2009-2013 JOURNEY REPORT Hay Group Global R&D Centre for Strategy Execution Singapore

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CONTENTS

03 Foreword 04 Mergers and Acquisitions 06 Family-Owned Business 08 Corporate Centres 10 Culture Transformation 12 Human Capital Development 14 Publications and Speaker Engagements

Hay Group’s Global R&D Centre for Strategy Execution researches best practices in strategy execution globally. Based in Singapore, the centre offers a unique East-West perspective for business leaders all over the world. Our research helps provide insightful advice to executives looking to build effective organizations for the future. The centre combines Hay Group’s long-standing research tradition with extensive client experience, database and global expertise located in 86 offices across 48 countries. We aim to nurture an ecosystem for global research through open collaboration with academia and professional institutions around the world to help business leaders transform their vision into reality.

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About Hay Group Global R&D Centre for Strategy Execution

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Hay Group’s Global R&D Centre for Strategy Execution researches best practices in strategy execution globally. Based in Singapore, the centre offers a unique East-West perspective for business leaders all over the world. Our research helps provide insightful advice to executives looking to build effective organisations for the future. The centre combines Hay Group’s

long-standing research tradition with extensive client experience, database and global expertise located in 86 offices across 48 countries. We aim to nurture an ecosystem for global research through open collaboration with academia and professional institutions around the world to help business leaders transform their vision into reality.

FOREWORD  

It is my pleasure to share with you the progress made by the Hay Group Global R&D Centre for Strategy Execution since 2009.The past four years have been a momentous period for our Centre. I have seen the Centre grow from its beginnings as a small research outfit still grappling with the inexperience of infancy to a truly global R&D centre involved with multiple projects and collaborating with parties both inside and outside of Hay Group. Hay Group has traditionally been admired for its solutions that focus on Human Capital, and the Global R&D Centre is proud to further this tradition through our research initiatives. Among the milestones we have achieved along our journey are numerous contributions to prestigious publications such as the Human Capital Leadership Institute’s HQ Asia, the beginning of the trademarking process for our own Family Capital Index (FCI), and acceptance in the academic field through our contributions in various prominent international conferences.We are also proud of the human capital development that we have engaged in while carrying out our R&D work. The Centre can now boast of having a diverse team with multi- disciplinary academic backgrounds. A focus on learning, both on the job and through Hay Group’s internal training, means our team members will undergo continuous personal development. We have also trained students from local and global varsities through many internship positions, equipping them with important skills for applied research and in the business world.It is clear that there is much more that the Centre can aspire to do. Nonetheless, it would be no exaggeration to say that much has been accomplished in the last four years. Most of the research and best practices that the Centre have developed continue to be accepted internally by Hay Group consultants. It gives us great pride

when consultants use our approaches in their solutions for clients. Although the Global R&D Centre is still a relatively small team, we have played a part in growing Singapore’s business strategy and management knowledge base, and I hope you will be as excited about the Centre’s future as I am after reading this progress report.

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Dr Andreas RaharsoDirector

Hay Group Global R&D Centre for Strategy Execution

MERGERS & ACQUISITIONS  Corporate dealmakers are increasingly seeking growth by looking outside their firms. In line with this wider trend, Singapore is also experiencing a significant rise in M&A activity.In 2009, global M&A activities had slowed down due to the recent crisis. Such an unfavourable climate led the Global R&D Centre to look at how executives could maximise M&A value by engaging in deals only if an overall increase in shareholder value could be guaranteed. Our research efforts led to the Intangible Capital Model capturing the attributes of an M&A deal that were central to the success of the deal: Organizational Capital, Relational Capital, and Human Capital. Post-2009, the Centre has helped advance academic discourse and M&As practices in Singapore and globally. Our unique approach that focuses on intangible assets, known as the Intangible Capital Model, was expanded and refined. In 2010, our research uncovered certain triggers that are critical in moving intangible capital from ‘inert’ to ‘active’ states. The Centre has codified these triggers into four core drivers: Candor, Courageous Follow-through, Calculated Risks and Compatible Response. These drivers have become integral to Hay Group’s solution for value-creating M&As. Additionally, we see these drivers as important for developing best practices for the related field of HR risk management. We believe that more work can be done to introduce a stronger focus on intangible capital when dealing with the risks entailed by people within an organisation, an area of growing concern in management. Subsequently, working with leading research companies such as NASDAQ-listed Harris Interactive, and holding multiple interviews with key M&A players in New York, the Centre collected a large set of data that validated our intangible capital approach. These research findings gained acceptance during a formal presentation to an audience of over 9,000 in September 2011 at the Academy of Management Conference in San Antonio, Texas. With most of the research findings validated, the Centre began internal marketing efforts to roll out its M&A solutions to consultants in Hay Group globally in 2012. Through two white papers,

