Leaders who go the extra mile Growth engine: GE vice-chairman John Rice moved to Hong Kong with the group's non-US HQ Step out of the lifts on the 33rd floor of the downtown Hong Kong building where General Electric last year established the headquarters for its businesses outside of the US and it is easy to miss the understated entrance. Walk around the elegant, airy offices and there are noticeably few people. It does not seem fitting for the headquarters of a US conglomerate with $147bn in revenues to be quite so unprepossessing. John Rice, a vice-chairman of GE, whose appointment created a stir when it was announced that he would head the company's global operations in Hong Kong, halfway around the world from the corporate headquarters in Fairfield, Connecticut, has a simple explanation for the small, sparse office. "I didn't want to add another big layer of management," he says. What you see on this floor is about as big as it's going to get. Rahul Jacob What one sees on the floor, in fact, are the offices of only 25 staff - including the chief financial officer of the global business and senior HR and legal managers. Mr Rice, a 34-year veteran of GE, which has businesses ranging from aircraft engines to gas turbines to energy and healthcare equipment, explains that the choice of Hong Kong rather than mainland China had several benefits. While GE had 15,000 employees on the mainland, it had very few people in Hong Kong. And placing a large global team atop the GE operations on the mainland would have been a distraction given that employees in Asia tend to be more mindful of hierarchy. "Our customers buy engines from our aircraft engines business," Mr Rice says. My role is to enable that to happen more efficiently. . . to be almost transparent. It has long been a management mantra to "think global, act local." But the rub is that top-level thinking has invariably been done in headquarters in Europe or the US. GE was one of the first US multinationals to build significant operations in China and India when they started liberalising their economies more than two decades ago. Even so, at the start of 2011 it still had more than two-thirds of its senior executive group of 650 people in the eastern US. Since then, the number of people in GE's senior executive group in Asia, Latin America and the Middle East has risen by 40. GE may be going down a less travelled path, but it is not alone. Last year Intel's Sean Maloney, widely viewed as a possible future chief executive of the technology company, moved to Beijing. Mr Maloney's move from Intel's headquarters in California was not just bold in the context of the corporate chess game that is an inevitable preamble to becoming CEO; it was also personally courageous. Mr Maloney is both learning how to do business in China and relearning the ability to speak after suffering a stroke in 2010. Global business needs local relationships ● Doing business in the developing world means interacting often with top government officials. John Rice, GE's vice-chairman, was even invited to a cabinet meeting in Nigeria a couple of years ago. Joseph Ngai, head of McKinsey & Co's Hong Kong office, says not only are meetings with senior government officials par for the course in China, but they schedule changes at short notice. ● The value of personal, chatty conversation with the troops. David Morley of Allen & Overy sent "postcards" over the law firm's intranet, as he travelled through Asia. From India, he recounted how an Indian colleague said there had been 1,000 guests at his wedding, only to be topped by business associates boasting of 3,000 or even 10,000 at theirs. ● Innovating in growth markets needs an ecosystem of relationships. "Companies are increasingly looking at China as a second home-market," says Mr Ngai. This requires deeper relationships with universities and customers in China and, inevitably, "innovating products in China for the Chinese." This trend among a handful of multinationals of relocating top executives thousands of miles away is arguably long overdue. It was predicted almost a decade ago in a seminal Harvard Business Review article, "The End of Corporate Imperialism." The late C.K. Prahalad and Kenneth Lieberthal wrote: "Success in the emerging markets will require innovation and resource shifts on such a scale that life within the multinationals themselves will inevitably be transformed." In a variation on this trend, David Morley, who heads law firm Allen & Overy from its headquarters in London, decamped to Asia and the Middle East late last year, travelling 100,000km between 11 cities in nine countries over the course of two months. One of the lessons he learnt was the importance of liaising with officials. "In Asia, businesses tend to work more closely with the government," he says. Mr Morley used Singapore as a base-camp for his excursions, which brought the realisation that the city had become a regional business hub. Despite already having 65 lawyers in Singapore, Mr Morley's sojourn there was the catalyst for Allen & Overy's decision to enter preliminary discussions about collaborating with a leading Singaporean law firm. Such strategic goal-setting is a large part of what top managers always do, but both Mr Rice and Mr Morley have found that the small details matter as well. Mr Morley deftly used Allen & Overy's transnational status to work with the Australian embassy in New Delhi and the British embassy in Tokyo to organise dinners that were aimed at promoting trade and cross-border investment, but also had the handy benefit of treating the firm's clients to the cachet of dining at an embassy. One consequence of Mr Rice's move to Asia is that he does not use the misapplied term "Chindia" or even speak of "emerging markets." Mr Rice uses the term "rising markets" instead. This might sound like a tedious version of politically correct corporate speak but it includes resource-rich countries such as Canada and Australia, where GE's business has been growing strongly on the back of demand for energy and minerals from countries such as China and India. "If you don't get the definitions right you don't put the resources where they are needed," he says, speaking the day after GE's oil and gas business had won a $1bn order for gas turbines, compressors and subsea production equipment for a large liquefied natural gas project in Australia at the end of January. Instead of obsessively worrying about heightened corporate risk in the aftermath of the Arab spring, Mr Rice argues that the uprisings in Tunisia, Yemen and Egypt suggest that in a world of 24-hour television news and social media, more and more people are conscious of a "standard of living disparity." He argues that GE will benefit because it is involved in industries that could improve the developing world's often creaky infrastructure. "Don't you think people looked at [former president of Egypt Hosni] Mubarak and said "our lives aren't changing fast enough,"" he says. Companies like ours can be part of the solution. Perhaps, but this view underestimates the capacity for politicians in places such as India and Africa to make a hash of privatising the building and operation of power plants and airlines - and, by extension, slow the growth of the businesses GE is betting on. Nonetheless, last year GE did business in excess of $100m in revenues in Kuwait, Angola, Algeria and Nigeria. Jeffrey Immelt, its CEO, was in Lagos late last month. But despite the huge order book the company's industrial business boasts overseas, the global divisions are getting less attention from investors. An analysts" call with Mr Immelt and the company's CFO after GE released its fourth-quarter results last month was dominated by questions about its once-troubled financial business, GE Capital, which had very good results. Early next month, GE is hosting a two-day meeting in Rio de Janeiro to familiarise fund managers and analysts with its global operations. Relocating top management to growth markets is good strategy, but the stock market will want to see what difference it is making to the conglomerate's profit margin.