China’s Talent Pool: Warning, Lifeguard Not on Duty

Monday, June 4, 2007 4:21

HR in China is always a hot topic among myself, clients, friends, & employees, and it has been for everyday of my 5+ years in China. Last week, Shaun Rein of CMR expressed his opinions in the article How Multinationals Err In China

The essentials of the article are best summarized by Freight Dawg’s Eric Joiner

The article highlights three main reasons why multi-national firms have such difficulty in finding, attracting and keeping local talent.

  1. Two Tiered Pay Systems with Little Opportunity for Advancement. There is a perception that a glass ceiling exists for local Chinese staff – Western companies often import senior managers from the head office or from Hong Kong or Taiwan to run their operations in China.
  2. Younger Chinese workers have experienced three decades of Chinese economic explosion. As a result they want many of the same trappings of a comfortable life that those in the West enjoy.
  3. Chinese employees want and need more advanced education that prepares them for the dynamic pace of business

Following the publication of this article, received 60 emails with 5 hours offering comments on his article, and there have been a number of mixed reactions in the blogosphere (go figure):

CLB: Dan gives the article a thumbs up, and agreed with the points laid out in the article, but some of the readers have mixed opinions:

Phil writes – This sounds a bit dubious, I have to say. One of the reasons companies come to China is because labor is cheap. If you start dishing out western salaries to the Chinese workforce, then that reason is removed. I know the article is talking about high-level execs, and you could still use cheap labor, but I’m not convinced.

Recruiting in China on the other hand was a little more critical in their write up:

While the majority of his reasoning rings true with me his assertion that companies here need to “implement uniform pay packages,” is unsound in my opinion. I spend hours per day singing a completely different song: if you want to compete in China you must have a creative and flexible compensation and benefits plan that is going to allow you to recruit the top-talent you need so that you can increase the number of high level Chinese executives who get promoted through the ranks.

and in my opinion, they are both right… and both wrong..

Shaun’s article, as always, is articulate, succinct, and does a good job of presenting some of the critical issues that many firms face here in China.. and unlike many who simple report the facts as they see them, he presents what he feels are some solutions that address the highlighted issues.

Where he erred is only in the fact that he failed to properly show readers that while his thoughts are applicable in some industry sectors, and in some regions, they are not applicable in others. He essentially tried to lump the China market into one… which with only 750 words is about all one can do

His critics also do the same, would have done better to use their industry specific HR issues, but each post did highlight some important differences.

The market in China is dynamic, and companies need to understand that. For anyone in Silicon Valley in the late 90s, the market in Shanghai is comparable, and so will be the difficulties of attracting, managing and retaining staff. On the most general level, China is a developing market that 30 years ago was all but closed to the outside world. It is a DEVELOPING ECONOMY that required DEVELOPMENT in many ways, and one of those is in the area of HR and training.

Within this context, where I most strongly object is when writers attempt to somehow make readers think that this country is void of talent at all, or that somehow the labor here cannot be motivated, trained, controlled, etc. It is something that one can read in many forums, and more than anything, it shows that the author of such comments neither understands the market nor how to operate in it. There is definitely room for improvement, but the last 20 years have show that despite the void from 1949 to 1979, the Chinese were able to move from an economy solely dependent on agriculture, to one that became a leader in manufacturing.. and that takes talent no matter how you cut it.

What makes me sit back and go “are you kidding me?” is that many firms still rush here knowing full well the difficulties, yet they are not only unprepared for the local market, they are unwilling to work within it. It is almost a sense of entitlement that some feel they should be able come here and their 12% return is waiting for them at SIP‘s door. That somehow the Chinese government is supposed to leave all the doors open for investment, that somehow the market channels should be primed for their products, and that somehow there will be this line of overqualified middle managers just hanging out at the Starbucks down the street… cause that is what highly qualified managers do right?

Talent needs to be developed..

