Business leadership is at the core of Asian economic development, says HBS professor D. Quinn Mills. As he explained recently in Kuala Lumpur, the American and Asian leadership styles, while very different, also share important similarities.
Political connections and family control are more common in Asian businesses than in the United States. In addition, says HBS professor D. Quinn Mills, American CEOs tend to use one of five leadership styles: directive, participative, empowering, charismatic, or celebrity. Which styles have Asian business leaders adopted already, and which styles are likely to be most successful in the future?
In a talk in Kuala Lumpur on June 15 at the invitation of The Star/BizWeekpublication and the Harvard Club of Malaysia, Mills explained the differences and similarities between American and Asian leadership. Below is the transcript of his talk, “Leadership Styles in the United States: How Different are They from Asia?”
The rapid economic development of Asia in recent decades is one of the most important events in history. This development continues today and there is every reason to anticipate that it will continue indefinitely unless derailed by possible but unlikely international conflicts. At the core of Asian economic development is its business leadership—managers and entrepreneurs who sustain and create Asian companies. Do they exhibit the same leadership styles as top executives in the West?
There are important differences. Are differences attributable to different cultures or to different stages of corporate development?
But first, what are we talking about?
Roles in organizations involve more than just leadership. It is useful, but not yet common in our literature and discussion of business, to distinguish among leadership, management, and administration. They are in fact very different; each is valuable and has its place. Briefly, leadership is about a vision of the future and the ability to energize others to pursue it. Management is about getting results and doing so efficiently so that a financial profit or surplus is created. Administration is about rules and procedures and whether or not they are being followed. These distinctions are very important to clear communications among us about how organizations are run—when they are not made, we become very confused, as is much of the discussion around our topic.
Briefly, running an organization effectively involves:
- Energizing Management:
Our focus today is on leadership: how an executive sets direction and energizes his organization to pursue the direction. This is appropriate because managerial techniques are being spread fast by imitation, adoption, and MBA education. Administrative techniques were generalized around the world decades ago. So what is much different now is leadership.
Family And Political Connections
Cultural differences are important, but primarily as a matter of emphasis. For example, family leadership of business enterprises, including large companies, occurs in very similar ways in both [regions], but is more common in Asia.
Li Ka-shing [of the Hong Kong-based Hutchison Whampoa and Cheung Kong holding group], for example, runs his companies closely and is planning to pass the leadership of his firms to his two sons. Similarly, the heads of some of America’s largest firms, both publicly held and private, are the scions of the families that founded the firms.
THERE IS LESS FREEDOM OF ACTION FOR EXECUTIVES AND BOARDS IN AMERICA THAN IN ASIA.
But more common in America are firms that are run by professional managers who are replaced by other professional managers, either as a consequence of retirement or of replacement by the board of directors of the firm. The better companies have sophisticated programs for developing executives within the firm, and ordinarily choose a next chief executive officer from among them. American CEOs average about thirty years with their firms and own less than 4 percent of its shares. There is a small number of firms, which get a great deal of publicity and so seem more numerous than they are, that hire CEOs directly from the outside, with no previous experience with the firm. These CEOs are driven by a need to excel in a competitive environment (they want to win), and they insist that money is less important to them than professional achievement; but it’s hard to credit that given the enormous inflation of top executive compensation packages in America in the last decade.
Many American firms, especially most of the large ones, are more dependent on capital markets for their capital (equity and debt) and so pay much more attention to Wall Street than is yet common in Asia. Wall Street has strong expectations about the behavior and performance of executives and about succession. There is less freedom of action for executives and boards in America than in Asia.