Heidrick & Struggles: Who Do China CEOs Report To?

Heidrick & Struggles Survey Shows Growing Strategic Importance of Chinese Operations

To operate at their best, global cross-border companies require clear and effective regional-reporting lines for senior leaders. This is particularly true for multinational companies (MNCs) operating in China given the country’s size and complexity as a market, as well as its outsized importance as a source of revenues and future growth.

Yet determining the best reporting-relationship structure is a tricky proposition. Indeed, a Heidrick & Struggles survey finds that companies in the region choose a range of reporting structures for their China heads. Although respondents are largely satisfied with their current chains of command, those who see a need for change overwhelmingly cite structures that give the China leader a more direct line of sight to global leadership and the CEO.

Who Heidrick & Sruggles Surveyed

These are among the findings of a survey of 100 senior executives in the Asia Pacific (APAC) region who oversee or are deeply involved in their company’s operations in China. The survey, part of an ongoing research project to study the China market, examined the various reporting-line models employed by MNCs and how well these function. Roughly 90% of our respondents were from American, European, or Asian MNCs headquartered outside China. Respondents hailed predominantly from companies in the industrial, consumer, technology, and healthcare sectors, with nearly half providing goods or services to both China and overseas markets.

In terms of scale, 70% of the respondents’ companies reported worldwide revenues last year of more than $3 billion, and 80% of the organizations have been established in China as either wholly foreign-owned or joint-venture entities for more than 10 years.

Key highlights of the study include:

The strategic importance of the China market: Close to 60% of respondents said China contributes more than 40% of their Asia Pacific revenue. Nearly 40% reported that China revenues represent 10-30% of their company's total global earnings. More than 40% of respondents say their company's China leader sits on the global executive committee or its equivalent, underlining the strategic importance of the China market to the overall business.

Who do China Business Leaders Report to? Close to 30% of respondents said their company's China boss reports directly to global leadership (either the CEO or the global head of a business unit). Half of China heads report to the head of Asia/APAC; 26% of the China leadership surveyed also oversee Asia/APAC operations. Nearly half of respondents said that MNCs do not give their China heads oversight of operations in the Asia/APAC region to avoid diluting the focus of the company's China leadership.

Reporting structures unlikely to change: Some 44% of respondents said their reporting structures had been in place from the start of their company's involvement in China; 69% said it was unlikely these would be changed in the coming two to three years. Of those surveyed, 17% anticipate changes in their company's reporting lines within the next two or three years; 29% are not satisfied with their company's existing structure.

To read the full report, click here.

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