Local Managing Director in a Multinational Enterprise - Who are you? Perspective from Vietnam

Local Managing Director in a Multinational Enterprise - Who are you? Perspective from Vietnam Hoang Nguyen University of Social Sciences and Humanities (USSH), Vietnam Dinh Thoi Vietnamese - German University in HCMC, Vietnam Abstract Foreign direct investment (FDI) is expected not only to bring capital, technology, knowhow and managerial skills, but also to contribute to the GDP and create jobs to the host country In this paper, the mentioned job is not the general position in an enterprise, but it is the position in the fingers – the top managers/ the head managers By a mixed qualitative and quantitative approach, the results show that qualified education degree, rich working experience, and being trusted, inspired, combined task and relationship-oriented characteristics are three key factors to promote a local staff becoming managing director in FDI multinational enterprise (MNE) The findings give local staffs the directions to improve themselves professionally to meet the requirements of the managing director position; while the foreign employers can understand the characteristics of the local employees for personnel planning Keywords: Local Managing Director; Multinational Enterprise (MNE) Introduction Any foreign company that operates in abroad needs employees from front staffs to middle managers and the top managers such as managing director (MD) According to the Dictionary of International Trade, “Managing Director is someone who is responsible for the daily operations of a company, organization, or corporate division In some countries, the term is equivalent to CEO (Chief Executive Officer), the executive head of a company In other countries, managing directors primarily work as the heads of individual business units within a company rather than heading up the company as a whole” In this paper, “MD” is a mention as the executive head such as CEO, CFO (Chief Financial Officer), CIO (Chief Information Officer), and COO (Chief Operating Officer) of an oversea subsidiary MNE in a host country “Manager” is the head of an individual business unit Nonetheless, in the literature review section, “manager” is an umbrella term for people in the management level The question is who should be the head – an expatriate, or a local, or a localhired foreign manager? In multinational enterprises (MNEs), hiring MD position in an oversea subsidiary is very important and depends much on the company’s recruitment policy: whether the headquarter applies a home-country national strategy which hiring home employees and send them to abroad branches as expatriates; or a host-country national strategy, which hiring the local people, or a third-country national strategy which hiring people from a third country A study by Harzing in 2001a finds that 40.8 percent of 2,689 subsidiaries had a parent-country national as MD This study also states that MNEs tended to select parent-country national for the MD positions than for other lower managing positions such as head of departments In the same line, Deresky (2011) claims that there has been a remarkable trend for multinational organizations to hire executives from foreign countries, in the belief that they “can better affect change than a homegrown executive” Recently, 374 in a survey in 2016, ECA (Employment Conditions Abroad) International note that both Western and Asian enterprises prefer sending people from home country, train them and put them in the high position (Mayberry, 2017) However, not all MD expats are successful in their role because of high hiring cost and non-financial problems such as differences in legal and cultural distance, stress family, overload responsibility and emotional immaturity (Selmer, 1999) Interviewing major senior management from 44 Australian and German enterprises doing business in China, Kühlmann and Hutchings (2010) indicates a trend of substituting expatriate managers by Chinese managers and local‐hired foreign managers In Vietnam, according to data from the Ministry of Labor, Invalids and Social Affairs (MOLISA), by the end of 2014, most expats are responsible for high management positions, executives, chief representatives or specialists (MOLISA, 2015) In 2011, MOLISA also announces that over 32% of foreigners working in Vietnam plays management roles, and 41% are technical experts From this regard, there is still a large room for the local people to be promoted to higher positions in the MNEs This research tries to find the answer for the question Local managing director in a FDI multinational enterprise- Who are you? The findings will give a real image of a MD that might be interesting for those who want to be MD, as well as knowledge for employers who apply the host-country national strategy for staffing Vietnam is not big country to be too crowded MNEs; however, the country is an example of a developing country with high economic growth rate, potential market growth, educated labors, and is a destination of FDI Therefore, studying this case might be relevant for similar circumstances Theoretical Framework The USA Bureau of Labor Statistics (2014) shows that managers in general are effective communicators have extraordinary leadership skills, rich managerial experience, and the ability to stimulate employees Additionally, the managers must have results-orientation and innovative thoughts They have strong business-development abilities and skills to interact with clients, as well as to work well with staffs and senior managers This concept reflects fit an overall people in management level description However, besides asking for relevant capacities (candidate side), the recruitment of a MD depends heavily on parent company’ staffing strategy (employer side) In addition, leadership styles also influence staffs’ motivation and company performance; therefore, personal leadership style of the MD candidate must be a concern (in colleagues’ perspective) This paper argues that the promotion of a local to the MD position is not only determined by the candidate’s capacity, but also the headquarter ’strategy, as well as favorite candidate’s characteristics Therefore, three dimensions, which are (1) Candidate qualification, (2) Organization’s strategy, and (3) Leadership styles/ Personal characteristics, will be reviewed In this section, the word “manager” is a term for people in management level Well educated and trained degrees with deep executing experience in a particular market are almost the top requirements for a MD position Indeed, Grant and Urbanik (2013) identifies working experience including executives’ responsibilities and job experiences that shaped their know-how is one of three key categories of factor influencing of career progression to higher executive positions Moreover, Sitthipongpanich and Polsir (2013) notes that not only working experience but also qualified degree is a minimum requirement for a MD position The author presents that the director board should consist of various skills, experience, and expertise that are advantageous to the company For more specific cases, Hay and Hodgkinson (2006) claim that the key purpose of getting a MBA degree is that it leads to fast track career success, typically interpreted in terms of increased salary and higher hierarchical position In 2006, the Thai Institute of Directors Association issued Director Nomination best practices, which suggest particular board competencies and director capabilities Firstly, the management board must well