YOU CAN'T GROW IF YOU CAN'T MANAGE Businesses in Asia are expanding so fast that they are running out of people to lead them. Some are taking unusual steps to develop a whole new generation of executives.
By Ford S. Worthy REPORTER ASSOCIATE John Labate

(FORTUNE Magazine) – WHEN THEY COME to compete against you, the Asians sometimes seem ten feet tall. They appear to have everything: brains, drive, determination, and capital. But, increasingly, they lack one crucial element for success. Take the case of Ng Pock Too. He certainly appears to have all he needs to fulfill his dream of transforming his Singapore shipyard and construction company into a diversified multinational corporation. Like other chief executives in Asia, he can count on an abundance of financial resources and business opportunities. From his years as a top government official, he also has that most valuable asset -- connections. What he lacks is what much of Asia's newly industrializing world beyond Japan is also looking for: managers. ''It's the greatest restraint I face,'' says Ng, chief executive of the Sembawang Group. Not just any managers, but flexible, creative professionals at home in an increasingly competitive and sophisticated market. While the nature and severity of the shortage vary from place to place and from industry to industry, no company doing business in Asia can afford to ignore it. The bottleneck both stymies Asia's ability to compete in global markets and limits the growth opportunities of foreign companies in Asia. Philip Ng, IBM Singapore's managing director, says his team is ''perpetually under attack'' by headhunters. The constant pressure is forcing IBM and other well-managed multinationals to devote even more attention to training young managers and to devising new incentives to keep them from leaving once they have been developed. The shortage is caused partly by Asia's stunning economic progress. As consumer spending power has gone up and regulatory and tariff barriers have come down, foreign multinationals have swooped in to hire the best local managers. Thailand's remarkable success has so taxed its limited supply of managers, particularly those with engineering backgrounds, that companies like Sony say the shortage has begun ''to bite into our ability'' to keep growing there. Hong Kong's growth problems have been aggravated by the specter of 1997, the year China takes control of the British territory. This is driving tens of thousands of managers to Canada and other havens abroad. THERE ARE ALSO other, more complex causes. Taiwan and South Korea, the two heavyweights among the newly industrializing economies, face not so much a quantitative shortage as a qualitative one: The skills its managers have are simply no longer appropriate for the changing competition they face. As wages have risen, the region's traditionally low-tech companies have had to move into higher-value-added products dependent upon expertise -- overseas marketing sophistication, for instance -- that their old-line managers often do not have. As authoritarian governments in both countries loosened up, workers began to challenge their bosses for the first time, creating a whole new set of managerial problems. Says Lee Hak-chong, a dean at Yonsei University in Seoul: ''Democratization has produced a tough and loud labor force.'' The search for more of the right kind of managers is challenging some of the region's most basic values. Once immovable traditions -- owners have absolute power, senior managers get the promotions regardless of competence -- are slowly giving way. A new wave of thinking is bringing forward a fresh generation of managers, men like Ng Pock Too and Nelson An-Ping Chang. After getting an MBA degree from New York University, Nelson Chang went back to Taiwan. He heads an innovative computer services firm and a large cement manufacturing company that his father founded in 1954. With his long, dark sideburns, Chang, 38, could easily fill the part of the omnipotent, dictatorial boss, the role favored by his father's generation. He has instead renounced that style because he thinks it stifles productive ideas. Says he, proudly: ''I am a participatory manager.'' The participation can get rough. To make certain that his senior executives take issue with him, Chang sometimes deliberately sets overambitious goals that they must argue against -- or suffer penalties if the objectives are not met. Belatedly, the region's universities are trying to respond. South Korea has added seven new MBA programs since 1986. Singapore has just launched a second business graduate school, and a third university is in the planning stages. Taiwan's ruling political party, which has always tightly controlled higher education, is talking about easing laws that have held down the number of private universities and other schools. Business schools are broadening curriculums in response to criticism that they have been turning out narrow specialists. At the National University of Singapore, business majors will now be required to take courses in such areas as psychology and Japanese culture. Chow Kit Boey, director of the school's Centre for Business Research and Development, says professors are also challenging students to become more ''participative'' and ''free-thinking.'' STILL, only very few Asian workers are university educated. In Singapore, for instance, the figure is just 6%, compared with 23% in the U.S. and 16% in Japan. ''Our system is very elitist,'' says You Poh Seng, executive director of Singapore Institute of Management, which offers a broad range of courses for managers who never went to college. Of course, companies should be training managers too. Until recently most have done little more than give the matter lip service. Older Asian executives preferred investing in tangible assets -- new machine tools or inventory -- rather than in intangible resources like managers. American or European managers, in Asia for a three-year hitch, sometimes figure they will be back home before any investment in training pays off. So they scrimp on it to make the bottom line look better. The Japanese often are even stingier, partly because they don't want to share any of their expertise with the locals. But now a growing number of companies are beginning to realize that such short-term thinking will lead to competitive disaster. Matsushita, the Japanese electronics giant, and other big companies are setting up their own training units. Matsushita's Human Development Center in Singapore has trained more than 500 employees in the past year. Sampo Corp., a rapidly diversifying consumer electronics company in Taiwan, calls its facility in Taipei the Enterprise University. Other companies are hiring professors or contracting with universities to create and conduct what might be called proprietary mini- MBA programs, tailored to meet their managers' specific needs. Procter & Gamble asked Chinese University of Hong Kong to develop a training program using P&G case studies for the young managers in its plant in Guangzhou, China. Xerox, Unilever, Glaxo, and other multinationals enroll key executives in short, intensive courses put on in Asia by Insead, a top European business school. Insead's prices are guaranteed to help you think long term: A customized, one-week program typically costs $80,000. With their Confucian respect for learning, Chinese managers in particular will devour anything that looks, tastes, or smells like education. Jean Francfort, a Frenchman who heads Thomson Consumer Electronics' regional training, tells of management courses his employees in Malaysia take on Saturdays and Sundays. Says Francfort: ''This would be quite unbelievable in Italy, Britain, or France -- that people would go to training courses on weekends.'' FOR THE MOST farsighted companies, such classroom exercises supplement on- the-job training. While U.S. and European companies have long moved promising managers through a variety of jobs to expand their skills, the practice is just catching on in Asia. Stan Shih, founder and chairman of Acer, a fast-growing personal computer maker in Taiwan, acknowledges that during the 1980s he didn't have time to think about things like job rotation. As a result, he says, his management team is expert in technology and marketing, but needs experience in such general management disciplines as finance and human resources. To be sure that it rotates managers through the most appropriate jobs to develop their potential, Singapore International Airlines continually assesses how far up the ladder a person is likely to go. Managers are then told in face-to-face evaluations how they're doing. That may not sound significant in the West, where such sessions are routine, but in a culture that discourages direct criticism, the encounters can be agonizing for both boss and subordinate. Through training in classrooms and on the job, Asian managers are trying to overcome weaknesses in three critical areas: the ability to plan strategically, to provide high-quality service, and to operate in the international marketplace. Take strategic thinking. Korea, Taiwan, and Asia's other newly industrializing economies grew explosively in the 1970s and 1980s largely because they became low-cost producers of goods that were invented, designed, distributed, advertised, and sold elsewhere. Often a product's only connection with South Korea was a MADE IN KOREA tag. Now companies in these countries are no longer just filling orders. Samsung Group in Korea, to pick out one, is creating products to be marketed under its own brand names. To compete at this higher level, says personnel chief Y. C. Cho, ''we desperately need strategic planners, but they just aren't around. We're training some now, but they won't be in place for another ten years.'' The notion that Asian managers have a weak tradition of service is surprising to Westerners who have been pampered on any flight of an Asian airline or catered to in the region's many superb hotels and restaurants. But it's not to residents of the region, including Western expatriates. In their home markets, Asian companies have been accustomed to delivering quality and service well below Western or Japanese standards. ''Traditionally, we didn't have to worry about service,'' says Dirk Rossey, a manager for Inchcape Pacific, a British company in Hong Kong that markets countless consumer products throughout the region. ''Local consumers were always quite satisfied with low-quality service.'' INCREASINGLY AFFLUENT Asian consumers are now demanding more. To give it to them, Inchcape and other companies now barrage their workers with the kind of sermons on service and quality that have become so familiar in the West. E- Land, a fast-growing clothing-store franchiser in Korea, starts with the basics: The standard training course requires managers to smile a minimum of 60 times a day. Says Philip Shin, an E-Land director: ''The E-Land manager of the future is definitely going to be customer-friendly.''