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‘Touching the Intangible’ and ‘What Lies Beneath’, the results of the centre’s analysis were disseminated to over 2,000 consultants. Hay Group’s unique and rigorous approach to M&As has seen great success across many of our global offices. Notably, an international project for CGG, spanning both Hay Group’s offices in France and United States, uses this approach. The solution for CGG remains so successful that the project’s latest results will be presented in Shanghai at Hay Group’s International Conference 2013 in November this year.Our most recent milestone is the publication of ‘Managing Intangible Capital in M&As: Asia-Pacific Report’. A 65-page report published in Aprial 2013, it provides insights on how to best maximise the returns  from intangible capital during the entire M&A process in Asia. This report, a collaboration with Mergermarket, has already reached over 18,000 M&A practitioners all over the world.The Centre’s insights and solutions have also been translated into Hay Group’s Masterclass workshop and sharing session series that equip Hay Group consultants with the means to develop action plans in alignment with their clients’ organisational strategies. The workshops and sharing sessions have been conducted for senior consultants in Tokyo, Sydney, Istanbul, Jakarta, Seoul, Shanghai and Singapore. In addition, to focus on marketing the Centre’s solutions in Asia, an M&A event for the most significant M&A dealmakers in India will be held by in November 2013 in Mumbai.The Centre’s achievements in M&A-related R&D are a validation of the sound approach and methodology we used. In the next phase, as both the level of M&A activity and the adoption of the Centre’s solutions increase, the Centre is committed to translating its findings into M&A success in Asia and globally.  

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FAMILY-OWNED BUSINESS  Family-owned businesses (FOBs) are increasingly recognised as a growth engine of the global economy. FOBs also make up a large portion of the private sector in Asia, including Singapore. Given the economic and business importance of FOBs, their sustainability is therefore an issue of great importance.Our FOB-focused R&D efforts began in 2009 with an examination of the key issues facing FOBs, such as succession management and professionalisation. From there, we zoomed in on the question of how to turn FOBs into professional outfits by balancing family and business interests. In August, the Centre’s director, Dr. Andreas Raharso, participated as a guest speaker and panellist at the Hong Kong University of Science and Technology’s Asian Family Business Roundtable, which brought together world-renowned FOB academic researchers with regional practitioners and family business owners to explore topics in family business research. Our findings from this period were presented in a paper entitled ‘Strategizing for a Sustainable Family-Owned Business’ at the Strategic Management Society Conference in Rome (2010), a summit attended by over 1,000 academics, practitioners and consultants from around the world.The next stage of our R&D efforts was a collaboration with market research firm exëvo (a subsidiary of Moody’s Corporation) in 2011, obtaining data through a global survey of executives from 1st to 8th generation FOBs.  

