In this CEO Insights blog, Martin reflects on his recent visit to Hong Kong where he attended the Asia Pacific Regional Conference
The last of this summer’s BDO Regional Conferences was the Asia Pacific, a two day event attended by firms from as far apart as New Zealand and India and focusing on BDO’s strategic ambition, as well as Hong Kong’s economic outlook, and its situation in the context of the Asian and global economies. This was my fifth visit to Hong Kong and eight years since my first visit – looking back, there have certainly been some changes during that time. Obvious changes are the national flag and the disappearance of the former British Colony’s red post boxes, now replaced by the typical green ones of China. But many things remain the same – not just the splendid horseracing and unbeatable night life energy, but the economy of Hong Kong itself and the continuing healthy atmosphere of economic freedom that enables the country’s position as a premium financial centre to flourish.
Hong Kong is known for its expansive skyline and deep natural harbour and has a land mass of 1,104km2 and a population of over seven million people, making it one of the most densely populated areas in the world. For such a small territory it is an astonishing economic success story and has maintained its strong position on the global economic stage since 1997 when China resumed sovereignty. Hong Kong is still the world’s tenth largest trading economy, and has the second largest stock market in Asia – after the Tokyo Stock Exchange - with approximately 1,650 publicly listed companies.
As one of the world's leading international financial centres, after London and New York City, Hong Kong's service-oriented economy is characterised by low taxation and near free port trade, while its currency, the Hong Kong dollar, is the eighth most traded in the world. It is also China’s largest source of both inward direct investment and foreign capital, and as such is regarded as the gateway to mainland China.
The cooperation between Hong Kong and mainland China remains healthy and successful. Hong Kong is governed under the principle of ‘One country, two systems’, through which China agreed to give the region a high degree of autonomy and to preserve its economic and social systems for fifty years from the date of the handover. In my opinion, this is the primary reason for this sustained success, with the sensible approach of the China and Hong Kong authorities enabling both parties to realise economic achievement. At BDO, we understand that many markets are unique - and Hong and its link to China is a good example – and so each of our member firms is given the freedom and autonomy to provide the right service for their clients.
But I think the main challenge here is to ensure the continuing healthy cooperation between the two sides. When Hong Kong became part of China in 1997, there were legitimate concerns about what would happen and how much influence China would hold over Hong Kong and its development potential. It is natural that a big powerhouse such as China could have been heavy-handed in overtaking the smaller economy, but by working together, they have realised a situation where one plus one is more than two. Many Hong Kong companies have businesses in mainland China and likewise, an impressive number of Chinese companies use Hong Kong as a gateway to Chinese investment.
According to the Heritage Foundation, Hong Kong remains the world’s freest economy, evaluated by its rule of law, regulatory efficiency, the size of the government and open markets. This is quite remarkable considering the many concerns back in 1997. With hindsight, those fears were somewhat premature, and it’s good to see that we continue to reap the rewards and benefits of such a strong economy.
Also remarkable has been BDO’s growth in Hong Kong over the last 5 years alone. With over 50 directors and 800 staff, BDO Hong Kong is considered one of the leading firms there and boasts an impressive portfolio of clients, for whom the healthy cooperation with BDO firms around the world is important, as global clients are keen to take advantage of its open gateway into Asia’s markets. We have often seen clients setting up a Hong Kong operation in order to get into mainland China and BDO advisers know the landscape inside out – because of course the majority have been born and raised there. Many BDO personnel speak English, Mandarin and Cantonese and this ensures the seamless service delivery to a range of clients who have interests in the territories and for whom cross border activity is vital to success.
Guest blog by Emree Siaroff, Managing Director, Human Capital, BDO Canada LLP & Global Head of People, BDO International Limited.
August is a notoriously slow month for many businesses and most, particularly in the northern hemisphere, are currently experiencing the inevitable ‘summer lull’ of the holiday season. Forward-thinking business leaders and HR professionals, however, are using this time as an opportunity to sharpen their pencils and think about their talent management strategy, which is extremely important in keeping businesses on the front foot in an increasingly competitive marketplace. As the busy back to school season fast approaches, and as budgets are being signed off and business activity ramped up for a new quarter, here are some of my own thoughts on key factors that can influence any business’ ability to attract and retain the best as the ‘war for talent’ heats up.
If you’re not familiar with said war for talent, in a nutshell it involves a prolonged period of intense competition in which companies regularly raid each other for the top applicants. Indeed, my experience has been that demand tends to increase in September, because employees who might have only been thinking about changing jobs in recent months start to seriously consider the benefits of a fresh new challenge.
Together with many other business leaders and HR professionals worldwide, this war for talent is the biggest challenge in my role, so I’d like to try to explain what’s driving it, and suggest how to manage the impact it can have on your business.