With that said here are some thoughts of what I have seen over the last 5+ years in China:

1) Labor is abundant, and those having trouble are those that have exploited labor in the past. Reports last year that it was difficult to find labor to fill the factories were being highlighted in the popular press like China has somehow dried up. But nothing could have been further from the truth. Sure, many of the Taiwanese and HK factories in Fujian were having difficulty, but that is because their labor pools were moving to other areas to find work within firms that offered better wages for fewer hours. Manufacturers from these areas are known for being the most strict, offering the least pay, and requiring the most overtime.. and they are having issues finding labor.. and RIGHTFULLY SO

2) Fresh grads in China are just like fresh grads in the U.S. – they think they know everything, they want to work for the biggest company possible (because that’s what their parents want them to do), they want as much training as their company will provide, and they want to take all of that and trade up in the form of a bigger paycheck or an admission to graduate school. they are no more loyal to the company as they believe the company is to them, and for many moving around is a way of amassing skills and figuring out just what it is they really want to focus on.

3) Different industries have different labor pools, and some are deeper than others – i banking, VC, and PE are defiantly three areas that need additional local talent, however I would also say that many of the foreigners who I have seen in this space have been just as equally ineffective and unlike their Chinese counterparts will usually spin out of Shanghai in under 2 years. Manufacturing on the other hand is an area that the Chinese are very strong, and there are a lot of systems in place to ensure that factory managers are in abundance (again… this will be industry sensitive!)

4) Different regions have labor pools – Wenzhou is known for having the savviest business men and entrepreneurs, Shanghai the most greedy, Beijing the most political, Chengdu the most “balanced”, Wuhan the toughest, and so on… for many Beijing and Shanghai 5 years ago was scary, and these are by far the most developed regions… add Chengdu and Chongqing to the mix, and you have a whole new learning curve…

5) What Shaun describes as a glass ceiling is actually a glass partition in my mind. More about attitude than anything else, this partition is definitely not about title or office. For many of my Chinese friends they know that they have an opportunity to reach the corner office (many already have), but many feel there is a divide between themselves and western managers. Some of it comes from the fact that the western bosses treat them different in other more subtle ways… some related to culture, others out of arrogance, and others out of miscommunication… on both sides. And some of it comes from the fact that the Chinese know that they are the ones who will still be there in the long run…

6) Local packages (in large firms… in Shanghai/ Beijing) are coming up fast, expat salaries are on the way out of many large MNC, and Halfpats are playing in the gray areas. With some local senior managers making 60,000RMB/ Month within Fortune 500 firms, the packages are becoming very competitive and as firms focus on developing these managers.. the expats will be phased out.

7) Local staff are innovative.

While working as a bartender at Thunderbird, I put a notice on the tip can that read “Take care of us, and we’ll take care of you”, and that is a motto that should be practiced here as well. Shanghai is as dynamic now as Silicon Valley was in the 90s, and the managers that recognize the costs/ benefits to that are the ones that will succeed most. Talent at that time was often time in need of significant training, and once they received that training, those persons would jump.

Right now, everyone believes they have a shot, and you can feel that just walking down the street as people talk about their investments in real estate, their plans to get the MBA, the ideas they have in their head, etc, etc. Everyone is in on the game, and it is this environment that many often fail to appreciate or manage.. and it is not just foreign executives having these problems.

Of course, there are those that complain about their job, whine about their hours ,etc… but ask my uncle what he thinks of his boss at the local gas company and you will get an earful or read a couple of Dilbert comic strips to see how one middle manager at PacBell felt on a daily basis, and you will see that these are not Chinese actions, but just action of people who think their company, boss, and/or job sucks.

No doubt, the 1000 or so words are only a slice of the tip of the iceberg… and I encourage comments on the above or just in HR in general as it is no doubt an issue that will continue to affect everyone in China… and elsewhere.

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One Response to “China’s Talent Pool: Warning, Lifeguard Not on Duty”

  1. Nick says:

    June 12th, 2007 at 10:37 am

    This probably the best short breakdown of the Chinese HR situation I have read. I have lived in China for two years and see situations like this often. I have come across both local and foreign company owners that see their employees leave after training or working there for a short stint and they are at a loss as to why. After hearing this, I ask them a few questions, such as hours, payment, potential for growth and their general attitude toward their employees, I usually follow up with on last question:

    “Would you, as a young professional, want to work for your company?”

    Too few companies ask themselves questions like this. It is amazing in this day and age, with so much technology and information available, that some employers treat their employees as though it is still the robber baron days, expecting nothing but total subservience and respect from their employees. It is tough to get great results from something you see as an expenditure drain. Plain and simple, your employees are one of the most important assets your company has, invest in them, and they will return the favor. Or to but it as you said, “Take care of us, and we’ll take care of you.”