now has the status of a second headquarters. Since 2007, many top-level managers have moved to Bangalore from San Jose, California, as the company seeks to position itself better for the immense changes taking place in emerging Asia. Cisco does not publish a breakdown of profit by region.
In 2007, the Dutch software company Irdeto split its headquarters between Amsterdam and Beijing. Its chief executive, Graham Kill, moved to Beijing, and the company’s development and back-office functions are now in both cities.
The trend of senior executives spending more hours in Asia is in its early stages. However, such moves go way past outsourcing, and far beyond beefing up the lower ranks of a company’s work force with hires in Hong Kong, Singapore or Shanghai.
“It’s not about costs and cheap labor. It’s about how can we get access to talent, how can we get access to growth and innovations, and how can we get access to new partners,” Cisco chief globalization officer Wim Elfrink said in a telephone interview from Bangalore. “The demographic shifts and the massive process of urbanization here mean the region is going through a tremendous transition — and to be part of that, and to really understand it, you have to be here.”
Companies are also holding board meetings with increasing frequency in Asia.
The Swiss bank Julius Baer held a board meeting in Singapore for the first time this month. One of Julius Baer’s executive board members moved to Singapore last year, and its chief executive plans to spend one month a year in the city beginning next year, in addition to frequent shorter visits.
Many top-level US and European executives have, of course, been to Asia and other emerging growth areas numerous times, be it for conferences and get-togethers like the World Economic Forum that took place in the Chinese city of Tianjin earlier this month or to visit the factories or distribution and service centers that have mushroomed in recent years.
Some experts contend that executives at many companies may still not be spending enough time in Asia.
A recent report by McKinsey & Co said multinational companies often devoted less top management time to China — for many the most critical market within Asia — than they perhaps should.
“Senior executive time spent in China and knowledge of Chinese customers are no less important than more straightforward metrics about market share in China or sourcing volumes,” the report’s authors wrote.
“Many of our clients are way beyond the market-entry stage; all of them think they know China,” said Martin Hirt, who heads up McKinsey’s Asia strategy practice, by telephone from Taipei. “But how much time do senior execs actually spend in China? Is the CEO trying to become part of the community there, is he on the ground, networking?”
Edge Zarrella, a partner at KPMG in Hong Kong, predicts that over the next five to 10 years, senior executives’ time in Asia will really pick up.
So far, visits from top-level executives to the region tend to be brief.
And it is hard to find top-level executives of multinational corporations who actually live in the region, or spend extended periods of time here like Rorsted does.
“Lots of Western companies purport to have a significant senior presence in the region, but when you actually look at it, they’re mostly at headquarters back home. We are very much the exception,” Graham Kill of Irdeto said by telephone from Beijing recently.
Those who do spend large amounts of time in Asia say their insights give them and their companies a totally different perspective and appreciation of the profound and rapid changes taking place in the region.
Kill said his company’s dual-headquarters structure had significantly improved productivity and internal communication and had been instrumental in securing contracts and improving customer loyalty.
“You have to live it and breathe it, otherwise you don’t feel it, you don’t intellectually understand it,” Elfrink said. “When I was based in California, topics relating to Asia may have been priorities No. 8 or 9 for me. Now, they are top of my list and I can help move them up the company’s priority list.”
One of Rorsted’s many gatherings this summer was a two-and-a-half-hour event in Shanghai with about 1,100 of his staff.
Many Henkel employees clamored to have their pictures taken with the chief.
Videoconferencing and phones can do a lot of things, Rorsted said.
“But you can’t replace presence and personal contact with technology,” he said.
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