We are all aware that, as the economy continues to grow, businesses are becoming more international. This opens up new and exciting opportunities for employees, and in particular those who are mobile and wanting to travel. Some key trends are emerging in terms of people wanting to move between borders and it’s evident that it’s certainly more fluid between groups of countries with common characteristics. In the Commonwealth countries around the world, for example, their similar structures and backgrounds make it a lot easier for a person to move from one to the other: you see a great deal of movement by Australians, South Africans, British and Americans. By the same token, those same cultures tend to be looking for experiences abroad.
At the same time, the economic upswing is changing the talent battlefield on a country-by-country basis. In Canada, where I come from, if you compare the number of people turning 65 with the number of people coming out of school, there isn’t enough talent emerging to meet workforce demands. Similarly, in countries including Japan, Germany, France, the UK, the US and Canada, the ageing populations mean that increasing numbers of retirees will increase workforce demand - much of it is pure demographics.
In this situation, the shortage is not only the number of people available (there may be many) but the number who have the required advanced skill sets. The training and talent I’m looking for in the future is based on the approach that the technical requirements are the ‘given’ that you need to get in the door - but not at the expense of soft skills. In our profession, I’m always looking for well-rounded candidates who have strong sector expertise, local knowledge and an ability to interact effectively with their clients and build strong relationships.
How can business leaders and HR professionals manage these changes? It’s fundamental for companies to adopt a holistic approach to talent management. Addressing skill shortages throughout the entire organisation - not just at the most senior levels - should be a top priority and will become more and more critical. Companies need to rethink their strategies and develop a mindset that emphasises the importance of talent to their success. Those businesses that see talent management as a key survival strategy to differentiate them from competitors and position them to benefit from the eventual upturn are those that not only survive, but progress.
And there’s another challenge: getting people interested in your profession. What’s keeping me up at night is how to stay on top and stimulate interest in our profession going forward. In my experience, students have been shying away from accountancy over the last few years, or looking at other areas, such as finance, banking and investment banking. Perhaps not all the students and individuals in our profession have a true understanding of the value that a member firm of a network – such as BDO - can bring them in terms of the exposure, experience and career progression. At BDO, our strategy for winning the talent war is to work hard to create awareness of the value and career benefits of working in a firm in the mid-tier of our profession - as opposed to a boutique or much larger entity.
In summary, in the midst of the summer lull, now may be a good time to for companies to rethink their tactics: they’re likely to gain more competitive ground as a result. Many organisations responded to the economic downturn by adopting positive talent management practices - now, as the crisis recedes, the war for talent is back.
In this CEO Insights blog, Martin reflects on his recent visit to Mexico where he attended the inaugural BDO Americas conference.
In the past few weeks, people have descended on a major Latin American country to celebrate and share in something they are passionate about and showcase the best of their talent. You would be forgiven for thinking that I am talking about this summer’s most enjoyable and widely watched and discussed World Cup. I am however, describing BDO’s inaugural Americas Conference, which brought together 2 BDO regions: Latin America and North America & the Caribbean.
Admittedly, the analogy may be a little far-fetched but it is true to say that I, for one, had been looking forward to this gathering as much as to the global sporting occasion: I’m hopeful that a number of my colleagues might agree.
BDO America’s Conference marks a change in BDO’s regional structure, for the first time bringing together our colleagues from as far apart as the northern cities in Canada to Chile, and encompassing Argentina, the United States and Mexico, amongst others – the latter was the venue for this joint event. In total over 170 colleagues attended the two day meeting which saw us both take important time to celebrate our success across these territories and to look ahead and evaluate future opportunities and challenges in the region: not just for our own network but for our clients and other businesses too.
On the near-11 hour flight from Mexico City to Amsterdam, I had plenty of time to reflect on the conference and on Mexico as a country and a place to do business. Here are some of my thoughts:
It has to be said that Mexico has many of the ingredients to make a first-class centre for business. Its prime central location on the continent is made better through fantastic flight connections that serve not only the region but the rest of the world too. Add to that its economic stability: Mexico is the 14th largest economy in the world in nominal terms - and the 10th largest by purchasing power parity, according to the World Bank. Inflation remains steady at 4% and unemployment at 5%: with healthy growth, this is clearly an attractive place to do business. It’s no wonder that Mexico placed 10th in our Global Opportunity Index of countries* where CFOs intended to invest and expand.
And the same can be said for our Mexican firm. Joining the network in early 2011, it has seen very healthy growth and has almost doubled its revenues since then. And, not unlike Mexico’s airports, which provide connections to the rest of the world and underpin its economic prosperity, BDO Mexico has gone from strength to strength by joining our network and being able to benefit from its global reach, expertise and infrastructure.
But countries, as well as businesses that are enjoying growth must keep one eye on the future challenges that prosperity can bring. Take Mexico City: it’s a vibrant city bursting with its colonial history, as well as thriving modern day businesses. But it now has a population of over 24 million people, 5 million cars on its roads and 6 million people using public transport every day – all of which put strain on the country’s infrastructure and limit its potential for further growth.