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With the information obtained, we were able to further refine our scope to address a problem that transcends the professionalisation question—that of the sustainability of FOBs beyond the third generation of owners.We discovered that 60% of FOBs suffered from sustainability issues and 30% faced the dilemma of balancing family values with business concerns, as compared to only 10% that grappled with the issue of professionalisation. This is because the typical approach of looking at professionalisation is not directed at FOBs’ most pressing problems, which are associated more with inter-generational transition. Instead, through our research, we were able to identify strong family dynamics as the most important factor in the sustainability of FOBs. This inaugurated our framework of family capital, the key elements of which are defined in 2012 as: Heritage Capital, Kin Interaction Capital and Principled Capital. To measure the intangible value that is represented by family capital, the Centre created the Family Capital Index (FCI) in 2013. An intellectual property originating in Singapore, the Index is currently in the process of being trademarked at the United States Patent and Trademark Office.Once the trademarking process had started, there was a need for the proper rollout of FCI within Hay Group. Thus, marketing for our FOB findings followed a different method. Beginning in March 2013 with a meeting in New Delhi that was attended by Hay Group executives from Europe, Asia and South America, a global roll-out team with a multi-million dollar revenue target to actualise the solutions derived from the Centre’s research was established. Another outcome of the meeting was the 2013 white paper on family capital entitled ‘The inner workings of the family-owned business’. In addition, to help prepare Hay Group consultants for the delivery of FOB-related services, the Centre also produced an FCI dictionary, an FOB technical manual and an FCI database.The solutions we have developed also provide a practical and rigorous approach to talent management within FOBs, which is a common problem, as our data shows that less than 2% of FOBs succeed past the third generation due to the phenomenon of unplanned gifting, where unforeseen circumstances cause the next generation of family owners to have to quickly take over the family business. This finds the new owners unprepared to run the family business. Moving forward, the Centre will continue to support and develop Hay Group’s FOB practice. We will also reach out to both public and private organisations to raise awareness about FOB issues and help them improve the sustainability of family businesses.

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CORPORATE CENTRES  As companies struggle to rebuild revenue streams and profitability in the post-recession world, growth for many lies in exploring new market opportunities. Many MNCs are expanding and consolidating their Asia-Pacific operations under regional corporate centres in order to be more responsive to local markets. However, efforts to set up regional corporate centres do not always produce desired results. Corporate centres are often labelled ‘value destroyers’ due to local interventions. This is a worrying trend when MNCs are increasingly choosing to set up corporate centres in Singapore. The Centre’s R&D efforts into Corporate Centres began with a CEO roundtable in April 2010 at the Four Seasons Hotel in Singapore. At the roundtable, 11 CEOs from notable Singaporean companies discussed wide-ranging issues that they faced when setting up regional corporate centres. Viewpoints from the roundtable were used to create ‘Corporate Centers: Value Destroyers?’, a white paper combining the problems highlighted by the CEOs with our Resources-Synergy-Learning (RSL) model. This gave consultants and their clients a starting point from which to approach the issue of corporate centres and their value proposition. As part of our ongoing efforts to share our insights with the broader business community, the Centre collaborated with the Singapore Business Federation (SBF) to organise the Singapore Business Federation-Hay Group Human Capital Initiative, a series of seminars for over 100 SBF-affiliated executives, which were held in August 2011. The seminars outlined the Centre’s approach for handling the tension between centralisation and decentralisation, and how our solutions can be applied to local businesses and employee groups. Feedback from the seminars was highly positive and there was sufficient demand for the Centre to hold similar workshops on managing corporate centres for the public. In September 2011, the Centre conducted one such workshop for many large Singaporean firms, such as mega-retailer Courts. In February 2012, the Centre expanded the RSL model with a companion framework called the Formalized Stakeholders-Attention Focused-Reputation Management (FAR) model. The FAR model, developed with additional data collected in collaboration with notable Australian research firm ResearchNow, entails an improved form of management control that enhances the value-creation activities of corporate centres.

