By all accounts, the Southeast Asian tigers are once again fierce regional contenders offering exceptional growth opportunities and human capital challenges for international organisations with the appetite to expand.
For firms to be successful, visible long-term commitment to the market, development of local leadership and HR due diligence must be top priorities on the agenda.
In the era of global competition, expanding into new markets is not a new concept however when it comes to entering the five Southeast Asian tigers: Indonesia, Thailand, Malaysia, Vietnam and Philippines, organisations should consider the sobering lessons in human capital learnt from earlier forays into China.
International organisations entering these markets will need to reinforce their commitment to being long-term players. In China, luring quality local talent to international brands has become increasingly challenging as they are having to compete with state-owned enterprises which are becoming more popular among the mainland’s young job seekers attracted to allure of growth versus the prospect of contraction or even withdrawal from the market experienced by many international companies hindered by faltering economies in their home countries. Whether real or perceived, this uncertainty is the most cited reason prompting local talent to change employers.
Secondly, many international businesses operating in China find it difficult to source quality local leaders and saw a reshuffle of its leadership team every six to 12 months, giving employees a high sense of instability and detrimental to retention. In the new emerging markets, building a team of quality local leaders will likewise be a major challenge - quite typically in low-wage countries even degree-qualified talent are not equipped to work in international organisations.
MNC’s who are rethinking their leadership development strategies are opting to fast track leaders by selecting managerial talent and sending that individual or team to headquarters for a collective period of six to nine months, over a one or two year time frame, for them to actively observe and participate in best practice in preparation for return to their home country. Having the business heads from headquarters spend time in the new market is also critical but this alone is just simply not sufficient for building a sustainable bench strength of local management.
Finally, not including HR in due diligence has proven to be another common blunder for firms entering the emerging markets of Southeast Asia, leaving themselves open to legal and reputational risk. Confusion over labour laws and regulations can be costly mistakes and quite often organisations have seen the initial labour cost advantage they gained from entry into an emerging market very quickly erode.
Not fully understanding the complexities of the local labour laws, culture and unique operating environment can be disastrous, and human capital risks are wide ranging: from the difficulty in terminating a local employee or hiring in a highly protectionist environment, to issues such as the mistreatment of workers, unacceptable workplace conditions and wage abuse - risks often faced when international businesses are
working with a local partner.
Similarly without effective or non-existent anti-corruption and compliance policies and education programs, many firms are unknowingly violating global anti-corruption laws.