A less palatable result of the country’s connections to the rest of the world, which have attracted and brought in investment, is that this has also opened up doors through which some of Mexico’s best brains and talent have exited. Mexico was ranked as the world’s fourth major exporter of brain power in 2012, clearly demonstrating that its rising middle class has significant access to opportunities to develop their skills and become internationally competitive. President Enrique Peña Nieto has now launched a project to reduce the ‘Mexican brain drain’, and implemented a 15% increase in the federal budget designated to science and technology.
This war for talent is a challenge facing businesses of all sizes all over the world and is one that I’m sure will continue as the population of many countries becomes more and more mobile. A key way to combat this is to create a culture that empowers employees, rewards them appropriately and continues to offer opportunities for career progression. As CEO of our network I’m passionate about making sure our firms have the autonomy to make decisions concerning their people as well as their service delivery to clients – BDO firms are not restricted by clunky global processes – while at the same time reaping the benefits of being part of a thriving global network in which all our firms adhere to internationally agreed working procedures and quality controls, resulting in a uniform approach worldwide.
*BDO Ambition Survey 2012
The 2014 FIFA World Cup in Brazil has already seen some spectacular highs and lows: Costa Rica has come from under the radar to qualify top of their highly competitive Group – knocking out England and Italy in the process – and then scrape through to the quarter finals; the reigning world champion, Spain, failed to progress beyond the group stages – in part thanks to a stunning performance by my home team, the Netherlands, and in particular, van Persie – and Uruguay’s talisman, Luis Suarez, is unfortunately once again making headlines for all the wrong reasons.
It may seem like an unlikely comparison, but you’d be surprised how many parallels can be made between the world of international football and that of global accountancy - not least of which is the importance of strong leadership.
When I was watching Louis van Gaal giving the Dutch team last-minute advice during the water breaks of their nail-biting match with Mexico, I found myself thinking about my own views on leadership, and I’d like to share my World Cup-inspired advice for being the best leader you can be:
Don’t be afraid to break with tradition – it’s true that the way a company is operating shouldn’t be changed just for the sake of it, but equally, it’s vital that the men and women in leadership positions have the strength and courage to break with tradition on occasion and try something new. Too often, companies and organisations get stuck in a pattern of doing things a certain way because that’s what’s been successful in the past. In a world in which technology and the business environment as a whole are rapidly changing the way we do business, this simply won’t cut it anymore. A good leader has to be prepared to change their approach for the wider good - Brazil won the tournament in 1994 only when they abandoned their romantic free-flowing heritage and played instead to their strengths. At BDO, we have put in place an ambitious strategic goal in 2014, which we fully expect to see realised in 2019: this takes both courage and vision.
You’re only as good as your support staff – a good leader, like a good football manager, recognises that not only does he or she not know it all, but that their strength as a leader comes from the strength of their leadership team. The outside world might think that the best CEOs, Prime Ministers or Presidents know the answer to everything, but the reality is that they have whole teams of people behind them to act as their eyes and ears – and advisers - on the ground. The golden rule of good leadership is not to go it alone. Instead, true leaders surround themselves with people who have the skills, expertise and experience to create the complete package – although the Argentina team of ’86 would be an exception here – Maradona was good enough to be a one-man team (or at least, he thought he was…)!
Trust is vital – once the right people are hired, it’s imperative that they’re given the trust and freedom to achieve their best. It would be like signing Lionel Messi and then asking him only to shoot when he’s told – all the best opportunities will be missed. A good leader makes sure that everyone is clear what the company or team wants to achieve, as well as what is expected of them, and then gives them the freedom to do what they think is right. At BDO, we invest in our people and we provide an environment where they can develop their careers and really contribute to building the business – which they will lead in the future.
Emotional intelligence shouldn’t be underrated – as leaders of some of the highest-paid individuals in the world (not to mention some of the biggest egos…) it’s fair to say that most football managers are adept at managing strong personalities. But the same should apply in the Boardroom. A good leader needs both a high IQ and a high EQ to understand how to get the best out of each and every individual.
Putting a legacy in place – finally, while a good leader is of course remembered for what they achieve, it’s also vital that senior executives think beyond their own careers – it’s about putting in place a succession plan for future growth. This means not just nurturing those who are likely to take the reins in the future, but ensuring there is a sufficient pipeline of talent on and off the ‘bench’ to be sure of achieving the business team’s long-term goals. It will be fascinating to see if Spain has a succession plan and enough new talent coming through, now that it seems the glory era of Casillas, Puyol, Xavi and the rest is coming to an end.
I realise that football analogies only go so far in the corporate world, but nonetheless, during this exciting summer of sport there is much to be said about having a leader in place who is strong enough to galvanize a team and to see them go on to achieve great things.
It is of course too early to predict who will be lifting the trophy in the Estadio Do Maracana stadium in Rio – but I’m prepared to wager that there will be a strong manager at the helm.