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The FAR model is a significant aspect of the Centre’ approach to regional corporate centres as it deals with the issue of control mechanisms, and how and where they must be applied to ensure value creation. As our model ranks as one of just a handful globally that directly addresses the issue of how to become an effective leader in corporate centres, developing best practices for these control mechanisms will greatly improve leadership practices in Singapore. We believe this is a timely and relevant area of work whose existing body of knowledge urgently needs to be expanded. In mid-2012, the Centre published its research findings in the white paper ‘Innovation: Staying ahead of the Red Queen’. This paper was subsequently shared to London Business School by members of the Hay Group senior leadership team. The Centre also started to reach out to prominent, C-suite-targeted online publications such as CFO Innovation Asia and CEOWorld Magazine, thereby marketing our approach externally and contributing to the body of academic and professional knowledge in this area.In 2013, the Centre organised a workshop titled ‘Global expansion: the role of the regional HQ’ at the Hay Group International Conference in Berlin, one of only four workshops in the conference, which was attended by international business leaders and practitioners. We also began a collaboration with Harvard Business Review (HBR) to create an article entitled ‘Harness the power of soft control’ for the HBR Blog Network. The article will address the pressing issue of how organisations should retain control of their increasingly global operations, and what headquarters’ role in these control mechanisms is. Also in the works is a global white paper entitled ‘The secret of successful relationships’ based on a global survey of MNCs that breaks the FAR model down into 8 dimensions. Additionally, it will show that organisations using the FAR model have better financial and non-financial performance than other firms.  

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CULTURE TRANSFORMATION  The Centre’s Culture Transformation research efforts began with a literature review of the existing research on corporate culture and climate in June 2009.With the benefit of being able to build on the extensive knowledge contained in external literature, the findings of the Centre’s research as well as our own analysis were soon collated with data from collected by a leading Australian research firm. In collaboration with Professor Ruth Wageman from Harvard University, the result was a 2010 technical manual for the Organisational Culture Assessment (OCA) tool, a comprehensive diagnostic tool for assessing the culture of an organisation through observation as well as employee surveys and interviews. The manual expanded on the earlier C-sort culture diagnostic method used by Hay Group that featured a four-dimensional culture model — functional, network, process and time-based. Feedback from the field suggested that the four-dimensional model was inadequate for dealing with the complex realities of corporate culture. Hence, the OCA manual expanded the model to encompass 20 different types of culture, marking a fundamental shift in Hay Group’s approach to culture solutions. Subsequently, the Centre was able to simultaneously develop our ideas into business-ready solutions and engage in internal marketing by producing and disseminating a streamlined technical manual for Hay Group consultants in 2012. Entitled ‘Organizational Culture Observation through Symbol’, the manual outlined the implementation steps for the OCA tool to be used in client work. The Centre’s efforts culminated in the creation of a Culture Transformation viewpoint entitled, ‘Sustaining culture change’, which was launched to Hay Group’s consultants and clients globally in July 2012.

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The tool has enjoyed great success. It has been fully adopted within Hay Group, having been incorporated by Hay Group Insight services and utilised by the company’s consultants as an integral part of the Building Effective Organizations (BEO) practice. In fact, of all the approaches and best practices the Centre has developed, Culture Transformation remains our most widely applied tool in terms of both acceptance by Hay Group consultants and integration with the solutions they implement for clients. The Cultral Transformation framework sees the most use in Change Management projects, as the model directly addresses the cultural dimensions that need to be transformed in order to align the values and behaviours of an organisation’s workforce with its business strategies. Further internal marketing efforts have also taken place in conjunction with external marketing. Externally, the Centre has been able to push for culture as the focus of Fortune magazine’s 2013 World’s Most Admired Companies list. Internally, following up on this success, a webminar for Hay Group consultants on the World’s Most Admired Companies list was conducted in July 2013 by Group Vice President Jeff Shiraki that featured extensive interviews with executives from Coca-Cola and IBM.Progress in the Culture Transformation area has been dramatic. In the coming years, the Centre will keep pace with developments in cultural studies beyond the fields of business and management, continuing to develop and deepen Hay Group’s culture approach.

