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Asias performance challenge

Ruby Chen, C. Scott Lpez-Gelormino, and Stephen M. Shaw
Asian companies still rely too heavily on shared values to motivate employees, but cultural and other barriers to a performance culture are falling.

One of the consequences of globalization for Asian companies is that they are now expected to match the performance standards of their counterparts in developed countries. In a recent survey of 27 leading Asian companies, we encountered the rigorous operational control of many top Western ones, but even now, little attention to managing and motivating people.1 Certainly, in terms of the building blocks of managing performance, Asian executives rate their companies somewhat highly on organizational strucEXHIBIT 1

How well do you manage performance?

Use of performance-management tools by leading Asian companies, percent of respondents1
Weakest performance areas

Mission High performance

Define clear, consistent, inspirational mission

Targets
Set measurable business goals

Organizational structure

Performance feedback

Consequence management2
Motivate through rewards, correctional training, or dismissal

Ensure organization Give timely and supports business unambiguous and performance goals feedback

37 26 32 5 Low performance 0

19 47 34

0 84 16 0

11 16 68 5

0 5 68 26

1 2

Based on a survey of 813 executives from 27 leading Asia-Pacific companies in China, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand. Percentages do not total 100%, because of rounding.

The survey covered well-performing companies in China, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand.

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ture and highly on framing a clear mission (Exhibit 1). Most executives said that the operational-control processes and organizational structures at their companies were geared toward meeting targets and goalsand that responsibility was indeed pushed down to accountable performance units. But few felt that their companies set bold and measurable performance targets, though all agreed on the need to do so. Of the three methods used to control or coordinate business performanceoperational control, financial control, and the placement and management of peopleAsian companies overwhelmingly favor the operational approach (Exhibit 2, part 1). None of the executives reported that their companies place a strong emphasis on ways of managing people to ensure top-notch business performance. Yet a large proportion of the executives surveyed said that their organizations needed to ensure stronger performance feedback and rewards for those who do well while dealing in a tough but fair manner with those who do not. When it comes to motivating employees, Asian companies tend to rely heavily on an appeal to values, such as being the industry leader and loyalty to the company (Exhibit 2, part 2). Despite the difficulty of instilling such values, most of the Asian executives we surveyed rated their companies very highly on doing so. Values are inculcated in many ways: photographs of the company founder and of national leaders in company halls (India and Thailand); references to company values in daily meetings (China and India); statements of values on bookmarks, desk calendars, posters, andin gold letterson the entrance to corporate
EXHIBIT 2

An operational preference
Use of performance-management methods by leading Asian companies, percent of respondents1

1 Asian companies favor operational approaches to control or coordinate performance . . .

2 . . . and rely on appeals to values to motivate employees

Operational control Financial control People management 0 16

84

Appeal to values Incentives Opportunities 11 32

57

Based on a survey of 813 executives from 27 leading Asia-Pacific companies in China, India, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand.

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offices (China and many other countries); and singing the company song before meetings (Indonesia). However, few Asian companies use differential incentives to encourage strong individual or group performance: they rarely pay high performers considerably more than other employees or provide performance incentives at many levels of the organization. Because most executives in these countries feel that equality is important to group harmony, they have serious qualms about celebrating individual performance. Only one-tenth of the managers surveyed reported that their companies provide employees with exciting job or project opportunities to stretch individual performance and development. Cultural and other barriers make it difficult for companies to manage performance by using measures that have proved effective outside Asia. Asian managers highlighted at least three such barriers. First, some managers asserted that their cultural milieu makes direct and transparent performance feedback difficult. The chief executive officer of a leading Thai conglomerate, for instance, said that he had tried for five years to institute a feedback mechanism and failed. Thailands culture values helping and supporting othersso much so that people doing well hide their good performance and give others the credit. That barrier, however, may be more perceived than real. Some companies surveyed have found culturally acceptable ways to deal with underperformers. In India, for example, a car downgrade sends an executive a strong message that is visible to others. A second barrier, Asian managers point out, is that regulations in many Asian nations make companies reluctant to act against low performers. True, the situation is changing, but it will be some time before a culture of consequences for underperformance can take root. Finally, while Asian executives assert that their organizations are designed to achieve targets and goals, many of them acknowledge that those organizations have no transparent and effective processes (including such basics as clear job descriptions and responsibilities) for tracking and measuring performance. Asian companies also lack the skilled people and the experience to carry out and coordinate the processes needed to optimize performance. These gaps are hard to fill, but Asian companies must strive to do so and to address other performance-management issues as well. The winds of change are blowing strongly in Asia: liberalization and privatization, globalization, entry into the World Trade Organization (in Chinas and

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Indias case), and e-commerce are transforming every aspect of doing business in the region. Recognizing this trend, some Asian companies are strengthening their performance-management methodsand the capital markets have rewarded their efforts.

Ruby Chen and Scott Lpez-Gelormino are consultants in McKinsey's Taipei office, and Steve Shaw is a director in the Hong Kong office.