Deloitte Human Capital survey
Leadership is still top priority in Southeast Asia amidst the rising urgency of organizational redesign in the new digital world of work
Jakarta, 30 May 2016 — 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”.
Deloitte's Global Human Capital Trends 2016 survey is one of the largest ever global studies of workforce, leadership and HR challenges. The Southeast Asia results are a subset of the global report and examines the responses of 213 HR and business leaders across countries in the region, including Indonesia, Malaysia, Singapore and Thailand.
“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 Ms 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 Ms 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.
Deloitte Leadership works closely with other Deloitte experts, for example in strategy, digital and risk management, to help organizations with these challenges – to really look at their leadership questions with a new comprehensive and invigorated lens. We strive to help companies across 4 domains:
- CEO And Board Advisory – providing expert advice on all talent and leadership issues, for example CEO/CXO Succession and acceleration, board succession and executive talent review and acceleration
- Business Transformation and Leadership – ensuring that the leadership issues which inevitably derail the best intentioned transformations are tackled upfront and followed through. Examples of transformations include digital, globalization and cost optimization.
- Leadership Acceleration – helping to accelerate the pipeline of leaders by building the right future focused capabilities. This can take the form of leadership development, coaching, cohort based learning, action learning and flagship programs.
- Return on Leadership – assisting organizations as they take stock of their total spend on learning and leadership development, and take innovative action to optimize and enhance impact and ROI (Return on Investments)
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 Ms 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 Indonesia
Indonesia shares four of its top six trends (there are five trends of joint importance) with those of Southeast Asia. Indonesia’s top trends in order of importance are Leadership, Culture, Learning, Engagement, Design Thinking and HR Capabilities. Organizational Design is ranked 7th in terms of importance.
Year on year, Leadership continues to be top-of-mind and has grown in importance across the world. For Indonesia, 100% of the respondents have indicated that Leadership is their key priority. This is more than the global result (89%) and that of Southeast Asia (97%).
The result shows that the focus on Leadership is not for debate –but rather a call for action. However, in spite of the importance, only 26% of the respondents feel ready or very ready to tackle this issue.
“Seniority and tenure remain a prevalent selection criteria in Indonesia, although some companies are trying to give their leadership talent a mix by hiring from outside the company. Most Indonesia companies feel that they are able to retain their leadership talent, but are concerned about leadership effectiveness, succession planning and measuring the ROI (Return On Investment) of leadership investments,” says Rukhsana Pervez, Human Capital Leader, Deloitte Indonesia.
Sharing joint second place for Indonesia is Culture and Learning with 97% of the respondents viewing these two aspects of Human Capital as important to their businesses.
“Indonesia’s culture of “sungkan” (indirect communication and actions out of respect for others) and the value of collectivism remains pervasive in business organizations. While this creates a culture of wellbeing and harmony, it may also slow the organization down at a time when speed of decision making and drive for greater productivity is critical. Interestingly, the new generation of talent in Indonesia, particularly those who have studied overseas, are challenging the local culture and initiating a bottom-up change,” says Joanna Yordan, Human Capital Senior Manager, Deloitte Indonesia.
“In Indonesia, the face of Learning is changing rapidly with the availability and accessibility of social media, online interventions and the tech-savvy generation of employees who want to take greater control of how and when they learn. The good news is that a commitment to learning is built into the fabric of the country, with employers leading the way in funding training and giving Learning & Development (L&D) strategies more focus, for example, by establishing corporate universities and standalone L&D functions. However, there is still room for improvement when it comes to challenging the preference for traditional delivery (for example the face-to-face classroom) and to examine sourcing decisions (for example internal versus external sources),” adds Ms Yordan.
Design Thinking and HR Capabilities have made it into the top trends for Indonesia, both coming in at 94%.
“Innovation, analytics and technology are the buzz words for HR management as businesses look to HR to help solve complex issues quicker and at lower cost. This continuous evolution of HR’s role will be challenging for organizations in Indonesia where the role of HR is steadily maturing, but at a slow pace. HR functions in these organizations are still working to transition from a transactional role to a business partnership role that is increasingly required of them. With this being the case, HR functions may need to double their investment in internal capability building and at the same time look for HR talent externally,” says Rukhsana Pervez, Human Capital Leader, Deloitte Indonesia.
For more insights on Indonesia’s Human Capital trends in 2016, please click here for the report.