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HUMAN CAPITAL DEVELOPMENT  The Centre is made up of team members from diverse cultural and academic backgrounds, including graduates from local universities such as the National University of Singapore as well as overseas academic institutions such as the London School of Economics.On top of our R&D efforts, the Centre has also taken a proactive approach in the development of human capital locally.The Centre has trained undergraduate and postgraduate students from Singapore universities through internship opportunities in strategy execution and management research. With good testimonies from past interns, internship positions within the Centre are coveted even by MIT’s Sloan School of Management.The Centre has also supported the development of Asia’s management scholarship by co-chairing a prestigious doctoral workshop at the Singapore Management University in 2012. In this workshop, a team of world class strategic management experts led by the SMU Lee Kong Chian School of Business Dean Prof. Howard Thomas shared their knowledge to 30 of the best doctoral students from all over Asia.Internally, the Centre has contributed to the training of Hay Group staff through webinars and workshops on its four research areas as well as on Hay Group practices. In addition, we help Hay Group offices around the globe in plugging knowledge gaps through our ‘Ask an expert’ service found on the company’s Global Gateway intranet site.                             

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Additionally, skills training within the R&D team has seen remarkable milestones. Among other learning efforts, 30% of the research team has been trained in and accredited for Hay Group’s competency coding tool, a rare achievement even among Hay Group consultants.Finally, the Centre has engaged in external knowledge-sharing and exchange sessions with va r ious o rgan isa t ions in Singapore. We have held s h a r i n g s e s s i o n s w i t h professional associations such as the American and European Chambers of Commerce, the r e s u l t s o f w h i c h w e r e subsequently disseminated to over 1,000 leading companies in their networks. From time to t i m e , t h e C e n t r e a l s o approaches major MNCs such as Google, Unilever, Pfizer and IBM, as well as Singapore-based organ isat ions l ike Keppel, SPRING Singapore and Contact Singapore to share our findings and seek feedback. Through our work, and as a partner to the local business n e t w o r k , t h e C e n t r e i s committed to contributing to the development of Singapore’s human capital. 

Learn more about the Global R&D team’s diversity here: https://vimeo.com/71786221

PUBLICATIONS AND SPEAKER ENGAGEMENTS  As a research centre, we constantly strive to publish our rigorously-validated findings and insights on two levels: internally to Hay Group consultants and our clients and externally to academics and professionals. We have published papers in academic journals, presented at academic conferences, developed white papers for Hay Group consultants and clients, as well as written customised articles for print and online publications read by professionals. We will continue to ensure that our best-in-class research and solutions reach as many people as possible, and that the body of academic and professional knowledge in our research areas is continuously expanded. The Global R&D Centre also conducts and participates in external seminars to share research findings with members of the public such as professional associations, interest groups and universities.

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2009-2013 JOURNEY REPORT

About Hay Group Global R&D Centre for Strategy Execution

Contact Dr. Andreas RaharsoDirector Hay Group Global R&D Centre for Strategy Execution E | andreas.raharso@haygroup.com Hay Group Global R&D Centre for Strategy Execution 10 Hoe Chiang Road #04-03/05 Keppel Towers Singapore 089315 T | +65 6323 1668 ©2013 Hay Group. All rights reserved.

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Hay Group’s Global R&D Centre for Strategy Execution researches best practices in strategy execution globally. Based in Singapore, the centre offers a unique East-West perspective for business leaders all over the world. Our research helps provide insightful advice to executives looking to build effective organisations for the future. The centre combines Hay Group’s

long-standing research tradition with extensive client experience, database and global expertise located in 86 offices across 48 countries. We aim to nurture an ecosystem for global research through open collaboration with academia and professional institutions around the world to help business leaders transform their vision into reality.

Hay Group is a global management consulting firm that works with leaders to transform strategy into reality. We develop talent, organise people to be more effective and motivate them to perform at their best. Our focus is on making change happen and helping people and organisations realize their potential. We have over 2600 employees working in 86 offices in 48 countries. Our clients are from the private, public and not-for-profit sectors, across every major industry. For more information please contact your local office through www.haygroup.com.

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