Economic momentum may have slowed down, but Asia continues to be the dominant force in driving global growth. The difficulty for leaders is to position their businesses in ways that overcome the current inflationary – or, in China’s case, deflationary – cost pressures at play to emerge strongly when the recovery begins.  

 

Cut too much and a business loses its competitive edge. Equally, those businesses that over invest in the push for growth can end up in serious trouble if customer demand doesn’t meet forecasts. The financial landscape, specifically the cost of debt, is posing a new kind of challenge for executives and Boards. 

 

It’s something that was discussed in depth at Criticaleye’s recent Asia Leadership Retreat, held in association with AlixPartners, together with the ongoing concerns about talent, leadership strength and technology, not to mention a complex and disconcerting geopolitical landscape.  

 

Lian Hoon Lim, Partner and Managing Director at AlixPartners, described the financial obstacles facing a number of businesses. “If you compare the different regions, companies operating in Asia are more likely to prioritise growth over profit. These organisations often grow fast enough, [such as around] 10 or 15 percent per year on the top line. In my experience, bankers, lenders and investors are happy with it too. The challenges occur when disruption takes place and a business is knocked off course suddenly as they haven’t been looking at profits. That’s when they have a big problem.”  

 

According to Lian, “leaders must be clear strategically about their business”. He explained: “In this part of the world, where there is a lot of growth, they need to remember that sometimes they’re going to be rising with the wave. They mustn’t get too carried away by this and think they’re superstars, as otherwise they may do silly things. Of course, they must seize the opportunities, but they also have to be clear about what’s happening.” 

 

Surf’s Up     

 

Aligning on this strategically as a leadership team and Board is never straightforward. Given the intense focus in the region on operating model change and performance improvement, it’s easy for tensions and contrasting points of view to appear in the top team. 

 

Surya Rai, Regional HRD – ASEAN, Greater China, Japan & Korea, Reckitt, took a pragmatic approach. “Long term is a series of short-term decisions,” he explained. “Every month and quarter, there are new stimuli coming in and as a leader you have to decide how to respond.” 

 

Executives must possess a degree of comfort with uncertainty. He said: “The biggest challenge for senior leaders is mindset and the ability to manage what’s happening today, while also keeping an eye on the future. If you’re to be successful, then you need to have ambidextrous leaders to manage the different stakeholders, whether that’s customers, the Board, or the people on the ground in the business … The task for leaders is to cascade strategy into an operational plan.”     

 

The ownership structure of a business is important too, explained Su-Yen Wong, Board Member at Kemin Industries. She told the audience: “It influences expectations around strategy and time horizon, which may vary depending on whether a company is listed, private equity-backed or family owned. As a Board, ensuring alignment on the overall ambition and priorities is essential.”      

 

Most investors aren’t overly comfortable with uncertainty, so it’s wise to keep them informed. Su-Yen said: “Some companies excel at engaging their shareholders, helping them understand the strategy and operations of the business for a long-term perspective. Strategy and alignment ought to also involve the shareholder base.”     

 

This in turn feeds into the importance of open communication internally. Su-Yen added: “Managing change from a Board perspective requires consistent collaboration with the management team. Keep asking: ‘How are we tracking on this? Are we moving forward?’ As long as there's movement in the right direction, allow the changes time to take effect. It's not easy to shift a culture or ways of working overnight.” 

 

Matthew Blagg, CEO of Criticaleye, said: “The great leaders, whether they're operational or independent directors, take insight from everywhere. They're constantly evaluating and looking for input. When you have that degree of curiosity around you, I think it also helps build into a culture of alignment.” 

 

According to Matthew, there will be differences of opinion around performance, but this doesn’t have to be seen as unhealthy.  He said: “Tensions are going to emerge as there are challenging conversations to be had in many companies about delivering on today’s numbers versus investing for the future. The reality is that it’s a difficult balancing act and it’s the same for management teams as it is for Boards. If tension does exist, it needs to be of the positive variety so it’s creating forward momentum, rather than undermining things.”  

 

Su-Yen agreed: “A degree of tension is beneficial, but this is all about balance. It’s about spanning the two dimensions of challenge and support between the Board and management. Oftentimes, we need to go through the process of challenge to get to genuine support and alignment. 

 

“First, you need the right composition of people who bring diverse experiences and insights. Next, create an environment which encourages different perspectives without fear of retribution. This is about creating safe spaces for constructive debate.”   

 

After all, a leadership team that simply agrees with one another is not going to thrive. Gnarly conversations are somewhat inevitable, especially at a time when a strategy to ride the waves of growth needs to be complemented by a robust approach to cash flow and profit. Getting this balance right has never been more paramount for business leaders across the Asia region. 

 

 

Marc Barber, Director of Content, Criticaleye 

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