controlled corporate procedures and approaches Secondly, they have best competencies in all firm’s operation, for instance, accounting and finance, organization and human 375 resources management, risk management, crisis management, industrialization, marketing, and strategic planning In Vietnam, people who obtained Western education degrees, have deep Vietnamese market experience, speak fluent Vietnamese and English are the most hunted for the high position in MNEs (Forbes Asia, 2012a) Similarity, requirements of education and experience are easy to find in some famous recruitment websites such as vietnamworks.com, timviecnhanh.com Therefore, it is hypothesized that outstanding personal profile with qualified degrees and working experience is a positive factor on hiring Vietnamese people as MD As mentioned earlier, there are different types of staffing strategy: home-country national strategy, hostcountry national strategy, and third-country national strategy Each strategy has its own advantages and disadvantages In terms of human resource management, using host-country national for the MD position gives a better understanding the local institution, the local market (Scullion and Collings, 2006), and the local staffs for increasing their morale (Vaghefi et al., 1991) On the other hand, the host-country manager might not absorb all objectives and strategy from the parent-company because of differences in terms of culture, educated background, language, and perception Evenly, Schniederjans et al (1998) states the probability of national loyalty confliction between foreign parent-company and local MD’s perspective On the contrary, a home-country MD is a guarantee for strictly following the business and management policies, greater control of organization, and greater cultural understanding However, this might discouraged the local-management Generally, when a foreign subsidiary has just been established, the headquarter prefers sending a homecountry national MD Then, when the business is in standard lines, a localization strategy will be applied and a host-country national MD is hired to replace the home-country national MD (García et.al, 2009) Furthermore, each company has their own decision making approach, whether centralization or decentralization Centralization means that decision-making authority is at the top of the organization; while decision-making in decentralization is authorized to the lower levels (Gomez-Mejia & Balkin, 2012) The question is whether the organizational structure and staffing strategy affects the local MD selection MOLISA’s record in 2014 that almost all foreigners who are in high management positions in MNEs in Vietnam were assigned by the native headquarters As a result, not many local people keep the role of top managers This situation leads to a hypothesis that whether the parent-company’s applies localization strategy and centralization structure to determine the local MD selection In any organization, employees are the central concern; without employees there is no performance In addition, employees are followers; consequently, they have the “power” to evaluate their supervisors positively or negatively Some managers appear to be nice and friendly; while others look too serious and dominance Nonetheless, there is no doubt that nobody wants to be untrusted On the other hand, leaders and managers can influence subordinates by their characteristics and behaviour An effective leadership can influence people However, not all managers are leaders and vice versus Most managers define a strategy, and perform executive and administration tasks based on their level; while leaders lean towards leading people in informal and unstructured way An effective manager is a person who can combine his/her official authority with the ability to inspire people Indeed, Tan (2011) and Robbins and Judge (2013) states that an organization needs both strong leadership and strong management The leaders need to be challenged in current circumstances in order to create future visions and to encourage people to achieve the common goals Meanwhile, the managers concentrate on formulating strategy, operating activities, and making productive hierarchical structures as well as making clear objectives, maintaining stable environment in order to keep people work together In the book “Một đời quản trị” (A lifetime of governance) (2017), Phan Van Truong, an advisor to the French Government on international trade writes that Vietnamese business managers often confuse leadership and management It is hypothesized that a local MD needs to have strong leadership as well as strong management skills 376 Manager or leader is human being; they have their own characteristics; therefore, they have their own leadership style, which can be trained, or can be changed by aging, by experience, by situation, or even by heavy incidence According to Gomez-Mejia and Balkin (2012), there are four major approaches to classify types of leadership The Trait theories focus on personal characteristics that can make a person to become a leader Some certain traits are self-confidence, determination and communication skills However, some researchers proved that some traits can be learnt such as ambition, desire to lead, and high correspondence The Behavioral theories reflect leaders’ behaviors In other words, these theories try to describe leadership styles The two studies which conducted by Ohio State University (1940s) and University of Michigan (1950s) reveal subordinates reviewing most leadership behaviors The description is based on two dimensions: Consideration (at Ohio University)/ Employee-oriented behavior (at Michigan University) and Initiatingstructure (at Ohio University)/ Production-oriented behavior (at Michigan University) The first dimension shows leadership’s concerns about followers in terms of feelings, needs, personal interest, well-being, and problems The second dimension refers to completing tasks such as organizing activities, responsibilities, and performance The Leadership style was first developed by Lewis and his students in 1939 They recognized two leadership styles corresponding to decision making approaches: the Autocratic style and the Democratic style For the autocratic style, the leaders make decision by themselves; while referencing subordinates ideas before making decision is in line with the democratic style Although, the democratic style satisfies workers; but the autocratic style brings better performance due to of strictly monitoring This theory also provides the third style – Laissez-faire style in which the leaders refuse to make decision The Contingency theories put the leadership styles into particular contexts In a specific occurrence, the leaders make decision which matches their behaviour in order to re-act the situation According to Fiedler’s model (1960s), leader behaviour or style was determined by three aspects of a situation: Leader-member relations; Task structure; and Position power The Fiedler’ study also supports the results from Ohio State University and University of Michigan in terms of two styles of leadership: Task-oriented and Relationshiporiented The task-oriented leadership want to see results of the tasks; they not pay much attention to the process to reach the accomplishments The people-oriented leadership care about people and try to build up good interpersonal relationships Similarly, the Directive leader style in House’s model (1971, revised 1996) also demonstrates that this kind of leader is comparable with the Initiating structure/ Production-oriented and Autocratic style in which the leaders set up almost employees’ activities from shaping targets to forming tasks, scheduling deadlines, and closely monitoring Interestingly, this model recognizes three other styles, which are similar to employee-orientation/ people-orientation as discussed earlier The leaders are warm and friendly (in Supportive leader), work with and listen to the employees (Participative leader), and motivate people by setting challenge goals (Achievement-oriented leader) By reviewing the above traditional explanation, the hypothesis is whether subordinates prefer a local MD with a taskoriented or people-oriented style In the book “Return on Character: The real reason leaders and their Companies Win”, Kiel (2015) finds that the company with CEO of strong characteristics gets 9.35% of ROA (Return on Assets) within a period of two years This ratio is times higher than a company where employees not give high appreciation to their leaders; the ROA is only 1.93% This means that leader’s characteristics are crucial for company’ succeed It can be said that the role of the administrator as a leader takes the organization forward and attracts others to follow along to achieve the goal This is only possible when the manager has the ability, bravery and good qualities that make others believe and support The Charismatic leadership theory demonstrates the leader associated with strategic vision to inspire other people, caring the needs and motivating followers to get the needs, self-confidence, self-sacrifice, and providing idealistic role model (Gomez-Mejia and Balkin, 2012) These characteristics make followers admire, trust and willing to believe their leaders Tan (2011) confirms 377 that trust is vital to powerful initiative correspondence and collaboration Trust is a primary attribute associated with leadership; breaking it can have serious adverse effects on a group’s performance (Dirks and Ferrin, 2002) In the same line, the Transformational leadership style also emphasizes on building trust by keeping commitment, reliability and persistence to the followers as well as scarifying themself Inspiring people is one of positive characteristic of this style The leaders promote the followers intellectual stimulation and individualized consideration Likewise, motivating is not only manager’ task but also a characteristic in which the leader can motivate people by asking personal challenging goal, reinforcing desired behaviors, satisfying followers’ needs, offering opportunities to encourage followers to use their talent, and giving reward as well (Gomez-Mejia and Balkin, 2012) Talking about rewards in relations to power, either managers or leaders, they have the powers A manager has authorized power to give rewards or punishment to subordinates; but the best leaders inspire and motivate people to get spirit of discipline to work (Gomez-Mejia and Balkin, 2012) The capability to affect other individuals implies that leaders have power The central point is how to use power fruitfully to influence people in order to achieve the targets In fact, some managers prefer applying the coercive power to make employees afraid and setting a distance with subordinates The size of distance depends on the national culture In countries with high power distance culture, the lower level person has to follow the higher level person without any discussion In countries with low power distance culture, the lower level person is respected and listened by the higher level person Caculating by Hofstede model1, Vietnam is a high power distance country with a score of 70, comparing to China of 80, Singapore of 74 and Thailand with a score of 64 Based on the above mentioned major characteristics of a manager/ a leader, it is hypothesized that a Vietnamese MD is high power distance, but is trusted and is an inspiring leader In summary, to test the portrait of a local MD in MNEs, this paper hypothesizes that the local staffs need to have a high education degree and rich working experience In addition, they should be a trusted person, have good ethics and capacities to inspire people However, the study also supposes that Vietnamese MD might be unclear between leadership and management and they are in large power distance In addition, the study argues that the local MD position much depends on the parent-enterprise’s policy regarding organizational structure and recruitment strategy Research Methodology This study uses both qualitative and quantitative method The qualitative approach focuses on semi-structured oral in-depth face-to-face interview in order to explore new ideas and get deep thoughts and information (Boyce and Neale, 2006) People in management level in MNEs are very busy; thus getting their acceptance for interviewing is not easy 23 interviews were arranged with 11 Vietnamese and 03 foreign heads of individual business unit (as senior manager), 03 Vietnamese and 06 foreign heads of company (as MD) They have been working some MNEs in Vietnam for 12 to over 30 years The meeting took 45 minutes to 60 minutes with some questions related to the research topic with three main arguments The first question was candidate’s qualification in terms of education and working experience The second question is the organizational strategy whether the parent company applies localization and decentralization strategy The last question is the description MD’s leadership styles Data analysis generally follows these steps: (1) Coding the answers corresponding to the interviewees’ expression; (2) Categorizing the interviewee’s expression into similar or dissimilar group of ideas; (3) Interpreting the findings with interviewees’ words and sentences The quantitative approach is conducted by a sending an online questionnaire to managers and staffs who are working for MNEs in Vietnam The aim of this investigation is to collect data to draw a picture about https://www.hofstede-insights.com/models/national-culture/ 378 Vietnamese MD in local employees’ point of view The questionnaire contains 39 indicators, in which 37 measuring 09 independent factors and 02 determining dependent factors The dependent variable is portrait of a Vietnamese MD The independent variables are (1) Qualified degree (QD), (2) Working Experience (WE), (3) Localization Strategy (LS), (4) Centralization Organization Strategy (CS), (5) Management and Leadership skill (MLS), (6) Task and Relationship Orientation (TRL), (7) Power distance leader (PD), (8) Trustworthy leader (TL), and (9) Inspiring leader (IL) The first two factors proxy for candidate’s conditions; the next two factors represent the organization’ strategy; and the remaining factors characterize the leadership styles A five point Likert scale is used from (1) = “Strongly disagree” to (5) = “Strongly agree” to measure all variables According to Hair et al (2010), the sample size (n) should equal or greater than times of the number of indicators, but not less than 100 In this survey, the sample size should be 195 (n= 5x39) The questionnaire was delivered to 200 employees of 25 MNEs which located in the South of Vietnam including Ho Chi Minh City and some neighboring provinces such as Binh Duong, Dong Nai and Ba Ria Vung Tau Phonak Vietnam and Samsung Vina are the two companies which have the highest numbers of requests The survey is run online on Google doc from 30 April 2016 to 02 June 2016 There were 137 responses, among which samples from non-MNEs-employees were removed Among 135 comebacks, 68.8% are senior managers (8%), middle