Learning to operate internationally usually means adding English language lessons for managers. Ford Lio Ho, the biggest auto assembler in Taiwan, goes several steps further. The company, a joint venture between Ford and local investors, routinely sends managers on short training missions abroad. Last year it recruited six students from Taiwan at U.S. business schools. Better managers are not worth anything if you can't keep them. That means not only raising their pay but also doing away with the traditional Chinese system based on longevity rather than performance. Sampo, the electronics company in Taiwan, is among many companies that have tackled the painful transition. Sampo's old salary structure sometimes resulted in differences of as much as 200% for managers of equal rank, responsibility, and performance if one was older and had been at the company longer. Says Robin Tsao, Sampo's human resources chief: ''We now pay according to ability.'' Companies are also experimenting with fringe benefits. While not widely employed by Asian companies, stock options, profit-sharing plans, and comprehensive insurance and pension packages are gaining popularity, reports Peter Lye of Hay Management Consultants in Singapore. The need to keep managers happy is even changing the look of the office, typically rows of metal desks on a linoleum floor in a big, drab, open room. At China Securities, a brokerage co-founded in 1988 by Nelson Chang's family, the floors are marble, dark paneling covers the walls, and private offices abound. Chang, who claims with satisfaction that another of his companies was the first major firm in Taiwan to introduce partitions, says his father's generation was oblivious to such intangibles as the ambiance of the office. THE SHORTAGE of managers has yielded other, more tangible byproducts. Some multinational companies have come to realize that one way to keep effective Asian managers is to give them a shot at the top jobs now held by Western expatriates. Arthur Pappas, an American who heads Glaxo's regional operations, has sent home ten Western managers since 1989, replacing them with locals or one of the growing number of Asians who work in the region but outside their home countries. Among his current tasks: to train or recruit an Asian to take his place. Women are benefiting too. Though still not very welcome as managers in Asian companies, they are finding opportunities at Western firms. Metropolitan Life stressed its equal opportunity policy when it entered Taiwan two years ago. The company thinks openness toward women gives it an important recruiting advantage over local competitors. Today, roughly half its professionals are women, including the controller and a senior actuary. There may well be a final, less obvious consequence of Asia's manager shortage. ''It is not necessarily a bad thing,'' says Daniel M.L. Tso, until recently a Hong Kong-based regional director for Britain's United Distillers. Tso thinks that the tight market for managers inhibits the growth of bureaucracy. Without the shortage, he figures his management group of ten might easily have swelled to 15. Says he: ''With a leaner, more coherent management team, I can do things more efficiently, more quickly.'' By forcing greater responsibility upon managers, the shortage also makes jobs more challenging and rewarding.

CHART: NOT AVAILABLE CREDIT: FORTUNE TABLE/SOURCE: THE HAY GROUP CAPTION: HOW MANAGERS' PAY COMPARES These figures are estimates of total compensation for middle managers at multinational companies in the region.