China’s HR Canary Needs a Little Oxygen

Tuesday, May 15, 2007 1:13

Canary ChinaWith 1.3 billion people in China, it is hard to imagine that there could ever be a shortage of labor in China. just think about that… 1.3 billion people.

How can you run out of people?

Well, for some industries, finding people is becoming a huge problem, and more and more I am being exposed to this. To be honest, if you had asked me 6 months ago if there would be ever be a shortage of labor in China.. I would have laughed. Middle managers sure… but labor?

However, over the last year there have been signs of this, and it was in a place I never thought I would find it, and it wasn’t until this weekend that I recognized that the canary in the mine was on a respirator…

for the last 12-18 months, I have come to accept that nearly every foreign owned restaurant in China will typically have poor service… and some just downright horrible.

the spectrum is wide, and many F&B managers will tell you just how difficult it is.

Bund 5 was a classic case (before they closed). They had prime space (on the Bund), yet their lunch was poorly attended as the service was famous.

Arch was another …

City Diner a third

and more recently Coffee Tree (a new store in town)

As I am constantly out and about (I have grocery shopped 2x in the last 16 months), I have gotten to know a number of the staffs at Shanghai’s foreign establishments.. and the turnover is high… VERY high.

Often, wait staff will be from outside Shanghai, and few if any will have worked in F&B before.. but now that they are in Shanghai and in need of a cash job, they end up in F&B.

They are untrained, unused to customers that require attention, and are generally unsympathetic to the fact that you have been waiting an hour and a half for your food (a fruit plate).

Worse yet, many foreign owners in Shanghai are really just in it for the hobby factor, and do not spend much time in the stores.. and like a kindergarten class without a teacher…. the kids go crazy.

Match that with the opening of numerous restaurants every week… and the problem only gets worse.. and in the end, customer experiences are beginning to become adventures and tests of patience as the quality of the overall experience goes down.

So why is this applicable to you, or to manufacturers in China? Well.. while I am describing the restaurant industry in China, I could just as easily be describing the banking industry. Or the telecommunications industry. Or the logistics industry.
This evening I was invited to a presentation by a very innovative company that was looking for people. Managed by a close friend of mine, they have had a really hard time finding people in china… foreign or local that would be able to excel in their programs, and they are opening their doors to those they knew, their friends, for ideas and recommendations.

Unfortunately, like in Silicon Valley in 99, I fear that this will be a trend for many companies. People that are good will train up and move on.. and companies that are not willing to pay above market will struggle to find and keep talent.

So, if you are a company in China, HR will become an issue, and for many firms that I have spoken to, it is why they are looking at Chengdu, Tianjin, Dalian, and other second tier cities: The talent pool is much deeper in numbers, and while more training is required, employees have fewer fences to look over

Currently looking for 2-3 more researcher for a specific industry, I must admit that it is getting more and more difficult. the resumes look more like scatter graphs, aend the quality to cost factor is reaching the OMG status. 7500RMB for a few internships and a year as an assistant?

Check please!

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4 Responses to “China’s HR Canary Needs a Little Oxygen”

  1. Andrew Hupert says:

    May 15th, 2007 at 5:55 pm

    Right. Good to hear someone with your sense and knowledge talking about this issue. If senior managers don\’t have a plan for dealing with HR — one that is built right into their company\’s DNA from the start — they are going to spend ALL of their time putting out fires and dropping their standards. HR is the single most important issue facing Chna managers.

  2. rbrubaker says:

    May 15th, 2007 at 7:31 pm

    Hi Andrew

    Thank you for checking in and your comments on DC.

    Planning HR is critical, and it is something people need to spend a lot of time on. One of the biggest issues I see is that there are no real benchmarks in place yet.

    In the U.S. you have all kinds of charts, graphs, and matrices that can compartmentalize employees and construct salary bands. Here… salaries are EVERYWHERE. I will receive a salary request from a fresh Fudan grad for 6000RMB and an experienced researcher at 4000RMB.

    What is becoming more important though is the environment in which employees are operating. The most successful companies, from an HR perspective, are good at creating strong bonds and excitement… and the worst are the ones that assign an employee to cube number 7-11b.

  3. Eric Hu says:

    May 16th, 2007 at 9:54 pm

    Frightening comments for anyone contemplating opening a restaurant. Any suggestions on how best to position oneself as they start setting one up?

  4. rbrubaker says:

    May 16th, 2007 at 11:15 pm

    Hi Eric,

    I have a number of friends who have opened successful bars and restaurants here in town.. and I have a few friends that have failed.

    To be honest, if I were to open a restaurant in Shanghai, I would shoot for the local market as a first step, not the expat market.

    The population of foreigners is finite, and with every restaurant opening it is getting very diffifult for high end restaurants to fill themselves consistently. It is like having 4 levy breaks along the river… that 4th one doesn’t have nearly as much water as the first. But the local market is prime for such restaurants.. especially if you can match western food to local pricing. There are a couple of restaurants near my office.. and they do very well.

    If I were in a 2nd tier city, then there is room at the high end, but placement is critical… and I would stick to comfort food rather than exotic.

    One area that is seriously lacking.. Meixcan. The best Mexican I ever found was in Chengdu.. Shanghai and Beijing offerings are on the level of what Omaha might have to offer.

    In the end it is all about turnover. A client of mine in the coffee business did not calculate the rental beased on per memter, he figure out the number of cups he would have to sell on average everyday to break even.

    As for how to staff a restaurant… I suggest visiting your competitor establishments, strike first, and poach their best staff… don’t waste your time training folks.. just play the game.