Leadership continues to be the top Human Capital trend in Southeast Asia with 97% of business and HR leaders in the region prioritizing it above other talent issues. This runs contrary to global results, where the urgency of organizational redesign has over taken leadership, with 92% of respondents identifying the critical need to redesign their organization to meet global business demands. This is according to this year’s Southeast Asia results of Deloitte’s annual Human Capital Trends report, titled “The New Organization: Different by Design.”
“With advancing digital technologies, changing workforce demographics and speed of innovation, it is becoming increasingly important for companies to evolve leadership models, redesign organizational structures and drive an employee-centric culture in order to remain relevant and competitive in the marketplace,” says Nicky Wakefield, Human Capital Consulting Leader for Deloitte Southeast Asia.
Tackling the issue of Leadership
Surprisingly, in spite of its importance, there is a wide 60% capability gap where leadership matters are concerned. A capability gap is defined as the difference between the importance of a trend and the perceived readiness of the organization to deal with it. This gap has widened since 2015, increasing by 19% from last year’s 41%.
This result is indicative of the current volatile business environment, where even though business leaders recognize the trends as important, they have chosen to focus more on matters pertaining to improving shareholder value rather than human capital and talent issues.
“Leadership is a perennial challenge for organizations operating in Southeast Asia. This challenge can be overcome in large by the evolution of leadership models and solutions; however running faster on the traditional leadership development track will not solve this perennial challenge.
"Companies must make and sustain investments in identifying and nurturing leaders earlier in their careers. Turning the traditional corporate hierarchy on its head, in a disciplined way, will help develop networks of teams and spawn more leaders faster. Senior leaders and traditional organization structures will need to continue to evolve to take full advantage of a re-energized leadership pipeline,” says Wakefield.
Businesses recognize that leadership development is a key priority, and are aware that there is a need to accelerate leaders up the pipeline to ensure that they are equipped with future-focused skills. To assist companies with their leadership development needs, Deloitte launched its Deloitte Leadership service line globally & in SEA in September 2015.
“While C-suites and boards in Southeast Asia recognize that leadership development is a key priority for their business, many do not have the capability to address the issues that come with it. The unique diverse markets within the region – with some more mature than others – poses specific challenges. There is a need to break away from traditional structures and mindsets toward leadership development, and embrace transformation,” says Indranil Roy, Head of Deloitte Leadership, Southeast Asia.
Some of the challenges for leadership development in Southeast Asia include digital transformation, globalization and regionalization, succession planning, misalignment of leadership capabilities and executive leader readiness.
Urgency of organizational redesign
The urgency of organizational redesign, while not as keenly felt in Southeast Asia as it is globally, is nonetheless beginning to take root as a top Human Capital issue, evident by it being in the top five despite being a new trend. 91% of business and HR leaders in Southeast Asia believe that this is a key issue, but more than half (53%) feel that they are still not ready to address it.
“Companies globally are overhauling their organizational structure and shifting away from hierarchical and functional business models towards a cross-functional “networks of teams. This shift is encouraging greater collaboration, agility, customer focus and employee engagement,” says Wakefield.
“Business and HR leaders in Southeast Asia may need to play catch-up and transition their existing structure towards one that empowers teamwork, develops leaders faster and delivers superior outcomes. This is likely to means significant changes to core HR processes and solutions such as recruitment and onboarding, performance management and remuneration. These need to evolve to ensure people are selected and rewarded in line with the new operating model. Such demands on HR will definitely require a step change & increase in capabilities for many HR organizations in the region.”
The top trends in Southeast Asia, in order of importance, are Leadership, Engagement, Organizational Design, Learning and Culture.
Zooming in on Singapore
The top five trends for Singapore in 2016 and their order of importance are the same as those of Southeast Asia.
Year on year, Leadership continues to be the top trend globally and in Southeast Asia. Respondents also perceive leadership as increasing in importance (11% increase globally and 15% in Southeast Asia compared to last year).
In Singapore, 93% of the respondents have indicated that Leadership is their key priority. This is more than the global result (89%) and almost as high as that of Southeast Asia (97%). However, in spite of the importance, less than half of the respondents are ready or very ready to tackle this issue.
Additional findings indicate that most Singapore companies are inadequately prepared for either developing current leaders or putting in place programs required to develop effective future leaders. Only 6% of respondents have a strong succession planning program, while only 12% have programs to build global leadership, millennial leaders and role-based leadership programs. Lastly, only a quarter reported having leadership programs across organizational levels.
“There is still much more to be done, even though investment in leadership development has seen a general increase. Senior leaders need to take on new coaching roles, and younger leaders need to be identified, assessed and developed early in their careers using more structured and scientific approaches. In Singapore, there are senior leaders that possess a legacy hierarchical Asian mindset, and they will need a paradigm shift in their thinking to adapt to the changing trends and challenges. Also, more rigorous leadership programs are required to ensure a strong pipeline for building effective leaders for the future,” says Roy.
In terms of organizational design, 90% of Singapore leaders surveyed are aware of its increasing importance, with almost half of the Singapore respondents (46%) reported to be ready to deal with the challenges.
“There are definite areas for improvement in this space. Organizations in Singapore need to re-look at how to structure themselves for success as they adapt their organizational design to compete in the highly challenging local and rapidly expanding regional markets. In addition, employees will need to develop more effective teaming skills to work in and lead project based groups to deliver optimal results,” says Jason Seng, Human Capital Director for Deloitte Singapore.