managers/supervisors (40.1%), and assistant managers (20.7%); the rest is senior staffs/staffs All of them have at least years works for MNEs, and 70.4% are older than 30 year olds These mean the sample is quite qualification in terms of rich experience; therefore, their responses can be appreciated Data analysis is strictly tested the validity and reliability Reliability analysis applies Cronbach’s alpha which is to measure the internal consistency Peterson (1994), Slater (1995), Nunally (1978) suggest that 0.6 is an acceptable reliability coefficient Exploratory Analysis (EFA) is to check the validity of the construct as well as identify underlying relationships among measured variables Indicator must be 0.5 ≤ KMO ≤ After then, multi- regression is used to determine the relationship and impact level between dependent and independent variables Result and Discussion 4.1 Qualitative Data Analysis To get perspective of people who are currently in management level about chances for local staff to become MD, interviews were conducted with 23 people who are managing directors, general directors, and heads of business units in FDI MNEs operating in some provinces in the South of Vietnam including Ho Chi Minh City The questions go around the three dimensions that are (1) Candidate qualification, (2) Organization strategy and (3) Leadership style/ personal characteristics Furthermore, advice on how to become a local MD is discussed (1) Candidate Qualification: All interviewees agree that education is very important; professional/ technical industry knowledge is required In addition, broaden management knowledge in supply chain, operations, finance, and risk management is a plus However, high degree is great but not everything Getting a master in business administration (MBA) is to improve the knowledge, not due to MD position Some interviewees have a master degree, but some just hold a bachelor degree Besides, most of them were sent to headquarter or others subsidiaries in several countries for training Learning by doing is encouraged Some people said that their capacity is improved by learning from colleagues and daily works Working experience is a crucial requirement All interviewees have been working for more than 20 years, experiencing several positions either in the same company or in international environment, or big projects The people who are MDs now are quite old, and reach to the position after at least 15 years of working There is an exceptional case; a Vietnamese MD was promoted when he was 36 years old Experience is a managerial 379 weapon when handling conflict, risk, crisis situation; solving internal issues; serving in the market, and forecasting Some Vietnamese managers point out that foreign colleagues are very good sources for learning and accumulating experience This looks like transferring knowhow and managerial skills (2) Organization’s Strategy: Recruiting a local MD is indeed dependent on organization policy Except 03 Vietnamese MDs, the rest of the interviewees say that their companies still apply home-national strategy, which mean the MDs are sent from the headquarters Especially in Japanese and Korean enterprises, MD and head of business unit position must be Japanese or Korean respectively as their policy and traditional culture Therefore, the highest position that a local staff can reach is manager or senior manager Conversely, European and American companies prefer to hiring locals for MD positions; but the candidate must be matched against many qualification and successfully go through headquarter’ strict evaluation At this moment, no candidate meets the company’s requirements Different culture and education system lead to language barrier, trust issue, limitation of technical skill and weak in risk management Interestingly, one MD reports the case of an oversea Vietnamese who had Western education and culture, but he could not succeed in his fatherland in the role of MD Normally, in Western MNEs, a foreign MD is assigned in the starting up stage When the business is going well, the role will be transferred to the local staff for saving cost and in-depth understanding of the customers and market Of course, the incomer is selected and trained beforehand In addition, a local MD shares that he is training a group of local staffs to be the next generation of the company Based on this analysis, chances to become local MD in a FDI MNE are plenty Centralization Organization Strategy: Most interviewees agree that the structure of an organization depends on company’s business model, company size and production or service providing In their case, the centralization organizational structure is applied In manufacturing industry that alway require the discipline and high efficiency, the centralization organizational structure is to ensure that all activities are controlled and decided by the highest postion Both foreign and local MDs prefer centralization organizational structure so that they can handle almost everything (3) MD Personal Characteristics/ Leadership Style There is only one MD who states that the MD should be an autocratic person while the rest share the same idea that leadership style depends on individual Management and Leadership Skill Regarding this issue, all interviewees notice that it is not possible to separate management and leadership skills However, there are some specific differences For middle managers group, they express that management and leadership skills should be a “combination”, while the MD group uses the word “flexible” Depending on the contexts, the ability and subordinates’ behavior, the MD applies either management or leadership in order to get better results On the one hand, the MD has to build up and maintain the company’s cultures and standard policies in which all employees have to strictly follow On the other hand, keeping good relationship with local employees is very important To be reassigned, the MD needs to gain not only a good business performance but also good evaluation from both the employees and the headquarter For both groups, directly facing with subordinates is necessary to some extent Official meeting is the best way to manage what happened and what might happen The meeting can be an individual or group discussion in order to get feedbacks and give comments and commands In addition, hanging out with subordinates is to build relationship, to get acquaintance, and to close cultural gap One middle manager interviewee shows his daily time arrangement as 70% for producing, 20% for training and 10% for socializing A little bit different, 50% for operating, 30% for strategic planning, and 20% for people is the daily division of another MD It seems like the MD spends more time contacting with people than the middle manager There is also differences between Vietnamese and foreign MD based on the middle manager interviewees’ experience For them, the Vietnamese MDs often spend more time on management; whereas, foreign MDs the way in contrary Comparably, a foreign MD displays seven-tenth of leadership appearance, while the rate is only four-tenth for Vietnamese MD This means Vietnamese MD does more 380 management activities Indeed, they want to know detailed reports and control strictly any issues in company Thus, the subordinates feel easier working with foreign MD than local MD Although, both foreign and Vietnamese MDs deeply concentrate on company business results; however, Vietnamese MD tends to make decision based on feeling and affected by outside inspiration A sharing from a foreign MD is that leadership