Most senior executives who oversee China operations still report to APAC regional leaders. But as China operations have contributed to an increased share of global revenues and profits, as well as R&D and supply chain, these senior executives increasingly are gaining a more visible and direct relationship with global leadership, including the board and CEO.
In some cases this is structural with China operations reporting directly to the CEO, a member of the C-suite or an operating board.
“As China continues to emerge as an economic force, aligning global strategies with China’s 5-year plan has become increasingly important for multinationals,” said Steve Mullinjer, Regional Leader of Heidrick & Struggles, Asia Pacific operations.
According to a recent study conducted by Heidrick & Struggles, a premier provider of executive search, leadership consulting and culture shaping, multinational corporations increasingly are creating direct reporting lines for their Chinese operations leader to the CEO or board.
To examine the various reporting line models employed by multinationals and how well these function, Heidrick & Struggles’ Industrial Practice surveyed 100 senior executives in the region who oversee their organization’s operations in China. More than 90% of the respondents were from U.S., European or Asian MNCs headquartered outside China.
“There has been ongoing discussion on how to structure the reporting line between regional headquarters and global headquarters, and some companies have experimented through trial and error. Our research shows that the most common reasons for lack of communication between China operations and global headquarters are cost, and insufficient organizational efficiency,” said Seth Peterson, Partner, Industrial Practice, Heidrick & Struggles.
Some of the key highlights from the study include:
“Companies are often hesitant to make changes to the current structure because they want to avoid duplicating costs, such as costs in their finance and product design departments,” said Peterson.
“Others believe that China revenues have not yet reached a sufficient scale to justify such independent status in the next few years. It is worth noting that some respondents feel their global headquarters do not have sufficient understanding of the China market to add value through direct input,” Peterson added.
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