style can be improved and build up; the more the leader is trained and learnt, the more professional leadership skills they have Task and Relationship Orientation As mentioned above, foreign MDs less management works, but they are keen on task accomplishment An individual idea from a middle manager is that task occupies 80% of the concern of a foreign MD, while this rate is only 60% for the Vietnamese MD This means that Vietnamese MDs always ask for performance, but they care about the process to get the goals In fact, many business contracts get acceptance outside the office The network/ the social relationship is a supportive part in their business Most interviewees agree that result is the biggest concern, but encouraging people to work to achieve the target is a significant point Therefore, setting up KPIs for each individual is necessary A Vietnamese MD shares that the slogan of his company is “Dialogic, One Family" This value make people work together as members of family Task and Relationship-oriented must be combined nowadays in general and particularly in Asian and Vietnamese culture Power Distance Leader Literature says that power distance is high in Asian and Vietnamese culture Foreign interviewees slightly agree with this view since Vietnamese staffs often keep distance with them because of language and culture barrier Some foreign managers have tried learning Vietnamese language, to save more time for communication and to join social activities with subordinate One foreign MD realizes that charity works bring them closer because Vietnamese people love doing charity, especially in the Southern areas On the side of Vietnamese interviewees, they identify that the distance is not high in Western MNEs, while the distance is high in Asian MNEs A Manager looks like a boss; a staff is just a follower with no comment However, most interviewees confirm that the power distance varies on different individuals One Vietnamese MD strongly disagrees and says that it is wrong; it depends on individual, not nationality To some extent, high power distance is not the indicative factor for Vietnamese MDs Good leaders can influence the follower based on their knowledge, experience, abilities, and not by power of organizational position Trustworthy Leader Seeming trustworthy is a so regular characteristic that no interviewees have any comments They only share how to build trust Transparency in activities, especially in reward and position promotion; Treat fairly in workplace; Do discipline; Build the trust by keeping the promises, encourage the people to tell the truth; Do good things then subordinates follow; Respective behaviors; Always believe subordinates are suggested There is only one note from one manager about a prejudice that foreign MD works better than Vietnamese MD in term of fairness, learning, encouragement, and recognition For him, this is not right at the moment in Vietnam Inspire leader Confidently, all interviewees confirm that sitting on management position, inspiring employees is their job There are many ways to motivate employees such as creating professional values and culture and convincing them follow; making good working conditions and environment which employees can develop their skills and career; boosting employees work-life balance; sharing successful and failure stories to employees; giving 360-degree feedback; opening to talks, periodical survey A foreign MD shares that mistake is usually acceptable; people grow up based on their fault; but not repeatedly One mistake is considered as a serious issue, employees have to take responsibility Going through the above analysis, the local MD position in a FDI multinational enterprise is governed by the parent company’s recruitment policy Except for MNEs rooted in some Asia countries like China, Korean and Japan, the Western MNEs open chances to the local staffs if they meet the company’ high requirements The requirement does not include high education degree alike MBA or doctoral degree; but it is about professional knowledge and rich experience Beside, personal characteristic is a big concern The candidate should have both leadership and management skills; be a result-orientation person, keen on task-orientation 381 but cannot lack of relationship-orientation Certainly, they must be trusted and know how to stimulate employees to follow, and to work together to achieve the final goals 4.2 Quantitative Data Analysis The quantitative approach in this research includes gathering both foreign and Vietnamese MDs and middle managers to discuss about the local MD position in FDI MNEs On the quantitative side, a survey was sent out to collect data to draw a picture about a local MD in local managers and employees’ description The data from 135 respondents went through descriptive analysis; reliability and validity testing; and regression application 4.3 Descriptive Analysis The Data contains 39 indicators, in which 37 measuring 09 independent factors and determining dependent factors The name of 01 dependent variable and 09 independent variables are shown in Table Based on the value of Mean in Table 1, it can be said that the respondents generally agree that Vietnamese MD needs to have qualified education degrees; not only a bachelor degree, but also higher degree(s) Especially, being excellent in English and the native language of the parent company is a compulsory Besides, people say that Vietnamese MD has to have professional working experience in MNEs and similar industry as well However, many respondents are not sure whether oversea working experience is necessary Some people clearly pointed out that in order to become a local MD, the person must have been working for at least fifteen years Table Mean’s Value of Variables Qualified education degree QD Indicators number QD1, QD2, QD3, QD4, QD5 Working Experience WE WE1, WE2, WE3, WE4 3.44 Localization Strategy LS LS1, LS2, LS3, LS4, LS5 3.43 Centralization Organization Strategy Management and Leadership skills CS CS1, CS2, CS3 3.53 MLS MLS1, MLS2, MLS3, MLS4 3.38 Task and Relationship Orientation TRL TRL1, TRL2, TRL3, TRL4 3.80 Power distance leader PD PD1, PD2, PD3 3.44 Trustworthy leader TL TL1, TL2, TL3, TL4, TL5 3.86 Inspire leader IL IL1, IL2, IL3, IL4 3.72 Overall Vietnamese MD OV OV1,OV2 3.77 Factor Code Average of Mean (N=135) 3.74 Regarding the organizational policy, the respondents totally agree that Vietnamese MD is only hired if the parent company applies the host-national strategy to localization the subsidiary business The respondents realize that hiring a local MD can reduce cost and cultural barrier However, some of them think that it is not easy to find a candidate who meets the employer’s expectation But this does not mean that it is impossible The respondents also recognize that the companies which employ the local MD follow the centralization organizational structure However, the structure is quite flexible to adapt to the current situation in the local and global market In term of leadership style and characteristics of a local MD, the respondents show some evaluation and comparison between Vietnamese MDs, Asian MDs, and Western MDs Generally, the respondents agree that 382 a MD have both management and leadership skills They take both Task-oriented and Relationship-oriented styles to achieve better performance The MDs often make decision by themselves without referencing the others’ ideas Mostly, MDs get trust from subordinates and have the ability to influence people Setting the clear goal, ready to give advice, supportive, fairness, and respected behavior are among inspired ways of the local MD Table represents some comparison in the leadership styles of Vietnamese, Asian, and Western MD Table Leadership Style’s Comparison Leadership style Management leadership skill and Task oriented and Relationship oriented styles Power distance Trustworthy leader Inspiration Comparison Vietnamese MDs spend more time for monitoring; while Asian MDs are quite flexible based on specific situation; Western MDs pay more attention on building long-term strategy All three of them focus on task and results, but Vietnamese MD pay less attention to it Asian MDs are flexible in changing the oversea business organizational structure to adapt the changing of market; while Western MDs make clear KPI and create working environment This is also a weakness of Vietnamese MD Both Vietnamese and Asian MDs are quite similar in power distance level, but the Mean value is not too high They are serious because of heavy responsibility At the same time, Western MDs try to close the gap with subordinates Among these MDs, Western MDs get the highest Mean value, while Vietnamese and Asian MDs get a little bit lower value, but still very high Again, Western MDs get the highest Mean value, the second place belongs to Asian MDs, following by Vietnamese MDs Both Western and Asian MDs influence people by building trust and matching works and their decisions; while Vietnamese MDs convince employees by their professional knowledge Overall, more than 70% of the respondents agree that Vietnamese MD has the ability to replace the foreign MD However, the local people prefer working for foreign MD in order to learn from differences This is understandable because Western MDs always get higher Mean values in leadership style and personal characteristics Although the assumption is based on scientific evidence, people often said that “A prophet is without honor in his own country” 4.4 Reliability Testing Analysis Cronbach's Alpha reliability index indicates whether the measurements are linked or not Alpha values: greater than 0.8 are good measures; 0.7 to 0.8 is usable; 0.6 or more is possible in case the research concept is new or new in the research context (Nunally, 1978; Peterson, 1994; Slater, 1995) Based on the value of “Corrected Item-Total Correlation”, the observations with variable coefficients are small (less than 0.3), which not contribute much to the description of the concept under investigation will be discarded The scale is chosen if Alpha reliability is greater than 0.6 (Nunally and Burnstein 1994) After running the reliability test, 02 whole independent variables including Management and Leadership Skills, and Power Distance are exclusive 06 independents variables remain with 27 indicators The dependent variable is lasted with 02 indicators 383 Table Reliability Analysis Result Factors Items Deleted items Remaining items Qualified Degree QD3, QD4, #3 None #4 0.724 None #5 0.649 Centralisation Structure QD1, QD2, QD3, QD4, QD5 WE1, WE2, WE3, WE4 LS1, LS2, LS3, LS4, LS5 CS1, CS2, CS3 Cronbach’s Alpha 0.631 None #3 0.640 Management & Leadership skills Task & Relationship orientation Power Distance MLS1, MLS2, MLS3, MLS4 TRL1, TRL2, TRL3, TRL4 PD1, PD2, PD3 All #0 0.399 TRL1 #3 0.828 All #0 0.148 Trustworthy Leadership Inspiring Leadership TL1, TL2, TL3, TL4, TL5 IL1, IL2, IL3, IL4 None #5 0.873 None #4 0.886 Overall VN MD CS1, CS2 None #2 0.711 Working Experience Localization Strategy 4.5 Validity Testing (Exploratory Factor Analysis - EFA) Exploratory factor analysis (EFA) is applied to clarify the validity of the construct as well as to find the various relationships among these items, then re-group or reducing the number of dimensions (Morgan, Leech, Gloeckner, & Barrett, 2012) The Kaiser-Meyer-Olkin (KMO) value is used to examine the appropriate of factor analysis According to Mayers, Gamst, and Guarino (2006), the method of extracting Pricipal Components Analysis coupled with Varimax rotation is the most commonly used method Loading factor is the norm to ensure the true level of EFA For Hair et al (1998, 111), factor loading> 0.3 is considered to be the minimum, > 0.4 is considered important, > 0.5 is considered to be practical Therefore, 0.5 ≤ KMO ≤ coefficient is an index used to determine the suitability of factor analysis In addition, suppress absolute values is useful for suppressing the factor loadings Any factors that are lower than a chosen value are excluded Stevens (1992) recommends the value greater than 0.4 (which explain around 16% of variance) Child (2006) suggests the value less than 0.3; while Ho (2006) says 0.33 Field (2000) chose for a value of 0.50 In this study, the suppress absolute values is chosen less than 0.4 (exactly 0.44) Here is the result from EFA analysis for independents variables with 27 indicators: 384 KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy .828 Bartlett's Test of Sphericity Approx Chi-Square 1794.810 df 351 Sig .000 Total Variance Explained Initial Eigenvalues Extraction Sums of Squared Rotation Sums Loadings Loadings of Squared Component Total % of Cumulative Variance % Total % of Cumulative Variance % Total % of Cumulative Variance % 7.486 27.727 27.727 7.486 27.727 27.727 7.327 27.138 27.138 3.804 14.088 41.815 3.804 14.088 41.815 2.287 8.469 35.607 1.696 6.282 48.097 1.696 6.282 48.097 2.205 8.167 43.775 1.623 6.010 54.107 1.623 6.010 54.107 2.169 8.032 51.807 1.159 4.293 58.399 1.159 4.293 58.399 1.746 6.468 58.275 1.107 4.102 62.501 1.107 4.102 62.501 1.141 4.226 62.501 997 3.694 66.195 946 3.504 69.699 862 3.194 72.893 10 798 2.955 75.848 11 789 2.921 78.769 12 730 2.705 81.474 13 650 2.408 83.882 14 555 2.057 85.939 15 503 1.862 87.801 16 486 1.801 89.603 17 385 1.427 91.030 18 361 1.338 92.367 19 341 1.264 93.632 20 299 1.107 94.739 21 293 1.084 95.823 22 244 904 96.727 23 221 818 97.545 24 197 729 98.274 25 185 686 98.960 26 157 580 99.540 27 124 460 100.000 Extraction Method: Principal Component Analysis 385 Rotated Component Matrixa Component TL4 859 TL3 844 TRL4 836 IL2 825 IL3 809 IL4 805 IL1 800 TRL3 774 TL5 766 TL1 696 TRL2 652 TL2 570 WE3 782 WE2 733 WE4 639 QD1 797 QD2 756 WE1 497 510 QD5 LS4 689 LS5 649 LS3 624 LS1 586 LS2 477 CS3 768 CS1 746 CS2 445 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations From the above result, 06 news independent variables are grouped which quite match with the 03 arguments as early mention that the local MD is influenced by Recruitment requirements, Organization’s strategy, and Leadership styles/ Personal characteristics The Table presents news variables as following: 386 Table Variables for Regression Model Factors ID1 (PC) reflects leadership style/ personal characteristics ID (WE) represents recruitment requirements ID (QD) represents recruitment requirements ID (LS) denote organization’s policy ID (CS) denote organization’s policy ID6 (CMD) denote organization’s policy Items Task-Orientation style Trustworthy leader Inspiration leader Working Experience Indicators TRL2, TRL3, TRL4 TL1, TL2, TL3, TL4, TL5 IL1, IL2, IL3, IL4 WE2, WE3, WE4 Qualified Education Degree QD1, QD2, WE1 Localization Strategy LS1, LS3, LS4, LS5 Centralization Structure CS1, CS3 Centralization in making decision CS2 Noted that QD5 (Qualified degree) has value of 0.336 4.6 Regression Test Regression is a statistical measure used to predict and determine the strength of the relationship between two variables The dependent variable, denoted y, is regarded as the outcome which is influenced by the independent variables, denoted x, are the major factors for explanatory (Sekaran and Bougie 2013) In this study, overall local MD (Y) is dependent variable that is influenced by leadership style/ personal characteristics (X1) including Task-Orientation style, Trustworthy leader, and Inspiration leader; Recruitment requirements including Working Experience (X2) and Qualified Education Degree (X3); and Organization’s policy including Localization Strategy (X4), Centralization Structure (X5), and Centralization in making decision (X6) Y = a + b1XPC + b2XWE + b3XQD + b4XLS + b5XCS + b6XCMD + u Where a is the intercept, b is the slope, and u is the regression residual The result from the regression analysis is as following: Model Summary Model R R Square Adjusted R Square Std Error of the Estimate 792a 627 610 62468042 a Predictors: (Constant), Centralization in making decision, Centralization structure, Localization strategy, Qualified degree, Working experience, Leadership style R value is at 792 mean there are considered relationship between dependent variable and its independent variables The R Square value of 0.627 indicates that the dependent variable (Overall local MD) can be explained by the above independent variables In the next ANOVA table, the Sig is 0.000 reflects the statistical significance of the model, in which the dependent variable is predicted well ANOVAb Model Sum of Squares df Mean Square F Sig Regression 84.051 14.009 35.899 000a Residual 49.949 128 390 Total 134.000 134 387 a Predictors: (Constant), Centralization in making decision, Centralization structure Localization strategy, Qualified degree, Working experience, Leadership style b Dependent Variable: Overall local MD From the Coefficients table, there are variables that are Leadership Style, Working Experience, and Qualified Degree has sig less than 0.005 Both Localization strategy and Centralization are non-significance Coefficientsa Unstandardized Coefficients Standardized Coefficients B Std Error Beta (Constant) -1.638E-16 054 Leadership style 418 054 Working experience 620 Qualified degree Model t Sig .000 1.000 418 7.751 000 054 620 11.481 000 250 054 250 4.639 000 Localization strategy 064 054 064 1.183 239 Centralization structure 038 054 038 696 488 Centralization decision -.017 054 -.017 -.316 753 in making a Dependent Variable: Overall local MD The relationship equation is as below: Y = -.163 + 418*XLS + 620*XWE + 0.052*XQD+ 054 The result shows that the Localization strategy and Centralization are not statistically significant They not statistically impact the dependent variable – Overall local MD But it does not mean that they are meaningless factors To some extent, it is understandable that the host-national strategy and organizational centralization are not decisive factors for selecting a local MD The market is a battlefield; the company needs a commander who can lead the business to the peak of glory If a local candidate satisfies all requirements, the parent company has no reason to pay a high fee and high risk for sending a home-nation MD who does not deeply understand the internal market Among these three variables, Working Experience (.620) is the most influential factor, the second is leadership style (.418), and the last one is qualified education degree (.250) In Vietnamese education system, qualified degree is an approval for good knowledge and gets more competencies In fact, degree does not reflect a person’s knowledge However, holding higher degree is holding more chances to get better job It is just a psychology issue That is why the current MDs talk about qualified degree while a part of the respondents (who are in managers’ level and staffs’ level) think that a MD should have a graduated degree Besides, fluent English communication is a requirement due to international working environment At this moment, it is not difficult to improve English skill, so English skill is a must, not a priority as ten years ago As showed in the research, fifteen working years in MNEs is a minimum period that one person needs before getting promoted to MD position in Vietnam Actually, this period depends on company size and the products/services of company In manufacturing industry, experience either in starting up a new business, or handling big projects, or spending in several key positions are good points for MD position Vietnamese people prefer stable jobs They might work for a long time, even for their whole life in only one company; therefore, they lack diversified working environment’s experience This might be a disadvantage on their way to become a MD in a FDI MNE Certainly, MD is the top position in company; professional knowledge is definitely a compulsory However, experience looks more superior Ghattas, Soffer, and Peleg (2014) state that experience gained through past process execution is one of criteria driving the decision making Similarly, 388 Lasmane and Briksnis (2014) find that one of the factors that influence the decision-making of a CEO is individual experience, which includes beliefs, values, likes and dislikes In the leading position, MDs have heavy responsibility on the success of the company They work and deal with people from the headquarter, subordinates, customers, partners, and competitors on a daily basis The leadership styles of MDs might affect people, working atmosphere, organization’s culture, and company performance Bertrand and Schoar (2003) report that different leadership style, different behavior leads to different decision making and different performance In this study, three major characteristics are tested: whether a local MD is task-orientation or relationship-orientation, whether the local MD can inspire and get trust from subordinate Like foreign MDs, Vietnamese MDs always focus on results as first priority Task assignment is the equipment to get expected performance However, if employees not accomplish their tasks, there is no achievement Mishra and Mishra (2013) state that CEOs of small companies can directly embrace all works; but not put fingers too depth Thus, task and relationship cannot separate nowadays A MD has to apply both of these styles to direct the company business Building code of conduct (COC) and organizational culture are one of the effective ways to match task delivery and people encouragement Caring people, convincing people is a job of MDs In this day and age, the market is changing rapidly and affected by technology changes, international trade changes, new entrants, new competitors, new business patterns and others Consequently, MDs have to quickly response to the change by redefining company internal and external resources and reshaping the organizational structure as well This asks for inspirational skills to attract the followers first Horwitch and Whipple (2014) express that “inspirational skills are exactly what today’s environment requires” From this study, what the employees expect from the local MD is their voice in protecting their financial and non-financial benefits As culture, the local MD is expected to care not only employees’ jobs but also employee individual life such as school for children Additionally, in Vietnamese culture (and Asian as well), people said that “Praise in public, Criticize in private”, to some extent this is a way to inspire people Sometimes, separating work and personal business is not always helpful Correspondingly, caring people is one of the ways to inspire followers Another linking issue is trust Trust is a positive inspiration and a vital matter in any organization When MDs are trusted by employees, it is easier for them to convince people; subsequently, working together to get the best performance Therefore, trustworthy is a required characteristic of a MD Mishra and Mishra (2013) believed that “leaders are critical to developing trust in an organization” The MDs need to build mutual trust and rebuild mutual trust, not only in management board, executives and subordinates but also in the whole company In professional working environment in MNEs, trusted leader is one of key factors that help company to survive and develop in globalization This study shows that Vietnamese MDs have tried their best to build trust and encourage people to tell the truth Transparency in policies and relationships, be a mirror for the employees, or be hungry to get feedback from employees are some good examples Table is a summary of qualitative and quantitative results All factors are supported in qualitative analysis while only 05 per 09 factors are accepted in quantitative analysis Although the Localization strategy and Centralization structure are denoted for organization’ policies are reliability and validity; they are not statistically significant in regression analysis 389 Table Summary of Qualitative and Quantitative Analysis Results Factors Qualitative result Quantitative result Qualified Degree Working Experience Supported Qualified education and knowledge is important Working experience is a crucial requirement Accepted Localization Strategy Supported Rejected Centralisation Structure Supported Management & Leadership skills Task & Relationship orientation Power Distance Trustworthy Leadership Supported Recruiting a local MD is indeed depended on organization policy Both foreign and local MDs prefer centralization organizational structure cannot separate management and leadership skills Task and Relationshiporiented must be combined Rejected Inspiring Leadership Supported the power distance is depended on individual trustworthy is one of regular characteristic of managers inspiring employees is MD’s job Supported Supported Supported Supported Accepted Graduated degree, English professional working experience in MNEs and similar industry Rejected Rejected Accepted take both Task-oriented and Relationshiporiented styles Accepted MDs get trust from subordinates Accepted MDs have capacity in influencing people Conclusion Vietnamese MD in FDI MNEs – Who are you? The qualitative and quantitative results demonstrate as follows: In terms of personal qualification to meet the requirements of recruitments, the MD must have qualified degrees, excellent English, professional/technical background Besides, a professional managerial working experience is required; experience in being MD position, international working environment is a plus Regarding the organization’s policy where MNEs apply host-national strategy or centralization organizational structure can influence the recruitment outcome; but these factors are not decisive While companies from Asian countries such as China, Japan, or Korea are more likely to stick to a home-national strategy, the Western MNEs are willing to transfer “power” to the local MD if they are qualified Concerning leadership style/ personal characteristics of a MD, the management and leadership skills and power distance are not statistically significant This means these factors are not big concerns Being trusted and inspired are the most interesting characteristics Trust and inspiration are obligatory to make people become followers Consistently, task delivery follow up taking caring employees Those are portrait of a MD that a Vietnamese candidate should consider in order to become a MD of a FDI MNE in Vietnam In addition, there are some sharings from the current MDs both foreign and Vietnamese to answer the question: How to promote a local staff to be a MD in a Multinational enterprise? The chance to be promoted to MD is reserved to everybody The candidates should get knowledge about foreign culture, realize the cultural gaps, and fulfill the gaps The local MD has to play as a bridge to connect local subsidiary and oversea headquarter “Think Global, Act Local” may be an appropriate strategy Professional or technical knowledge is necessary, but soft skills make differences The candidate should sincerely learn from supervisors, from colleagues, and by practicing The important thing is the ability to lead 390 people Leadership style can be learnt and trained A typical MD should have some characters such as responsibility, passionate, decisiveness, sharps and preciseness, fast thinking and thinking out of the box, and good social skills.Last but not least, to be local MD, the candidate needs a little of luck This study contains some limitations The first limitation is sample Due to the difficulty in taking time of MDs; the study did … interviews The MDs are working for MNEs in manufacturing and production industry only The second limitation is the framework There are many factors influence on becoming MD position; however, this study stays within 03 dimensions: candidate qualification, organization’s policy, and leadership style/ personal characteristics Among plenty of leader’s characteristics, this paper focuses on only management and leadership style, task and people orientation, power distance, trustworthy and inspiration The sample size for survey is expected to be larger For future research, the test should either include internal factors (personal characteristics) and external factors (macro environment factors and internal company factors), or focus on local-foreign hired and Vietnamese overseas./ Reference Bertrand, M., Schoar, A (2003) Managing with Style: The Effect of Managers on Firm policies The Quarterly Journal of Economics, vol cxviii, issue Boyce, C., Neale, P (2006) Conducting In-Depth Interview: A Guide for Designing and Conducting In-Depth Interviews for Evaluation Input Pathfinder International Tool Series, Monitoring and Evaluation-2 Child, D (2006) The essentials of factor analysis Continuum, London Deresky, H (2011) International Management: Managing Across Borders and Cultures : Text and Cases Prentice Hall Dirks, K.T., and Ferrin, D.L (2002) Trust in Leadership: Meta-Analytic Findings and Implications for Research and Practice, Journal of Applied Psychology, 87 (4), 611-628 Field, A (2000) Discovering Statistics using SPSS for Windows SAGE Publications, London, Thousand Oaks, New Delhi Forbes Asia (2012a) Interview with a “Plus” Atlantic Research Technologies, L.L.C García, C., Sebastian, R., Anne-Wil, H (2009) Management of International Staff IESE, DPON-79-E Ghattas, J., Soffer, Peleg (2014) Improving Business Process Decision Making Based On Past Experience, Volume 59, Pages 93-107 Ho, R (2006) Handbook of Univariate and Multivariate Data Analysis and Interpretation with SPSS Chapman & Hall/CRC, New York Horwitch, M., Whipple, M (2014) Leaders Who Inspire: A 21st-Century Approach to Developing your Talent Bain & Company Gomez-Mejia, L R., Balkin, D B (2012) Management: People, Performance, Change International Edition, Pearson Education Grant, A.K., Urbanik, G (2012) CIO to CEO, Barriers and Success factor Institute for Research on Technology Management and Organizational Learning, Ted Rogers School of IT Management, Ryerson University Hair, J F., Tatham, R.L., Anderson, R.E, Black, W., (1998) Multivariate Data Analysis Pearson Hay, A., Hodgkinson, M (2006) Exploring MBA career success Career Development International, 11(2), pp 108-124 Harzing, A.W.K (2001a) Who’s in charge? 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